The distributor, once one of the UK channel’s largest players, has been operating with minimal resilience in a market defined by high volumes and tight margins. Insiders say the business had been under sustained pressure, with profitability hovering around break-even for years and deteriorating further in the period leading up to the sale.

Sources close to the transaction suggest the UK arm contrasted sharply with other parts of the wider group, some of which were performing more strongly at the time.

Underperforming

The UK business, however, was widely regarded as underperforming and over-layered from a management perspective, leaving it poorly equipped to respond to shifts in demand or margin pressure.

The current consultation process has triggered widespread concern across the channel after initial proposals suggested a dramatic reduction in headcount from a workforce previously numbering around 1,200. Those figures, however, are understood to represent an opening position required under UK consultation rules, rather than a final outcome.

People familiar with the process stress that no decisions on the future scale of the business will be made until the consultation concludes. This is expected to happed towards the end of January. The final structure could differ materially from early projections, depending on discussions with employees, customers, and vendor partners.

Management

While the existing C-Suite executive leadership team has largely exited day-to-day roles, the company continues to operate under an interim structure, with senior managers stepping up to ensure continuity during the consultation period. Operational management is said to remain in place, despite the departure of the former C-suite.

Exertis UK is expected to emerge as a smaller, more specialised distributor, focusing on a narrower set of product categories. The product lines and vendor relationships that will form the core of the future business has yet to be determined and remains subject to consultation outcomes.

Industry observers note that Exertis UK’s situation highlights the fragility of large-scale distribution models in the current market, where small margin shifts can quickly destabilise even high-volume operations. While the business can perform well when conditions are right, sources say the lack of margin headroom leaves little room for error if volumes fall or costs rise.

For now, stakeholders across the channel remain in a holding pattern, with vendors, customers, and partners awaiting clarity on the distributor’s future shape once the consultation process concludes.

“It’s not a drama from my point of view. I see it as a big opportunity to have an owner that is focused on us,” Griffin told Mobile News.

“The Exertis sale announcement is news, but it’s good news,” Griffin explained.

“It’s a positive step for us as we evolve, and it’s business as usual. This is no different from Westcoast being sold or Ingram going through its transition from private equity to IPO, or Tech Data’s private equity move and subsequent merger with Synnex. Capital structures change all the time. This industry is accustomed to operating in a constantly changing environment regarding ownership models. This isn’t unusual.

24-month strategic review

“We are starting a 24-month strategic review of the business. A new owner could come from anywhere across the spectrum of capital structures. It could be a trade buyer, an equity partner, or private equity—really anything. We’ll be looking at who will be the best owners for the assets we’ve got.”

When examining DCC’s overall business, it becomes clear why it is concentrating on energy activities.

Energy makes up 75 per cent of DCC’s operating profit. DCC Energy distributes LPG, natural gas, and other fuels across Europe and North America. It is also investing in solar power and hydrotreated vegetable oil to support decarbonisation. In the UK, DCC manages smart meter infrastructure.

“DCC has been a brilliant owner”

“DCC has been an absolutely brilliant owner for us for many years. Their strategic decision to focus on energy will ensure an orderly transition to a new owner more aligned with our needs. Tech and healthcare are less significant to DCC, so this move makes sense for them. They’ve been fantastic, but there’s an even better fit for us moving forward.”

“It’s vital that everyone understands this is part and parcel of how the market operates. Our focus remains on our people, our customers, and enabling both to grow and thrive. That means helping vendors and retailers do more, and we’ll continue to do so regardless of this announcement. DCC CEO Donal Murphy rightly noted in his announcement that this is the best move for all three divisions—energy, tech, and healthcare—making them stronger for the future.”

Whoever eventually aquires Exertis will be in charge of the UK’s biggest mobile tech distributor with a portfolio of more than 700 global technology brands and over 13,000 resellers, e-commerce operators and retailers.

Exertis’ mobile division has had to adapt to a market now consolidating around Apple and Samsung. Brands like Sony Ericsson and Huawei, once flagship partners, are no longer as prominent. But Griffin maintains a broader perspective:

Biggest distributor of smartphones

“I wouldn’t characterise it as a two-horse race. There are many excellent vendors in the mobile space that we represent and do strong business with. We continue to be the biggest distributor of smartphones in the UK.”

Exertis represents Apple in its Irish operations but does not handle Apple in the UK.

“We have a very strong relationship with Apple. Meanwhile, we’ve built a solid partnership with Samsung, covering everything from first life to second life through our MTR business. The second-life market is fascinating,” Griffin said.

“When you look at sustainability models, residual values and second life become crucial. We’re well-positioned to serve this market. Mobile is hugely important for us. We handle Honor, Motorola, and nearly every other major brand you can think of, except Apple.”

“As far as the DCC announcement is concerned, nothing is happening overnight. The reality is, nothing changes. It’s essential for everyone to understand this is entirely normal for the industry. We remain focused on delighting our customers.”

DCC aims to streamline its portfolio to capitalise on growth opportunities in energy. This announcement was made by DCC Chief Executive Donal Murphy during the company’s interim results presentation. The company plans to simplify its structure and concentrate on sectors it believes hold the most growth potential. While DCC will continue supporting the Technology division financially, it intends to identify a strategic partner to ensure a smooth transition.

Exertis, a key player within DCC’s Technology division, will continue delivering value to its vendor partners. DCC remains committed to investing in operational efficiencies, digital advancements, and integration initiatives.

Tim Griffin, CEO of Exertis IT, commented:

“We’re excited by the opportunities that DCC’s strategic update presents. This is a great opportunity for our Technology division as we explore the possibility of new ownership. Our focus remains on delivering for our customers and vendor partners. DCC’s strategic update provides another opportunity for us all to grow and progress. We want to reassure our customers and vendors of our commitment to them, to adding value, to delighting all our partners, and to enabling their success.”

Exertis changed its name from Micro Peripherals in 2013 when it became the technology division of DCC.

Computers Unlimited has been rebranded as Exertis Unlimited, completing the integration of the IT company into Exertis UK.

Exertis’ parent DCC bought CU in May 2015 for an initial £24 million, adding £140 million to its annual turnover. The 30 year old IT distributor supplies a wide range of third party branded software, IT hardware and products to over 2,000 customers in the UK and continental Europe.

It will now operate as Exertis Unlimited, and has legally transitioned to become a part of Exertis UK as of today (July 1).

Exertis UK&I managing director Gerry O’Keeffe (pictured, right) said: “Since the acquisition of CU, we have had the opportunity to work together, leveraging the skills and product categories of both companies.

“Exertis Unlimited becomes a key business unit that complements our strategy of providing specialism and expertise right across the technology sector for a diverse set of customers.”

Unlimited Apple

The distributor said Exertis Unlimited will continue with its specialism in products and accessories for Apple devices, as well as distributing smart home technology, products for creative professionals and audio products.

Exertis Unlimited’s reach also extends on to the continent, in France and Spain. Additionally, it has direct distribution agreements with more than 70 tier 1 manufacturers including: Adobe, Epson, Griffin, Incipio (phone cases), LocknCharge (charging solutions), Microsoft, Parrot (consumer electronics), Sonos (audio) and Western Digital (hard drives).

Exertis Unlimited chief operating officer Tony Taylor said: “By retaining the Unlimited name, we’re recognising the unique culture, values and skills that have been built over the last 30 years.

“It’s also a strong statement to our vendors and customers that we will continue to offer the services and support that they have enjoyed, enhanced by the reach and resources of Exertis.”

Existing contact details for CU remain for Exertis Unlimited.

Exertis saw its operating profits decline year-on-year from over £49 million to £35 million for the year ending March 31 2016.

The financials were released today (March 17) by its parent company DCC. Revenue, however, did increase by 3.9 per cent from £2.350 billion to over £2.4 billion.

Exertis claimed the decrease was caused by ‘a reduction in sales from one large supplier’ and a slowdown of growth in the market. DCC did not reveal the name of the supplier. It said in the financial release: “The UK business was materially affected by a reduction in sales of products from one large supplier and also by weaker than anticipated demand for tablet computing, smartphone and gaming products.

“These factors contributed to a like-for-like sales decline of 7%. Although the business achieved growth in other areas such as audio visual and components, the change in product mix, together with the effects of negative operating leverage, contributed to a reduction in operating margin in the UK.”

Revenue and operating profit across the entire group was more positive, however. Revenue increased year-on-year from £2.9 billion to £3 billion. Operating profit increased 35.5 per cent from £221.7 million to £300.5 million.