12th Mar 2015 09:25
LONDON (Alliance News) - Northamber PLC shares hit their highest level for nearly three years Thursday morning, after the company reported a narrowed loss for the first half of its financial year, helped by strong revenue growth and as it returned to margin growth.
The IT distributor to trade has had a difficult few years, with sales halving over the last four years and losses mounting as margins came under pressure from continual price drops for IT equipment. It provides everything from desktops and servers to hard drives, laptops, memory boards, printers, routers, modems and software.
However, its loss in the six months to end-December was GBP292,000, compared with the GBP690,000 loss it reported a year earlier, as revenue rose to GBP35.7 million, from GBP30.2 million and its gross margin rose to 6.83% from 6.7%.
Northamber said it had managed to carefully control overheads, even though there were additional distribution costs associated with the big revenue increase.
There was a palpable sense of relief in the statement from Chairman David Phillips, although he was also cautious about the outlook give the company's difficulties of the last few years.
"In the past I have too frequently needed to refer to ongoing price erosion, thin margins and the need for tightly focused management, rather than just building empty revenue. The sector has for too long been driven by either over-supply or poorly regarded products, all then subject to un-commercial, competitive stock clearance pressures, which whilst partially avoidable, has not abated," he said.
"After a very long term downward trend echoing the extreme levels of product driven price erosion, we are achieving a slight resumption of growth in margins. The 13 basis points improvement in the gross margin for the first half year compares favourably with the same period in the previous year. This improvement has been generated by the continued refocusing on those more profitable elements of our business and these established core resources are continuing to show results," he added.
The company said the increased turnover resulted in increased working capital used in the business and as a consequence free cash fell to GBP2.7 million at the end of December, from GBP5.07 million at the beginning of July.
Phillips said the company will continue to operate a tightly controlled cost structure that will insulate it from "any untoward surprises", but also thinks it's well placed to benefit from further revenue growth.
"As you will know from my previous reports, I have learned not to speculate or be over optimistic and am hopeful that our improved trading performance will continue," he said
"As we know from history, however, within both the sector and the economy as a whole, there are many unknowns. Not the least of which will be any delaying effects on the user base IT refresh intentions, resulting from Microsoft's awaited forthcoming release of Windows 10, following the belated abort of the Windows 9 launch, plus the upcoming General Election," he added.
Northamber said it will pay an unchanged interim dividend of 0.3 pence, costing it GBP84,476. However, the board seems to be conflicted over its payouts.
"The subject of dividend is complicated by the message it also sends," Philips said. "Perceived conflict decrees I exclude myself from this subject. Your board has taken particular consideration of the improving results for the period and the strength of our debt free, tangible asset base."
Northamber share were up 13.2% at 43.00 pence Thursday morning, the stock's highest level since March 19, 2012.
By Steve McGrath; [email protected]; @stevemcgrath1
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