This is happening on our market also (Romania ). Local Dahua and Hik distributors having net profits very very high. Also, it looks kind of strange as usually there is a big price war going on between them ( which i would suppose would decrease their margins ) .
I am sure they get very good prices. And also for sure they are trying to get everybody to some price level... though i hear HIK is worse at it than Dahua. Plus the volumes are truly so big that stuff moves fast, not a lot of "sleeping" stock, and i gues "low cost marketing" is easy/cheap.
Still, bear in mind over here distributors do a lot more than it seems they are (generally) doing in US : we do marketing for them ( trade shows and all ), we do full tech support ( maybe even RMA for an aditional discount maybe ), pre-sales also etc. There is not a lot of people to call about a defective HIK camera or a project you are planning, other than the distributor that sold/sell it.
Hello John, sure i know about Hik`s margin for distributors as well for installers, integrators… as well about real practice. i think its possible to share but by email, so, let me know what kind details do you wanna get- price, discounts, real sells price -margin of players... activity of Hik to build a brand to to push a sells etc. more or less i know those issues if anything special i can check with market players
U1, I agree about the cashing out part. It certainly prudent to lock in gains at this point.
But on the first 2 points, it strikes me that their situation still could be quite difficult if Hik 'screws' them. So I agree that this has certainly empowered them to become far bigger and better known but where will they make as much as they are doing from Hik now? Dahua? If DVS does not find the next big thing quick (presuming a Hik issue), it would strike me they would see revenue and profit margins plunge quite quickly as they fell back towards regular distribution numbers. Am I missing something?
No, don't think anything is being missed ...from either side of the discussion.
It could just be a case for them of riding the crest of this wave as it's happening, and enjoy it while it lasts. If their profits reduce to the more common level in the future then they will still be ahead of where they were a few years back.
On how it's happening; I know as fact that on at least one occasion in the past they have gathered all their distribution partners together face-to-face and told them not to drop below a certain percentage margin, with the message "if one of you does it then you then you spoil it for yourself and all the others too"
1. This seems like a clear case of price fixing to me.
2. It would suggest that DVS is not getting a better deal than any other HIK distributor partner, certainly not up-front anyway. Perhaps as they only really major on the HIK product, unlike say ADI who are very diluted focus-wise, perhaps they are just plain selling it better/more and hitting improved back-end rebate terms.
As the (recently retired) MD of DVS Ltd, this makes interesting reading with some good points raised.
My personal opinion (and this is purely my personal opinion as I have no inside information on Hikvision) is that I don't see Hikvision going direct in the near future and indeed I don't feel that they will ever go direct in the more established markets like the UK and the US. As far as I can see, the much reported recent investment of $3.1Bn into Hikvision is being invested globally into building the enterprise market, not into building a distribution model to cut out distributors.
Regarding profit levels, What I would say is that DVS adds a lot of value to the distribution model and has consistently turned over in the region of £500k per head of staff which is I believe higher than any competitors which would certainly affect the increased net profits. I would also say that when we (DVS) took Hikvision on in the UK, nobody else was interested in it...funny how times change.
I have obviously made the decision recently to "cash out" most of my shares, as referred to in this thread and the press release about the MBO. When I set up in business 22 years ago, it was always my aim to retire before the age of 50. Due to various circumstances, both good and bad, I have now retired at 47. I intend to enjoy it to the full. The industry has been very good to me, and I have thoroughly enjoyed it whilst making some of the best friends of my life, but the time has come to enjoy a slower pace of life with lots of family time and sailing.
I won't comment on the financial details of the MBO, but in the audited accounts that there is a link to on this thread, the EBITDA for last year is public information, so an educated guess is plausible.
Above all of the politics involved in our industry, I feel that DVS's success to date and continued success has and will be as a direct result of having the best team in the industry (along with getting Hikvision at the right time, but hey, we all need a bit of luck). Whilst I am obviously biased, I do genuinely believe that it is about the people and if you can get the whole team pushing in the right direction, together at the right time you can achieve anything. This won't change at DVS as the team in place now really are second to none.
Shaun, thanks for the feedback and congrats on your retirement!
I would also say that when we (DVS) took Hikvision on in the UK, nobody else was interested in it...funny how times change.
You certainly bet well.
My question: The situation is now different, Hikvision is far better known and there is more demand to carry / sell Hikvision, which means more competition. Given that, do you think maintaining the current high gross margins / markups is sustainable?
The short answer is no. The situation is now different, more competition from other branded distributors, OEM distributors and grey imports along with the current exchange rate issues for the UK following "Brexit" will undoubtedly make maintaining previous margins difficult to impossible. However, I think demand will continue to increase so I guess smaller margins but higher turnover is what the immediate future holds for Hikvision and/ or Dahua distributors (possibly Uniview distributors to a lesser extent as well). This being said, I'm sure any of the Hikvision/ Dahua distributors are currently very relieved that they have distribution rights to one of these brands at all. I for one would be far more concerned if I had a distribution Company without access to one of the Chinese "Giants" of CCTV.
DVS revenue is way up, ~40%, gross margins are modestly down from 27.6% to 25.3%, administrative expenses / overhead was way up 64%. Net margins were down from ~14% to 11%, primarily due to the jump in admin expenses.
Revenue was up ~4% while gross margins declined from 19.5% to 17.1%. The decline in gross margins surprises me since DVS fairly heavily marketed fever cameras which generally commanded excellent markups.
DVS are temperature screening experts and they are showing Hikvision, a forehead only screening system with 2 people with hats on:
If anyone has color to share on UK distribution or DVS, please do.