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PERFORMANCE
Revenue up 19% to US$4 854.5 million
Gross margins stable above 11%
Senior management and reorganisational changes
Increased revenue contribution across all regions highlighted by 42% growth in North America
EBITDA increases 37% to US$125.1 million
Corporate overview
WestconGroup (“Westcon”) is a value-added distributor of category- leading security solutions, unified communications and collaboration, network infrastructure and data centre solutions with a global network of speciality resellers.
Westcon is represented across six continents, distributes to 170 countries, operates more than 20 logistics/staging facilities and transacts with more than 20 000 customers globally. Westcon consists of two go-to-market brands and business units:
Westcon
Operating in the Americas, Europe, Asia-Pacific, Africa and the Middle East, Westcon provides category-leading solutions from a broad portfolio of premier vendors. Westcon has deep expertise in the following areas and technologies:
- Security solutions: Blue Coat, Check Point, F5 Networks, FireEye, Fortinet, HP, Juniper Networks, Palo Alto Networks, Radware, RSA, SafeNet and Trend Micro
- Unified communications and collaboration: AudioCodes, Avaya, Jabra, Multi-Tech Systems, Plantronics, Polycom and SMART Technologies
- Networking infrastructure: Extreme Networks, Juniper Networks and Meru Networks
- Data centre: EMC, Fujitsu, NetApp, Riverbed, VCE Corporation and VMWare
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Comstor
Comstor is the Cisco-centred business unit of WestconGroup, shipping to more than 100 countries. The business distributes the full line of Cisco networking, collaboration, security and data centre solutions:
- Enterprise networking: Cisco Routers and Catalyst Series Switches and Cisco Wireless Series
- Collaboration: Cisco Unified Communications Manager, Cisco Unified IP Phones, Cisco TelePresence and Video and Content Delivery Solutions
- Security: Cisco AnyConnect, Cisco ASA, Cisco IPS, Cisco VPN, Cisco Email/Cloud Email/Web Security Appliances, and Cisco Cloud Web Security
- Data centre: Cisco Unified Computing System, Cisco Nexus Switches and Cisco MDS Storage Switches
- Services: SMARTnet, SmartCare and Advanced Services
The current year marked a period of changes and transitions that improved Westcon’s overall performance while also positioning it for future growth. Strategic acquisitions within key categories, including cloud and technology services, broadened its capabilities to better serve these and other fast-emerging markets more efficiently, profitably and responsively to changing customer demands.
Building on this growth momentum, Westcon formed pivotal alliances with leading technology vendors across multiple practice areas, further enhancing its potential for long-term success within its global capabilities and technology practice areas such as:
- Global capabilities
- Security
- Unified communications and collaboration (“UCC”)
- Networking
- Data centre
- Technology practices
- Cloud
- Global deployment
- Services
See www.westcongroup.com
for more information
Westcon’s culture of performance was also evident as new and existing leadership teams strengthened operational cadence and accountability, resulting in increased revenue contribution across most regions, highlighted by 41.9% growth in North America.
How Westcon creates value
Vision and value proposition
Knowing it takes more than anticipating technology trends, but also how they will change the way businesses operate, Westcon empowers solution providers – through education, training, programmes and services – to become the trusted advisers of tomorrow’s leading enterprises. Westcon works with the world’s most progressive and innovative technology vendors to create effective routes to high-growth, advanced technology markets critical to their fundamental growth while also providing the fastest time to revenue. By consistently and responsibly providing the right products, services, technologies and resources to capitalise on fast-changing market opportunities, Westcon has become the IT channel’s go-to business source for unified communications, network infrastructure, data centre, and security solutions.
Guiding philosophy
As a global value-added distributor at the centre of the technology supply chain, Westcon is ideally positioned to enable both IT vendors and solution providers to most effectively reach and support businesses of all sizes in any industry. Westcon continually scans the market for technology vendors who can help expand its portfolio of exceptional products and create the greatest opportunities for its customers. The skills, expertise, loyalty and dedication of its employees worldwide are the driving force behind not only the success of the organisation, but also that of its vendor and solution provider partners. Westcon operates under the highest ethical standards and actively supports the communities, industries and markets where it conducts business through charitable and socially responsible programmes.
Westcon’s strategy
Since its founding in 1985, Westcon has evolved its business model with one clear principle in mind: enabling partners. This strategy has allowed Westcon to successfully navigate myriad market changes over the years, emerging stronger and more responsive to vendor and solution provider needs each time. Westcon’s leadership team continues this practice today using five strategic priorities as its foundation:
- Create efficiencies – to drive operational excellence, deliver a consistent customer experience and provide a more automated, self-service business approach. Standardising processes, developing shared services and optimising internal systems accomplish this.
- Enhance vendor portfolio – to ensure the most relevant, fastest-growing categories are represented, available and supported by adjacent technology practices. This heightens Westcon’s ability to anticipate technology evolution, maintain its thought leadership position and accelerate incubation of promising vendor technologies globally.
- Strengthen partner enablement – to create a clear and compelling value proposition that makes Westcon the distributor of choice for technology solution providers worldwide. Enhancements to e-commerce and self-service tools, business intelligence capabilities and globalisation of Westcon’s partner framework Engage, Develop, Grow, Extend (“EDGE”) help drive this initiative and build strategic relationships with global accounts.
- Globalise services capabilities – to become the worldwide channel leader in value-added, complementary white-labelled technology services. Three key focus areas include first and second-level technical support; education and training; and remote professional services such as deployment, maintenance and solution design. Westcon recently acquired Intact Integrated Services to broaden its global services capabilities and deliver unprecedented support.
- Launch cloud practice – to build the most compelling offering combining technology with managed and digital services. Westcon continues to evolve this growing practice, optimising partner enablement services for the cloud to include billing-as-a-service, service contract financing, reseller sales training, channel ROI model tools, and reseller up and cross-selling capabilities. The company recently acquired Verecloud and the minority interest of Data Copy System, S.L. (Acrosnet) to bring these powerful, channel-optimised cloud and services distribution capabilities to market.
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During the year, Westcon also concentrated on driving long-term profit margin improvement and strong generation of cash to ensure liquidity for growth. Technology investments in Enterprise Resource Planning (“ERP”) systems are paying off with three successful deployments of the ERP system in the Asia-Pacific region – New Zealand, Singapore and Australia – now completed, and future deployments across other regions are planned for the coming year. In all, these processes help Westcon create a more global and efficient operations organisation and a world-class supply chain.
Progress against objectives
| FY15 objectives | FY15 execution of objectives | FY16 priorities |
| Improve operational leverage and efficiency |
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| Focus on cloud and services |
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| Continue development of integrated offerings |
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| Continue globalisation of top vendor relationships and accelerate key emerging vendors |
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| Successful restart and continued roll out of the ERP system across the globe |
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Markets
Commodity rich countries such as Australia, Canada and South Africa have shown weakness since the end of 2013. Westcon is focused on cost management in these markets to ensure profitability is maintained. European demand is recovering in key markets such as the UK, Germany and Spain.
Performance
Westcon accounted for 75% of the Group’s revenues (FY14: 72%) and 56% of its EBITDA (FY14: 50%).
Revenues increased by 19.4% to US$4.9 billion (FY14: US$4.1 billion). Most notably, revenues improved in North America where sales increased 41.9% through a return to efficient execution following the resolution of post-ERP issues in that region.
Of Westcon’s revenue, 34% was generated in North America (FY14: 29%), 32% in Europe (FY14: 35%), 12% in AME (FY14: 13%), 12% in Latin America (FY14: 11%) and 10% in Asia-Pacific (FY14: 12%). Cisco products made up 46% of Westcon’s revenue (FY14: 47%), 21% came from unified communications and collaboration (Avaya, Polycom, others) (FY14: 22%), 25% from security (FY14: 22%) and 8% from data centre and other vendors (FY14: 9%).
Gross margins were 11.2% (FY14: 11.2%) with higher margins across all regions except Europe which was impacted by lower profit from maintenance and renewal sales. Gross profit increased by 19.6% to US$542.2 million (FY14: US$453.4 million). Operating expenses increased by 15.2% to US$417.1 million (FY14: US$362.1 million) while operating expenses as a percentage of revenue decreased to 8.6% (FY14: 8.9%)
Westcon’s EBITDA was US$125.1 million (FY14: US$91.3 million) with increased results in North America, Latin America and AME, while EBITDA margins were 2.6% (FY14: 2.3%), with increased margins across all regions except Europe. Operating profit was US$100.2 million (FY14: US$62.0 million).
Westcon’s net working capital days decreased from 35 days in FY14 to 27 days in FY15 due to a combination of lower days’ inventory outstanding and higher days’ payable outstanding (“DPO”) and higher days’ sales outstanding (“DSO”). Net debt decreased by US$29.6 million, resulting in a net debt position of US$165.2 million at year-end as decreased working capital requirements drove reduced use of working capital facilities and increased cash balances.
Partner and vendor relationships
Westcon’s customers include technology vendors, value-added resellers, systems integrators and service providers offering technology solutions for small and medium-sized businesses, enterprise organisations, governments, and other vertical markets around the world. Solutions include the design and configuration of unified communications and collaboration, mobility and data centre networks, as well as network extensions such as videoconferencing, network storage, unified messaging and network security. Westcon also provides a range of comprehensive services to complement these solutions, such as its unique partner enablement platform – EDGE programme, which this year became available to customers worldwide.
Partner engagement programmes and an ongoing focus towards vendor relationships continue to create new market opportunities both now and into the future. Westcon’s 14 global vendor lines exceeded growth expectations last year and new partnerships promise to build on that momentum. Among recent developments, Palo Alto Networks became a global vendor partner, with a roll-out under way in many countries, and Juniper became a global vendor with roll-outs in Latin America and the US. NetApp also named Westcon Group as distribution partner in Australia and New Zealand. Westcon continues to build other strategic alliances with vendors across targeted categories in cloud, security, hybrid storage and collaboration.
Awards and recognition
Westcon’s leadership, vision, programmes and performance continue to draw the attention of the technology market it serves. From vendor partners to technology journals, the reaction is clear: Westcon’s relentless commitment to excellence transcends all facets of the organisation. A number of accolades include:
- Comstor Africa – Distributor of the Year, Cisco
- Comstor Americas – Distributor of the Year, Cisco
- Comstor Brazil – Innovation Award, Cisco
- Comstor Brazil – Best Integrated Marketing Campaign, Cisco Marketing Velocity
- Comstor EMEA – EMEAR Global Distributor, Cisco Distribution Forum
- Comstor EMEA North – Distributor of the Year, Cisco
- Comstor France – Distributor of the Year, Cisco
- Comstor Latin America – Americas Collaboration Distributor of the Year, Cisco
- Comstor Mexico – Revenue Marketer of the Year, Cisco
- Comstor Middle East/UAE – Distributor of the Year, Cisco
- Comstor Middle East – Revenue Marketer of the Year, Cisco
- Comstor Netherlands – Security Distributor Award, Cisco Distribution Forum
- Comstor Netherlands – Distributor of the Year, Cisco
- Comstor Portugal – Distributor of the Year, Cisco
- Comstor Singapore – Zenith Club and Top Services Sales 2014, Cisco
- Comstor Singapore – Top Performing Distributor ASEAN, Cisco
- Comstor Spain – Distributor of the Year, Cisco
- Comstor Turkey-Neteks – Distribution Partner of the Year, Cisco
- Comstor United Kingdom – Best Integrated Marketing Campaign, Cisco Marketing Velocity
- Comstor United Kingdom – Revenue Marketer of the Year, Cisco
- Comstor United States – Distributor of the Year, Cisco
- Comstor United States – Americas Security Partner of the Year, Cisco
- Westcon Brazil – Distributor of the Year, F5
- Westcon Germany – Special Achievement Award, Solutions for an Application World, F5
- Westcon Group Americas – Distributor of the Year, FireEye
- Westcon Group Austria – Best Performance Award, Trend Micro
- Westcon Group Australia – APJC Collaboration Distributor of the Year, Cisco
- Westcon Group Australia – Distributor of the Year, Palo Alto Networks
- Westcon Group Australia – ICT Industry Awards 2014 Winner, ARN
- Westcon Group Australia – ABA100 Winner, Employer of Choice 2014
- Westcon Group EMEA – Distributor of the Year, Polycom
- Westcon Group EMEA – Distributor of the Year, Extreme Networks
- Westcon Group Germany – Excellent Distributor 2015, CRN
- Westcon Group Germany – Best Distributor in Germany, IT-Business
- Westcon Group Germany GmbH (formerly Intact Integrated Services GmbH) – National Champion, European Business Awards
- Westcon Group Middle East – Value Added Distributor of the Year 2014, Reseller Middle East
- Westcon Group Middle East – Networking VAD of the Year 2014, Integrator Middle East
- Westcon Group Middle East – Top Value Added Distributor, Enterprise Channel MEA
- Westcon Group New Zealand – Distributor of the Year, IBM
- Westcon Group North America – Distributor of the Year, Palo Alto Networks
- Westcon Group Services Solutions (includes Intact) – Most innovative Channel Product Award for Professional Services, Comms Business Awards 2014
- Westcon Group South Africa – Southern Africa Distributor of the Year 2014, Motorola
- Westcon Group South Africa – Hosting Distributor of the Year, Microsoft
- Westcon Group South Africa – VL and Cloud Distributor Partner of the Year, Microsoft
- Westcon Group South Africa – Microsoft MEA SPLAR Awards 2014, Fastest Reach Growth
- Westcon Group South Africa – EMEA Fastest Growing Distributor of the Year, Ruckus
- Westcon Group South Africa – Top Performing VAD, Symantec
- Westcon Middle East – GGM Distributor of the Year 2014, Avaya
- Westcon Middle East – Value Added Distributor of the Year, Channel Middle East Awards
- Westcon Netherlands – Distributor of the Year, Avaya
- Westcon Security Solutions EMEA – Commended at Annual Marketing Academy, Juniper
- Westcon Security Solutions Germany – Distributor of the Year, Juniper
- Westcon Security Solutions Belgium/Luxembourg – BELUX Distributor of the Year, Check Point
- Westcon Solutions Taiwan – Partner Excellence Cross-Pillar, Hewlett Packard ESP
- Westcon Unified Communications and Collaboration – Best Distributor for the Nordics and Baltics Region, Avaya
- Westcon Unified Communications and Collaboration – Winner 2014 Best Convergence Distributor, Comm National Awards (“CNA”)
Westcon’s executives are active members of the industry body – the Global Technology Distribution Council (“GTDC”), with some holding board positions. The GTDC is the industry consortium representing the world’s leading technology distributors who together represent over US$135 billion in annual revenue.
Outlook
Under the leadership of recently appointed (December 2013) CEO, Dolph Westerbos, and his new executive leadership team, Westcon is on a path of profitable growth and market leadership. With its strategic plans firmly in place, the team will continue to focus on developing its cloud and professional services initiatives.
Westcon will also continue to execute its emerging vendor and incubation business plan, which provides additional resources and custom go-to-market business models that ensure greater success and profitability potential for these promising new technologies.
In the EMEA region, a significant focus centres on delivery of Westcon’s shared services model. This transformational programme enhances the customer experience, drives process excellence and improves overall efficiencies. By simplifying processes and providing a more consistent organisational structure, Westcon is better able to adapt to changing market, customer and vendor demands in the future.