TECH Pacific boss Tony Butler has refuted claims that the largest local distributor has taken a hammering this year.
The distributor, regarded as the broad-based New Zealand titan, has lost a number of high-profile agencies in the last 12 months fuelling speculation that it is losing ground and that Butler has taken more of a back seat in daily operations.
However, if the distributor had to undergo a full health check, it would recieve a good prognosis, says Butler, adding that big third-party agreements with Vodafone and JVC will give the business a significant boost. He concedes that securing these arrangements has removed him from the daily operations of “reseller land”.
Although the company’s recently released 2003 financial results show a drop in revenues and only a slight improvement in profit, Butler proclaims the patient to be in excellent health. However, he points out that the distributor is unlikely to sustain the strong growth it has experienced over the last 12 years.
“We have grown at a compounded rate of 30% per annum since 1992, while the market place has grown by around 10% — our growth will now be largely tied to the growth of the industry.”
The company’s financial results for the year ending December 31 2003 show revenue of $412 million, a drop of $4.4 million over 2002, while profit increased by just over $900,000 to $11 million.
Butler says despite the “flat” revenues, unit sales actually increased by 25%, which was not reflected in turnover as the strength of the New Zealand dollar last year resulted in a lower average sales price on most products of around 25%, effectively cancelling out the growth in unit sales. “The high rate of the dollar is one of the biggest challenges we face,” he explains.
Butler does not expect this situation to increase substantially this year.
Butler does however expect profits to increase this year, as Tech Pacific has secured the third-party back-end logistics arrangements with JVC and Vodafone, which he says will be reflected more in profits than in turnover.
“The Vodafone business is big and covers handheld phones, PDAs, SIM cards and prepaid vouchers. It is probably the largest outsourcing contract in New Zealand today,” says Butler.
“These are low-cost, high-profit activities, which will impact more on the bottom line than the top line — I want to grow profit faster than revenue.”
Meanwhile, Butler says the company is “on balance” with the number of agencies lost and gained in the last year.
Over the last 12 months Tech Pacific ceased distribution of five lines — IBM software, 3Com, Veritas, NetIQ and HP spare parts — but at the same time took on sole agreements for IBM replacement toners for HP Laserjet printers, Fuji Xerox printers, BenQ and Linksys.
It also extended its relationship with Business Objects and Red Hat, while taking on a wider range of products by Symantec, following the vendor’s acquisition of a number of companies in the last year including Brightmail and PowerQuest. “This is a fairly normal turnover — some vendors decide to change their distribution models, while with others we might decide to disagree with their strategies. I do not think there has been an impact on our image.”
But, Butler does not refute the perception in the industry that he had taken a more of a hands-off approach to the business.
“Over the last year I have been highly focused on strategies around the services we offer and heavily involved with Vodafone and JVC, so have been removed from the everyday frontline in reseller land,” he says.
Butler has also stepped back to allow those heading up the company’s newly formed three divisions, enterprise, consumer and commercial, to be more visible.
This restructure into divisions will also lead to more growth for the company, says Butler, as each division is competing with other similar-sized distributors as if they are separate businesses that are not part of the titan parent.
“Our enterprise division is a $100 million business and has Express Data or Datastor, who are not much smaller, snapping at its heels, so Scott Cowen [head of the division] needs to be visible among our customers as the one who runs it.”
In his final prognosis Butler says Tech Pacific is in very good health all round — he expects revenue growth this year to be more in line with the New Zealand market at a rate of around eight to 10% and unit sales to increase by between 12 and 15%.