France boosts ADVEO performance

2013 was a stable year for ADVEO despite tough market conditions.

A strong performance from ADVEO’s French subsidiary helped the European wholesaling and distribution group achieve stable results in 2013.

Boosted by the acquisition of the Buro+ dealer group early last year, ADVEO’s sales in France increased by an estimated 12% year on year to about €439 million ($607 million), or 41% of ADVEO’s total sales – making France the group’s largest market by some distance.

Speaking to OPI, ADVEO CEO Millán Álvarez-Miranda recognised the contribution of Buro+, but added that France also achieved organic growth.

The same cannot be said of the Spanish market, however, where strong double-digit declines led to a result that came in below expectations, although Álvarez-Miranda did point to a double-digit increase in February 2014, suggesting a more positive outlook for the rest of the year.

In its other markets, ADVEO said that sales in Germany and Italy were in line with those of 2012 (although gross profit was up) and that Benelux saw improvements in the second half of the year.
Overall, companywide sales for 2013 (adjusted to exclude the Unipapel manufacturing and distribution business that was recently sold) were down by just 0.3% to €1.07 billion, a positive performance given that the European market is estimated to have declined about 8% during the year, according to ADVEO’s own figures.

The result looks even more impressive when you take into account around €50 million in lower sales from EOS products. The ADVEO CEO told OPI that a good part of this EOS decline was due to the company exiting unprofitable businesses.

Return to growth

“We actually generated about 10% more gross profit from EOS in 2013 than we did in 2012,” he said. “We are now comfortable with our gross margin level in this category and are looking forward to a return to growth from a stronger platform. We are very satisfied with the 2013 performance.”

The improved gross profit in EOS helped offset price pressures in traditional office supplies, and full-year gross profit increased slightly to €190.3 million, while gross margin improved by 20 basis points to 17.8% of total sales.

Adjusted EBITDA for 2013 was €47.1 million, 3.1% lower than in 2012, while adjusted pre-tax profit fell 9% to €22.8 million.

Álvarez-Miranda pointed to a number of operational improvements during the year such as reductions in inventory levels and working capital requirements, and the generation of €30 million in operating cash flow. Debt has been reduced to x1.5 EBITDA and this is expected to be down to x1 EBITDA by the end of this year.

2014 is a key year in terms of developing fully integrated systems and processes across all of ADVEO’s operating companies. SAP implementation has just started in Spain and this will be followed by France shortly.
With the near-term focus on this SAP rollout and on improving the performance in the Spanish market, Álvarez-Miranda said that acquisitions were not on the radar screen until at least the end of this summer, although he did not rule out looking for opportunities after that.

The financial markets have certainly reacted favourably to ADVEO’s strategic direction and operating performance. In the past 20 months, ADVEO’s share price has more than doubled to over €17 and is currently up more than 15% year to date.