Things were supposed to be on the up for the Leeds brothers in charge of troubled reseller Systemax: by this point in calendar '13 profits should have returned as the restructuring plan takes hold ahead of the glide into Christmas.
But that is happening elsewhere in an alternative reality - in this time dimension Systemax remains in a world of pain with both the top and bottom lines continuing to slide downwards in Q3 despite job cuts.
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Turnover came in at $791.8m versus $847m in the same quarter a year ago, a dip of 6.5 per cent, but the cost of transacting that business was $674m, down from $728m, leaving a gross profit of $117.7m: a little worse than the $119m in 2012.
S,G &A expenses were down more than 2.5 per cent to $115.7m and special charges came in at $5.8m, meaning that Systemax made an operating loss of $3.8m. Special charges were related to severance pay and litigation costs.
After investment income of $600k and an $8.4m provision for taxes were factored into the P&L, the firm ended the September quarter with an $11.6m net loss compared to a profit of $14m twelve months ago, which had been boosted by a $16m benefit from the provision for taxes.
That Systemax paid tax on losses in this Q3 is a bit odd, a point picked up by analysts on a conference call last night. But the firm said it was because it makes profits in some countries, losses in others but wasn't allowed to include tax breaks under General Applied Accounting rules used in the US.
The stack 'em high sell 'em cheap dealer is in the middle of a massive turnaround effort with like-for-like and constant currency sales in its consumer unit stateside continuing to slump, down 17.5 per cent year-on-year to $263.5m.
The B2B unit fared better, as sales declined 0.5 per cent on a constant currency basis to $528.3m. This business is largely based in Europe where Systemax trades as Misco, and has seen numerous country level changes as top brass here sets up a shared pan-European services centre.
Both commercial and consumer kit is housed in the firm's Technology Products Group - where all the operating losses were recorded - and all product categories recorded declines in Q3. The Industrial Products division was the only part of the business to record growth, up 13.9 per cent to $110.4m.
In a conference call, chairman and CEO Richard Leeds said the technology biz on both sides of the pond "remain a key area of focus for management" and described the health of the financials as "disappointing".
The firm closed a "number of under performing retail stores" during the quarter in the US - one in Chicago and two in Texas - leaving 36 outlets remaining. TPG sales in North America fell 12.5 per cent and 6.1 per cent in Europe.
The European team was set aside for a special ticking off last quarter: in this one, operational growth in France, Netherlands and Ireland was more than offset by a single digit decline in the UK and double digit declines in smaller markets. ®