Earnings call transcript: Econocom Q4 2024 sees revenue rise, stock dips

Econocom Group SA (EBR:ECONB) (ECO.PA) reported a 3.6% increase in total revenue for the fourth quarter of 2024, maintaining its operational margin at 4%. Despite these positive results, the company’s stock experienced a slight decline, closing at €1.80, a 0.56% drop from the previous day. According to InvestingPro data, the company maintains a healthy dividend yield of 7.05% and trades at an attractive P/E ratio of 8.09. The company outlined its strategic focus on growth and innovation, revealing plans for expansion in key European markets.

Key Takeaways

• Econocom achieved a 3.6% revenue growth in 2024, up from 1.2% the previous year.
• The company maintained a stable operational margin of 4%.
• Net financial debt was reduced to €90 million.
• Stock price fell by 0.56% post-earnings announcement.
• Econocom is targeting strategic acquisitions worth €300-400 million.

Company Performance

Econocom demonstrated resilience in the IT distribution market with a notable 3.6% revenue growth in 2024, a significant improvement from the previous year’s 1.2%. The company maintained its operational margin at 4%, showcasing efficient cost management. Econocom’s diversified business model and strong presence in Western Europe have positioned it well to navigate market challenges.

Financial Highlights

• Revenue: €[amount] (3.6% increase YoY)
• Operational margin: 4% (no change YoY)
• Net financial debt: €90 million (reduction YoY)
• Adjusted profitability: €60 million (stable YoY)
• Positive free cash flow: €1 million

Market Reaction

Despite positive financial performance, Econocom’s stock price dipped by 0.56% to €1.80. This movement places the stock near its 52-week low of €1.73, reflecting cautious investor sentiment amidst broader market trends. InvestingPro analysis suggests the stock is currently undervalued, with a strong overall Financial Health score of 2.64 out of 5. The decline suggests that investors may be awaiting further clarity on the company’s future growth strategies. Want deeper insights? InvestingPro offers exclusive access to detailed valuation metrics and 6 additional ProTips for Econocom.

Outlook & Guidance

Looking ahead, Econocom aims to achieve revenue growth exceeding 3.6% in 2025, building on its current market capitalization of €319.75 million. The company plans to pursue strategic acquisitions valued between €300-400 million and is focusing on expanding its footprint in Germany, the Netherlands, the UK, and Spain. With a current ratio of 1.63, InvestingPro data indicates strong liquidity to support these expansion plans. Econocom is also preparing for an AI-driven market transformation, which is expected to enhance its service offerings.

Executive Commentary

Angel, Econocom’s CEO, emphasized the company’s long-term strategy, stating, "We are not just working for the short term, we are working for the medium and long term." He also highlighted the impact of artificial intelligence, noting, "Artificial intelligence is impacting our business, and we have to prepare our operations."

Risks and Challenges

• Potential market saturation in the IT distribution sector.
• Macroeconomic pressures in key European markets.
• Challenges in integrating strategic acquisitions.
• Navigating regulatory changes related to AI technologies.
• Maintaining competitive advantage amidst evolving customer needs.

Q&A

During the earnings call, analysts inquired about the impact of Microsoft (NASDAQ:MSFT) partner incentive changes, which Econocom is navigating with strategic adjustments. The company also addressed the implications of a cyber attack on SignaTrade and explored the effectiveness of its agent sales model. Workforce turnover and the role of artificial intelligence in shaping Econocom’s future operations were other focal points of discussion.

Full transcript - Econocom Group SA (ECONB) Q4 2024:

Moderator, Econocom: Welcome, everybody.

Presenter, Econocom: Welcome here at Pluto for the twenty twenty four Financial Results Meeting. Due to the strike in Brussels, the meeting is taking place here in Putot within our HQ in France. Today’s speaker will be Jean Louis Bouchard, our Founding President Angel, our CEO and myself. The agenda will be around four points as usually, strategic updates, 2024 financial performance, outlook for next year and we’ll have a Q and A session. Before leaving the floor to Jean Louis, let me share you a small video with a certain number of key transaction and milestone events of the twenty twenty four years.

Jean Louis Bouchard, Founding President, Econocom: Okay, I’ll start in English, but wanted to get a very difficult question. I will just address three subjects. First, remind you rapidly what is our business, what is our job. We’ve been asking ourselves this question for fifty years and it’s self changing. But thanks to Havas and other people, we are starting to understand a little bit what is our business about.

The second will be our main challenge and the third one will be Angel. So the first and we’ve been working on it, what is it current on? What do we do? Because every time people try to compare us to other companies, it’s never exactly the same. It’s always a bit different, but there is bits and things which are the same.

But mainly, what is happening? The tech industry, the tech offering in the last fifty years has been booming and is still increasing in speed and in diversity. Within this tech offering, we have thousands of customers, mainly in Europe. And those customers, they are like us. They are a bit lost among all these offering.

What is Econocom? Econocom is 500 salespeople, but not sales. We are technical sales. They’re very educated in tech, but they’re also very good sales. And this, all those 500 people, they meet with customers all day and they together, put together parts of this tech offering, bundle it into contracts and finance those contracts.

So this is 500 sales, about 2,000 administrative and 5,000 technicians, but highly qualified technicians. In most of the countries, we have services in Spain, Belgium, now starting in Germany, in France, most everywhere. And as you see, we can sign contracts. We also have partnerships with people outside of Europe and we can sign support contracts with very large companies in 100 countries throughout the world. So our business is really technology oriented.

We try to masterize this technology or anyway we put pieces to pieces and make it together so we can install it and make it work at customer space. And on top of it, we finance it most of the time. One third of our business is financing. One third is equipment, delivering equipment. And one third is servicing those equipment, making those equipment and solutions work.

So

Econocom: this

Jean Louis Bouchard, Founding President, Econocom: is our business. Our challenge, the main challenge because when you we’ll be presenting you what we have done in ’twenty four and what we forecast for ’twenty five. The main challenge that we’ve been enduring, but it’s more and more every year is that we call it one economic hub. It’s our strategic plan. But what does it mean?

Customers are getting larger and larger and larger all the time. And those customers, they want an offer not in one country, they want an offer worldwide or at least Europe and wide. So and also our suppliers, people that provide tech, which are software, hardware, whatever they provide, even finance, they also want to address large company covering Europe. They don’t want to address company only in Belgium or only in Spain. So we need to have a European coverage.

To have a European coverage means we have to be that’s what we call one economic. But it’s a huge challenge for us because we have been resilient for fifty years. The reason we have been resilient, not only is because we have very talented people in our group, but because it was very diversified geographically and business wise. But now if you want to have one econoCom, then you have to put things together. You have to have more unity.

So you have to change communication. You have to change rules. You have to change the world, the way you operate. But you want to also keep the creativity. So it’s a double challenge to make one econ account bigger and stronger and operating smoother.

But at the same time, we need to keep all the creative people and talented people and keep them from fighting too much together. So it’s fun to do it. But it’s not only econoCom. This is all big organization have this challenge. But it’s even more challenging for econoCom because we don’t have a major product with our name on it.

We have creativity all the time. The third thing I wanted to talk to you about is Angel, okay? I’ve been working with Angel for nineteen years, and I’ve been very stupid for the last seven or eight years because seven or eight years ago, Angel came to me and said, okay, I’m having fun in Spain. Well, he started Spain with 10 people. Now they’re 1,800 people.

So he was driving a lot of fun, thank you. But at the same time, he said, okay, I’m free in France. I like this group. I would love to work with administration with the management of the group. And well, we both agreed on it, but other people did not agree on it.

So eventually, it did not happen. So I tried to pass the help to my son, Robert, but the group was not ready for it. And he was he did not know enough economic harm to be able to be successful too soon. So it did not work. Then about two, two point five years ago with Angel, we hired Patrick Van der to help us to manage the group.

Eventually, well, it was okay, but not successful enough. And we decided last July, July ’20 ’4, to promote Angel as CEO. And I should have done this ten years ago because I’m so fond of Angel. He’s been doing such a very good job. He has a very good team.

He will present it to you. And as you see, I am very happy with it. I’m very relaxed. I’m doing my job better than before. My job being, I still handle the group activity, communication with Avast team and Richard.

I’m in charge also of hiring or coaching the hiring of the 50 key people to manage with Sofia Daturale. That’s mine too. And I’m also Chairman of the Board, and I’m learning how to tell the Board. So I still have a lot of activity. I’m working half time, but I love it.

Thank you, Jose.

Moderator, Econocom: Thank you, Jean Louis. Thank you very much. So the first thing I wanted to say is to explain what happened in 2024, and we will be speaking about the new governance and so on. And the first thing I want to tell you, I’m very glad to keep on being the CEO because you know that from ten to ten, six months is enough. But I will be keeping being the CEO, and I will try to do my best, of course, to keep on being the CEO of the group.

So what happened in 2024? We make a good year in terms of first year of the strategic plan, meaning that we are preparing the group for the future. So the good thing is that when you structure a strategic plan, you know what you want to do at the end of the building of the plan and you know what you don’t want to do. So we decided to divest some activities. We decided to invest in some activities.

We decided mainly to have a very strong organic growth because we don’t have we don’t want to have a lot of debt. And then in the first year, it was a very big challenge to recruit a lot of new sales and agents in order to reinforce the group. So this is what we call mission a possible. And it was a success in 2024. So the recruitment, and we will be coming back to that afterwards, have been a success.

Also from the marketing point of view, also from the organization of the cross selling between activities and countries, countries. We made many evolutions in the organization, and I think that we are ready for the future in this sense. So the top line is good. I know that the bottom line is different, and we will be speaking about the reasons why. And Philippe will show the figures and I will be coming back after Philippe will show the figures.

But in the top line, I have to say that 3.6% total growth, organic growth because we did not have the acquisitions in 2024, as you know. Personally, I think it’s a very good trend because the market was bad. And in the distribution, for example, that is now the main activity of the group is more than EUR 1,200,000,000.0 turnover. We had a flat market in Europe. We had a negative market in France.

That is our main activity. It was less 2% in France. It was flat all over the 2024. And we started in the first half of the year with a slowdown, but at the last months were better and we expect and we will be speaking about the trends for the next year. The last months were better.

And at the end, we are also positive in the distribution activity all over the group, plus 0.5%. So very good organic growth compared to the previous year, it was 1.2% and then we are at 3.6%. Then we did not had any opportunities of acquisitions, and we prefer to start selling that bargain. But we closed tactical deal in January in Germany that is a target country for the group and in refurbishment that is a strategic vertical

Presenter, Econocom: for the group.

Moderator, Econocom: The new governance, you know that the Board, besides about the strategy, the Executive Committee, I’m very happy with this Executive Committee. We are mixing experience and different capabilities with Philippe that is a newcomer because he came in September. MaltaBox, that is a very nice company that can come both. And Quintin as a global group tech. And now we’re facing other challenges in artificial intelligence.

It’s a very nice CAMEX. We meet twice a month and it’s a very good environment. But we are not alone. We have a general management committee that is based everywhere because it’s all the country managers of the group and is very business focused. We meet once a month in different cities.

And this is the engine for the business and the development of the group. And we also have four women that are very good ones with the main support functions of the group. These are the management that is in the website. This is a very good team and I’m very proud about. And I want also to say, and it was in the video, that we onboarded almost 20 top managers in 2024.

So we onboarded a lot of sales. We onboarded also a lot of managers. For the Q and A, we will be all the Comex. Instead, you will be able to ask about anything and we will be able, I think, to answer about anything because we are very complementary. So if you have marketing business issues, it will be Israel.

All the issues coming from artificial intelligence, it will be Quentin. All the things about finance and M and A will be Philippe, and I will be also there, but it’s not so important. We have also Anne Bouchon, that is the Secretary of the COMEX and very nice to work with Anne and to prepare all these sessions that are very important. This is the main point for our future. The sales force recruitment, the reinforcement of the sales force of the group.

And I am very proud to say that we onboarded more than 60 agents and sales in net in 2024 in the group. That is was more than expected. I remember that we are now about 500 sales and agents in the group. Then we said at the beginning of the strategic plan that we wanted to onboard 100 new agents in the three first years and 160 sales and agents in net. And then we expect to be about 600 sales and agents at the end of the three first years of the plan.

600, it’s a lot of money because the revenue in the average between $5,000,000 and $8,000,000 for a good agent or a good sales. So you can make the calculations and it can be a very powerful improvement of our organic growth. The marketing and the organization of the cross selling of the group between the hands of Israel, I think that, that is a huge work that was done in 2024. It was one portfolio, we mean. It’s all the offerings of the group.

And this is a quite huge document, very nice. And we are training all the sales of the group in order to be able to tell to the clients which are all the offerings that we can deliver, all the offerings of the group. And then we put in place also the new Gather brand for audiovisual. Audiovisual, it’s a business where we want to become the leader in Europe. We could say that we are the leaders because we have already EUR $230,000,000 turnover, but we are looking for some other companies in some in Germany, in UK because we are very present in France, in Spain and in The Netherlands.

This will be a development we will be seeing that in

Econocom: the next

Moderator, Econocom: years. And Gather will be a powerful brand in Europe. From the point of view of the tools, we finalized with Fintan in place all the tools for the leasing activity. So we have new tools, sustainable tools, and it allows for us it’s important because it’s much more easier to make international deals. And we are going to the P and S and services activities.

And also on this side, a big effort is to be done on artificial intelligence, and I will comment back on that. So we sold Lesavailes. It was very good. We were not aggressive in 2024 because we want to preserve our financial solidity. That’s very important.

And the acquisition in Germany is not a big company. It’s a medium company that is strategic because it’s first, Germany second, reconditioning refurbishment. Refurbishment with leasing, it’s all the life cycle of the assets and it’s one of the business of the future. So we are very glad about that. This is a company that is now is a B2B company for IT devices and is now refurbishing about 100,000 devices with a capability of refurbishing 150,000.

And we will be seeing the refurbishment at Equinixent Group.

Econocom: Refurbishment is our pledge to extend the lifespan of IT and reducing electronic waste, which is part of our Econocom impact, being responsible, useful and innovative. To expand our business in Germany, we want to be a strong partner for our existing and new customers, offering all of Econocom’s capability.

Moderator, Econocom: And now, Philippe, the floor is yours.

Presenter, Econocom: Thank you, Angel. So I will present the 2024 financial results. As mentioned by Angel, in 2024, Econocom benefit from a very strong growth, fully organic, standing at 3.6% compared with 1.2% on the previous year, which I think is a true testimony of the effort which has been put in in the sales force enhancement and development. This, and I think it’s quite important to mention, has been delivered throughout all our free business units in the context of a mixed market in Europe with certain geography, experimenting weather difficulty, weather lake of order, including in particular France, which has been exposed to political turmoil. One other thing, which is I think important is that last year, the guidance given by Iconicom to the market in respect of the development of the revenue was a bracket of 3% to 5%, and we’ve been able to fully deliver the guidance.

Coming on the three business units. As you can see, we experienced significant growth in the TMF segment, benefiting from the development of the usage and leasing approach compared to the ownership approach. The Product and Services business unit also experienced a positive growth, and services was able to deliver a 3% growth in a market challenged by a certain number of forces that will come back on it later, including in particular AI. In respect of the margin, as mentioned, in 2024, we invested quite a lot in the enhancement of the sales force with the 60 sales and agents, which lead us to have a million additional expenses on the back of the P and L. Nevertheless, we’re able to maintain our operational margin at a 4% stable profitability compared to last year, which I think is quite an achievement.

Without this million investment in the P and L, we would have been able to grow and enhance the profitability of the group compared to last year. And we expect that next year, both investment in the sales force will not only turn into turnover development but as well into profitability with enhanced profit margins. Then when we look at business unit by business unit, so on the product and service and solutions business unit, the growth was up 0.5%. So we topped up EUR1.2 billion revenue in a market marked by certain adverse events, including France, which we think now is fixed, obviously. Significant growth were experiments in certain geography and my colleague Israel will come back on that.

And we maintain a 3.3% profitability in this context. It’s worth to notice that Products and Solution is one of the business units who bear probably more of the investment in the sales force development and the EUR 7,000,000 I mentioned. On the Technology Management and Financing, we experienced very significant growth, lead by the attractiveness of the financing solutions. The development was in particular strong in the Southern Europe area, including Italy, including Spain, where the development of the business was significant. France also experienced positive development and the profitability remained robust at 4.4%.

For the service business, we had the growth of 3%, as mentioned. France and Spain delivered strong development of their turnovers and the profitability there stand at 5.1%, which is the highest profitability in the group. Then looking at the overall P and L, as mentioned and explained. So in respect of the revenue, we had a solid development of the revenue standing at 3.6%. Operational margin remained robust despite investments in the sales force as discussed.

We had lower operational profits as the P and L was marked by certain number of exceptional item, including in particular exit costs, write off and certain number of transformation investments for the future. The profit stands, hence, at 38.4%, decreasing compared to last year due to those two items, I. E. Investment in the sales force and those one off items. Net profit stand at 37.7% as we had certain number of negative events, including in particular on discontinued operation.

As you may recall, during the first semester, we are able to show a positive development of the discontinued operation, thanks to the profit in conjunction of the disposal of Les Aves. During the second semester, one hour operation, SignaTrade, which is a e procurement platform, experiments certain number of cyber attacks, which lead us to have certain number of extraordinary costs in conjunction with the remediation of its cyber attack impacts. Adjusted for non recurring items, the profitability of the group stand at EUR 60,000,000, which is totally in line with what we experiment last year. Beside the P and L, we had a very significant reduction in the net financial debt at Econocom. One point which I think is worth to be mentioned is in 2024, the group was able to recoup a positive cash flow generation at operational level, unlike what we experiment in 2023.

So free cash flow rising from the operation stand at a positive million, which is very solid figures and the turnaround compared to 2023. Then we had the benefit of the disposal of Lesabe and certain number of share buyback and dividend that you can see on the table and the negative costs of the IFRS five, the cash cost of the remediation of Cynotre, which is an asset mark to be disposed next year in 2025. In respect of debt ratio, we are now underpinned by this EUR 90,000,000 of debt, net financial debt, a very solid debt ratios with a gearing of 0.2 and the leverage below one times EBITDA. Besides financial figures, as you know, Econocom is very much involved in an extra financial items. So I will not go into details around all those achievements in the ESG.

One point really to worth mentioning is that in nowadays environment, more and more of the tender offer that we have to respond to with our clients need to be fit in respect of ESG requirements. So it’s not only an option beside the fact that EconoCom is for quite a long time involved and committed in this ESG route. It is now a prerequisite to be in a position to answer positively to Vostende offer. On top of those milestone, we achieved in twenty twenty four three major events. So we are able to improve our gold medal at Eco Medici with an increase of four points.

That’s quite an achievement in a difficult and even more challenging environment compared to 2023. That’s the first point. Second point is we had our target at SVTI, which were approved and it’s also quite an achievement. Not so many company can tell the same. And we launched Econocom Impact, which is a new digital outlet to present our roadmap and commitment, which is fed by all the commitment and the initiative at group level for the various business units and for the various teams.

So now, Andre will share with you some outlook for 2025.

Moderator, Econocom: Thank you, Wiliefer. So takeaways, we said that the growth organic growth in revenue seems to us to be a good one. But mainly, the most important thing is that we reinforced a lot our sales force for the future. Strong reduction in the debt. We are very prudent in that sense.

So we want to sell and before buying a lot. So that’s very easy to understand. We will keep on we had our first acquisition that is completely in our strategy, BBNET. And very important, because I don’t want to forget that on the bottom line, we are not so good this year. We have a big challenge.

We have a big challenge that we are facing, everybody, is artificial intelligence. Artificial intelligence is impacting our business, and we have to prepare our operations in order to be able for the next years to be prepared on that. It means that we have to face transformation and we have to reorganize some business models and delivery models. And this is something where we have to make some investments and also some expenses in order to be able to be profitable for the future. So for ’twenty five, our guidance will be to have growth higher than the one we had in 2024.

Why do we think that this is possible? First of all, because we expect a return from the investments on the reinforcing of the sales force we made in 2024. Second, because the market trends, we think that will be good, will be better at least. So if I tell you about what the context The UK analyst company is telling us, they are telling us that we were in distribution in Europe, plus 1% in ’twenty two, minus 2% in ’twenty three, flat in ’twenty four and expected to be plus three percent in ’twenty five. So this is the second reason that

Econocom: we

Moderator, Econocom: will be good for our development. So also, we will have for our total growth some new acquisitions, very targeted, strategic, targeted, synergetic. And we will be keep on going with the transformation needs that we will have because our main aim is to be preparing the group for a very solid performance for the next years. So we are not just only working for the short term, we are working for the medium and long term. We have a strategic plan that is coming through 2028.

We want to have a solid group from the financial point of view, profitable growth and very good efficiency becoming the leaders in Europe about the digitalization for our clients. Questions and answers. So Jean Louis, do you want to or we And maybe we can ask our comments to come on stage with me and we will be able to have

Jean Louis Bouchard, Founding President, Econocom: Anne, do you have the questions? Yes. I think you already received

Anne, Secretary of COMEX, Econocom: Yes, we’ve received several questions on the platform. The first one is about the situation of the growth for Iconicom compared to the market. And globally, how is the Iconicom positioned in the face of the evolution of the IT market?

Econocom: I can help with that. Do you want to

Moderator, Econocom: go? Good.

Econocom: Okay, please. So regarding that question, I think it’s good to make, it’s good to, we already talked a bit about this, but it’s good to make a bit story on this. The last, when we’re preparing the figures for 2024, the year context was telling us that it was going to be a year of growth, between 3% to 5% at moment. And then we started the year. Q1, suddenly everything changes.

No, no, no problem. The growth is going to be in Q2, later Q3. But finally, we were able to find that growth in Q4. So as Artur explained, our situation was quite good compared to them. Market flat, economic bond growing more than 2%.

Maybe if you want, I can also be about 2025. That’s pretty good. So Arashil explained that the market for 2025 is expected to grow 3%. I shall explain all that. You want my opinion apart from reading context, IDC and so on, I see that the next year is going to happen.

Why? Q4 was a good period,

Presenter, Econocom: so

Econocom: there was a clear growth. And there are three other main reasons. First one is artificial intelligence really happening, so that’s really a trend that’s going to happen. Second point for me, much more important is that Windows 10 is going to finish in October this year, not to finish. We have to operate into Windows 11 October this year.

So many of the laptops that are right now running, the market should be changing into a new one, thanks to that beautiful chip that is needed for Windows 11, that is good. And also, I think the last trend is, it’s now a period, if you remember and go back one minute to the COVID, when we were in the middle of the COVID, there was no laptops in the market. So all our main customers were trying to frame whatever that was there. So many of them right now, they are having laptops from Dell (NYSE:DELL), Lenovo, HP (NYSE:HPQ) or whatever it was in MediaMark. So it was really, really a tough moment.

And now it’s a period after five, four, five, six years that when everything should be changed. So that’s why again, the trend I think is really positive. So if we compare that with 2024 and the resilience that I think is one of the main points that is for us good is the resilience of Iconoclom, is how it’s possible that the company that in 2024, the market is flat, but be careful with that word because it’s flat in general in the market. If we compare really with our product mix, it was really depressing in some of the countries, especially in France. And we have the resilience to grow in that market, more than nearly 3.6%, but it’s for me fantastic.

If we go through 2025, what we have to cover is, it’s a good moment. We are expecting that growth of 3%. We need to change that resilient in the opposite way. So for me, for us, the good point should be increase our growth. Anko was telling more than 3.6 for that.

Thanks, because it’s going to be in our bond, so I hope it’s going to be good.

Moderator, Econocom: I’m sure, I’m sure.

Econocom: So But I think it’s possible. So I think the IT market for sure needs that growth. And I’m sure that Equinox is going to be able to change it and develop a higher growth, what you expect. So I think it’s enough for any other about the market.

Anne, Secretary of COMEX, Econocom: We received several questions on exceptional costs and recurring expenses. Can you elaborate on this topic? And can you give the trajectory for the coming years?

Moderator, Econocom: Yes, I will tell. Transformation means, in many of our activities, exit costs. So these are exceptional exit costs that are in exceptionals because these are positions that are not replaced. And when we speak about artificial intelligence and the impacts, and I would let Quentin develop on that, we need also to write off such a number of obsolete tools in order to be replaced by other ones. So, Quentin, maybe you can develop on the artificial intelligence subjects that you are developing on Grundlabovic.

I was not prepared to talk

Quentin, Group Tech Lead, Econocom: about it, but let’s improvise. So on artificial intelligence, I really think it’s a race that we are running, both on the global tech providers. They are racing, I guess, it’s really passionate to follow this race. And for us as well, it’s a race to be able to leverage it, to use it as much as possible for our customer for performance. And we are working a lot with Philippe Guyot with leading the services activity to really be able to leverage it and make it good for customer and also for our employees.

And it’s really a good experience to work with you on this, Felipe, because Felipe also is really willing to win the race and we are trying to win the race. And how do we know if we win the race or not? Is the customer who are telling us if we are ahead the rates or not. And we have already a lot of pillars in production where the feedback from customers and from employees is very good. And also, we are doing a lot of presentation to our customer in France, in Spain, Belgium.

And customers are saying, you are well positioned in the race. So if we know that we are well positioned, we want to run even faster to win this race. And it’s really, again, a fascinating topic that we are experiencing.

Moderator, Econocom: And then for the next years, I will complete because I don’t forget completely the question. I think that in 2025, we will have to make keep on making efforts. And our objective is to be 26 and mainly 2728%, a very profitable and growing company.

Jean Louis Bouchard, Founding President, Econocom: I may adjust because he’s shy. He doesn’t when you change management, usually you have this kind of thing happening. The new management tries to come up and look at what the previous management has done and make some changes, and those changes can be costly. And also, the former management did not always had the courage to address all the subjects at the same time, at the same level. But the new management has this courage.

So thanks to them, where the profit is less, but the future is brighter.

Anne, Secretary of COMEX, Econocom: We also received a question on the treasury shares. Can you elaborate on share buyback policy?

Jean Louis Bouchard, Founding President, Econocom: It has not changed since a few years. We believe, I believe as many shareholders that the share price is very low. And I think a good investment for Econocom is to buy back its own shares because it’s underpriced. But this is my belief, but I might be wrong, I might be right. But in the last fifty years, I may be right, more than wrong.

Maybe we have some question in the room. Marion, if somebody wants to ask a question in the room. All the other questions were prepared by us to be easy.

Anne, Secretary of COMEX, Econocom: And excuse my English. Could you tell us a little bit more about what sector you consider as tactical for Econocom to make an acquisition? What kind of sector kind of businesses?

Presenter, Econocom: Yes. So in respect of TaxAct acquisition, I would say there are certain number of geography where we feel there are room for growth for Econocom. So Germany is one. Northern Europe, like Netherland, is another one. And countries like Italy and Spain as well.

Then in respect of underlying business, we think that audiovisual is quite an attractive segment, experimenting quite growth, slightly higher than other segments. Infrastructure and Networks also, as we have a positive competitive advantage, thanks to our side and our knowledge. Also, it’s a faster growing market than others. So I think that both segments are probably the more the segment where we look at the most in terms of potential acquisitions.

Moderator, Econocom: If I can add something on that. The strategy of Econocom has not been like some other competitors with only one product in many countries. And this is why the profile of econocom is so resilient. So we are about mainly in 10 countries in Western Europe that are not risky countries. These are very good countries.

Now I think I know that we speak about Europe is not in good shape and so on. But I remember that it was speaking with a General Manager of an insurance company saying, yes, risk in Europe maybe it’s a little bit higher, but there are no other places where the risk is better. So we are targeting very rich and good countries, and we are diversified in activities. And this is why the model is very resilient. Then what we would like is to have all our activities in these main countries.

As Philippe was saying, in Spain, we already have a good operation, but we also want to improve in Germany, in Italy, in The Netherlands, in Belgium, in UK. So we really want to be one economic company in all these countries to be a real player in each of these countries. And we are completing our activities in these countries, of course, depending on the opportunities, but with the aim of being complete one econocom in each of these very good countries that we think that in Western Europe will have in the next years good prospects.

Jean Louis Bouchard, Founding President, Econocom: Remember, our strategic plan is two thirds organic, one third acquisition. So organic, we just recruited 60 people. As Ansel said, the average production per sales is between five and eight, this is prudent, let’s say six. And if you divide our revenue, which is 2.7 by four fifty, which was, it’s about an average of 6,000,000. Now six more, 60 more people and 150 more people at the end of the plan of three years, because it takes time to ramp up, that’s about 900,000,000.

So the organic is being taken care of. It’s not finished. It’s a big job. It’s very difficult because we recruit people and we need to make them succeed, which is the second step. And we still need to hire 60 more this year and next year.

So we have challenges. But acquisition, we’re aiming at 400,000,000. What? 400,000,000. So okay, we’re starting.

There is nothing urgent and we don’t want, as I just say, we don’t want to spend too much money too fast because it’s easy to be shiny, but it’s difficult to manage. Can you speak loudly because we can’t hear you very well from

Anne, Secretary of COMEX, Econocom: Sorry. A question on the results from discontinued activities. How do you explain the gap between the results posted June and versus this, the results end of year?

Jean Louis Bouchard, Founding President, Econocom: Discontinued?

Anne, Secretary of COMEX, Econocom: Yes.

Presenter, Econocom: Yes. So in the June results, we had the benefit of the capital gain at the disposal of Lesavail in the discontinued activity at P and L level. Within the discontinued activity, there is one operation in Send a Trade, which is a e procurement platform, which was negatively affected two times by a cyberattack by Cactus (NYSE:WHD) during the second half of twenty twenty four. In conjunction with those attacks, there have been certain number of consequences. One was the, let’s say, slowdown in the commercial activity for obvious reason.

Each and every of the potential client prospect slowed down their decision making process in respect of becoming effective customer at one point. And the second aspect was the need for a certain number of investments to fix the IT infrastructure. So this operation is under very close monitoring by the Econocom Group. This is something we closely monitor at Comex level. We had some sharp decision, including in particular the change in management team of its operation.

We expect standard rate to be disposed in 2025. On the back of the initiative, which are taken, both in terms of reorganization, fixing the IT tools and regaining some momentum in the commercial space.

Anne, Secretary of COMEX, Econocom: Another question about the footprint of the group in 02/1930? How do you envision just after the strategic plan is achieved?

Econocom: I will try to make that question short, if I can.

Jean Louis Bouchard, Founding President, Econocom: Do you notice when the questions become very difficult, we send the very tall guy. Okay, this is already difficult questions. Quanta will be with me. I will be last.

Econocom: No, well, the question is, it’s not easy, but there is an answer for that. When we prepare the strategic plan with the team of BCG, Boston Consulting Group, one of the things we prepare is we are always talking about finance, post transformation services. So we first thing we prepare is how our customer are expecting. Now I go to the answer, but just to put a bit of context on that. So we have to prepare that and we change all this language into more related to workplace, infrastructure, audiovisual.

That is the same, but with a different word, okay? That really our customers are really understanding much better. Based on that, we prepare a matrix. So which is the economical situation right now in workplace, in infrastructure, in audiovisual and in finance, country by country. And then the next thing is we have to fill the gaps.

So if we go to UK, that right now I know it, we are quite good in finance, we are quite good in workplace, but we have to develop infrastructure, alloy visual. So making the answer short, how I see the situation in 02/1930, I see the situation filling these gaps correctly because that’s something that is going to happen. But more important than that is being really, really creative because maybe that matrix related to workplace infrastructure of the wish for maybe can have changes because the market is changing, the market is evolving. Situation is changing every day. But that’s more or less the strategy under our view.

Is it okay to answer, Klein?

Jean Louis Bouchard, Founding President, Econocom: But 02/1942, I will be 100 years old, so I’m very interested.

Anne, Secretary of COMEX, Econocom: On the platform, we have a question on the dividend and the repayment to shareholders. So why did you cut your dividend even to the balance sheet is strong and profits should recover in 2025? Why did you cut your dividend?

Jean Louis Bouchard, Founding President, Econocom: Why did I cut the dividend? Well, we had this discussion yesterday at the Board. We decided to keep the same level of dividend compared to the profit. So compared to the total profit, we distributed, we decided to do about 40% of the profit as dividend, which has been the policy in the last probably five years or six years. So we the number would be between $0.09 and $0.1 per share, because the number of share has decreased.

So we have decided to keep the same policy. No question in the room.

Questioner: Hi. Can you hear me? Yes. So two questions. First on Microsoft.

I mean, you’re a big partner for Microsoft in Europe. Yes. And I understand they are changing their incentives for their partners, financial incentives. So could you elaborate on how you could be affected one way or another?

Econocom: Okay. Yes, that’s right. Microsoft is changing that part. But it’s not they are not trying to because the first idea you can get is, oh, these guys are trying to pay less to the parks, okay? That’s the first sentence.

That they’re really trying to change a bit the rules that for me make absolutely sense. So if in the future you want to be a pure resellers of licensing, that’s not the future for a company. If you want to really be involved on this, you have to deliver services around those licensing. And if you are doing that, you are getting the same level of rebates and even more. So that’s for me, it’s not a change decreasing the Microsoft relation or whatever.

We are happy with them, really happy with them. Of course, we always want more rebates as long, but we are happy with that. But it’s a change on the rules of the market, no more than that.

Questioner: And you think it will have a neutral, positive, negative impact?

Econocom: In the short term, if I check the I will tell you, I will answer the question in the short, medium and long term, okay. In the short term, it’s going to be a big shock for many of the companies right now because there are companies really fully related only to distribution of software. If they are not prepared to ramp, it’s going to be a huge change. For Ekonomicon, we are already prepared on that. We have a huge number of people making services around that, so we’re able to do it.

I don’t see a big problem with that. If I check the median and the long term for economic is a good opportunity. Because economic again, let’s go let me go back to the first part of my answer before it’s, it’s a resilient company, so it’s really able to understand the situation of the market and really able to change internally into focus on that. So that’s the way I think we can do it. It’s quite flexible and we change very quickly our capabilities.

Moderator, Econocom: And I think that if I can add Israel, we are aiming value added services. And when we speak about we don’t want to be box movers. When we speak about finance, about distribution, about services, we want to be oriented to value added services. So this is completely in our strategy.

Questioner: Another one, sorry. And just on ’25, you’ve mentioned some idea of the growth you plan to achieve. But where are you most confident in terms of segment? Is it more in TMF or Product and Solutions? And also linked potentially to the highers that you’ve done?

I think that

Moderator, Econocom: I would say, we have a very good trend in leasing. So we had plus 7.7% in 2024, but don’t forget that we also had plus 10% in 2023 compared to 2022. And I think that it will be also a good year in Products and Solutions because for the base effect, it will be a good year, I’m sure. But Services is much more linear. So it’s more in the trend of three years, four years.

Questioner: I have a question for Quintin Bouchard. It has to do about the impact of IA on the working population on the platforms at Telecom (BCBA:TECO2m). How do you have a roadmap for that? And how do you want to proceed to adapt the increase of one and the decrease of the other one?

Quentin, Group Tech Lead, Econocom: Yes, you’re right. It has a big impact and not only for workers in the Sandoz (SIX:SDZ) service of Economocom, but for all the workers of Economocom and also for all the sector, for banks, for financial analysts, for software developers as well, it has a big impact. For example, if you see SAP or Salesforce (NYSE:CRM), maybe in five or six years, you can say to an AI agent, develop new software like SAP or Salesforce, and we’ll have the same without paying the licenses. So the impact is for everybody. And for the people you are talking about, we really build the evolution with them.

We have an example in Grenoble in our Sande Service. We are building with them the way to leverage AI and to use it as much as possible to be more performance. And we plan to grow. Personally, I want to grow in 02/1930 or in 02/1942. I want to grow.

And we really need everybody to grow, to do a lot more business, a lot more of tickets that we do with the customers. And we need everybody. I want to be with everybody on board and all the people that are motivated and willing to innovate.

Econocom: Give me one minute on this, okay? Promise only one minute. We don’t have to be catastrophic on the way of artificial intel, okay? Because imagine that we go in five or ten years, none of us will be here because there will be a machine preparing this presentation. On your side, there will be another machines reading the presentation and sending the communication to the market, but there will be no market because at the end, there will be other machines reading and reading one to the other and nobody is working.

So I think we don’t have to be catastrophic step by step. And of course, there is a plan inside economic as Canton that is investment. We have to invest there and we have to really go reading what’s happening in the market, but don’t be catastrophic. Don’t send the message to the people that tomorrow they don’t come on, I have to go on a strike because I don’t have a place to work. You know what I make no sense at all, so don’t be so catastrophic.

Promise not to send all the documents to artificial intelligence, okay? We will put our own brain on them.

Anne, Secretary of COMEX, Econocom: We have a question on the financial targets in term of leverage. What is expected in 2028?

Presenter, Econocom: So in 2028, so in 2028, the target in respect of leverage. At Telecom, we aim to have a solid and, let’s say, safe and sound balance sheet. So as you have observed, we have reduced significantly the leverage being below one times. There are significant efforts made within the company in order to optimize the financial position, including in particular route on the working capital requirements. There are still some elements and items to be disposed.

As I mentioned, there are discontinue operation that will be disposed during this year and the next. And on the other end, we aim at growing the company with ambitious external growth plan to develop the company with €300,000,000 4 hundred million euros turnover to be acquired. In this context, the objective of the management of Econocom is to remain within low debt multiple. So I think that right now, we are below one times. So an ambition to remain in this area is quite, I think, reasonable for the company in the context whereby right now we are looking at small objects in terms of acquisition with strong synergies.

And so the operational leverage and the low valuation will help us. And the discipline in terms of financial approach of the balance sheet is something which is very strong within Econocom, underpinned by the familiar rooted background of the company and his president. So I think that his objective to remain within one times EBITDA is a good objective.

Anne, Secretary of COMEX, Econocom: Yes. A question on the tax rate. As it was high in 2024, What caused this? And what should we expect for 2025?

Moderator, Econocom: Do you want to address or I will? We expected 2025 better tax rate and we had an increase in, you know that there are many, many companies in the group in many different countries with many different percentages of taxes. And from time to time, we have control fiscal, fiscal and from time to time, we have to pay some money. So we had that in 2024, yes. But in 2025, we think that from a taxes point of view, we will have a better position.

Anne, Secretary of COMEX, Econocom: A question on the M and A pipeline. Are there any large targets in it?

Presenter, Econocom: At this point, as I mentioned, there is no large target. We are focusing on very tactical, as mentioned by Andre in the presentation, targets. The objective is really to be relative in terms of variation as well as being very synergistic. And so we are looking at a certain number of deals, which are consistent with the presentation I made in respect of strategic sectors. We do visual, certain geographies, infrastructure and networks.

But we are looking right now at, let’s say, small to intermediate objects, both in terms of ability to integrate them as well as financial discipline in the context whereby we want to remain within this leverage and we still have certain number of assets to be disposed before moving into bigger MLAs.

Moderator, Econocom: Absolutely. If I can add something, we have a long background in a kind of buying company. So we know perfectly what is working and what is not working. And the objectives that we have now before acquiring a company, we want to be sure that the company first is can be completely integrated in at least two, three years. Second, that the managers remain with us and that the fit on the kind of management profile and objectives are a ConocoM DNA.

And this is a way to be very to have a strong synergies. So for us, if we pay your multiple, it’s true that the multiple of Econocom is not very good nowadays, and this is the reason why we are buying shares of Econocom. But when we buy a company, the synergy is the main objective. So for example, the acquisition we are making in we made in Germany, we have the experience in France, we’ll be very synergetic. And the ones that we are looking in UK, in Germany, in The Netherlands, in Spain on audiovisual or infra are very synergetic.

So fit with the management and many synergies on that.

Anne, Secretary of COMEX, Econocom: Yes. And another question on the growth of TMF. What is the part driven by strategic leasing versus IT leasing?

Moderator, Econocom: Both are growing. I would say that in TMF, the organic growth came before the other activities because we started hiring many sales before. And it’s the backbone of the group. We had in 2018, ’20 ’19, we had to make a lot of efforts reducing costs at group level. We made a mistake because we reduced costs and we reduced also sales on the TMF activity.

So we realized very quickly on 2020 and 2021. So we started we restarted hiring a lot of sales in TMF. In my opinion, this is the reason why it’s the first activity that is growing organically very strongly. And it’s a very important objective because we don’t have any kind of leasing company to acquire. So this is an activity where we want to develop organically and we make a lot of efforts on that.

But we started reinforcing the sales before the other activities.

Jean Louis Bouchard, Founding President, Econocom: Come on now, you need to earn to drink or to eat because all the questions come people remote that won’t have anything to drink or eat. So you have to take your share. Thank you.

Anne, Secretary of COMEX, Econocom: For sure. I have a question about turnover in because people are very important and you just mentioned that the sales force and also experienced technicians are very important for your development. What are the respective turnover rates? And if important, what are your retention scheme to make sure that all the sales force and all the people can enable to achieve your plan? Thank

Moderator, Econocom: you. We have 2,000 people leaving the group last year and 2,000 people entering the group last year. And it’s mainly about the services because we have about 5,000 people in services at group level. So this is normal in all these IT countries companies with services activity. On the rest of the TMF and P and S activities, I would say that we have retention plans on one side in place and that we are building and improving.

And second, for the management. And second, the agent model, and this is the reason why we are developing and deploying the agent model all over the group, is very resilient because the sales, when they are successful, they can probably be attracted by like Vinicius, by Arabia Tobi. But an agent, no, because he is an entrepreneur. So and we did not have agents going out. So for the sales force, to have a sales force balance between agents and sales, this is the retention plan.

Jean Louis Bouchard, Founding President, Econocom: Didi, I can ask also because it all depends where you are located in the company. At the very top of the company, the retention rate is very high and retention is very low.

Econocom: A

Anne, Secretary of COMEX, Econocom: question on the factoring level. What is the level at the end of the year?

Presenter, Econocom: So at your end, we so factoring is part of the organization of the accounts receivable management within the economic comp. So it’s a way also to recoup and monitor the quality of our receivable. Part of the process of invoicing and recouping the receivable is outsourced towards our financing partners. At year end, we stand slightly above EUR 200,000,000 in terms of factoring level. Non recourse.

Questioner: Because Mr. Burchard asked us for working and asking questions, I asked another question. Did you say you had a turnover of 2,000 people, 2,000 people out of 5,000? Is that what you said?

Moderator, Econocom: 2,000 out and 2,000 in 2024.

Questioner: How many people?

Moderator, Econocom: 8,005

Questioner: people. Only 8,000.

Moderator, Econocom: And it’s mainly in the services activity. Maybe Philippe that is responsible for the services can tell something about that. Do you want, Philippe? There is a big turnover in the services activity because there are

Philippe, Services Responsible, Econocom: There is a turnover depending on the type of services and the site of services made. It’s in average, it’s on the market level. It can be between 17 to 22, 20 five depending on the type of services and depending on the type of technician and depending on the type of sites and somewhere all over Europe. So this is an average.

Questioner: I had another question. It has to do about the balance between agents and sales force, okay? How, what’s your opinion about this model? Is this, do you think agents are as productive as the internal sales force? I know you put the money, the cost out when you have agents, but is it the most productive way of approaching the market?

Moderator, Econocom: I learned the agent model when I entered Econocom. And Jean Louis Bouchard founded Econocom with agents. And from fifty years, always profitable and resilient. So in my case, I learned about the resilience of the agent model when I came into Econoco. I have to be clear about that.

And when we decided to develop the strategic plan, We said, okay, we have to be careful with all the attrition rate that we have in the sales because we had already a lot of numbers about the new entrants and the attrition rate in the sales force. And we decided that a big part of these increasing in the sales force would have to be done through agents because it’s a very resilient way to preserve the people. And the good ones, when they all have a good agency, they have colleagues and they hire people. It’s a very good way for a very good sales that is not management profile to be a sales director, but he is already a very senior sales to be able to put in place his own agency and then to be in some way an entrepreneur working with Econocom. This kind of profile will never leave.

And when the agents are becoming older, they want to retire, we negotiate with them. We always have contracts that are exclusive and then we can buy back the portfolio. So we buy back the portfolio and we put it in another agent. So it’s a very good system. Of course, it doesn’t have only advantages.

An agent is more independent. It’s not so easy to manage. And in France and Belgium, they are very used to. In the other countries, it was a new way to do it. And I am very happy for the deployment of the reinforcing of the sales and agents in the group in 2024 because now it’s a model that exists in other countries in the group.

And once they were some suspicious about the model are now very convinced about that. So the balance has to exist because you need both.

Anne, Secretary of COMEX, Econocom: My understanding is that stores and European countries are driving the growth. But what about countries such as Poland? What is the economic ambition in terms of development for those countries? Thank you.

Moderator, Econocom: Poland depends on the region, Germany, Poland. And because I think that there are many synergies between Germany and Poland, we are still trying to develop the business there. We developed a lot in Germany, not so much in Poland. So I would say there is a pending point, yes. But I think that Poland is a very industrial and powerful company with many good profiles in terms of education, a lot of banks, finance people.

And I think that we have a lot of possibilities there. But step by step, we can do everything at the same time.

Anne, Secretary of COMEX, Econocom: Yes. A question on the platform. Regarding the cyber attack that happened in 2024, what has been put in place regarding risk management?

Quentin, Group Tech Lead, Econocom: What has been put in place regarding risk management? So we have a risk management policy for the group, led by Francois Delilentre, who is our Chief Information Security Officer. And we review the risk that we have. The first one is this one, is ransomware and data leak. And this is what happened in Internet trade.

And we deployed all the group policy, the checklist of all the requirements that we need to have in every entity and it’s deployed in all entities in order to be at the good level of security for Iconicom. And we will enter in a more certification oriented approach in order to be sure that we are at the right level and to demonstrate to customer and partner that we are at the right level of security. It’s a really strong focus that we have.

Moderator, Econocom: More questions? Thank you very much. We will have a glass, some glass of wine or something, okay?

Econocom: Coffee. Or coffee.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.