The pressure will be on new Corporate Express CEO Peter Ventress to deliver on the promise of increasing shareholder value after the results of the company's 6-month EUR3 million strategic review which were announced last Monday.

One thing is for certain: he will not be given the almost 10 years afforded to his predecessor Frans Koffrie as militant shareholders, disappointed that the strategic review brought "nothing new", are growing increasingly frustrated and impatient at the company's apparent inability to stop the share price moving south. And with one of the company's new watchwords being "execution", Ventress will have his work cut out over the next few months to ensure that his own head is not next on the chopping block.

Shareholders still unconvinced

Reactions to the news on Monday that Corporate Express was to pursue a "stand-alone" strategy were mixed. There had been a number of rumours over recent weeks that the company would be split up or even sold off, with unconfirmed reports in the Dutch press last week that ABN AMRO had been approached by Corporate Express to look into the feasibility of a bid and that Staples had made an approach. Certainly, a number of analysts present on Monday questioned how thorough the strategic review had been in terms of the key question as to which course of action would maximise shareholder value and pressed Ventress and outgoing President of the Supervisory Board Paul van den Hoek to justify the stand alone decision. They stood firm, maintaining the all possible options had been looked into and that the stand-alone scenario was "the best way to improve shareholder value going forward". History, though is not on their side, with CE's share price sliding 36% over the last 12 months.

"Nothing new"

Central to Corporate Express' argument is the idea that the company is based on a strong business model, it is just the execution that is lacking. The main upshot of the review is that the company will create a centralised Executive Management Group to focus on establishing key performance indicators and promoting best practice within the group, which will become a more sales driven and accountable organisation. Hardly the kind of stuff to get the shareholders, who have become increasingly vocal since the arrival of equity firm Centaurus, cheering wildly in their seats. In fact, this just raised more questions as to why adequate systems were apparently not already there in the first place.

Furthermore, the areas that have been identified as key to achieving turnaround are hardly anything new either: increasing the spend of existing strategic customers, developing sales in the mid-market sector and expanding geographically through acquisitions are all strategies that were outlined in 2006's annual report. Hence, the "we've heard it all before" reaction of some of the shareholders.

US challenge

So, where does this leave Ventress? He's promised to deliver top line organic sales growth averaging 6% over the next three years. As I've already said, he's under pressure to deliver results fast, so he'll have to be able to show improvements in the short term. He'll hope to buy himself a bit of time with personal visits to major shareholders over the next few days, but some sources are giving him as little as one quarter to show improvements.

He'll be banking on Europe and Australia to continue their good performance and we can expect some acquisition activity in eastern and southern Europe (possibly funded by a sell-off of the Print Division), but the key is the US market which accounts for about half of Corporate Express' revenues and which has seen sales and margins decline steadily over recent quarters. Steps are already being taking to improve efficiency, for example with a reduction in the number of distribution centres from 28 to 23 this year, but other signs are not particularly encouraging. Firstly, the US economic slowdown is leading to competitive pricing pressures and this is bound to hit margins. Secondly, Corporate Express' own sales force has been hit by key departures in recent months - recruiting and training new sales staff generally requires both time and money, neither of which are an option at the moment. Latest results from the US show a reduction in the losses, but it will be interesting to see how the division performs in the fourth quarter. And though a break-up of the company has been denied, offloading the US operations might just be the solution that appeases shareholders in the short-term and lets Peter Ventress and his team focus on expanding in Europe and emerging markets in Asia, where there are greater growth prospects.