The year 2019 in TIM Capital Group: record high revenues and EBITDA

Over PLN 890 million of consolidated and almost PLN 800 million of individual revenues from sales were brought by the year 2019 in the TIM Group. It is, respectively, by 7.2% and 6.2% more than in 2018 as also the most in the history of TIM S.A. The annual dynamics of TIM’s turnover was at the same time more than twice as big as that of the industry of distribution of electrotechnical articles (+2.9%). Record high levels of the consolidated and individual EBITDA – respectively PLN 53 million (+70.6% y/y) and PLN 35.8 million (+108.7% y/y).

Once again the year 2019 was the year of records in the area of sales of TIM S.A. Apart from the increase in turnover, the company recorded also the highest in history number of orders placed online (nearly 461 thousand) or the number of customers (over 30.9 thousand).

– This, of course, is the effect of the record high group of customers, intensive pro-sales activities or the development of the product offer. To a large extent, this is associated with the development of alternative trade models (dropshipping, marketplace, B2B2C) indicated in the medium-term strategy of TIM SA announced last year for the years 2019-2021 – emphasizes Krzysztof Folta, the President of the Management Board of TIM SA.

Marketplaces are one of the most important trends in the development of B2B e-commerce. The estimates of the British research and consulting company iBe TSD show that the value of global purchases in the B2B marketplace will amount to about USD 3.6 trillion in 2024 (in 2018 it was about USD 680 billion), whereas the value of the entire B2B e-commerce market by 2024 should increase to nearly USD 12 trillion. By 2024, B2B marketplaces will therefore be responsible for 30% of the global B2B sales. Having observed the global trends in the development of B2B e-commerce, the decision to make the TIM.pl platform available to new sellers (customers, as also new suppliers) proved more than good This way TIM.pl sells products offered directly from their warehouses – in the dropshipping model, which throughout the entire last year, according to the adopted strategy, was being systematically developed.

Prospects for further growth

Over 70% of the sales revenues of both TIM S.A. and the TIM Group was generated by online channel. The conversion rate (number of sessions that ended in making a transaction) at TIM.pl increased in 2019 to 4.62% (from 4.51% in 2018) and is higher than the average for the B2B e-commerce industry specializing in the sale of electrical equipment (2.43%).

– The year 2019 is also the time of the best indicators in history reflecting the receipt of our e-commerce offer available at TIM.pl – says Piotr Nosal, Board Member and Commercial Director of TIM SA. – Two other parameters describing the users behaviour at TIM.pl have also undergone an improvement. The average time of a single visit used to be 8 minutes and 49 seconds, i.e. almost 8% longer than in 2018 (8 minutes and 10 seconds). In turn, the bounce rate, showing the percentage of users exiting the site without interacting with it, dropped from 21.40% in 2018 to 20.92% in 2019. It is worth noting that the average bounce

rate for the entire e-commerce industry is more than twice as high and amounts to 47.85% – adds Piotr Nosal.

According to the report, the B2B purchasing process: challenges, trends, inspirations, developed by e-point SA and the Mobile Institute, the B2B e-commerce market has been growing up to four times faster than B2C and B2B customers spend nearly ten times more on online shopping than B2C customers, i.e. consumers.

– This data confirms that changing the business model and focusing on e-commerce almost seven years ago was the right decision whose effects will bring joy to us also in the future. Development of alternative sales models, of course the online ones, allows us for dynamic development. Thanks to them, we also set new directions in the entire electrotechnical industry, as evidenced by twice as high the dynamics of turnover than that of the companies affiliated to SHE – Association of Employers of Electrical Devices Distribution (+6.2% vs +2.9% y/y) – emphasises Krzysztof Folta.

Sales grows faster than costs

In 2019 TIM SA recorded a net profit of PLN 22.7 million, which means an increase of 122.4% as compared to 2018 (PLN 10,2 million). This is the effect of the highest sales revenues in history, the increase in the gross margin and maintaining the growth dynamics of operating costs below the growth dynamics in revenues (4.4% against 6.2%).

– Within the area of operating costs, it is worth paying attention to the lover by nearly PLN 1.8 million level of costs related to write-downs and liquidation of inventories, being the consequence of the improvement of the efficiency of inventory management policy – says Piotr Tokarczuk, Board Member and Financial Director of TIM SA.

As a result, TIM closed the year with EBITDA (operating profit increased by costs of depreciation) higher by 108.7% as compared to 2018 (PLN 35.8 vs. 17.2 million).

Also at the consolidated level, TIM Capital Group had very good financial results in 2019 – net profit reached almost PLN 19.6 million (+29.6% y/y) and the growth dynamics of operating cost was lower than the dynamics of revenues. Consequently, the Group’s EBITDA reached record high level of over PLN 53 million (+70.6% y/y).

3LP close to the strategic goal

For the first time in the history of the TIM Group the share of the parent company, i.e. TIM SA, in the Group’s revenues from the sale, dropped below 90% – to 89.7%. This is mainly due to the logistics company 3LP.

– The dynamic development of 3LP translated into an increase in the Group’s revenues from the sale of logistics services to nearly PLN 27 million, i.e. 87% more than in 2018. Last year was for 3LP, among other things, the time of commencement of operational implementation of the contract with IKEA – comments Piotr Tokarczuk.

The share of external customers (from outside the TIM Group) is constantly growing in the area of logistics services provided by 3LP S.A. In 2019 it amounted to 39.1%, whereas in the

second half of the year – 44%. One of the main strategic goals, which assumes achievement by 3LP of the share in revenues from external customers at the level of 50%, is therefore close to being implemented.

Growth of the turnover dynamics of ROTOPINO.PL SA is similar to the level of TIM S.A. and the entire Group (+ 6.8% y/y). The company closed the year 2019 with net profit of PLN 466 k (+253% y/y). These increases are also the result of operational and sales synergies within the Group. The ROTOPINO.PL SA product offer is available on a dropshipping basis at TIM.pl, while the TIM offer is available at the Narzedzia.pl platform and the logistics services for the company are provided by 3LP SA.

Development in the area of responsible business

Management report on the operations of TIM Capital Group for the year 2019 has, similarly to that of the previous year, the form of an integrated report, which means that it has been the second time the TIM Group is reporting non-financial data on such a large scale. Similarly to that of the previous year, also the integrated report for the year 2019 was prepared in accordance with the guidelines of the international non-financial reporting standard – Global Reporting Initiative (GRI Standards).

In 2019, the Management Board of TIM SA adopted the strategy of responsible business TIM pro for the years 2019-2021. – After the publication of the integrated report for the year 2018 and the organization of a consultative meeting with stakeholders in 2018, the creation of this strategy was another natural step in the development of the entire organization in the area of sustainable development – explains Krzysztof Folta.

As a result of the directions and actions set out in the TIM pro strategy, the report Responsible Business in Poland 16. Good practices published by the Responsible Development Forum on 2020 April 2019, included eight practices submitted by TIM SA against three published during TIM’s debut in this publication in 2019.