Unieuro, efficiency and more service revenues against the weak market

On the one hand, also thanks to the integration of the newly acquired Covercare, increase revenues from services. On the other hand - in the face of the same weak reference market - to continue cutting costs and seeking greater operational efficiencies. These are among the priorities of Unieuroo, whose top management was interviewed by Lettera al risparmiatore in order to support the business.

Yes, the business. The group recently carried out the shopping spree of Covercare, a company active in the world of all-round services for consumer electronics. The offer of the acquired company is not, however, only in favour of the segment's traditional customers, but also of subjects such as multi-utilitities (from Hera to Iren), large telephone companies, or the subject that manages the Auditel service (since the beginning of the year, Covercare has been offering services related to the equipment for the survey of ratings). This feature explains many of the 'whys' of the operation: on the one hand, the move allows for accelerated growth in the service sector, even in non-traditional areas; and, on the other, it helps to create an ecosystem around the consumer/customer, which - among other things - increases affiliation with the group itself.

All as easy as drinking a glass of water, then? The reality is more complicated. The saver - all the more so given the importance of the move (60 million investment plus cash, and then an earn-out of up to 10 million by 30/6/2026) - expresses a fear: there is execution risk for the transaction itself. Unieuro, although aware of the need to evolve its service delivery culture, does not share this concern. First because - the company recalls - the many acquisitions made in the past show the group's efficiency in integrating new realities. Also because - the group states - an important focus in 2024-25 is placed precisely on the implementation of the extraordinary operation (in the board of directors of the integrating reality, for example, the entry of a 'transition manager' is foreseen). Finally, because - in spite of the negative impact on labour costs as a result of the new collective bargaining agreement for commerce - the company indicates that it is precisely Covercare that will be able to contribute to the achievement of the group's profitability guidelines for the end of the current financial year.

Beyond M&A, however, the strategy of pushing service turnover is clear. In this sense, it may be recalled that Unieuro has started offering extended warranties on its products, through a sort of subscription. That is, if one opts for the extension, the purchaser does not make a single additional payment, but rather a disbursement in periodic instalments. These, each time, renew the contract. Not only that. The group, on the one hand, has activated the service for electronic products already in the customer's possession, in addition to those purchased; and, on the other hand, is studying the possibility of working with second-hand products. Also thanks to Covercare's know-how, Unieuro is thinking about the opportunity to recondition 'devices' already used by the customer and then resell them. In short: there are many initiatives on the table and the objective, in the medium term, is to reach a double-digit percentage incidence of services on overall turnover (they were 5.9% at the end of 2023-24). The challenge is significant, but the will - in line with the 'Bejond omni journey' business plan - is to reach the target. Not least because the marginality of the services world is higher than that of simple sales.

So far, some suggestions on 'services' and acquisitions. Another priority of the group, however, is the search for greater efficiencies. On this front it must be remembered that, in the context of a declining reference market (-6.9%), Unieuro reported income statement figures in 2023-24 that went in the opposite direction. Adjusted revenue fell from EUR 2.811 billion in 2022-23 to EUR 2.635 billion last year, a drop of 6.3%. Adjusted Ebitda, on the other hand, rose slightly (+0.9%) to 143.9 million. Finally, both EBIT (-5.9%) and adjusted net profit (-10.6%) declined again. That being said, the interesting dynamics concerned turnover and EBITDA. The former was down by about 177 million, while the latter grew by 1.3 million. That is: Unieuro has found operational efficiencies and reduced costs: from logistics charges (-5.6%) to marketing (-16.8%) to other costs in general (-16.4%). Any specific examples? Among other things, the company acted on the sales channel front. Thus, it re-negotiated the rents of retail shops, or closed some of those with negative EBIT. In addition - while the omnichannel and online sales remain essential - it has favoured physical shops (which have higher margins on average). On the other hand, with regard to product offerings, the emphasis was on those with higher profitability. In conclusion: Unieuro has implemented various actions, across the entire business, aimed at reducing costs and seeking greater operational efficiency. Against this, the saver - playfully - makes a consideration: in the business plan "Bejond Omni journey" it was foreseen, after the drop in 2022-23 - an adjustment of the reference market in 2023-24. In reality, the dynamics of the last financial year were worse than estimated, and problems seem to persist in the start of 2024-25. The fear is that there may be a further impact on the company's business. The company, indicating that things are taken care of and not worried, says it can handle the situation. First of all, it is explained, the interventions on costs and efficiencies will affect the whole of 2024-25 (and not only part of the financial year as in the past). Furthermore,' says the group, 'the acquisition of Covercare will have to make its contribution. Lastly,' is the company's reasoning, 'the arrival of products 'augmented' by artificial intelligence will also help on the sales side. In this sense, Unieuro, which expects the It sector to recover in the second half of 2024-25 and to be flat or slightly down over the entire year, confirms its target - for 2024-25 - of an adjusted Ebit between 35 and 40 million. Revenues and free cash flow, for their part, should (again at the end of the current financial year) be in line with those of the previous fiscal year.