Otto Group reports solid growth pushed by Hermes acquisitions

The growth rate of Otto Group continues to be impressive, with 2017 sales rising 9% to €13.6bn.

Most financial metrics received a boost from favourable market conditions, but it appears evident that the multi-channel retail and logistics services company also benefited from a balanced investment strategy in the 12 months ended 28 February.

Not only is the Hamburg-headquartered firm well on track to hit its 2022 turnover target of €17bn, but its profits and core cash flows also surged, fueled by a mildly rising net debt position and stable capital expenditures (capex), as it continued to invest in staff last year.

EBITDA rose only 2.7% to €750m from €730m, yet EBIT was markedly higher, up 11% to €405m. As far as underlying profitability is concerned, growth came at little cost of dilution for margins, with EBITDA margin at 5.5% against 5.8% in 2016, and unchanged EBIT margin at 2.9% for the year. Meanwhile, on a reported basis, group net income shot up to over half a billion euros.

Chief executive Alexander Birken said the company “successfully pushed the limits in all core areas of the strategy – Kulturwandel (cultural change), innovation, customer relevance, and economic success – and created the prerequisites for further sustainable growth”.

e-commerce was again a key growth driver, turning over almost €7.9bn, up 12.3% from €7bn one year earlier.

The rise in sales was meaningful in the core multi-channel retail division, which turned over €10.5bn against €9.8bn one year earlier, while sales from financial services and other services also contributed to higher consolidated numbers. 

“The service segment, which mainly comprises Hermes Group companies, reported a particularly strong increase in revenues,” Otto Group said, thanks to a 12.9% growth in sales. “Factoring in the financial-year harmonisation, growth was 15.8% and reached €2.3bn,” versus less than €2bn of services sales in 2016.

The growth of Hermes Group was only partly organic.

In fact, the acquisitions of French parcel business Mondial Relay and two-man handling specialist Girard Agediss boosted its growth prospects in its main European markets.

At the time those deals were announced in April 2017, Hermes had a staff of 12,618 – with the vast majority, 8,500 full-time employees, based in Germany – and deal-making, it said, helped it become the second largest logistics service provider in Germany, Great Britain and France. 

By 2020 Hermes plans to invest up to €500m “in building and expanding high technology logistics centres, goods warehouses and ParcelShop network, as well as in electromobility for delivery in metropolitan regions and an individualised, more flexible delivery system supported by business intelligence.”

Source: Transport Intelligence, May 24, 2018

Author: Alessandro Pasetti


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