Interim Results

Northamber PLC 15 March 2006 Northamber PLC Interim Report & Accounts (Unaudited) For Six Months Ended 31 December 2005 Chairman's Statement Results Despite very strong growth in the number of units sold, there was a 6.75% reduction in sales revenues to £116 million £124.5 million to 31st December 2004 due to a continuation of the very high levels of price erosion during the period. The levels of price deflation averaged circa 17-20% and overwhelmed the otherwise encouraging first half growth in unit sales. We provided some insight to the marketplace difficulties in our 24th November 2005 trading update statement. Although we executed well and as intended, pre-tax profits suffered from that imbalance between volume growth, continued pressure on prices and the resultant lower cash value of the sales margins. This reduced last year's pre-tax profit from £1.403 million to £316,000 for the 6 month period to 31st December 2005. This resulted in a fall in gross profit margins from 7.66% to 6.71% and was despite having improved our logistics with a 16% increase in our stock turns. The resultant effect on our earnings per share was a reduction from last year's 2.92p to 0.63p. The net asset value per share reduced to 99.5p from 102.3p after adjustment for the share repurchases. At all levels of product type and complexity, trading conditions were challenging. The now, largely commodity, portable notebook product market having grown most aggressively in unit volumes, also recorded the greatest price erosion. Although not with ourselves, we having reduced stock levels and avoided a major volume vendor's uncertain strategies. At calendar year end, channel stocks of one brand of notebook computers represented very material levels of oversupply and from that, de-stocking price actions across the UK market The Balance Sheet Our balance sheet remains very strong with neither debt nor any intangible assets and with £3.99m of cash at 31st December 2005. There was a small decrease in the value of our total net assets and net asset value per share decreased to 99.5p from 102.3p. The daily focus on the key business ratios remains at the forefront of our management controls. At the end of 2005, the cash balance was £3.99 million (2004: £4.1 million) after allowing some flexibility to reduce margin pressures. The Group continues to remain debt free. During the period we continued our policy of purchasing our shares for cancellation and 50,000 ordinary shares were acquired at a cost of £46,000 . Since the period end we purchased a further 205,000 shares for cancellation at cost of £185,400 on the 4th January 2006 Dividend I have previously drawn attention to the dividend policy reflecting the combination of both trading results and an ongoing strong and healthy balance sheet. However, with these results your Board feels it appropriate to reduced the interim dividend to 1.1p net from the 2.0p paid last year. The interim dividend will be payable on 10th May 2006 to members on the Register as at 18th April 2006. International Financial Reporting Standards Consolidated financial statements of Northamber plc until 30th June 2004 have been prepared in accordance with U.K Generally Accepted Accounting Policies (U.K.GAAP), U.K.GAAP differs in certain respects from IFRS. When preparing the consolidated interim financial statements for 6 months to 31st December 2005, management has amended certain accounting methods applied in the U.K GAAP financial statements to comply with IFRS. There have been no other changes to accounting policies. The comparative figures in respect of the interim period ended 31st December 2004 and the year ended 30th June 2005 have been restated to reflect these adjustments. Reconciliations and descriptions of the effect of the transition from U.K GAAP to IFRS on the group's equity and its net income are given in the notes to the financial statements OUTLOOK Sales since the start of the new calendar year continue to reflect the effects of the very considerable inventory levels of volume products overhanging the marketplace. As advised above and as a direct result of our avoidance of uncertainty, we had avoided participation, but, the effect on sales and with that any volume rebates from otherwise normal trading of the other and more stable brands are being negatively effected by the de-stocking actions across the sector We have reacted to the trading conditions over recent months, which have across the sector provoked the need to evolve the business model to better suit the volume, price and margin opportunities that now prevail With the above and as always, subject to the economy as a whole, your Board remains cautious over the outcome for the full year. D.M. Phillips Chairman 15 March 2006 Northamber plc Consolidated Income Statement Restated Restated 6 months ended Year 6 months ended 31.12.04 ended 31.12.05 31.06.05 £'000 £'000 £'000 Note Revenue 116,032 124,504 236,271 Cost of sales 108,242 114,971 218,170 Gross profit 7,790 9,533 18,101 Net operating expenses 7,675 8,289 15,762 Operating profit 115 1,244 2,339 Investment income 202 160 318 Finance costs (1) (1) (56) Profit on ordinary activities before tax 316 1,403 2,601 Tax on ordinary activities 4 121 489 901 Profit attributable to equity shareholders 195 914 1,700 Earnings per share Basic earnings per share 0.63p 2.92p 5.44p Fully diluted earnings per share 0.63p 2.92p 5.44p Consolidated Statement of Recognised Income and Expense Total income recognised directly in equity Profit for the period 195 914 1,700 Attributable to equity shareholders 195 914 1,700 Northamber plc Consolidated Balance Sheet Restated As Restated As at 31.12.05 at 31.12.04 As at 31.06.05 £'000 £'000 £'000 Note Non current assets Property, plant and equipment 5 4,074 4,213 4,219 Investment property 2,483 2,483 2,483 Available for sale investments 1 4 1 6,558 6,700 6,703 Current assets Inventories 18,690 23,741 13,890 Trade and other receivables 37,791 33,354 31,830 Cash and cash equivalents 3,987 4,113 9,735 60,468 61,208 55,455 Total assets 67,026 67,908 62,158 Current liabilities Trade and other payables 34,094 33,015 28,242 Current taxation 122 490 404 Provisions 1,228 1,683 846 35,444 35,188 29,492 Non current liabilities Deferred tax liabilities 760 783 760 Capital and reserves attributable to equity shareholders Issued share capital 1,548 1,561 1,551 Share premium account 5,734 5,734 5,734 Capital redemption reserve 239 226 236 Retained earnings 23,301 24,416 24,385 30,822 31,937 31,906 Total equity and liabilities 67,026 67,908 62,158 Northamber plc Consolidated Cash Flow Statement Restated 6 Restated 6 months months ended Year ended 31.12.04 ended Note 31.12.05 31.06.05 £'000 £'000 £'000 Operating activities Profit on ordinary activities before tax 115 1,244 2,339 Adjustments for:- Depreciation of property, plant and equipment 308 406 753 Interest payable (1) (1) (56) Increase in provisions 1 18 Operating cash flows before movements in working capital 422 1,650 3,054 (Increase)/decrease in inventories (4,800) (6,378) 3,473 (Increase) in receivables (6,570) (6,467) (4,333) Increase in payables 5,615 6,194 936 Cash generated by operations (5,333) (5,001) 3,130 Tax on profit paid (407) (395) (915) Net cash from operating activities (5,740) (5,396) 2,215 Investing activities Interest received 87 59 105 Income from investments 114 103 199 Proceeds on disposal of trading investments 360 360 Proceeds on disposal of property, plant and equipment 1 10 26 Purchases of property, plant and equipment (164) (89) (480) Net cash generated/(used) in investing activities 38 443 210 Financing activities Purchase of own shares for cancellation (46) (84) (278) Equity dividends paid (1,562) Net cash used in financing activities (46) (84) (1,840) Net (decrease)/increase in cash and cash equivalents (5,748) (5,037) 585 Cash at beginning of period 9,735 9,150 9,150 Cash and cash equivalents at end of period 3,987 4,113 9,735 Northamber plc Notes to the Accounts 1. Basis of preparation These financial statements do not constitute statutory accounts and have not been audited. They have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, and are covered by IFRS1 - first Time Adoption of IFRS because they are part of the period covered by the group's first IFRS financial statements for the year ending 30 June 2006. 2, Accounting policies The policies set out below have been consistently applied to all the periods presented in these financial statements and will apply for the full year to 30 June 2006. Previous financial statements prepared by the group have been prepared in accordance with U.K. GAAP which differs in certain respects from IFRS. When preparing the consolidated interim financial statements for the period to 31 December 2005, management amended the U.K. GAAP data to comply with IFRS. There have been no other changes to accounting policies. The comparative figures in respect of the interim period to 31 December 2004 and the year ended 30 June 2005 have been restated to reflect these adjustments. Reconciliations and descriptions of the effect of the transition are shown in the notes to the financial statements. 3. Adoption of new and revised International Financial Reporting Standards The group adopted IFRS with a transition date of 1 July 2004. Comparative figures for 2005 which were previously reported in accordance with accounting principles generally accepted in the United Kingdom ('U.K. GAAP') have been restated to comply with IFRS. Consolidated financial statements of Northamber plc until 30th June 2004 have been prepared in accordance with U.K Generally Accepted Accounting Policies (U.K.GAAP), U.K.GAAP differs in certain respects from IFRS. When preparing the consolidated interim financial statements for 6 months to 31st December 2005, management has amended certain accounting methods applied in the U.K GAAP financial statements to comply with IFRS. There have been no other changes to accounting policies. The comparative figures in respect of the interim period ended 31st December 2004 and the year ended 30th June 2005 have been restated to reflect these adjustments. Reconciliations and descriptions of the effect of the transition from U.K GAAP to IFRS on the group's equity and its net income are given in the notes to the financial statements 4. Tax charge The interim period tax charge is accrued on the estimated average annual effective tax rate of 38% (6 months ended 31 December 2004 - 35%) Northamber plc Notes to the Accounts 5. Property, plant and equipment Restated Restated 6 months ended 6 months ended Year 31.12.05 31.12.04 ended 31.06.05 £'000 £'000 £'000 At beginning of period 4,219 4,541 4,541 Additions 164 87 480 Disposals (1) (9) (49) Depreciation (308) (406) (753) At end of period 4,074 4,213 4,219 6. Post balance sheet events An interim dividend of 1.1 p per share was approved by the Board on 8 February 2006 and will be paid to shareholders on 10 May 2006 to those shareholders on the register as at xxx On 4 January 2006 the company purchased a further 205,000 ordinary shares of 5p each at an average cost of 90.5p per share and a total cost of £185,400. 7. Movement in share capital During the period the company purchased 50,000 ordinary shares of 5p each. The average price was 91.7p per share and the total cost was £46,000. 8. Related party transactions Mr D M Phillips is the ultimate controlling party of the company. During the period the company payroll and personnel manager, Mrs S Matthews, was paid £23,652 as salary and £4,139 as benefit. Mrs S Matthews is the wife of the Managing Director Mr H W Matthews. In the opinion of the directors the payments were made on an arms length basis. Northamber plc Reconciliation of U.K. GAAP to IFRS Reconciliation of income statements - for the year to 30 June 2005 Effect of transition to U.K. GAAP IFRS IFRS Note £'000 £'000 £'000 Revenue 236,271 236,271 Cost of Sales 218,170 218,170 Gross Profit 18,101 18,101 Net operating expenses 15,537 225 15,762 Operating profit 2,564 (225) 2,339 Investment income 318 318 Finance income/(costs) 49 (105) (56) Profit on ordinary activities before tax 2,613 (12) 2,601 Tax on ordinary activities 905 (4) 901 Profit attributable to equity shareholders 1,708 (8) 1,700 Reconciliation of income statements - for the six months ended 31 December 2004 Effect of transition to U.K. GAAP IFRS IFRS Note £'000 £'000 £'000 Revenue 124,504 124,504 Cost of Sales 114,776 195 114,971 Gross Profit 9,728 (195) 9,533 Net operating expenses 8,425 (136) 8,289 Operating profit 1,303 (59) 1,244 Investment income 160 160 Finance income/(costs) 56 (57) (1) Profit on ordinary activities before tax 1,359 44 1,403 Tax on ordinary activities 476 13 489 Profit attributable to equity shareholders 883 31 914 Notes: The adjustments made in relation to the transition to IFRS was in respect of a reclassification of income and expenses, the inclusion of additional employee benefits and the related tax thereon Northamber plc Reconciliation of U.K. GAAP to IFRS Reconciliation of equity at 30 June 2005 Effect of transition to U.K. GAAP IFRS IFRS Note £'000 £'000 £'000 Non current assets Property, plant and equipment 4,219 4,219 Investment property 2,483 2,483 Available for sale investments 1 1 6,703 6,703 Current assets Inventories 13,890 13,890 Trade and other receivables 31,830 31,830 Cash and cash equivalents 9,735 9,735 55,455 55,455 Total assets 62,158 62,158 Current liabilities Trade and other payables 29,471 (1,229) 28,242 Current taxation 408 (4) 404 Provisions 846 846 30,725 (1,233) 29,492 Non current liabilities Deferred tax liabilities 760 760 Capital and reserves attributable to equity shareholders Issued share capital 1,551 1,551 Share premium account 5,734 5,734 Capital redemption reserve 236 236 Retained earnings 23,152 1,233 24,385 30,673 31,906 Total equity and liabilities 62,158 - 62,158 Notes: The adjustments related to the elimination of dividends not accountable under IFRS but which were accounted for as current liabilities under GAAP and additional employee benefits recognised under IFRS and the tax relating thereto. Northamber plc Reconciliation of U.K. GAAP to IFRS Reconciliation of equity at 31 December 2004 Effect of transition to U.K. GAAP IFRS IFRS Note £'000 £'000 £'000 Non current assets Property, plant and equipment 4,213 4,213 Investment property 2,483 2,483 Available for sale investments 4 4 6,700 6,700 Current assets Inventories 23,741 23,741 Trade and other receivables 33,354 33,354 Cash and cash equivalents 4,113 4,113 61,208 61,208 Total assets 67,908 67,908 Current liabilities Trade and other payables 33,683 (668) 33,015 Current taxation 477 13 490 Provisions 1,683 1,683 35,843 (655) 35,188 Non current liabilities Deferred tax liabilities 783 783 Capital and reserves attributable to equity shareholders Issued share capital 1,561 1,561 Share premium account 5,734 5,734 Capital redemption reserve 226 226 Retained earnings 23,761 655 24,416 31,282 31,937 Total equity and liabilities 67,908 - 67,908 Notes: The adjustments related to the elimination of dividends not accountable under IFRS but which were accounted for as current liabilities under GAAP and additional employee benefits recognised under IFRS and the tax relating thereto. Northamber plc Reconciliation of U.K. GAAP to IFRS Reconciliation of equity at 30 June 2004 Effect of transition to U.K. GAAP IFRS IFRS Note £'000 £'000 £'000 Non current assets Property, plant and equipment 4,541 4,541 Investment property 2,833 2,833 Available for sale investments 4 4 7,378 7,378 Current assets Inventories 17,363 17,363 Trade and other receivables 26,887 26,887 Cash and cash equivalents 9,150 9,150 53,400 53,400 Total assets 60,778 60,778 Current liabilities Trade and other payables 1 27,444 (880) 26,564 Current taxation 396 (17) 379 Provisions 1,048 1,048 28,888 (897) 27,991 Non current liabilities Deferred tax liabilities 783 783 Capital and reserves attributable to equity shareholders Issued share capital 1,566 1,566 Share premium account 5,734 5,734 Capital redemption reserve 221 221 Retained earnings 23,586 897 24,483 31,107 32,004 Total equity and liabilities 60,778 60,778 Notes: 1 Final dividend eliminated from Payables (938)and employee benefits increased liability 58 and increase Retained Earnings by same amount This information is provided by RNS The company news service from the London Stock Exchange

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