Systemax bleeds cash, reports $100m net loss for 2015
Closing North America reseller biz to blame... mostly
The cost of exiting its North America reseller biz propelled Systemax’s net losses to nearly $100m in calendar 2015 - but European ops might just be finally showing some signs of recovery.
The year ended on a relative high, with Q4 sales rising 2.6 per cent to $468m; the European arm Misco declined eight per cent to $285.9m but in constant currency was down just 2.3 per cent; Stateside, the Industrial Products Group (IPG) grew 25.8 per cent to $178.7m.
Under the previous Euro management team - the local CEO split last summer - Misco lost sight of its core reselling business in the pursuit of higher margin tech services, and sales growth evaporated. A new leadership team was inserted including execs poached from rivals.
A comparatively brighter Q4, however, failed to save the yearly results; turnover from continuing operations edged up 0.3 per cent to $1.8bn; IPG was up 25.6 per cent to $698.6m; and Misco declined 11.5 per cent to $1bn. A change in US accounting practises meant some discontinued retail sales were included in the revenue figure.
Selling, general and admin expenses of $338.9m, coupled with $27.5m worth of “special charges” left operating losses for 2015 at $34.8m. After tax provisions, the net loss from continuing ops was $48.3m.
Add to this the $51.5m net loss from discontinued business, and the net loss totalled $99.8m compared to a net loss of $37.5m in the prior full financial year.
CEO Richard Leeds - twenty years in situ - revealed with the results that he’s handed the top job to CFO Larry Reinhold and moved into the background to pull the levers as exec chairman. Reinhold will also remain as the top bean counter.
Leeds said the results reflected the exit of the reseller market in North America. “While this was a difficult decision and the exit costs are substantial, it will significantly improve our consolidated financial performance and streamline our business going forward.”
He said the new management team on this side of the pond are “executing” on the turnaround blueprint, with France up 20 per cent in the year and more senior sales heads entering the UK subsidiary, as El Chan revealed last month.
Systemax has reported so many one-time charges in recent years based on the restructuring and closure of businesses - it exited PC retail too - that the recent award by a Florida court of $36m in restitution from disgraced former exec Gilbert and Carl Fiorentino was a filip.
The bungling brothers were imprisoned for receiving kickbacks from an eight-year scam while at the company, during which time they placed $230m worth of orders with component suppliers that overcharged Systemax to the tune of $27m.
How much of this money Systemax manages to recoup from the duo is questionable. ®