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Annus Horribilis for Avnet Inc

Spent $268m on acquisitions in fiscal '13, sales still declined

Enterprise tech distie Avnet closed off fiscal '13 on a relative high - well sort of - but the single digit sales hike came too late in the day for management to characterise the year as one of progress.

The sector bellwether posted Q4 numbers for the three months ended 29 June showing a 4.5 per cent year-on-year rise in revenue to $6.59bn (£4.25bn) but a 5.5 per cent fall in net income to $126.1m (£81.4m).

CEO Rick Hamada, said the "expense management action" and better than expected sequential growth at its component biz made for better numbers.

"Given that the substantial majority of our previously announced restructuring initiatives have been implemented, and we are beginning to see various positive signals on our dashboards, we plan to build on this most recent performance," he said.

This is more upbeat than Avnet's CEO has sounded for some quarters and may indicate that enterprise tech buyers be starting to prise open the wallets once again, as rival distie Arrow hinted recently.

The Electronics Marketing division - components - posted a sales bounce of 5.5 per cent (2.2 per cent organic) to $3.97bn and operating income of $175.4m, versus $191.1m a year earlier.

The Technology Solutions unit - enterprise IT wholesaling - grew three per cent in reported revenues to $2.62bn but declined 2.4 per cent organically. Operating income went up to $73.3m from $67.5m a year ago.

For the year group sales dipped one per cent to $25.4bn compared to $25.7bn for fiscal '12 and net income was down a whopping 20.6 per cent to $450m.

The numbers reflect the "impact of slower global economic growth and businesses' cautious spending on technology, particularly in our higher margin western regions," said Hamada.

He added that stripping out the impact of acquisitions in the year - Avnet closed on 12 deals including Magirus, Mattelli and Pepperweed - organic revenue declined four per cent.

He said it generated $696m from cash-flow, up 32 per cent year-on-year and used $262m to acquire those 12 firms.

So in actuality, Avnet used $262m to prevent group turnover from declining less than one per cent on a reported basis. Not a year to remember, certainly not for the right reasons anyway.

Looking into his crystal ball, Hamada said there continues to questions hanging over global macro conditions but reckons those acquisitions, many which operate in IT services, will strengthen its hand and push up profits. ®

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