Final Results

NORTHAMBER PLC 23 September 1999 NORTHAMBER PLC Preliminary Results for the year ended 30th June 1999 23 September 1999 Highlights * Turnover £277.73 million down 5.4% (1998-£293.46 million) * Profit before tax £6.32 million down 28.3% (1998-£8.81 million) (Pre Exceptional FRS 11 Item) * Pre-tax margin 2.17% (1998-3.00%) * Earnings Per Share of 11.8p down 31.8% (1998-17.3p) * Net Asset Value per Share increased by 8% to 91.8p (1998-85p) * Return on Capital Employed 19.8% (1998-32.6%) * Zero Net Borrowings - Net Cash £3.9 million (1998-£1.7 million) * 20 times Stock Turn (1998-19) * 23 Creditor Days (1998-22) * 38 Debtor Days (1998-38) * Proposed Final Dividend of 3.5p per share, a total of 5.0p for the year (1998-4.2p) David Phillips, Chairman, said: 'These results simply reflect the effects of the over supplied and competitive trading conditions during the second quarter of 1999 and also the absence of the anticipated pre-millennium upturn.' Enquiries: David Phillips, Chairman Marilyn Lee, Financial Director Northamber plc Telephone: 0181-296 7000 CHAIRMAN'S STATEMENT Results The successes earlier in our financial year were followed sadly by the adverse computer market-place conditions in the second calendar quarter of 1999. These were unexpected and required steps to be taken to minimise our exposure. As a consequence, our results are below those reported last year and our own earlier expectations, but compare favourably with the performance of others within our immediate sector. The resultant pre-tax margin was 2.27% (before the exceptional FRS 11 item) and compares with the 3.00% for the prior year. Pre-tax profits fell to £6.32 million (before the exceptional FRS 11 item), compared with the £8.81 million a year ago. Sales for the twelve months ended June 30th were £277.73 million as against the £293.46 million for the previous year. These results when viewed against the prevalent levels of over supply and price erosion reflect the strengths of Northamber's tight controls. The resultant Earnings per share was 11.8p down from the 17.3p last year. Net assets of 91.8p per share are a worthwhile improvement on the 85p reported a year ago. The £2.15 million increase in net cash over the year improved the positive cash position at year end to £3.93 million. Dividend Our stated policy is to keep the level of dividend under constant review. This has resulted in a proposed increase that recognises our financial strength with a final dividend per share of 3.5p. At 5.0p for the year, the 19% increase in the total dividend compares with the 4.2p for the year ended June 30th 1998. Trading The results for the second calendar quarter of 1999 were unexpectedly impeded by a strong UK market place imbalance between forecast and actual demand. Of the three major US based global distributors, two referenced the UK market as having been significantly difficult. Oversupply destocking within the sector resulted in increased levels of price competition and a consequential reduction in the available gross margin across many product ranges. That effect on overall margins has since been quantified for the UK and Germany by one of the US based world-wide distributors as being a full 1% below that in other European countries. Price erosion and consequent reduction in annual sales revenue fails to reveal the significant growth in product shipments and distorts any meaningful annual growth based comparison. Despite market confusion, we were successful in maintaining margins on the majority of product lines, whilst focusing on further cost efficiencies and reducing our exposure on marginal product sales. The year end value of our stocks is below that of last year, it being our policy to avoid stock levels inconsistent with known demand. This again reinforces our policy of managed avoidance of profitless revenue. The earlier, general expectation of a robust market ahead of the millennium has so far simply failed to materialise. Your Board remains committed to revenue growth from those product areas where we are able to achieve a satisfactory return on capital employed. Financial The success of tight controls over working capital reduced our stock holdings and improved stock turns. Trade debtors and creditors continued their beneficial trend resulting in our strengthened balance sheet and improved cash position. Staff The expanding skills and service based element of our business required an increase in the number of staff employed particularly on the Channel Assembly of PCs and Servers. Over the year the average number of staff increased from 366 to 416. As a people-based activity and only able to expand with the commitment and efforts of our staff, we extend our thanks for their strong contribution over the past year. The Board In the period since Tony Caplin joined as a non-executive director, his presence on the Board has been valuable, involved and enjoyable. To recognise his unique and focused contribution and to further strengthen the Board itself, it is proposed that Tony be appointed non-executive deputy chairman as at the forthcoming AGM. Outlook In the second quarter of 1999 our sector encountered unfavourable trading conditions but the market now appears to have stabilised and the new trading period has started in line with our own expectations. Return on capital and margin retention will continue to remain our primary focus, with margin retention likely to be the main source of profit growth until market conditions improve further. The Board is confident of a profitable outcome for the year ahead. David Phillips Chairman 22nd September 1999 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 30th June 1999 Notes 1999 1998 £'000 £ '000 As restated Turnover 277,727 293,461 Cost of sales 2 (253,675) (266,708) _______ ________ Gross Profit 24,052 26,753 Net operating expenses 2 Distribution costs (10,887) (9,787) Administration expenses - Exceptional item 3 (277) - - Other administrative costs (6,971) (8,225) Other operating income 417 458 _______ ________ Operating Profit 6,334 9,199 Interest receivable 130 113 Interest payable (426) (501) _______ ________ Profit on ordinary activities before taxation 6,038 8,811 Taxation (1,971) (2,858) _______ ________ Profit on ordinary activities after taxation 4,067 5,953 Equity dividends 5 (1,724) (1,452) _______ ________ Retained profit for period 2,343 4,501 ======= ======== Earnings per ordinary 4 11.8p 17.3p share Diluted earnings per 4 11.7p 17.1p share CONSOLIDATED BALANCE SHEET At 30th June 1999 Notes 1999 1998 £'000 £'000 Fixed Assets Tangible assets 3,121 3,652 Investments 2,833 2,483 _______ ________ 5,954 6,135 _______ ________ Current Assets Stocks 12,896 13,816 Debtors - amounts falling due after more than one year - 363 Debtors - amounts falling due within one year 34,216 36,074 Cash at bank and in hand 4,984 3,355 _______ ________ 52,096 53,608 Current Liabilities Creditors - amounts falling due within one year 25,331 29,217 _______ ________ Net current assets 26,765 24,391 _______ ________ Total assets less current 32,719 30,526 liabilities Creditors - amounts 1,053 1,151 falling due after more than one year Provisions for 9 35 liabilities and charges _______ ________ Net Assets 31,657 29,340 ======= ======== Capital and reserves Called up share capital 1,724 1,725 Share premium account 5,706 5,706 Capital redemption reserve 47 46 Profit and loss account 24,180 21,863 _______ ________ Equity Shareholders' Funds 31,657 29,340 ======= ======== CONSOLIDATED CASH FLOW STATEMENT For the year ended 30th June 1999 Notes 1999 1998 £'000 £'000 Cash inflow from continuing operating 6 7,803 12,059 activities _______ ________ Returns on investments and servicing of finance Interest received 130 113 Interest paid (495) (481) Income from fixed asset 189 177 investments _______ ________ Net cash outflow from (176) (191) returns on investments and servicing of finance _______ ________ Taxation UK corporation tax paid (2,812) (2,816) ACT paid (51) - _______ ________ (2,863) (2,816) Capital expenditure and financial investment Purchase of tangible (1,104) (620) fixed assets Sale of tangible fixed 165 39 assets _______ ________ Net cash outflow from capital expenditure and (939) (581) financial investment _______ ________ Equity dividends paid (1,552) (1,242) _______ ________ Cash inflow before 2,273 7,229 financing _______ ________ Financing Purchase of shares (26) - Issue of ordinary share - 50 capital Debt due beyond a year : Repayment of secured loan (98) (90) _______ ________ Net cash outflow from (124) (40) financing _______ ________ Increase in cash in the 6 2,149 7,189 period ======= ======== NOTES 1. Accounting policies The financial information set out above does not constitute the Group's statutory accounts for the years ended 30th June 1998 or 30th June 1999, but is derived from those accounts. The statutory accounts for 30th June 1998 have been delivered to the Registrar of Companies and those for 1999 will be delivered following the Group's Annual General Meeting. The auditors have reported on these accounts, their reports were unqualified and did not contain statements under S237(2) or (3) of the Companies Act 1985. 2. Restatement of Cost of Sales and Net Operating Expenses Following a review of profit and loss account classifications certain comparative profit and loss figures have been amended where appropriate in line with the new classifications. 3. Exceptional Item The Directors have undertaken a review of the Group's fixed assets in accordance with FRS11. As a result of this review, the Directors consider that it is more appropriate to reclassify a property in Southampton as an investment property as the Directors have concluded that the property is unlikely to be utilised for the Group's core activities. As part of this process, the Directors have reviewed the market value of the property and consider that this is less than its current net book value. This reduction in value is considered to be permanent. Accordingly, the carrying value of the property has been reduced to £350,000 and the loss of £277,000 has been charged to the profit and loss account as an exceptional item. 4. Earnings per ordinary share The calculation of earnings per ordinary share is based on the profit after taxation of £4,067,000 (1998: £5,953,000) and on 34,496,613 ordinary shares (1998: 34,455,363). The number of ordinary shares for the years ended 30th June 1999 and 30th June 1998 is the weighted average in issue for each year. Computation of Earnings per share for 1999 Per share Earnings Shares Net profit for year 4,067,000 Weighted average shares 34,496,613 outstanding during year Basic earnings per share 11.8p Dilutive effect of options 373,760 Diluted earnings per 11.7p 4,067,000 34,870,373 share 5. Dividend An interim dividend has been paid during the year of 1.5p per share. A final dividend of 3.5p per share will be paid on 7th December 1999 to all members on the register at the close of business on 12th November 1999. The ex-dividend date for the shares will be 8th November 1999. 6. Cash flow a) Reconciliation of operating profit to operating cash flows 1999 1998 £'000 £'000 Continuing operations Operating profit 6,334 9,199 Income from fixed assets (189) (177) investments Depreciation of tangible 867 767 fixed assets (Profit) / loss on sale (25) 10 of tangible fixed assets Decrease in stocks 920 1,277 Decrease / (increase) in 1,792 (3,442) trade debtors Decrease in other debtors 36 483 Decrease / (increase) in prepayments and accrued income 82 (13) Increase in trade creditors 302 3,266 (Decrease) / increase in (2,163) 910 other taxation and social security (Decrease) in accruals (430) (221) and deferred income Exceptional Item 277 - _______ ________ Net cash inflow from continuing operating 7,803 12,059 activities ======= ======== b) Reconciliation of net cash flow to movement in net funds Increase in cash in the 2,149 7,189 period Cash outflow from changes 98 90 in debt _______ ________ Change in net debt 2,247 7,279 resulting from cash flows and the movement in net debt in the period Net funds / (debt) as at 1,683 (5,596) 1st July 1998 _______ ________ Net funds at 30th June 1999 3,930 1,683 ======= ======== c) Analysis of net funds At 1st July Cash At 30th 1998 Flow June 1999 £'000 £'000 £'000 Cash at bank and in hand 3,355 1,629 4,984 Overdrafts (521) 520 (1) ------- ------- ------- 2,834 2,149 4,983 Debt due after more (1,151) 98 (1,053) than one year ------- ------- ------- 1,683 2,247 3,930 ======= ======= ======= A copy of this report is being sent to all shareholders. Copies are available to the public on request from the Company's offices 1 Lion Park Avenue Chessington Surrey KT9 1ST The Company's registered office is 1-3 Union Street Kingston-upon-Thames Surrey KT1 1RP

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