Westcon's European profit hit by Cisco discount decline

FY14 numbers show reduced margins in European business as UK business grows past $500m

The European operations of distribution monolith Westcon were hit by reduced upfront discounts on Cisco wares during an up-and-down 2014 fiscal year.

Annual accounts for the distributor's European operation show sales for the year to 28 February grew 7.9 per cent annually to $1.42bn (£832m). But EBITA fell by more than a third to just over $23m, equating to a drop in margins from 2.8 per cent in the prior year to just 1.6 per cent in FY14.

Gross margins also went the wrong way, falling from 10.7 to 10.4 per cent. The directors' report for the year chalked up the decline in profitability to "a combination of increased competitive pressures and a reduction in early-payment discounts for Cisco products".

During the year the distributor grew solidly across the continent, with UK turnover expanding almost seven per cent to $510.95m. Across the rest of Europe revenue grew eight per cent to $891.9m. Turnover in the rest of the world jumped more than 40 per cent to $14.5m.

Employee numbers rose slightly from 868 to 878 over the course of the year, but the staff remuneration bill increased by upwards of $6m to more than $81m.

The total equity in the business at year-end stood at $167.8m, down from $185.2m at the close of FY12. The directors sounded a quietly upbeat note about the ongoing 2015 fiscal year.

"The group is cautiously optimistic and is planning for growth in the majority of the markets in which we operate," adds the report. "In addition, the group is looking to execute various strategic growth initiatives."