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By | Paul Kunert 30th April 2014 11:46

Systemax CEO: Can't get consumer biz out of the crapper

Reports frazzled financials despite B2B arm bringing home bacon

It is a new calendar and financial year for shape-shifting box-shuffler Systemax but the same problem remains: it is hamstrung by a "weak" consumer division that is a burden on the relatively fit B2B operation.

The New York-listed reseller last night reported Q1 results ended March with sales declining one per cent to $873.4m, as healthy gains in the commercial arm were countered by collapsing retail turnover.

The Technology Products business in EMEA and North America climbed 9.8 per cent and 1.6 per cent respectively to $323m and $195.4m, while Industrial Products went up 22 per cent to $129.1m.

But after three consecutive years of declining revenues in Systemax's consumer operation, 2014 got off on the wrong foot as sales decreased 22 per cent to $225.9m.

"Our North American consumer technology performance remains weak," said CEO Richard Leeds in a conference call with analysts.

He said retail PC shipments were "generally stronger" than CE products, but conceded "additional improvement" is required and execs "remain disciplined in the management of this business" to regain profitability.

On the enterprise side of the house, Systemax said larger markets "continue to perform well" but output was more mixed in smaller countries.

In Europe, where the firm trades as Misco, it has shifted all but sales and marketing functions to a Shared Service centre in central Europe and work to build this will continue for another year, the company confirmed.

"We still have work ahead of us, but we see that the fruits of our labours are paying off there," said the CEO.

Not every customer will agree. The outfit is trying to rely less on hardware and software reselling by building an IT services practice but it seems to be aiming at the commodity end of the market.

Leeds finally confirmed last night what El Chan told readers some months ago, that Systemax has swallowed former Cisco Gold partner Phoenix IT Group's network ops centre and its staff.

"In a continued effort to enhance our strategic position within EMEA, we’ve recently added a team of high level Cisco certified engineers, sales experts, and technical support personnel in the U.K".

Leeds added, "We’re just going to emphasise more of our efforts on B2B and try to continue to fix and get the consumer business to be profitable".

Bottom line goodness was something that evaded Systemax in Q1 but the business is finally headed in the right direction: gross and operating margins hardened but a rise in overheads and special charges related to restructuring European ops wiped out profits.

Operating losses came in at $1.3m versus $8.7m a year ago and after interest repayments and the tax man took a cut, net losses were $3m, significantly down from $6.3m.

Working capital crossed the Q1 finishing line at at over $345m, and cash and cash equivalents were $160m. ®

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