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By | Paul Kunert 18th February 2014 12:01

Rigby dynasty to retain control at SCC - 'no IPO for us'

One day son, all this will be yours. And that managed print firm there, too

SCC CEO James Rigby plans to pass the privately owned biz to the next generation of the clan rather than co-crafting a retirement plan with his brother based on a flotation or trade sale.

The Rigby dynasty's Midlands empire, which includes service-based reseller SCC at its heart, sold distie wing SDG to Tech Data in 2012 for $350m and has just used some of the cash to buy managed print services specialist M2 Digital Ltd as part of multi-year expansion plans.

"We see all things annuity as important these days," Rigby tells us. "We have a very big capability around desktop and data centre recurring revenues and we saw an opportunity in print".

He reckons the UK lacks an "independent channel player [of size], it's dominated by vendor propositions … we've got the customer base, the understanding of annuity but needed to up our game and skills."

Managed print player Danwood may disagree - though it has faced its fair share of problems in recent times - as might Annodata.

SCC launched a managed print division back in 2006, headed by Tony Newman, but it lacked focus and hasn't grown beyond the £10m mark. M2 will add another circa £30m to the pot and 180 heads, 100 of which are field based engineers across the UK.

The unit, to be branded "M2, an SCC company", will still be run by M2 MD John Taylor along with the rest of his management team, reporting to SCC MD of services Mike Swain.

Print will be served on a cost per page basis with a full managed services including fleet and consumables management.

The price coughed was not disclosed but Rigby adds, "we paid a decent price for it, this is not a distressed business, it's a very successful business and that was reflected in the price".

In the last M2 financials filed at Companies House for fiscal '12 ended 31 March, turnover was £31.3m, up eight per cent year-on-year, but net profit dipped to £1.75m from £1.84m.

As for SCC, in the last published accounts for the year to 31 March 2013, revenues climbed 3.6 per cent to £655.3m and profit came in at £9.08m, up from nearly £7m in the previous fiscal.

Tech services comprised £114.5m worth of sales, or 17.5 per cent of revenues and Rigby forecasts services growth of 20 per cent for this current financial year ending next month.

"In terms of the project side of things, that has come back very strongly since September. Like others, we had a really strong calendar Q4, particularly December which was outstanding."

"There is particularly a lot of strength around Windows 7, the XP [end-of-support] aspect, the penny has dropped and it's like drinking from a fire hose," he added.

The firm says demand for underlying infrastructure refreshes is returning across multiple customer markets from public sector to financial services, manufacturing and engineering.

And it's not all about investing to cut costs: "A lot is about performance improvements", the CEO claims.

As revealed here last month, SCC put three MDs - Swain, John Bland and Tracy Westall - in charge of services, sales and corporate services respectively for the next phase of biz building.

Rigby reiterated that SCC has "lots of financial resources to develop.

"Our ambition broadly is to double the profitability of the business in the next three years, it will be a balance and mix of things but as you'd expect services are at the heart of it," he said.

Tech services margins are certainly higher than those on product and it gives the supplier a degree of independence rather than relying on manufacturer rebates that can be changed on a whim.

But Rigby, like rivals Computacenter and Softcat, doesn't see product reselling as unfashionable. "We will not be walking away from product," he says, "perhaps our growth ambitions there are a little tempered versus services.

"We want to attach more, more professional service, mid-market outsourcing, annuity, where off the back of those situations you get the product, and you get the projects."

"That is working really well for us and is where a lot of the resources will go, building more data centres, lots of capital plans. Some of it will be acquisition as per the one we are going through now but not necessarily all of it; a lot of it will be investment in organic growth".

Rigby says areas for further potential acquisitions include "networking and security" where a lot of smaller boutiques still exist and "where we could up our game".

With arch rivals Computacenter trading on the LSE, and Kelway working with an investment bank with a view to finding a trade buyer or seeking additional PE backing, what is the end game for the Rigbys?

"The plan is to continue as a private business, we all enjoy running the business, it is on a great financial footing, we see huge opportunity," he says.

An IPO is not on the radar as "we've got control of our destiny … it gives us a lot of flexibility as a business to respond to change, so no plans to do anything differently".

The founder of SCC, Sir Peter Rigby, stepped back from daily operations a number of years back, leaving eldest son James at the helm. Does James plan to pass the baton to the next generation in his turn?

"Absolutely, yes absolutely," he says. ®

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