Esplanet Group reported a robust financial performance for the fourth quarter of 2024, with gross sales increasing by 10% year-over-year to €4.4 billion. Trading at a P/E ratio of 9.36x and offering a substantial dividend yield of 12.19%, the stock appears attractively valued according to InvestingPro analysis. With 6+ additional exclusive insights available on InvestingPro, investors can access comprehensive analysis to make informed decisions about this dividend-paying stock. Despite this, Esplanet’s strategic initiatives and focus on innovation have positioned the company well for future growth, especially in the green technology sector.
Key Takeaways
- Gross sales rose by 10% year-over-year in Q4.
- Esplanet launched Zeliatek, a division focused on green technology.
- The company’s return on capital employed improved to 8.3%.
- Esplanet declared a dividend of €0.40 per share.
- The company sees potential M&A opportunities in green tech.
Company Performance
Esplanet Group demonstrated strong performance in Q4 2024, driven by a 10% increase in gross sales compared to the same period last year. The company has been expanding its footprint in the green technology sector with the launch of Zeliatek, which is expected to enhance its market position. Furthermore, the firm’s return on capital employed improved significantly from 6.9% to 8.3%, showcasing effective capital management. InvestingPro data reveals a strong current ratio of 3.74, indicating the company’s robust ability to meet its short-term obligations. The company has maintained consistent dividend payments for 8 consecutive years, demonstrating commitment to shareholder returns.
Financial Highlights
- Total gross sales: €4.4 billion (+6% YoY)
- EBIT adjusted: €69.5 million (+8% YoY)
- Gross profit margin: 5.54%
- Cash conversion cycle: 22 days
- Net financial position: Negative €36 million
- Dividend: €0.40 per share
Outlook & Guidance
Esplanet Group anticipates mid to low single-digit market growth in 2025, with a focus on capitalizing on the upcoming PC refresh cycle due to the end of Windows 10 support. According to InvestingPro’s comprehensive analysis, which includes detailed growth projections and peer comparisons available to subscribers, the company’s next earnings report is expected on May 28, 2025, potentially providing more clarity on these growth initiatives. The company is exploring potential mergers and acquisitions, particularly within its Zeliatek division, to further bolster its presence in the green technology market. Full guidance for 2025 is expected to be announced in May.
Executive Commentary
Alessandro Catanisi, a leading executive at Esplanet, emphasized the company’s ability to identify and seize new opportunities, stating, "We have been good in this last twenty-plus years in spotting the opportunities." He also highlighted the importance of sustainability, noting, "Sustainability is a key opportunity." Catanisi expressed optimism about the company’s future, stating, "A new world is emerging."
Risks and Challenges
- Inflationary pressures could impact cost structures.
- The negative net financial position may pose liquidity challenges.
- Market competition in the green tech sector is intensifying.
- Economic uncertainties in the EMEA region could affect growth.
- Supply chain disruptions remain a potential risk.
For detailed insights into Esplanet’s risk factors and comprehensive financial analysis, investors can access the full Pro Research Report, available exclusively on InvestingPro, which covers over 1,400 top stocks with actionable intelligence for smarter investing decisions.
Q&A
During the earnings call, analysts inquired about the company’s outlook on the PC market, which Esplanet views positively due to the upcoming Windows 10 support end. Questions also focused on the profitability of Zeliatek, which currently boasts a 3.5% EBITDA margin, and the potential expansion of its product range. The company’s strategy to improve the devices segment in 2025 was another topic of interest.
Full transcript - PermRock Royalty Trust (PRT) Q4 2024:
Giulia Perfet, Investor Relations and Sustainability Manager, Esplanet Group: Good morning, everyone. Thank you for joining the Esplanet Group fiscal year twenty twenty four results presentation call. I’m Giulia Perfet, Investor Relations and Sustainability Manager of Esplanet and with me is Alessandro Catanisi of the Group. Before going into the details, please note that this webinar is being recorded and after the call the podcast will be posted on the Esprevent website in the Investors section together with the presentation already available. During the speech, your lines will be on listen only mode, but at the end there will be a Q and A session.
Please note again that this presentation contains forward looking statements, so I would like to draw your attention to the regulation note on page two regarding the information contained within this document. I will now turn the call to Alessandro to present and comment with you the fiscal year twenty twenty four results. Alessandro, over to you.
Alessandro Catanisi, Group Representative, Esplanet Group: Thank you. Thank you, Giulio, and welcome, everybody. Well, we are here to pretty happy. We are out of a very strong fiscal year 2024. We met our targets and apart from having achieved really good numbers in our view, we are here highlighting a clear improvement of the industry during 2024 and we are seeing a rather complex geopolitical situation.
We’re seeing a pretty interesting outlook for the industry as a whole and hopefully for us more specifically. So quickly into the industry inside. Well, 2024 marked the recovery of the IT market in the EMEA market where we operate. It was roughly up 4% and Southern Europe, where more specifically where active was up 4% as well. And that is good news after especially the first part of the year in Spain, which was particularly tough, but then we saw a progressive recovery and we ended the year in a much more upbeat tone.
EMEA spending keeps on outpacing the growth of the GDP. That’s something historical as tracked worldwide by IDC and the growth rate keeps on being around five times faster than GDP. What we witnessed during 2024 were on one side a comeback of private consumers confidence. It has been particularly beaten up during 2023 and again in Spain First Part Of Twenty Twenty Four. But then especially during the second half of the year, the inflationary pressure was was eased up.
We began recording lowering interest rates and therefore lower mortgages costs and that helped to grow the consumer business. Consumer is no longer the main portion of our business, neither our focus, strategic focus, but still it’s an important contributor to the overall market performance of an aspirant group as well. What we have seen is also the process of digital transformation. We kept on being particularly active during the year with companies that were beefing up their level of investments in digital transformation and the governments of both Italy as well as Spain and Portugal kept on investing through their recovery and resilience plans. What’s particularly noteworthy is the PC segment, which in 2024 was initially eventually stable after a couple of years of significant reductions and closed the year with a rebound.
And what we are witnessing now is most probably the replacement cycle of what was purchased during COVID eventually kicking in. As per the infrastructure segment, which we serve through our V Valley line of business, we see that artificial intelligence projects are increasingly frequent in the overall projects designed by companies and they are beefing up slowly, but constantly our long term growth projections. What’s even more interesting is that artificial intelligence is particularly energy intensive. And therefore, there’s a lot of activity in building up new data centers and let’s say, making more energy efficient the existing ones with constant request of renewable energy. And we’ve launched Zeliatek, our new business division in form of a separate legal entity and we had really, really pleasing results over there and we see good numbers moving forward.
And last but not least, the distribution channel in Southern Europe was still very solid in the go to market strategies of vendors. As a matter of fact, it increased furthermore its weight in their go to market strategies and it now stands around 47% in our calculations. And that’s for the industry for 2024. Now if we move forward to what we delivered during 2024, I would say that basically we delivered on our promises. It was a near solid growth.
Our EBIT adjusted was up to EUR 69,500,000.0. As a matter of fact, EBITDA and EBIT adjusted are the same. There’s no adjustments whatsoever this year. It’s a growth of 8% compared to 2023 and it’s in the middle upper portion of the range of profitability that we gave the analyst back in May. So solid set of results which underlined which are supported by 6% year on year gross sales growth that drove our gross sales up to $4,400,000,000 We had in Q4 a 10% year on year gross sales growth, 4% as recorded revenues.
We are growing more than the average in the Software and Cloud segment, which are mostly recorded according to IFRS 15 with the agent system. So we strip revenues as reported from the gross sales, but we outperformed against last year. But even more interesting, we outperformed the distribution market and in the countries. And so we basically grew and quite significantly our market share. In terms of profitability, strong rebound.
As I said, gross profit margin was stable at 554% and we had very strong cost discipline. Cash conversion cycle close to twenty two days. We’ll dig more into this. Net financial position, bank net financial position was positive. And then because of the IFRS 16 lease effect, we closed on a negative by $36,000,000 And as we forecasted, the return on capital employed began its journey up and is now up to 8.3% against 6.9% last year.
Dividend after having suspended the dividend last year also on a cautionary position because of the extraordinary charge we had last year, even if payment of that charge is spread along five years, This year, we have got back to our usual dividend. And in this case, we went for $0.4 which brings the total amount pay since going public back in 02/2001 to over million. So a company that not only grew and made profit, but was also able to provide cash, tangible cash also to our shareholders. And one last word in summary on the strategy, we achieved these numbers, thanks to our team and their capability of executing on the existing strategy, but also on our capability to evolve and adapt to the market challenges. I would stress the point that around the birth of Zeliatek.
Zeliatek is our response to an opportunity and in a sense a challenge on the other side, the double transition digital and green. And by launching Zeliatek with remarkable results that we have achieved over there and we’ll see in a second, we have begun our journey of greatly expanding the addressable market. So far, Zeliatek is addressing a portion of the overall digital and green market in Italy and we think we can grow furthermore in that area, but we are looking for opportunities across other nations already served by us, Spain and Portugal, but we are also looking at a ZelaTech business across Western Europe. We have an Esprite that demonstrated resiliency, V Valley that accelerated its growth and ZelleTech, which was a key growth engine in 2024 and we expect it to be a growth engine for the following years. Now coming to the repositioning of our group, you might have noticed that those that have been in this course in time that we no longer have the Esprinet slides.
We are talking about Esprinet Group. Today, we mark the birth officially of the concept of Esprinet Esprenet Group, we have now three clear pillars for the development of our strategy. Esprenet, which represented in 2024, ’70 ’6 percent of our group sales and 40% of our group’s EBITDA. It’s the group’s origin born in February. It’s the distributor of tech and consumer electronics inside of Europe with focus on screens, so PC phones and devices, consumer electronics and IT peripherals.
We have an opportunity ahead in terms of the rebound in IT spending and especially the product refresh in the PC segment, this area is and will be more and more focused in absorbing fixed costs of the overall group structure because of its large volumes. But the key focus is and will be more and more working capital optimization. We went through 2023 with a desire to optimize our working capital and probably we sacrificed too much our P and L with the aim of reducing as we did our working capital. 2024 was more a balanced result. We could have achieved much better P and L results if we had not tried to keep on stabilizing and improving our working capital.
Mission of Esperanza Future, as I said, will be to exploit the best return on capital employed focusing particularly on working capital management. V Valley, twenty percent of group sales and now 52% of group EBITDA. Born in 2011, in 2011 we kicked off the project with roughly million of revenues. Last year we were less than hundred million, so multiplied by eleven, twelve in thirteen years. Here we are talking about solution, digital solution, advanced digital technologies to enable the companies and institutions to take advantage of the new solutions stemming out of digital transformation and cloud computing and so on.
Here we are talking about service storage, networking, cloud cybersecurity. Opportunities had digital transformation, artificial intelligence and the growing growth growing threat around cybersecurity. And ZelleTech, the newborn, born in 2024, ’4 percent of group sales already 8% of group’s EBITDA, key player in supplier of technology for renewable energy and energy efficiency. Here we are talking about two areas of business, generation and distribution of electricity out of solar and photovoltaic solutions. So we’re not really yet in panels.
We’re mostly in batteries, inverters and solutions for the recharge of cars, so EV charges. But on the other side, we are leveraging the opportunities around data centers that are built and designed for artificial intelligence. So there’s a high growth in the build up of these data centers and we’re really focused on providing the infrastructure to build this data center. So racks, cabling, air conditioning systems for, let’s say, UPS and interruptible power supplies provide business continuity to these solutions as well as smart buildings. So future of our group, EspruNet absorbing with high volumes absorbing fixed costs and super focused on working capital.
We don’t expect enormous growth here. There will be opportunities, but as I said, we will sacrifice growth opportunities in this size inside on the altar of working capital improvement. Vivale should leverage the opportunities both of hardware software and cloud as well as the opportunities around services and Celiatek is our growth engine in the years to come. Okay. That’s for our growth strategy.
Now if we move to the following slide, quick glimpse here. There’s plenty of numbers. You can read them easily. But as you can see, we outpaced the market both by country, by product category as well as by customer typology. What’s interesting, Spain at the end of the year was flattish as a market because of a very slow start, but then it kicked off pretty well and we had a really good year in the end.
Portugal, we are still suffering from the dismissal during 2023 of roughly 50% of our business, which was highly working capital intensive. And I go back to the concept of working on optimization of our cash position. Probably we won’t be so aggressive as we were in Portugal, but expect us to be very disciplined in this area. As you can see, Solution and Services, so the V Valley Zeliatek business have been very, very successful in a market that was struggling. And customer wise, we outperform both on retailers as well as resellers.
It’s probably not worth the fact that retailers and retailers, which represent a good proxy of consumer demand, were eventually up in the market after couple of years really under pressure. So that’s for our sales evolution. Now if we look at our P and L, this is the usual chart that we represent from now on. You will see the GreenTech business represented by Zeliatek as a separate line. Again, we see the Esprint total that grew 2% in terms of revenues and was down 11% in terms of EBITDA, mostly driven by devices.
And the vast majority of the issues in the device business were in the first nine months of the year. There was a little bit of pressure still in Q4. Devices are printers, IT accessories, monitors and consumer electronics excluding smartphones. Here we were under tremendous pressure in everything related to Consumer Electronics during most of the year. White goods, TVs, electrical mobility were really, really, let’s say, strained by a difficult market.
But as you have seen in the first in the last part of the year, we saw a recovery and so we are more positive on the results that we might achieve in this segment in the years to come. Solutions and Services, well, overall, the Valley was up 6%. Solutions were up 7% driven mostly by software, cloud and partially by cybersecurity. Services, it’s a mixed bag of different kind of services. It was down in terms of revenues, but sharply up in terms of profitability.
It’s worth remarking that since February, we have established a separate organization, which is in charge is and will be in charge of taking care of this division and hopefully grow it as a new nurtured growth engine of our profitability in the future. Back in 2011, we did it with solution 115,000,000 at the time and we grew to $8.30 as reported, but more than 1,000,000,000 in as gross sales and it’s now our biggest contributor in terms of profitability. Zeliatek is the newborn and volumes are $160,000,000 and last year we made something especially in the last part of the year with in 2023. We made something in solar business. The rest is historical it’s the historical business of data center infrastructure components.
And this year, we had a sharp acceleration, especially in profitability. And you can see it’s a very healthy contributor. We hope that ZelaTech in time will have a trajectory that in the next decade they can help us achieve the same satisfaction that we had with Vale. And now we are nurturing services and see if in time it can be a further opportunity for us. Down you can see the weight in terms of revenues as well as EBITDA on the total revenues and EBITDA of the group.
And you see that our group, Espinet Group, more and more is a value added distributor more than a pure volume distributor. Now if you look at the P and L, well, here I would just remark how efficient we were on our management of the cost structure by leaving in a situation where we added to bear the grant of really high inflation. Most of our G and As are employees and we added a strong impact because of the collective bargaining agreements that impacted significantly our cost structure. It’s also worth noting that CIFAR and LIDERA in Italy Spain were signed in August 2023. So the cost of ’24 as seven full months of the CIFAR and LIDERA companies, which were not accounted for in 2023.
Gross profit margin was stable with a very good performance in Q4 driven by more favorable mix. If we look at the cost structure, sorry, at the financial charges, the cost of IFRS 16 is higher for both higher interest rates as well as the impact of the new warehouse that we opened in Tortona in Italy during the course of last year. And in other financial income expenses netted of the impact last year of the extraordinary tax charge that we had in 2023. We consumed on average less we demanded on average less bank debt, but the blended cost of interest was significantly higher than 2023. We’re witnessing now a projection of progressive reduction of those rates.
And hopefully, we should have a benefit here. We were highly impacted at the foreign exchange losses this year against profits in 2023, and that impacted the end result. Tax rate was slightly growing, but essentially stable, no real big changes. So if we look at the balance sheet, well, no real big changes apart from the part of the right of use of assets, which grew compared to December because of the Tortona warehouse that I mentioned before. Most of the changes in our balance sheet are referred to operating net working capital.
There’s a slide a couple of slides later on where we can focus on those numbers. But equity was up. We didn’t distribute dividends last year. The net financial debt pre IFRS 16 was negative. So we had million of cash before IFRS 16 and then because of the lease liabilities we closed negative.
But all in all, a pretty strong situation. If I have to point one thing more on working capital, we keep on being focused on reducing inventory on one hand. We have launched a couple of internal initiatives with external consultancy as well, redesigning the way we are forecasting products when we are fully driving the decisions. There’s a lot of fulfillment business that we have with vendors, mostly on the retail side. Some of it runs also on some big deals in the corporate side.
On those areas, we are working with vendors to get longer DPOs. We have already achieved the good results. We will be more vocal with vendors if they want us to keep on having the high level of inventory that they require to serve efficiently their supply chain on one side, especially those that have very long production cycles and shipping cycles from Far East, as well as the level of service that they want us to deliver to their retailers, we will ask them to provide further support. On the other side, we are moving more and more on growth on the reseller side, which we normally don’t factor whose receivables we don’t factor. So we will more and more try to balance what we do in terms of factoring programs on retailers against what we do on those customers.
And again, we on resellers where we don’t factor. And again, as long as the cost of this factoring programs is on one side accounted in gross profit and the insurance portion is recorded in the SG and A, so everything above EBITDA, We will and we are negotiating with vendors for better conditions whenever we have to cover this market where we can factor receivables. Okay. So on a final note, on our results, working capital metrics, three quarters in a row, stable around 22. I remember that our ambition is to achieve an average of 20 or below when we are cash neutral before IFRS 16.
This is I remember for the newcomers in this call, the moving average of the last four quarters and so numbers have stabilized after the enormous spike we had during 2023. We think there’s a room for improvement, especially on inventory. If we look at the results quarter by quarter, you see that there’s these constant spikes and a lot of seasonality, especially in the last quarter when because of the high spike on sales, the inventory levels tend to hit their bottom. But still there’s quarters in which we are above our threshold of 20%. And so we will have to work hard to achieve our targets.
And as I said, we have multiple initiatives in place and we’re ready, especially in Esperanto, to sacrifice accelerated growth. We will look for growth, but we are ready to sacrifice accelerated growth in that specific area on the altar of further improvement in cash. We think this should help us and we see in the following slide improve our return on capital employed, which as you see began a journey up, which we hope we can continue to withstand in future. So that’s for 2024. If we move forward to the group sustainability achievements, well, for us sustainability is a key opportunity.
We have three big challenges climate change, people and corporate governance. We have done a number of activities in climate change not to forget the birth of the Heliatek, which is specifically from a business perspective aimed at helping the our markets as a whole to achieve faster and more efficiently the results of double transition digital and green. We always see sustainability also as a way to create value. That means that there is not just, let’s say, sugar coating activities that are done just to please the environmentalists. We are always trying to do something that is good in the short and in the long term for all our stakeholders, including our shareholders.
So, Zelatiks is a clear example in this sense and I’m pleased to record the fact that with the CDP we got the former Carbon Disclosure Project. We got a strong improvement in our rating and we got a B score. With our people, we are are working hard on a number of projects. Here I would just stress the point on training. We live in complex times full of uncertainty and evolution.
And in these times on one side, you need to have a solid balance sheet as we think we have and as our plans are designed to strengthen furthermore. I stress multiple times the concept around working capital improvement and not only profitability improvement, but on the other side you need to be flexible and able to address the challenges of this market, but the opportunities as well that lie in a market that is full of innovation albeit full also of sort of geopolitical and not only geopolitical shifts. And here you need ambitious people, good people with a lot of training and we are really investing on our teams. Once more, we have been certified as a top employer as well as a great place to work. And last but not least, there’s all the corporate governance framework.
We have gone through this nightmare of producing our first year reporting in a corner with CSRD. It’s been a major, major task and I want to thank all the people involved. And we keep on working on improving our internal processes, trying to guarantee optimal corporate governance standards. Okay. We move forward and I close with one last slide of final remarks.
If we look back at 2024, ultimately we can see that ICT is recovering and that’s the stronger message that we were a little bit afraid of putting on the table to our investors back in May, because we were out of a very challenging first quarter. But all the indicators were pointing in this direction and we were right. We were luckily, we were right. And last part of the year, we saw an acceleration. Consumers are back on stage after a dip in 2023 and enterprises and governments as well are really if not beating on all cylinders, definitely on most cylinders, because digitalization is here to stay and everybody knows that needs to stay on track.
Otherwise, you are lost against your competitors. Distribution channel healthier than ever. And there’s a lot of innovation that is bringing cars into adjacencies and especially into this green double transition, green and digital and Zeliatek is a way of addressing this opportunity. So what’s forward for this year? Well, I already mentioned the uncertainties geopolitical.
Well, if I look back at the last five years, we went through an health emergency inflation. We went through financial distress with the sharp rise of interest rates. And now we are facing geopolitical distress with a war raging since which has been raging for the last three years and tariffs and change of alliances, a new world is emerging. So forecast is more and more forecasting is more and more complex. But by this situation, we see a 2025 where all ICT sector analysts, all our vendors and we as well are forecasting mid to low single digit increase in demand in the reference market, still higher than GDP.
The year of COVID, so a boom in PCs then consumption was down and 2025 should be the year of the PC refresh. There’s also the end of support for Winder Stand. So for the aspirant portion of our group, there should be a good favorable opportunity because of PC renewal. The infrastructure segment is in good shape. AI spending was 50,000,000,000 in EMEA in 2024.
Analysts forecast the further growth of 35%, but it’s not so much the AI spending per se, which is interesting. The real news is that this technology is slowly maturing and probably there will be a more widespread utilization. And so we are particularly upbeat on the opportunities that should cascade into devices and PCs as well in due time. This is driving unfortunately on one side, but fortunately for us on the other side an increase the risk of cyber attacks. And so we are here ultimately bringing back opportunities for our group in cybersecurity and again opportunities for our V Valley business.
The IT managed services industry is expected to grow as well. And so we see also opportunities for our newborn well, it’s not really newborn, but newly redesigned service segment, which is still small, although very profitable and we have expectations that there will be more and more favorable environment for us to provide as outsourcers additional value add services to our vendor community as well as our system integrator and retailers community as well. And last but not least, there will be because of the environmental concerns, because of geopolitical issues, more demand for this green transition and especially solar business. And we are well positioned now to leverage from this further opportunity. And last but not least, there’s a lot of evolution.
Vendors face the same uncertainties and are reacting by streamlining their cost structures and outsourcing more and more activities to trusted partners. So the distribution channel we think will remain strong and hopefully could turn into an additional opportunity. So all in all, we have a good market ahead. And so for our strategy, we target another year of profitable growth with a strong focus on our return on capital employed. There’s a lot of tremendous opportunities.
There are changes, but I think we have been good in this last twenty plus years in spotting the opportunities given our broad reach in the market, setting up initiatives and profiting from these opportunities. We have grown our market share. We expect to and we want to outpace the market. There are areas where we think we have opportunities. We don’t expect the certain areas to reach the market share that we had during COVID period, because as I said, we are prioritizing return on capital employed.
So we think we have an opportunity given the struggle of especially of the smaller players to smaller competitors to win market share, but we will be selective in the areas that we will go for, because we will focus a lot on profitability, especially with a lot of focus on gross profit margins and fight as much as possible against the sharp inflation that we’re still seeing on our cost structure. Working capital is a top priority and I spoke at length about this and we see opportunities in M and A. I hope this year could mark, I don’t know if we will succeed, but it could mark the entrance, especially thanks to Zeliatek into other regions of Europe. We’ll see. But definitely, we keep on seeing M and A as an opportunity selected M and A to grow value for our shareholders.
And all in all, everything will be again targeted at profitable growth return on capital employed. In Q1 with the presentation of Q1 results, so mid May, we will as usual announce our 2025 guidance on the back of this overall strategy. Well, that’s it. Thank you for your support. Sorry again for the initial glitch.
And please, I turn the stage to the Q and A session and to Giulia.
Giulia Perfet, Investor Relations and Sustainability Manager, Esplanet Group: Yes. Thank you, Alessandro. We can start with the Q and A session. Let me remind to ask questions, sorry. You kindly book your speech and then unmute your microphone.
The first question from Mr. Storre. You are the first. Please go ahead. Can
Mr. Storre, Analyst: you hear me? Can you hear me
Alessandro Catanisi, Group Representative, Esplanet Group: now? Oh, sorry.
Mr. Storre, Analyst: Can you hear me? Hello?
Alessandro Catanisi, Group Representative, Esplanet Group: Yes. Yes. Sorry.
Mr. Storre, Analyst: Okay. Okay. Good morning. Thanks for taking my questions. The first one is on 2025 growth.
You have ended 2024 with strong growth. So can you tell us how you are imagining the phasing of growth into 2025 considering both the strong exit speed to 2024 and also the expectations for the market you just mentioned of low to mid single digit growth. Second question is on Zeliatek. You showed in a slide the strong step up in profitability in 2024. And I was wondering if you can explain us what drove such a strong increase if it was a matter of scale, mix or what reason is behind that?
And last question still on Zeliatek. Clearly, here the categories of product distributed
Mr. Padino, Analyst: are
Mr. Storre, Analyst: a sort of hybrid probably not specifically something which could be categorized as ICT. And so my question here is, do you see room to further expand the range and to move farther, I mean, beyond the strictly speaking the city world? Thank you.
Alessandro Catanisi, Group Representative, Esplanet Group: Okay. Thank you. So on 2025 growth, I would say first, we’re not yet out with the guidance. But generally speaking, we have a first effect, first part of last year in Spain, we had a really tough year. The market was down sharply and especially in Q1 it was down 12% and we were down more or less the same.
So a first step is just the market that is recovering in Spain and we’re really seeing it in this very moment, not surprisingly so because again the comparison here on here with staff. We see an opportunity for us an acceleration in our value add businesses of v Vale. We have been winning contracts. We are bidding for new contracts. Some of our competitors went through troubles, let’s put it this way.
And there’s quite a lot of interest from both vendors, existing and new ones as well as resellers to work with us. And ZelaTech is now another powerful engine of growth. We think in time there should be opportunities, but I will comment in a moment on Zeliatek. Those are the key drivers. Market overall should be good.
On PCs, there’s good expectations. So all in all, these are the key drivers at the top line level. We are working hard, as I said, in working capital optimization. So in terms of bottom line, we with declining interest rates and hopefully during the course of the year, the deployment of all the initiatives that we have launched in the second part of last year in working capital optimization. We think there should be lesser request of funding and therefore lower interest cost.
The question mark is around as always around the gross profit margins and costs and gross profit margins, so mix should help. And on the other side, the reduction in interest rates has an immediate effect on our gross profit margins whenever we sell receivables to factoring. So on gross profit margins because of the mix effect, because of this factoring cost, we have reasonable expectations. The only question mark is the impact on the cost structure of the significant inflation that we brought on board. We are working hard to further optimize our cost structure.
In May, we will give more indications on our forecast for the year. But the key drivers of our bottom line performance are around the numbers that I mentioned to you. As per Zeliatek profitability, Zeliatek inherited the portion of business that we had already on board, namely cabling racks, cabling, which we essentially bought back in 2015, I think, from EDS or 2016, EDS LAN. They had a business in cabling, very profitable. And then racks, UPS, air conditioning systems for data centers.
We added significant coverage on the solar energy business and that gave the boost both in terms of revenues as well as margins. Here, we are talking about different kinds of customers and a different market altogether. We are not referring to ICT resellers. Most of our Xeliatek customers are let’s say electrical contractors or anyhow companies, sometimes also ICT companies that they have developed a sort of, I call it, the screwdriver knowhow, people that physically install solar or data center solutions. And so it’s a different kind of business.
Of course, scale, you mentioned scale and that’s exactly the point, one of the two points. Scale is of paramount importance. If you grow here, you hit different discount levels. But on the other side, we worked hard during the year in getting the right level of certification and capabilities, so to be able to provide added value services to this community of customers on behalf of the vendors and that again turns into additional profits. Moving forward, we want to keep on growing on this kind of concept and see that we furtherly grow our coverage in terms of both vendors, customers and services provided.
Okay.
Giulia Perfet, Investor Relations and Sustainability Manager, Esplanet Group: Okay. Mr. Padino, it’s your turn. Please go ahead.
Alessandro Catanisi, Group Representative, Esplanet Group: Remember to unmute.
Mr. Padino, Analyst: No. It’s okay. You can hear me? Yes.
Giulia Perfet, Investor Relations and Sustainability Manager, Esplanet Group: It’s okay.
Mr. Padino, Analyst: Okay. Thank you for the presentation. I have one question about Windows 10. So do you expect that the end of the support in October 2025 to drive the demand primarily for hardware upgrades rather than software and security solution or maybe both? And if this impact will be felt early in 2025 with potential anticipation from the customer or mostly toward year end?
Thank you.
Alessandro Catanisi, Group Representative, Esplanet Group: Yes. If you listen to the presentation of all the PC manufacturers, they will speak at length of what their expectations are around this thing. We are as bullish as they are. Of course, PC is not 100% of our business is less and less the biggest contributor to our profitability as it was years ago, but still is an important contributor as you have seen in our presentation of the three pillars with relative profitability. Nevertheless, we are already witnessing an acceleration in PC renewal.
We as always, we expect when there are these kind of changes that there will be latecomers that will take a decision at the very last moment, hoping for change in mind of Microsoft, which frankly speaking given a history is difficult to foresee that anything will happen. Microsoft people will take their decisions. So I think there would be a good progression during the course of the year. Let’s not forget also that end users will are facing a combination of three things. First,
Mr. Padino, Analyst: for the
Alessandro Catanisi, Group Representative, Esplanet Group: first time since many years well, two things, first time since many years with the end of the support of Windows, you are facing tremendous cyber threats. In the past it was not that the case. And so people will be forced in a way to change and those that want change will pay unfortunately and direly their mistake. That’s a fact that all companies should realize. Cybersecurity is now a threat that was not here at this level years ago.
And the second point is, this is a moment in which AI is growing and aside from AI solutions that run on data centers, there’s a trend in having small language models and local applications that run on clients, so on PCs and smartphones and so on. And so you are renewing your PC. It’s a good opportunity to buy an AI enabled PC with an error processing unit on board. We’re close to 40% of the machines available in the market now that are already AI ready. Let’s say, AI on edge enabled.
And so we expect that companies will take the decision to upgrade also to bit more expensive machines, but update they have to. And so yes, we think it will be an acceleration during the course of the year and probably with a slightly higher price point and average sales price.
Giulia Perfet, Investor Relations and Sustainability Manager, Esplanet Group: Okay. Another question from Mr. Nardji. Mr. Nardji, please go ahead.
Mr. Nardji, Analyst: Hello, good morning and thanks for taking my question. Just a quick question on the profitability. We saw a solid increase on EBITDA margin in Q4 for the device segment. It was down 77% at the end of nine months. We end here with a reduction of about 23%.
So what are the main factors behind this strong improvement at the end of the year? And moving forward, what might we expect for this category? Thanks.
Alessandro Catanisi, Group Representative, Esplanet Group: Yes, devices has been a very challenging business for us this year. Historically, it runs with roughly 50% EBITDA margin more than PCs and smartphones. We group PCs and smartphones together under the screen name because they typically run with run about one between 1%, one point two % EBITDA margin And devices being a sort of a miscellaneous mix of other products typically depending on the mix within it, but they should run, let’s say, between 1.5% to 2% historically that was the normal range. This year has been horrible. We had three categories that were particularly impacted, white goods, TVs and electrical mobility.
There was pressure on printers and supplies as well, but to a much less risk stand. The real issue was mostly on those categories, especially the electrical mobility has been a disaster across Europe and we were caught into this issue as well. The other categories were mostly affected in Italy, especially TVs by 2023, which was heavily subsidized by the government and 2024, which was not. And there was a digital transition. And so we think that 2024 was a sort of extraordinary year for the devices segment.
We are more bullish on profitability for 2025. We have taken steps to improve profitability. We have been very open with certain vendors that were having particularly bad performance and say, guys, if you want us to keep on working on these product lines, we need a different support from you, both in terms of working capital management as well as in terms of margins. So moving forward, we should have a better performance. Ultimately, we think that the recovering consumer spending, which is mostly affecting this area, should help us and our vendor community to improve the situation as well.
So we’ll see. Devices are an important portion of the overall Espritnet division. They are together with the services that are sold through the Espritant division, especially certain marketing services. Those are an important contributor to the profitability of that division, even if that division as I said is mostly focused now on working capital management, but still. So we are more bullish here.
Let’s see if this year will effectively turn into what we expect.
Giulia Perfet, Investor Relations and Sustainability Manager, Esplanet Group: Okay. It seems oh, another question from Mr. Berti. Please remember to activate yes, your microphone.
Mr. Berti, Analyst: Okay. Sorry. Thank you. Thank you for the presentation and good morning. I have a follow-up on the question made by Niccolo about Zeltje tech profitability.
I was wondering if this 3.5% EBITDA margin reached in 2024 is already a target level for the division or is there still room for improvements and in that case, what could be a level, a target level for, for the segment? And then just to reconciliate my numbers, I was wondering if Zeliatek was previously represented under a Sprint division line or the Bali line?
Alessandro Catanisi, Group Representative, Esplanet Group: So on your last question, it was under Vivaldi. And you could probably see in the slide around revenues that we have given the growth of Espinet for Vivale Solutions and Zeliatek, but we have a single number for the market because we are among the few distributors that are reporting to context the data company that is providing market data. Zeliatek like revenues, there are other players that are doing so, we guess, but not that many. So we don’t have a separate measure of the market size. We estimate the market to be pretty big and growing, but we don’t have a separate number.
But nevertheless, it was in the into the Vale. Now on your first question around the profitability, we are planning in the future months to have a Zelia Tech Day. And during the Zelia Tech Day, we will give more color to the expectations that we have. Zeliatek was officially born in, I think, in March.
Giulia Perfet, Investor Relations and Sustainability Manager, Esplanet Group: February.
Alessandro Catanisi, Group Representative, Esplanet Group: February. Yes, yes, we were able to anticipate February 1, but was already active the last few months of the last three months as a division of 2023. We did a little, not a lot, but we were already testing. We have still a lot of things that we are trimming and before committing with a specific target, we wanted to finish our own work. It’s a matter of weeks, few weeks or months and then we’ll be out.
What I can tell you is, it’s a huge market, huge, growing and it’s easy to understand why. There are other companies in other in adjacent sectors that are moving aggressively into the green technology space. And as long as there’s quite a lot of value add over there, you need to provide services, logistics services, configuration and installation services to these electrical contractors, that’s value add. It’s we’re still relatively easy to choose a known technology as a smartphone or a PC or a printer and therefore margins are lower for us. It’s pretty complex to choose the right green solution.
And so consumers need support from electrical contractors, electrical contractors, installers need support from us and from the vendor community. So we expect profitability to be that can be said significantly higher than the one available for the Esprit division. We’re not yet there to say whether it will be above or below V Vale, it will be a good profitability nevertheless. Sorry, but not yet ready to provide these figures.
Mr. Storre, Analyst: Thank you.
Giulia Perfet, Investor Relations and Sustainability Manager, Esplanet Group: Okay. It seems there are no more questions, so we can close the call.
Alessandro Catanisi, Group Representative, Esplanet Group: Yes. Well, I want to thank everybody for your support. We are I think after a challenge in 2023, we were able to deliver on our promises. There’s a lot of challenges, but a lot of opportunities as well. We think we have a good setup to tackle those opportunities.
Market will be as it will be and we will follow it and hope to see you soon in person during stock conferences or at the next call. Thanks everybody and have a nice day.
Giulia Perfet, Investor Relations and Sustainability Manager, Esplanet Group: Thank you for participating and see you next time.
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