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SCC bulging with cash, plans acquisition spree

Rigby clan wave bye to SDG arm, pocket £220m in cash

SCC chief exec James Rigby has talked up a "programme of investment" for his company as it waves goodbye to its wholesale arm, Specialist Distribution Group, that was sold to Tech Data for £220m.

The deal, announced in the summer, received the all clear from the European Commission's competition watchdog after it decided there was no danger of a distie monopoly forming.

Rigby said offloading its distribution arm frees up funds to target "high-margin segments" including storage, intelligent networks, data centre and - surprise surprise - the cloud.

"Mid-sized private and public sector organisations are caught in the gap between the large global integrators and niche local players, with very little choice in between. We see huge potential in that market," he said.

SCC spent the best part of ten months and a hefty investment to win the right to sell secure cloud services to UK government departments. It also owns a £25m data centre and tech testing facility.

Rigby said it had mapped out an "extensive programme of investment and possible acquisition supporting our bid to become the partner of choice for mid-sized companies and government organisations across Europe".

By buying Specialist Distribution Group (SDG), broad-line distie Tech Data gets access to enterprise vendors including VMware, Citrix and IBM, and in theory at least some 600 employees. It also adds €1.4bn of sales in Europe.

Tech Data said it expects to incur acquisition and integration costs, as is customary in any takeover involved a publicly listed firm, over the next four to five quarters, but this will have a "minimal impact on earnings", it said.

TD's CEO Bob Dutkowsky said the buy reinforced its enterprise distie biz, and gives the "increased scale" that distributors require to make money.

According to a filing at Companies House, SDG made a £5.8m operating profit in fiscal 2012, ended March, compared to £3.8m in the previous year, on UK sales of £265.5m, up from £224.4m. But it should be noted that turnover was lifted by the integration of numbers from Interchange, which added £29m to the top line.

Trade debtors went up by £4m to £39.3m, and the average time it took to collect payment after completing a sale was 34 days, better than 36.9 days in the previous year.

Reseller-cum-integrator SCC saw UK turnover rise 14 per cent in the same fiscal year to £642m, with turnover from products and services up 15 per cent and 6.5 per cent respectively. The firm said in a director's report that "despite competitive pressures" gross margins held steady at 12.6 per cent, down slightly from 12.8 per cent.

Operating profit went up to £9.9m from £3.6m, and the privately held firm retained profit of £6.9m for the year compared to £5.5m in 2011. It also employed 1,782 people, down from 1,869 in fiscal 2011.

It's not a bad set of results for a reseller, certainly at the top end of growth rates, and gives SCC a suitable platform on which to spend some of its cash. ®

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