Ventress keeps mum on Staples rumours


Corporate Express CEO Peter Ventress refused to take questions on the recent Staples takeover rumours at this morning’s press and analyst meetings in Amsterdam. At the beginning of the question and answer session Ventress said he was “putting down a marker” and would not elaborate on the company statement earlier this week that denied that any talks with Staples were taking place.


Instead, he and CFO Floris Waller focussed on the company’s 2007 results, in particular the final quarter of the year which marked the start of the company’s turnaround strategy under Ventress’ leadership.


Echoing the messages from the last presentation in October, Ventress made all the right noises about a renewed focus on business basics, listening to the customer and learning from past mistakes.


Unlike October, however, he had some sales and results figures to fall back on and, all things considered, it looks like an encouraging start.


US operations boosted by sales growth


A lot of the recent focus has been on the troubled US operations, which account for around 50 percent of Corporate Express’ business. 2007 fourth quarter sales showed organic growth of three percent compared to the same quarter in 2006 – which was, it has to be said, a pretty bad quarter; nevertheless the sales numbers are now moving in the right direction. Ventress confirmed that sales staff morale had improved, staff turnover levels were back to normal and that some contracts, lost in 2006, had been won back.


However, while the top line was up in North America, operating margins were hit by an increase in business with existing large but less lucrative accounts and in lower margin product categories such as toner and paper. Also, sales staff recruitment and training costs have increased and this is coupled with a productivity ‘lag’ associated with new reps. And one must assume that contract win-backs have been at the expense of some margin percentage points.


One area of the US operations which the company admitted as “disappointing” was penetration in the mid-market, one of the four key strategic initiatives for growth. However, a pilot scheme in Georgia has been “encouraging” and improvements in this segment are expected in 2008.


So, signs of improvement in the US then, though uncertainties about the economy make the target of six percent organic growth per year seem challenging, to say the least, especially as ten percent of US sales comes from financial sector companies such as banks and insurance companies who are likely to be the most affected by the recent credit problems. Something to watch.


UK sales scheme to be rolled out elsewhere


With all eyes seemingly turned on the US, Europe continues to make steady headway, 2007 organic growth coming in at a respectable five percent. The UK was singled out as the top performer in Europe, credit for this being given to the implementation of a sales excellence programme which has “turned the UK sales force upside down”, according to Ventress, and which will serve as a model that is being rolled out in other European countries. European bottom line, though, is being hampered by so-called double running costs, notably in terms of multiple IT systems and the implementation of a SAP ERP system, and this will continue throughout 2008. However, there has been progress in terms of integration of merchandising with a centralised European merchandising team in place and the first EU catalogue published a few weeks ago, and operational efficiencies are expected from the new distribution centres which will be opened in Germany this summer and in Sweden by the end of the year.


Australia focused on growth


Corporate Express’ Australian results were described as a “great performance” by CFO Floris Waller, despite organic sales falling by one percent. The sales performance was attributed to the current deflationary environment in the country so, while actual sales were down, this was more than offset by reduced purchasing costs. In a separate statement issued earlier to the Sydney stock exchange, the company said that it expected growth to come mainly from diversifying its product offering, particularly into the educational market and through acquisitions, which “remain a key part of our strategy to drive earnings growth”.


The market reaction to the results has been positive, with Corporate Express’ share price up by as much as ten percent on the day, and it would appear that the chances of the Staples takeover rumours turning into something more concrete have dwindled… for the time being.


First round to Ventress!