VADs lose ground in UK distribution race

Falling behind: two-thirds of the UK's leading VADs posted top and bottom line declines last year

Research by ChannelWeb has revealed the UK's biggest distributors began to pull away from the pack during the recession, while ambitious specialists and value-added players saw sales and profits slump.

A rundown of the UK's 25 biggest distributors by revenue will appear in Monday's issue of CRN, alongside an in-depth look at the state of today's distribution landscape. The figures make grim reading for the leading VADs, as the volume players invariably strengthened their position at the top, largely through consolidation.

Examination of each company's most recent set of numbers reveals that seven of the 10 biggest distributors expanded in size last year. Much of the top-line growth came through the aggressive acquisition strategies pursued by the US giants.

With European sales down 12 per cent year on year, Westcon was one big player not to expand. But the comms and security firm claimed revenue had been in line with its expectations. It also turned a near-€10m (£8.4mn) net loss into a €7.5m profit in its 2010 fiscal year.

Ingram Micro's most recent set of UK figures also shows a double-digit sales decline. But the US giant's top line should be given a hefty boost by its acquisition of CCD late last year.

Top UK distributors also showed some mettle during the recession, with both Midwich and Westcoast growing sales and profits organically last year.

But it is a very different picture outside of the top 10, with just six of the top 11 to 25 growing in size.

One of those six – Nimans – could almost double in size through its acquisition of Rocom. But the Mancunian firm's most recent accounts saw sales down two per cent and profits cut in half. Magirus was another to boost its top line last year, but the German firm's UK operations had to swallow a £1.1m loss, compared with a £3.1m profit in 2008.

Nine other UK VADs – encompassing storage, audiovisual, communications, hardware and components players – had to endure a drop in both sales and profit last year.

The security space provided two of the rare success stories, with Computerlinks and Wick Hill both growing turnover and operating income. Ian Kilpatrick, chairman of Wick Hill, claimed distributors in the security space had weathered the economic downturn better than their bigger rivals.

"A recession typically puts pressure on the niche players, rather than the big broadliners," he says. "Yet we have seen minimal, if any, attrition in the good niche players – they have been able to carry on throughout the recession. In our sector, it certainly has not been tough enough to bring them to their knees."

See Monday's CRN for the full lowdown, which kick-starts our Spotlight on Distribution. Over the coming weeks we will be examining the key issues shaping the future of the UK distribution industry. Keep an eye out for more reports, polls and features, as we will be looking for your views on all the major talking points.