ADVEO Results Impacted by Stock Issues

Originally written and published by Andy Braithwaite at

Stock availability issues hit ADVEO results

European office products wholesaler ADVEO’s H1 results have been significantly impacted by stock availability problems across its different markets.

Excluding the impact of lower ink and toner sales due to the sales of its EOS business to Westcoast last year, ADVEO’s sales for the six months to the end of June decreased by 5.2% year on year as the group admitted to low stock availability in key categories. ADVEO said these stock issues – which hit sales to the tune of €18 million ($21.5 million) in the second quarter – were due to the refinancing process that was completed at the end of July and that the problems would persist into the third quarter.

H1 sales of €250.3 million represented a drop of almost 40% as reported, largely due to the ink and toner category, but sales still fell 5.2% on a comparable basis as the wholesaler reported declines in all of its markets.

The reduced exposure to the low-margin ink and toner category resulted in gross margin growing by 990 basis points to 29.5% of sales. Comparable EBITDA of €7.3 million was 11.4% lower than last year, representing a slight fall in comparable EBITDA margin to 2.9%.

For the period, ADVEO reported a pre-tax loss of €4.9 million, this was better than the €15.5 million pre-tax loss reported for H1 2016, but both sets of numbers includes several one-offs.

In ADVEO’s largest market of France, H1 sales were €104.2 million, a like-for-like decrease of 5.6%, although traditional office supplies (TOS) sales were down 9.4%. While gross profit fell by 17% to €26.8 million, gross margin increased by 910 basis points to 25.7%.

Reported H1 EBITDA in France was down 5.9% year on year at €8.8 million, but up 6.5% on a comparable basis, while comparable EBITDA margin grew by 140 basis points to 8.4%.

ADVEO confirmed that the stock issues have come about as a result of credit restrictions imposed on the company during the refinancing process, something that has hampered its purchasing ability. It pointed, however, to growth of €5 million in its strategic categories.

With these credit restrictions set to carry on in the third quarter, ADVEO will continue to see pressure to its top line. It will also be losing market share as resellers seek alternative sources for their products.

Despite improvements to debt levels, the cost structure, working capital requirements and gross margins, it still looks like a tough few months for the wholesaler, in what it has described as a “transitional year”.

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