17 November 2011
Northamber plc
Interim Management Statement
The results of the strategic refocus of the business model in my last update to shareholders and the repositioning of our vendor offerings, are starting to bear fruit. Sales in Q1 of the current financial year improved by some 9% over the Q4 sales to 30 June 2011.
However, as widely published, all volume product sectors continue to suffer significantly from reducing demand and resultant over-supply. Context's market analysis on European I.T. distribution stated that Q3 demand had decreased by 18% over 2010.
On our own volume product portfolio, we were not immune to the lower levels of demand. Consequential oversupply and commensurate vendor destocking actions adversely affected our overall margins. Despite having taken avoiding actions and our areas of success, overall gross profit margins of 6.5% for our July to September Q1 compared with 7.0% for last year as a whole.
The combination of de-positioning the empty-revenue portion of our volume portfolio offerings and the wider economic downturn resulted in a 29% reduction in total sales in Q1 to 30 September 2011 of this financial year compared with Q1 last year.
The effects of the significant falls in selling prices per unit of the oversupplied volume products has resulted in our costs of sale being a greater daily management challenge.
As always we operate very strict cost controls on every aspect of the business. Whilst continuing to work to bring the cost ratios back into line with our needs and expectations, since the start of 2011 the underlying uncertainties have presented additional challenges to the business.
Some pre-emptive significant cost savings have already been implemented and will be recognised in the second half of the current financial year, and beyond. However, the unabated pressures of the on-going challenges are keeping this subject at the forefront of our attentions.
The extent of the volume product sector downturn can best be assessed at the operating level where the loss in Q1 to 30 September 2011 of 1.6% of sales, compared with a profit of 0.4% of sales in Q1 last year and a near break-even level for last year as a whole.
After buying another 150,000 ordinary shares for treasury at a cost of £86,155, we continue to maintain a very high level cash balances, with zero borrowings. The cash balance at the end of Q1 this year was £9.08 million compared with £10.7 million at 30 June. Whilst the rates of interest remain at a consistent low level, the income from these balances is minimal.
Net Assets per share at 30 September 2011 were 85.2 pence per share, compared with 86.5 pence per share at the end of June 2011.
For the present, there is no clear indication of any early improvement in the industry outlook. Hopefully when the overstocking situation is resolved there may be a return to a more rational balance of product and pricing. In the meantime we can only continue to operate as efficiently and effectively as we can.
For further information please contact:
Northamber plc 020 8296 7000
David Phillips
FoxDavies Capital 020 3463 5000
Barry Saint
