Insight EMEA profits boosted by mid-market growth

Reseller banks higher profit in EMEA despite restructuring costs and static sales

Insight Enterprises posted a spike in EMEA profits in its second quarter as it offset a slowdown in public sector sales with a rise in higher-margin mid-market business.

According to results filed by the NASDAQ-listed reseller last night, EMEA sales for the three months to 30 June were flat in local currencies amid falling demand among public sector clients.

EMEA hardware sales fell by two per cent in euro terms – mirroring rival Computacenter's recent results – while software and services sales rose by one and 27 per cent respectively. Total EMEA sales rose 12 per cent in dollar terms to $402.9m (£247.1m), thanks to currency headwinds.

Insight also swallowed a $2.3m EMEA restructuring charge during the quarter, following a reorganisation that affected a small number of staff in Germany.

Despite this, EMEA operating profits rose sharply to $13m, up from $9.6m last year.

Stuart Fenton (pictured), president of EMEA and Asia-Pacific, said he was "extremely happy" with the results.

He told ChannelWeb: "Across Europe, we have seen some softness in public sector spending on hardware and software. But that was more than offset by growth in our mid-market business, which also runs at higher margins, hence we have seen an increase in operating profits.

"Notably, we continue to see strength in hardware for servers, storage, networking and mobility, all of which we have gained share within the midmarket."

Fenton said the government's controversial decision to force the police to procure IT through the single-supplier Sprint ii framework had also had a "marginal impact" on Insight's local sales.

"It is very likely there will be changes when the government realises some of the decisions it has made may not have yielded the outcome they expected," he said. "They sacrificed internal headcount for higher prices, but, net-net, they are probably worse off."

Fenton stressed the restructure, which occurred last month, affected just 50 or so of Insight's 1,400 EMEA staff. Most of the roles were administrative.

"We reduced centralised functions in Germany and pushed the roles back out to the countries or centralised them to a low-cost location in northern England [Sheffield]," he explained.

Overall, US-based Insight recorded its fifth straight quarter of double-digit growth, topping its internal expectations in the process. Total sales rose 16 per cent to $1.47bn while net profits grew 31 per cent to $35.3m.

The North American business grew sales by 14 per cent to $983.3m, while its much smaller Asia-Pacific unit saw sales rise 82 per cent to $76.8m.

Chief executive Ken Lamneck said: "We remain focused on growing sales faster than the market in 2011 while continuing to drive operational efficiencies throughout our business."