Sesa's bet: more services and technology for the financial world

Amongst the tables of balance sheet presentations there is always one that is more interesting than the others. This is also the case for Sesa. The group, whose top management was heard by Letter to the Saver, published its Ebitda breakdown by business segment at the end of the first half of the 2023-24 financial year (31 October). The breakdown is as follows: Value Added Distribution (Vad) and Software and System Integration (Ssi) account for 51 and 40.1% of the total, respectively. The remaining 8.9% of EBITDA is generated by Business Services. In general, compared to the same period in 2018-19, we note, on the one hand, the increase in the relative incidence of Ssi and Business services; and, on the other hand, the decrease in the weight of Vad. The dynamic, eliminating the seasonality effect, is confirmed at the full-year level. The breakdown of Ebitda for 2022-23 is as follows: Value Added Distribution and Software and System Integration are worth 52 and 40.5% of the total. Business services, for its part, accounts for 7.5%. In 2017-18, Vad generated 64.3% of Mol and Ssi 32.7%. Busines services, on the other hand, had to make do with 3%. In short: net that the profitability - in absolute value - of all divisions went up, Ssi and Business Services (Bs) accelerated the most. Is this trend confirmed in the medium term? The answer is positive. The company, having said that the aim is to expand in all areas of activity, predicts that, over a period of three to five years, the Ebitda split could be as follows: around 40% for Vad; around 45% for Ssi and 15% for Business Services. In particular, therefore, Busines services should be the 'hare' among Sesa's business areas.

Yes, Business services. But what is it all about? In this sphere, in principle, the group - which, it should be remembered, is a serial acquirer - brings back its proprietary hi-tech solutions, and services, for the world of financial institutions: from banks to insurance companies to SGRs. Products useful, for example, for computerising treasury or supporting wealth management. Recently, then, Sesa has expanded its offer with platforms - again digital - to support securitisation. The focus, therefore, is essentially on the world of finance. Although, hypothetically, the company is considering major expansion in the utilities sector (where, moreover, it already has a limited presence). That said, Business Services, for the full year 2023-24, is expected to generate turnover of around EUR 120 million (it was EUR 84 million the previous year). The Ebitda margin, for its part, is expected to stabilise at around 13 per cent after the acceleration of last year.

All as easy as drinking a glass of water, then? The reality is more complicated. The saver remembers that, in the wake of restrictive monetary policies, the economies of several countries (especially in Europe) have slowed down. This is a context in which companies can freeze investments in information technology and, thus, impact the activities of companies like Sesa. The group, inviting a more articulated analysis, does not share this consideration. The company, it is reminded, is focused on B2B. In other words: customers are essentially companies, industrial districts or financial institutions. All realities that, beyond cyclical events, are characterised by the long-term and structural trend of digitisation of business. In this sense, is the indication, one can look at the dynamics of It. On the one hand, in 2023, with the global sector expected to rise by 3.5 per cent, devices (on which Sesa is not focused) will fall; but, on the other hand, the enterprise software segment will rise. Put differently: the group's target markets, the company indicates, remain strong. Not only that. The company, as its history shows, points out that it is able to outperform, also thanks to M&A, the performance of its own target markets. Therefore, Sesa does not see any particular problems on this issue.

But it is not just a matter of business services or macroeconomic risks. In addition to Bs, the group has two other areas of activity. The first, a historical sector under ComputerGross, is Value added distribution (Vad). That is: B2B value added distribution. The second is Software sytem integration (Ssi). That is to say: the offer of tailor-made IT systems for companies, using the products of major IT vendors. Well: with respect to the latter, Sesa focuses its efforts - among other things - on cyber security and cloud computing. As well as in data science. In particular, there is a focus - across the board - on Artificial Intelligence (Ai) solutions. An example? The applications of Ai in support of cybersecurity for businesses. Those enterprises which, again in the SSI, are also served in Europe. The group, it should be remembered, has two pan-European hi-tech platforms. One is for cybersecurity between Spain, Germany and Italy. The other, on the other hand, concerns engineering (design in favour of company production) and is articulated between different countries: from the domestic market to Spain and even Germany and Romania.

The intention - evidently - is to strengthen the existing business. Without, however, excluding the possibility of creating, also through M&A, further pan-European businesses. For instance, in data science or digital green. Having said that, with regard to the outlook for the whole of 2023-24, Software and system integration is expected to grow by around 20% compared to the previous fiscal year.