Interim Management Statement

RNS Number : 1776C

Northamber PLC

26 April 2012

Northamber plc

("Northamber" or the "Company")

Interim management statement

As was announced on 20 April 2012, Northamber purchased the freehold of our warehouse premises. In view of that, the directors considered it would be helpful to shareholders to bring forward the release of this, our Interim Management Statement for the third quarter of our financial year ending 30 June 2012. Further information on the freehold purchase is set out below.

Trading

With a return to operating profitability before exceptional redundancy costs for the quarter ended 31 March 2012, the corporate objective of developing our vendor and product mix away from high volume but empty revenue, continued to evolve successfully.

The increase in focus, investment and resultant sales growth in higher and added value product sales, justified our previously stated intentions and confidence in moving our offerings further up the value-added services ladder.

A further benefit of the transition was the resultant increase in the Group's available cash, to £11.2 million as at 31 March 2012, as against £10.1 million at the corresponding date the year before.

A 1% point plus improvement in our overall year-on-year gross margins demonstrates the benefits of our ongoing readjustment away from those vendors or products with "empty" or net loss revenues. To remind members, rampant price erosion versus inflationary overheads have been our bugbear over recent reporting periods.

Progress in reprofiling our offerings has now resulted in a slower rate of total revenue reduction. The sales revenue result for our 3^rd quarter was only £609,000 less than our previous quarter.

In our view, these are positive indications that the Company is tackling the challenges of the market place. This represents an effective achievement, when viewed against the general uncertainty within the economic climate and the reported losses or reduced results posted by a large number of UK companies. As members know, we essentially serve the business use sector, one which has been suffering a general feeling of despondency.

Management

I am happy to report that the succession strategy, well trialled prior to Henry Matthews' retirement from the Company at the end of February, has been smooth. With only two executive and two non-executive PLC directors on the main board and acting similarly to the European Supervisory board model, the Operations Board has long been the core plank of our management structure.

The six members of the Operations Board have a combined total of well over 100 years of service within our Company.

I am also happy to report that John Henry has settled in well in both his new roles, on the PLC and Operations Boards.

Overheads

We constantly control our overheads in line with the cash values of gross margins, costs and trading conditions as they arise. The rate of product price erosion has been the principal impact on the declining sales revenues, rather than volumes on our logistical operations.

This necessitated still greater efficiencies and making some of our valued employees in the logistic functions redundant. This is a regrettable fact of life and one which we tried to postpone whilst seeking better alternatives.

Eventually we had to be realistic for the benefit of all staff and the Company. The savings arising from such action are not immediate because of the redundancy costs but will come through as the calendar year progresses.

The net operating costs of the Company, including those redundancy costs incurred in the quarter, were only marginally greater than those for quarter two.

But for the redundancy costs, the Company would have been profitable for the quarter at the pre-tax level.

From previous reports, including the Annual Reports and the Interim Reports as well as the Interim Management Statements, you will be aware that we have consistently maintained a high level of cash balances and that these have shown particularly low levels of return over the past few years.

Premises

On 20 April 2012, the Company announced the purchase of the freehold of our 5 acre Brooklands, Weybridge warehouse. This long-held objective came to fruition unexpectedly, as was set out in the Company's announcement on 20 April. Whilst the rent was £601,000 annually, the lease was due to expire in less than another three years. A developer very recently secured a draft contract to acquire the site and that required our entry into direct negotiations with the vendor.

In the competitive and tight time parameters driven by the developer, our cash came to our aid enabling us to take the transaction. By way of background, we became aware of the profit expectations of the developer and their supporting major pension fund partners, which we found very encouraging.

The achieved security and removal of very significant rent, enables an immediate and material reduction in overheads. There is also now the opportunity to review consolidating our two freehold operating premises, which are ten miles apart, enabling significant further overhead reductions and operational efficiency opportunities.

The purchase since the quarter end, for the sum of £6.35 million plus costs, also provides a far higher effective return on our cash. As a general note, irrespective of our £11.2 million free cash as at 31 March, both of our banks have positively indicated uncomplicated £3 million of mortgage facilities, were we to seek lending facilities.

A full circular on the purchase of this property by the Company is currently being drafted to be sent to members in the near future, enabling them to ratify this transaction which, due to its size, constitutes a Class 1 acquisition for the Company.

Balance Sheet

Whilst we continue to be debt-free and manage our assets, liquidity and shareholder value are critical factors in our corporate management strategy.

Part of the company's asset management process is the control of current assets and liabilities. These remain in a healthy condition with a net current asset ratio in excess of 2.3 times and the stock+debtors/creditors ratio in excess of 1.6 times.

The purchase of the warehouse freehold enabled us to preserve the value of the very considerable I.T. and dedicated logistic investments we have made to our warehouse.

The Board considers after the purchase costs that we continue to retain a very satisfactory and functional level of overall liquidity and working capital in the Company.

Further, the Board does not anticipate any material change in our dealings with our suppliers or opportunities to seek early settlement discount terms or volume discount opportunities.

During the quarter just ended, the Company paid the final dividend for the year ended 30 June 2011 to shareholders, amounting to £283,000. We also purchased 147,000 of our own shares in the market at a cost of £75,000. In keeping with similar recent purchases, these have been retained in our Treasury and the Board is considering whether some or all of these shares may in due course be made available for potential staff allocation, to further incentivise key members of Northamber's staff.

Outlook

Quarter three was encouraging, but it is too early to determine with any degree of accuracy whether "green shoots" are assured. We remain cautious for the remainder of the current financial year albeit perhaps with a little more optimism than we observed several months ago.

As always, we endeavour to liaise with our suppliers and customers to promote our respective businesses to mutual advantage.

David Phillips

Chairman

For further information please contact:

Northamber plc 020 8296 7000

John Henry

Fox-Davies Capital Limited 020 3463 5000

Barry Saint

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