Technogym: health and artificial intelligence to support margins

On the one hand, the theme - transversal to the different customer types - of health (and its protection) supported by the same product evolution (also thanks to Artificial Intelligence). On the other, the focus on the geographical areas of the Middle East and North America. These are among the priorities of Technogym, whose Letter to the Saver heard from top financial executives, in support of the business. Yes, the business. The wellness multinational reported rising revenues and profitability in the first half of 2024. Turnover stood at 402.1 million, up 9.2% at constant exchange rates compared to the same period in 2023. Ebitda and Adjusted Profit also expanded, reaching EUR 66.7 million (+12.4%) and EUR 32.5 million (+15.4%), respectively.

These results were aided, among other things, by the performance of North America and Meia (Middle East, India and Africa). Apart from Italy (+16.8%) and the former Europe (+6.7%), the USA and Canada - again in the first half of 2024 - brought home an increase of 8.4%. Africa, India and the Middle East, on the other hand, grew by 16.8%. In particular, the latter area was driven by the Middle East, which is one of Technogym's focuses. This is a world in which movement, sporting activity, and wellness are among the ultimate factors of social modernisation.

With which one can understand why, on the one hand, there is a high demand for Technogym products; and, on the other, the group has, among other things, opened a branch in Riyadh (Saudi Arabia) where a boutique will also be opened. In short: the Middle East is strategically relevant for the company. Similarly to North America. Here, with respect to Canada, the group - after the establishment of the legal entity - has started direct management of the local business. With reference to the US, on the other hand, it must be emphasised that the customer base is in line with that planned for the entire group in the future. That is, approximately 20% for BtC and 80% for BtB.

Against this background, then, what are the possible dynamics of the different markets? Europe is confirmed with an expansion close to the average annual increase estimated for society between 2023 and 2025. That is, a CAGR of 10%. Apac, which at last year's Investor Day was expected to develop at lower rates than the group, could have more opportunities by 2025. North America, for its part, after a year also below the company's CAGR, is now estimated to be travelling in line with the average annual rate of the entire company. And it could, again looking ahead to 2025, have more opportunities. Finally: the Middle East. (included in Meia).This is expected to grow at an average expansion rate of more than 10% per annum. From which - without prejudice to the objective of growth in absolute terms in all markets - it cannot be ruled out that Meia could gain - in the medium term - a few percentage points in revenue impact.

All roses and flowers, then? The reality is more complicated. The saver expresses a concern. In China there is a slowdown in the rate of economic expansion and a decline in consumer confidence. This is an environment that negatively affects the sale of Technogym's products in that country and, consequently, could weigh on the growth of Technogym's business. The group, although aware of the situation, makes a profession of calm. Firstly, it explains, the relevance of the Chinese market is limited and, therefore, the impact on the overall business is circumscribed. In addition, says Technogym, the geographical diversification of the business - as the latest results themselves prove - allows the trend in other areas to more than offset the trend in the former Middle Kingdom. Finally, the company concludes, the group boasts a flexibility on the production front - as shown, for example, during the Covid period - that allows it to quickly handle the various market dynamics. Even the negative ones. However, the saver expresses another doubt. The concern is about the Middle East. The area, unfortunately, is affected by dramatic military events. A context in which the uncertainty of the situation could lead to a lower propensity to buy products, including those of Technogym. The group, which is hoping for an immediate diplomatic solution to the tragedies upsetting those lands, indicates that it does not see any impact on business. Also because, the company adds, its business is linked to people's desire to feel good. And in this sense, it is recalled, Meia rose 16.8% in the first half of 2024.