A successful portfolio development and sales strategy has promoted growth of the ELKO Group - IT products and solutions distributor - across its operating region, providing increased turnover of 15.5% to USD 8.5 million (EUR 7.7 million) audited profit.

Key data of the audited consolidated financial statements:

• Turnover USD 1,460 mln (EUR 1,319 mln)
• Gross profit of 3.8%
• Gross profit USD 55 mln (EUR 50 mln)
• Net profit USD 8.5 mln (EUR 7.7 mln)

Growth in all markets

The ELKO Group’s consolidated turnover has significantly increased, amounting to USD 1,460 mln (EUR 1,319 mln), an increase of 15.5% compared with USD 1,264 mln (EUR 1,139 mln) in 2015.

The most rapid growth has been achieved in Central and Eastern Europe – an increase of 29%, reaching USD 496 mln (EUR 448 mln).

Outpacing the overall CIS IT market trend, the ELKO Group operations in this region have increased by 11% to USD 856 mln (EUR 773 mln).

In the Baltic region’s relatively stagnant market conditions, the ELKO Group operations have grown by 2% to USD 108 mln (EUR 98 mln).

ELKO Group has concluded the year with USD 8.5 mln (EUR 7.7 mln) net profit, whichis less compared to the unusually high 2015 rates that amounted to USD 21.8 mln (EUR 19.7 mln).

Product portfolio expanded by 50 new manufacturers

A well-balanced portfolio, which meets customers’ needs, is one of main targets of the ELKO Group in building long-term partnerships and supporting the development of new business services. During the past year, ELKO Group added almost 50 new vendors. For example, well-known brands such as LeEco, Xiaomi, ZTE, Meizu, Alcatel in the growing smartphone segment; Bosch Security and Mikrotik in the IT solutions segment. Existing partnerships were also extended: for example, the ELKO Group acquired distribution rights for Lenovo notebooks and electronic software delivery (ESD) rights for Microsoft software in Russia.

"While we are still mostly engaged in wholesale IT products, we place increasingly higher emphasis on IT solutions distribution and the development of new business lines. It is clear that technologies such as the Internet of Things and smart home concepts open up new market opportunities for us as distributors. This is also shown by the results of our operations: the IT solutions business is rapidly growing in both turnover and market share,” says ELKO Group Director Svens Dinsdorfs.

Interest in acquisitions of other companies

The ELKO Group currently operates in 24 countries in Europe and Central Asia with sales offices in 10 countries – Latvia, Lithuania, Estonia, Russia, Ukraine, Kazakhstan, Romania, Slovenia, Slovakia and the Czech Republic.

Although organic development remains the preferred route to growth, the industry is experiencing continuous consolidation with both horizontal and vertical integration. The ELKO Group also actively assesses opportunities for acquisitions.

"In dynamic market conditions, the merger with and acquisition of other companies is the way to improve competitiveness to quickly implement innovations, enter new markets, and expand geographically. During the last year, we have considered more than 10 different potential acquisition targets. At present, three-to-four European-based companies are being examined,” says Svens Dinsdorfs.

IT distributor’s role and function is changing

New technologies, extensive interoperability options, and applications necessitate new knowledge. The role of consulting and technical support has been growing in the distribution business. As an important challenge, the ELKO Group sees the creation of knowledge sharing ecosystem by merging market, suppliers and sales channel expertise and experience and making it readily accessible to partners. Opportunities to offer new services are emerging in the market. For instance, the ELKO Group is currently developing demo laboratories for product and various integration scenarios testing. Investment in staff development and new attractions has been increasing.

Fund raising

In July 2016, an agreement was signed with Nordea, SEB banka, Swedbank, and OP Corporate Bank on a USD 78 mln syndicate loan for current asset financing.

At the end of 2016, a new bond Base Prospectus of ELKO Group AS was registered, which enables bonds to be issued with a total nominal value up to EUR 50 million or an equivalent amount in USD during the year.

About ELKO Group

ELKO Group was founded in 1993 and is one of the largest IT product wholesalers and IT solutions and services distributors in Eastern Europe, now also actively expanding to Central Asian market. ELKO represents more than 120 IT vendors and sells their goods to more than 6 500 retailers, local computer producers and system integrators. ELKO offers more than 20 000 product titles from the most famous vendors - Acer, Apple, Asus, Dell, HGST, Intel, Kingston, Lenovo, Microsoft, Seagate, Supermicro, Western Digital and others. At the moment, more than 700 people are employed with ELKO. ELKO Group belongs to several legal entities and investment fund Amber Trust.

Further information: http://www.elkogroup.com

         Janis Kirsis
         Head of Treasury
         ELKO Grupa AS
         
         4, Toma Street
         Riga, LV - 1003, Latvia
         Phone: + 371 6709 2357
         e-mail: janis.kirsis@elkogroup.com