Corporate Express sees mid-market opportunities

Mid-market is lining up to be a bigger growth opportunity for Corporate Express (ASX:CXP) over the next 12 months, its chief claims.

Managing director, Grant Harrod, made the comments after announcing the ASX-listed products and services reseller’s half-yearly results to June 30.

Although Corporate Express doesn’t split out its IT results separately, Harrod said its IT performance was consistent with its overall result. Corporate Express reported a 1.1 per cent year-on-year increase in half-yearly revenues to $648.1 million to June 30. Pre-tax earnings were also up 2.7 per cent to $61.8 million over the same period, but net profits were down from $34.3 million to $32.8 million due to one-off expenses relocating its NSW warehouse.

Harrod admitted it had seen price deflation as a result of rapid cuts to PC and laptop prices over recent years. He also claimed the larger corporate market was softer than previous years due to mergers and consolidation as well as increased offshoring.

“In the large, corporate end of the market, particularly around the financial services sector, there’s been increased offshoring of IT,” he said. “It’s not just cost-based – the banking and insurance sectors are going through a tough time so organisations are consolidating. We’re seeing that larger market starting to soften.

“Government, and particularly Federal Government, has also made a commitment to reducing public sector numbers and we’re seeing less expenditure in Federal Government environments in relation to IT.”

On the flip side, the mid-market was a growing space for Corporate Express, Harrod said. Corporate Express witnessed a 7 per cent increase in mid-market sales across all parts of its business over the past six months and would be a key area of focus going forward, he said.

“In one part of our business things are slowing down but the mid-market is continuing to move alone nicely,” Harrod said. “Our growth there has very much been about taking share.”

Harrod agreed Commander’s demise had opened up new business in that space but had also allowed rivals to pick up skilled sales staff. Corporate Express has hired 15 ex-Commander staff in recent times.

Harrod was cautious about the next 12 months and said he expected growth to be flat across most industries. Nevertheless, he was confident its mid-market business would grow.

“Any opportunity to build our business is about taking share,” Harrod said. “The opportunity for us is in the mid-sized space.”