Ingram Micro's layer cake is about to get a bit flatter
World's biggest distie takes cake knife to $100m in biz costs after record 2013
Ingram Micro is toasting better trading conditions in Europe that helped it report record revenues for calendar '13 by sharpening the axe to "de-layer" and "align" the business and save up to $100m in overheads.
The world's largest tech distributor filed numbers for Q4 with sales edging up four per cent to $11.8bn driven by operations in Europe and Latin America, and climbing 12 per cent for the whole year to $42.6bn.
The North America subsidiary posted flattish sales of $4.46bn in the quarter but boxes shifted more fluidly in Europe with turnover up seven per cent to $3.3bn.
Chief abacus-stroker Bill Humes said it saw "incremental stabilisation" in several countries in Europe and it "benefited broadly from new vendor and product additions".
He called out France and Netherlands as "standout" countries, but the UK "continued to perform well with ongoing strength in SMB". The sales environment Stateside remained fiercely competitive, Humes added.
Revenues in Asia Pacific and Latin America grew 1.8 and 13 per cent to $2.22bn and $681.5m respectively. Mobile biz Brightpoint added $1.14bn to the top line, up from $1.04bn a year earlier.
Operating expenditure bounced 8.8 per cent to $537m, including a six per cent rise in sales, general and admin costs to $509.4, a massive spike in re-org costs to $14.57m from $3m ($8.4m in North America and $5.3m in Europe), and a slight rise in amortisation of intangibles to $13m.
Despite this, operating profit went up 2.8 per cent to $172.6m on the back of the sales rise. Once tax and for-ex currency conversion gains were accounted for, net profit crossed the line at $112.2m – up 10.7 per cent. The distie generated $466m in cash flow from operations.
Ingram closed three acquisitions in the year: domain name management, web hosting and IaaS biz target Softcom; supply chain and mobile device lifecycle services firm CloudBlue; and cloud logistics and supply chain SaaS provider Shipwire.
It said the latter two buys will require "incremental investments" to be able to expand the services across multi-territory operations, and this is one of three strategies that "form the next phase of execution", said CEO Alain Monie on a conference call with analysts last night.
"It is important that we further enhance our ability to innovate and respond to market needs with greater speed and efficiency.
He added, "[We are] aligning and leveraging the company’s infrastructure globally with its evolving businesses, opportunities and resources."
The second part of the "operational effectiveness programme" will include "delayering and simplifying the organisation to enable the company to be more nimble, responsive and collaborative," Monie added.
He did not expand on the nature of the "de-layering", which sounds like a re-working of the term redundancy, but Ingram's management structure is already known in the channel to be flat, in the UK at least.
The alignment and delayering programme is expected to yield annual cost savings of between $80m to $100m. Cost savings are expected to materialise in the second half of the year and be fully realised in 2015.
"One-time restructuring, integration and our re-organisation costs associated with this program are expected to be in the same range which includes $8m in cost associated with implementation of certain initiatives we took in the fourth quarter of 2013," the CEO said.
The third element of Ingram's execution strategy involves maintaining investments in higher margin growth areas, particularly in service in and around the cloud and mobility.
On top of the sales spike for the year, the wholesaler made a profit from operations of $514.8m, up from $462.3m in 2012. Net income came in at $310m versus $306m in the previous 12 months.
Ingram Micro's local PR team refused to provide more details, "We are focusing the country managers on staying close to [channel] customers and vendors. There is work to be done on what that entails". ®
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