The much-used channel phrase ‘revenue is vanity and profit is sanity’ could easily be applied to mid-market reseller hulk SCC as it opened up on results for the first half of fiscal 2015.
From its Midlands HQ, the Rigby clan’s last technology business turned over £729m at group level in the six months to the end of September, down some £4m, or 0.5 per cent, on the same period a year ago.
This included £304m worth of sales from UK ops, down £100,000, and a two per cent drop in France (where SCC is the largest reseller) to £377m, but a £1m rise in Spain to £19.5m.
The remaining £13.5m came from M2, a Brit-managed print services firm acquired by SCC in February and combed with its own MPS biz, and from Roman and distie operations in the Middle East and North Africa (£11.9m)
In Blighty, where it all began for SCC in the mid-70s, some £235m worth of revenues came from product resale, down six per cent but up on margin, said James Rigby, CEO at SCC.
“We walked away from empty calories revenues,” he told us.
There was no break-down in terms of product mix, but Rigby said PCs were “very strong” on the back of the XP refresh, and described the server market as tough, with the impact of virtualisation and cloud factors, “but coming back strongly” as customers refresh ageing infrastructures.
In contrast, UK services revenue was up eleven per cent to £69m, and gross margin climbed a whopping 24 per cent.
A “key element” here was the 90 per cent uplift in data centre services (DCS) to £11m. This has been a hotbed of investment for SCC, with £25m ploughed into three data centres in Birmingham, and £10m on three cloud platforms.
Sentinel is a “secure” government IL2 and IL3 accredited platform — SCC is one of a small band of suppliers with this, a “multi-tenanted” private sector Cloud+ platform, and a Back-up as-a-service cloud.
The firm also acquired in September SSE’s data centre in Fareham, taking the total number of racks to 1,770.
“These were big bets for a privately held company,” said Rigby, “but why would mid-market customers invest in their own assets when they can leverage someone else’s?”
With some customers potentially buying services from AWS, Microsoft and SCC, as an example, the CEO estimates life is going to get a heck of a lot more complicated for CIO and IT directors.
“The role of the channel is increasingly important to help end-users with that complexity.”
Strong UK economy
Professional Services were up in the UK by 27 per cent to £16m, with XP to Windows 7 migration — notice not Windows 8.1 — a “big contributor” to the business, along with SharePoint and Lync.
“It reflects the [growing] strength of the UK economy that there are a lot of projects, every area of PS is growing strong,” said Rigby.
On the Managed Services front, revenue was up at the half-way point to £35.1m. Flexible Resourcing — a new business launched to provide engineers where required — grew to £2.6m from zero. The rest of services revenues came from other areas, including recycling.
Gross margin in the UK was up to 13.4 per cent, versus 11.1 per cent in H1 2013, and dipped in France to 9.1 per cent from 9.7 per cent. It was down to 11.8 per cent in Spain from 13.2 per cent. At group level it jumped to 11.1 per cent, from 10.8 per cent.
Operating profit at group level bounced £3.02m to £5.44m: in the UK it rose 55 per cent to £3.75m; up £411,000 in France to £1.5m. Romania and MENA made up circa £1.1m.
Back in March, SCC devised a three-year plan to get to £50m EBITDA — it was at £34m in fiscal 2014 ended March — and put in place three directors to run things: John Bland is overseeing sales, Tracey Westall will handle marketing, and Mike Swain will run services.
Rigby told us it will acquire companies to help it get there, on top of organic expansion, with areas of interest including networking and comms, “not legacy businesses”.
“We have the data centre and the device, the bit in the middle with the pipes managing the comms between the two is a logical place to go,” he said. “Nothing is on the table at the moment but there are resources to deploy”.
The group employed 4,855 staff with 1,765 in the UK, 1,977 in France, 139 in Spain, 665 in the Romania operation, and 200 at M2.
The accounts were unaudited. ®