CDW CEO opens up on UK performance and Brexit impact in Q4 results

CEO Chris Leahy also gives update on potential M&A

CDW's UK sales grew by mid-single digits in its Q4 results, driven by demand from the education sector and customers planning for a "hard" Brexit.

CDW chief exec Chris Leahy revealed on an earnings call to investors that the UK business grew by "mid-single digits" during the quarter.

The reseller giant's UK business is lumped in with its Canadian operations in its financial reporting. This combined business posted a flat performance for the three months ending 31 December 2020, with sales 0.4 per cent lower year on year to $576m.

The wider CDW business posted net revenues of $4.96bn for the three-month period - up 9.2 per cent year on year. The firm ranked in $18.47bn in sales for full-year 2020, up 2.4 per cent on 2019.

CDW UK ranked #3 in CRN's VAR 350 with revenues of £972.4m in 2019.

Speaking to investors, Leahy said CDW UK benefitted from strong demand from the education sector during the year. Although she did not give UK-specific figures, Leahy revealed that education sales at a group level increased by 140 per cent year on year during the quarter thanks mainly to growth among K-12 customers (Kindergarten to grade 12).

Leahy thanked UK employees for doing a "tremendous job" in delivering more than 100,000 devices to hundreds of UK schools.

But the education sector wasn't the only factor that propelled growth for its UK business in Q4.

Leahy also attributed growth in Q4 to UK businesses buying technology in preparation for a potential no-deal Brexit in the weeks and months before the government secured a last-minute deal with the EU.

"There was some pull-in with customer demand before the announcement of the agreement with the EU, as customers prepared for a potential hard Brexit," she said.

"Over the last several weeks, the UK team has executed against its well-planned Brexit mitigation strategy and has done a great job helping customers navigate through the complexity of the new agreement."

CDW's entity in the Netherlands is helping its customers to navigate the new agreement between the UK and the EU, Leahy said.

The US reseller giant has been hinting at plans to expand further into Europe through M&A over the last few years, but the firm has yet to make an acquisition this side of the Atlantic since it bought Kelway in 2014.

When asked about its European M&A strategy, Leahy said that geographic expansion remains a focus and the firm has been "very active" in looking for opportunities.

"I doubt there's a deal out there that doesn't get to CDW's door to see," she said.

"But we also have our screens that we need to adhere to which are the cultural and operating match, the financial match and the strategic match. So, we'll continue to look."

At a group level, CDW's hardware sales grew by strong double digits, it claims, thanks to public sector demand for client devices. Software sales were flat, while services grew by low double digits driven by device decommission and configuration services for the Census project in the US.

Public sector sales ballooned by 45 per cent at a group level, driven by a 142.3 per cent increase in education sales. Small business sales declined by 4.8 per cent while corporate sales decreased by 11.2 per cent.

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There was a change at the top of CDW, with its Canada boss J.D. Hupp stepping in to lead the UK arm following the departure of long-time Kelway exec Dan Laws.

The reseller's UK business has struggled through the pandemic, with sales falling by "high single digits" in its Q3 results as government support schemes started to come to an end and customer spending slowed.

Although public sector spending has provided a lift to CDW UK, a lack of business from corporate and SMB customers has meant that the reseller's growth has been much more subdued than before the Covid crisis.

Hupp will be tasked with getting the reseller back into growth mode in 2021 as corporate customers - hopefully - resume investments into their on-prem infrastructure once again.