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By | Paul Kunert 5th November 2014 12:28

Systemax: Senior Blighty bods let us down, so we cut them

Group sales flat in Q3, losses narrow on back of B2B goodness

Systemax has opened up on the senior management re-org of UK ops after admitting the business took a turn for the worse over the summer.

The transatlantic reseller last night reported calendar Q3 financials: turnover was up four per cent year-on-year to $825.4m, but excluding the SCC Netherlands acquisition, organic growth was up a modest 0.3 per cent.

In a continuation of the same trend, the consumer side of house — based in the US — posted an 8.5 per cent decline to $201.2m, although B2B bounced 9.2 per cent to $624.2m including the Dutch buy, or 3.5 per cent excluding it.

Broken down, the Industrial Products Group continued to fuel much of the B2B growth, rising 13.5 per cent to $142.7m. Technology Products in North America grew 4.5 per cent to $200.8m, and in EMEA the unit bounced 10.5 per cent to $279.2m, but the SCC deal was responsible for this.

In a conference call with analysts, CEO Richard Leeds confirmed that on a constant currency basis and excluding the acquisition, “revenues declined modestly” in EMEA.

“We have seen weakness across much of our European markets and particularly in the UK where we’ve taken a number of actions to improve our performance, including the replacement of certain members of the senior management team,” said the top dog.

Enterprise sales director Richard Logan and exec veep Gary Withington are no longer at the UK business, which sources claimed is now run by head of sales Sue Keywood.

Leeds added it had made efforts to expand “services and solutions” which often have longer sales cycles — typically “three to six months”. Misco UK received the Gold partner badge from Cisco in the quarter, following on from its buy of certain elements of Phoenix IT Group Cisco services biz.

Hungarian expansion

Systemax established a European Shared Services Centre (SCC) in Hungary last year, where it has centralised back-office and marketing functions, effectively rendering local in-country offices as satellite sales branches.

“The ramping of our SCC in Hungary continues as we build out its capabilities. While this initiative — coupled with the ERP implementations — has been challenging with one-time costs and business impacts exceeding our initial expectations, we’re beginning to see the fruits of our labor,” said Leeds.

“We remain confident that the SCC and harmonised ERP solution will ultimately result in a lower EMEA cost structure and improved operating efficiencies in the long-term,” he added.

Once selling, general and admin (S,G&A) costs (up from $114.8m to $118.5m) were factored in, along with special charges of $1.7m (albeit better than the $5.8m a year ago), the group operating loss came in at $2.7m compared with an operating loss of $3.8m a year ago.

The Technology Products group reported an operating loss of $9.7m versus $9.9m in the prior year, with the Industrial Products Group making an operating profit of $10.6m. Corporate costs were $3.6m.

Interest and other net expenses of $3.7m left a loss before taxes of $6.4m ($3.2m in Q3 2013) but a benefit from income tax of $3.6m left a net loss of $2.8m, better than the $11.6m loss a year earlier. ®

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