Distribution Central has "most profitable quarter ever"

Distribution Central (DC) has had its most profitable quarter ever after it broke through the $250 million mark.

The distributor also nearly tripled its international footprint in FY 2013.

DC declared revenues of $252.3 million for the financial year ending 30 June 2013, up 20 percent from $209.9 million the year before.

Gross profit rose nearly 14 percent from $21.7 million to $24.7 million.

That number has been improved on in the current financial year. DC managing director Nick Verykios said: "We've just closed Q1 of this year and it was our most profitable quarter ever in the history of the company."

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The distributor showed growth across each of its three divisions. Its security services division, Firewall Systems, grew 13.1 percent from $51.8 million to $58.6 million. Its storage and data centre division, SAN systems, grew 11 percent from $94.8 million to $105.3 million.

Distribution Central consolidated two divisions, NetWorld Systems and Unity Systems, to form unified communications arm Vivid. Vivid generated revenues of $70.7 million, which was nearly 26 percent greater than the $56.2 million combined 2012 turnover of NetWorld and Unity Systems.

However, the company's debtor days increased from 26 days to 39 days, which Verykios attributed to the changing product mix.

"You're working with system integrators and telecommunication companies and they have different payment terms. As the mix changes, so does the payment schedules. We're always able to negotiate terms to make sure that it's in line."

DC's bottom line was one of the few indicators that went backwards, with net profit down from $816,691 to $299,591 year on year.

Verykios told CRN this was due to its policy of reinvesting back into the company. "The interesting thing about our FY13 results is we actually invested substantially. Whatever we want to make, we want to invest.

"We invest a lot in our own systems and processes. Last year, we implemented a new ERP system [and to ensure our customer service didn't drop, we had to invest in temporary labour," he added.

Acquisition target

While Distribution Central is not out there courting buyers, it is an attractive target. Verykios told CRN: "A number of people are looking at us. Every time someone pulls our ASIC files, we know they are looking at us."

Verykios and his DC co-founder, Scott Frew, have a history of starting and selling businesses.

Frew co-founded Micro Networks Australia, which sold to NetComm Australia in 1990, then founded LAN Systems, where he and Verykios grew the business to revenues of $200 million before selling to Datatec in 2000.

Verykios had previously founded and sold distie 1World Systems.

In 2004, the pair acquired Firewall Systems and rebranded its as Distribution Central (DC).

Verykios said that despite the impressive growth at DC, the partners are not ready to sell – yet.

"Anyone who builds a business and says, 'This business is not sellable', what that implies is that it's not valuable. When we sell it's got to be the right buyer. When somebody is going to take this company where neither Scott nor I could, that's the kind of time we're going to sell."

Part of the DC success story is its concentration on "emerging technologies", said Verykios.

"These technologies changed the way that people worked. In effect they were non-contested for a long time," Verykios told CRN.

Internationally, these technologies helped the company almost treble its footprint in New Zealand and Singapore.

Distribution Central's New Zealand's turnover grew 160 percent year-on-year from $5.3 million to $13.8 million. Verykios said the company's aggressive growth in the market was the result of its six-month exclusive distribution of NetApp, combined with a higher employee headcount.

"A lot of our investments are paying off in New Zealand. I think we're reaching critical size."

The same rampant growth was experienced in Singapore, where it grew 184.6 percent from $1.3 million in 2012 to $3.7 million in 2013. Verykios said he expects DC to generate $10 million revenue in the Asia market for the 2014 financial year.

"A lot of our business with Singapore is very project-based and not typical distribution. We have some trading entities already in Malaysia, Hong Kong and in Vietnam. If a couple of our new projects pay off, we'll generate maybe $15 million, definitely $10 million."

Distribution Central has 125 employees and operations in Australia, New Zealand and SIngapore.