Misco parent takes action in 'weak' UK

Systemax admits it has seen weakness in most European markets, but particularly the UK where it operates under the Misco banner

Misco parent Systemax says it has taken "a number of actions" to improve its performance in the UK, which it singled out as a weak link in its latest earnings call.

Systemax chief executive Richard Leeds lamented its "soft performance" across Europe as sales in the region fell 2.5 per cent year on year in the three months to 30 September, excluding currency effects and its recent acquisition of SCC's Dutch arm.

For its business as a whole, the US-based firm saw Q3 net losses narrow to $2.8m (£1.76m), from $11.6m last year, on revenues that rose 4.2 per cent to $825.4m, thanks in part to its burgeoning industrial components business.

As revealed by CRN, UK arm Misco is rumoured to have recently parted ways with two top executives and Leeds confirmed there had been a clear-out.

"We have seen weakness across most 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 of the senior management team," he said on a Q3 earnings conference call, a transcript of which can be found here.

Reduced selling margins in Europe, particularly in the UK and Germany, caused Systemax's consolidated gross margins to fall from 14.8 to 14.2 per cent year on year, chief financial officer Lawrence Reinhold said.

Systemax absorbed special charges in the quarter of $1.9m, primarily relating to costs associated with setting up its new Budapest shared service, which Leeds said would be completed this year.

Despite costs exceeding initial expectations, Leeds said he remained confident that the shared service centre – along with the harmonisation of its ERP systems – would ultimately result in a lower EMEA cost structure.

He also struck a note of optimism about Misco's future prospects as the traditionally product-focused reseller moves deeper into services.

"In the quarter, we made additional progress in our efforts to expand our service and solutions offerings and our Misco UK operations achieved Cisco Gold certification," Leeds said.

He added: "This achievement, coupled with the acquisition of SCC Services in the Netherlands, furthers our strategy of expanding our product and service solutions we bring to our customers beyond the traditional products we've offered for decades. The service solutions typically have higher margins than traditional products and have longer sales cycles, typically three months to six months, and we built a solid pipeline of business through these teams."