Did anyone out there have an expectedly poor or an unexpectedly good January and February? Action Computer Supplies is the latest company, joining Computerland UK and - on an altogether different scale - Compaq to trot out the 'unexpectedly poor start to the year' explanation for a profits downturn.
In October, Henry Lewis, chairman of Action, was bullish about the retailer's prospects. But in January and February, Action's corporate customers, which account for one third of turnover, stopped buying PCs in the numbers expected. Will these customers return?
The reseller is now effectively in play, although this should not affect the company's share price too much. The Investor's Chronicle cautions against speculating - Action's stock is high enough, it says, even if the company is bought out. This beggars the question: what would happen to Action's share price if it remained independent?
Well, there is a prospective, unnamed buyer in the wings. Industry scuttlebutt points to acquisitive US mail-order giants Insight or Global. But this is courtesy of the 'that would make sense' school of speculation as opposed to any insider knowledge.
Downturn or no downturn, Action remains a substantial business with revenue on course for pounds 300 million ... if it can stop corporate PC sales sliding any further. The mail-order company is properly circumspect about its prospects - another profit warning would be too much for the market to bear. Trading at the start of the second half is 'ahead of the corresponding period last year, but PC sales and large customer spending continue to be weak and we remain cautious about the effect on our prospects for the full year'.
For the six months ended 26 February, Action produced a pre-tax profit of pounds 2.721 million, down from pounds 3.087 million and sales of pounds 140.895 million.
Operating costs are higher following last year' s acquisition of Fraser Associates and SHL.
Action is making all the right noises about growing service revenues (only four per cent of its turnover) and points to like-for-like sale growth for the six months to 26 February for network sales, up 38 per cent, software sales, up 45 per cent, and PC sales up 19 per cent. Action.com, its e-commerce service launched in January 1998, is showing encouraging growth with sales up 45 per cent on last year to pounds 12.2 million.
Surprisingly, George LaPlante, chief executive of Action, thinks there are opportunities for acquisition (but only in the UK). In an interview he recently said: 'Organic growth is always very high on our priorities, but in this market place I think there'll be additional opportunities for acquisitions. The investment in our infrastructure has positioned Action very well to progressively pursue those.'
Especially with the backing of a new owner.
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