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Misco does well but parent globocorp suffers full year losses

'My work here is not yet done,' confides CEO

Giant reseller Systemax, better known in the UK as the parent of Misco, continues to review the operations after swinging to losses caused by the collapsing US consumer market and charges incurred by major restructuring on both sides of the pond.

It was a particularly nasty outing for the mighty firm in calendar Q4 - group sales fell 4.4 per cent to $935.2m with gains in its B2B division based largely in Europe dragged down by the retail sector stateside.

Turnover in the consumer operation fell 12.1 per cent to $408.5m and the business division grew 2.5 per cent to $526.7m.

Gross profit in the quarter was $120.4m, down from $140m in the same quarter a year earlier. But selling, general & administration (S,G&A) costs of £127m and special charges of $40.2m left an operating loss of $46.7m versus an operating profit of $21.1m.

A tax benefit of $19.7m helped out but not enough to prevent Systemax slumping to a net loss of $27.1m. This compares to a profit of $14.7m in Q4 2011.

CEO Richard Leeds said on a conference call with analysts last night, the company was "solid" in the B2B and Industrial Products group but this "more than offset" by the floundering consumer unit.

The two largest European markets for Systemax subsidiary Misco - the UK and Germany - grew by double digit and "gained market share", said the company, claiming this was due to "sales staff investments" and new customer wins.

For the year, sales climbed 3.7 per cent to $3.5bn, and again the same dynamics were at play: the B2B unit grew 5.1 per cent to $2.085bn; but consumer declined 14 per cent to $1.45bn.

Leeds said of the consumer unit, "Buying patterns remain challenged and we've seen eroding demand and pricing environments across the industry, including key categories such as TVs and PCs".

He added, "Similar to the business market, the ongoing fiscal discussions in Washington have added an overhang in the market, one that consumers are only just starting to understand and feel."

Gross profit was $488.1m compared to $530m in 2011, this barely covered SG&A expenses of $481.7m, up 5.7 per cent. Special charges for restructuring was $46.3m, leaving an operating loss of $39.9m compared to a profit of $80.8m. Net losses for the year of $8.3m compared to profits of $54.4m a year ago.

Working capital increased by $6m to $360.8m and short and long term debt totalled $8.1m for 2012.

The restructuring blueprint outlined in November included shuttering the PC factory in the US as well as consumer brands CompUSA and Circuit City.

Despite making good progress with the B2B operation in Europe, Systemax also previously confirmed plans to cut the workforce as it establishes a shared service centre in Hungary, headed by Sandy Price, to be opened this spring.

Leeds said this facility will "eventually serve as the hub of our Central and Eastern European sales and marketing operations."

The CEO said the European team had now been built to support efforts to "pursue a broader and more cohesive pan-European strategy".

Leeds pointed to the restructure undertaken in 2012 but issued a note of caution, "Our work in not complete.

"The review of our operations from a strategic and execution standpoint is ongoing as we continue to seek ways to optimise our performance. We're focusing on driving our top and bottom line performances," he revealed. ®

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