Redington Limited , a leading technology products distributor, reported strong financial results for the first quarter, with revenues growing 22% year-on-year. However, the company faced significant challenges in its Turkish subsidiary, Arena.

Financial Highlights

• Revenue grew by 22% year-on-year
• Profit increased by 12% year-on-year
• Excluding Arena (Turkey subsidiary), revenue grew 24% and profits increased 15%
• India showed robust performance with 24% growth
• UAE and Saudi Arabia posted 35% and 32% growth respectively
• The Mobility Solutions Group led with 44% growth
• Cloud Solutions continued momentum with 41% growth

Margin Pressure and Turkish Subsidiary Challenges

Despite the strong top-line growth, Redington faced some headwinds:

• Gross margins declined by 60 basis points to 5.10% due to large deals in the Technology Solutions Group, market pressures, and Arena-related issues
• The company's Turkish subsidiary, Arena, took $8.00 million in provisions due to customers filing for concordat (debt restructuring)
• Arena's performance was impacted by the challenging economic situation in Turkey

Working Capital and Future Outlook

• Working capital improved to 37 days from 39 days in the previous year
• Management maintains confidence in achieving operating profit targets of 2.30-2.50% and PAT above 1.30% for the full year
• The company is reviewing strategic options for the Turkey business

Business Segment Performance

• The Technology Solutions Group (TSG) performed well on top line with 21% growth, although margins were under pressure
• Software businesses in security solutions, infrastructure software, and application software continued their growth momentum
• The Endpoint Solutions Group with the PC business was steady at 3% growth

V.S. Hariharan, Managing Director and Group CEO, commented on the results: "This has been our best Q1 so far from a top line perspective with strong growth in both top and bottom line compared to the quarter 1 of last year. Outside of the challenges with Arena, our subsidiary, the profit performance has been good."

The company remains optimistic about future growth trends in Cloud AI and digital transformation. Redington is also focusing on enhancing its core hardware business while creating additional value in software solutions and subscription models.

S.V. Krishnan, Chief Financial Officer, addressed the margin pressure, stating, "The gross margin has been below expectations, and it's a combination of the mix shifting towards mobility for this quarter, the big deals in TSG and also market pressures on the TSG run rate business."

Redington is closely monitoring the situation in Turkey and taking proactive steps to manage the business cautiously by tightening working capital, managing overdue credit limits, and reducing Turkish lira exposure.

Despite the challenges, Redington remains committed to its growth strategy and is confident in its ability to navigate the evolving market dynamics in the technology distribution sector.

Redington Limited , a prominent player in the technology distribution and supply chain solutions sector, has announced a significant development in its international operations. The company's step-down subsidiary, Arena Bilgisayar Sanayi ve Ticaret A.Ş (Arena), has received approval from the Turkish Competition Authority to proceed with non-binding negotiations regarding a key distribution agreement.

Details of the Negotiation

The negotiations center around the transfer of a Device Distribution and Supply Agreement. This agreement involves two key parties:

1. Arena Connect Teknoloji Sanayi ve Ticaret A.Ş., a subsidiary of Arena
2. Vodafone Dağıtım, Servis ve İçerik Hizmetleri A.Ş., a subsidiary of the global telecommunications giant Vodafone

Regulatory Approval and Next Steps

The approval from the Turkish Competition Authority marks a crucial step in the negotiation process. It allows Arena to continue discussions without binding commitments at this stage. This regulatory green light is often a prerequisite for such high-level corporate negotiations, especially in sectors that can impact market dynamics.

Redington has emphasized that these negotiations are still in a non-binding phase. The company stated that any further progress leading to the conclusion of negotiations and definitive arrangements will be communicated in due course.

Potential Impact

While the specifics of the potential agreement are yet to be finalized, this development could have significant implications for Redington's operations in Turkey. The Device Distribution and Supply Agreement, if successfully transferred, could potentially strengthen Arena's position in the Turkish technology distribution market and enhance its relationship with Vodafone.

Company's Official Statement

In an official communication to the stock exchanges, K Vijayshyam Acharya, Company Secretary of Redington Limited, stated:

"We have been informed by our step-down subsidiary, Arena Bilgisayar Sanayi ve Ticaret A.Ş (Arena), that pursuant to receipt of the approval from the Turkish Competition Authority, Arena will continue non-binding negotiations for the transfer of the Device Distribution and Supply Agreement signed between its subsidiary, Arena Connect Teknoloji Sanayi ve Ticaret A.Ş., and Vodafone Dağıtım, Servis ve İçerik Hizmetleri A.Ş."

The company has assured stakeholders that any further developments in these negotiations will be duly notified. Investors and industry observers will be keenly watching for updates on this potential strategic move by Redington's Turkish subsidiary.