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Reseller giant Systemax bleeds red ink in Q1 of 'turnaround year'

CEO Leeds: 'Operating loss is unacceptable'

Misfiring reseller big gun Systemax has seen poor results in the first quarter of calendar 2013 - which is supposed to be its turnaround year. In its efforts to recover, the business has slashed European jobs, shuttered US PC factories and axed retail brands.

The ailing firm, branded as Misco in Europe, saw sales decline 3.6 per cent year-on-year to $880.7m in Q1 ended 31 March.

This included a 5.8 per cent drop in the Technology Products division to $773.5m, with turnover sliding 11.3 per cent in North America. Even on this side of the Atlantic, the B2B operation - a part of the business that seemed almost immune to the general economic downturn - has slid 1.5 per cent.

Bizarrely, PCs represented the only growth product category in the Tech Products unit, up 5.2 per cent at a time that the overall market worldwide has reported the steepest decline since records began.

The Industrial Products unit - which handles furniture and office gear, plumbing supplies, workbenches and shop desks among other things - grew 16.8 per cent to $105.6m.

B2B sales across the group grew 1.6 per cent to $543.8m and those in the consumer channel dropped 10.9 per cent to $336.9m, the firm revealed.

Gross profit for the group was $122.6m but a 6.1 per cent rise in selling, general and admin expenses to $125.2m and $6.1m in charges related to restructuring left Systemax with an operating loss of $8.7m

A tax benefit of $2.9m meant the net loss for the business was $6.3m, compared to a profit of $7.3m a year earlier.

Systemax CEO Richard Leeds noted that losses had narrowed sequentially from the $27.1m reported for Q4.

"However an operating loss, no matter how small, is still unacceptable to us and we are working diligently to improve the business," he said.

"The operating environment remains challenging across our technology businesses from both a competitive and demand perspective," said Leeds.

The turnaround plan drafted last year included exiting PC production in the US, chopping retail brands stateside, opening a shared services facility in Europe and cutting jobs in the region.

Leeds said that in the past 12 months it had expanded the sales organisation in Europe, particularly in the UK.

This has involved the addition of a Euro CEO Pim Dale, formerly an exec at Dell and a man with a grand plan, and some new generals including former HP sales director Richard Logan.

"While these efforts bring increased additional costs which are reflected in the quarter, there are key components in our growth strategy that are expected to benefit our long-term performance," the CEO said.

The Hungary shared services site is due to be completed in the next few months, the firm added, and this will "drive operational and cost efficiencies in the second half of the year".

Leeds said Systemax has nearly $135m in the bank. ®

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