Distributor Ilion is expected to hit its re-adjusted market targets after a drop in margins had forced the company to issue a profit warning three months ago which was #2 million lower than City predictions.
Ilion had anticipated making a profit of #8 million for the year ending 31 December 1997. However, as rival distributor Azlan attempted to rectify its financial difficulties, margins had dropped four points, prompting Ilion to state in November that results would fall between #6 million and #6.5 million (PC Dealer, 26 November 1997).
Wayne Channon, chairman of Ilion, said: 'The market has now stabilised, and while gross margins are not as high as before, they have risen since November last year.'
Azlan's financial strife had raised City concern over a price war between the two distributors which would force down margins. But Channon said: 'The City is now happy but it had also been worried about a profits downgrade.'
The distributor also cited the strength of the US dollar against sterling and the need to consolidate its cost base as factors which had previously dragged down its expectations.
Channon said: 'We used to have vertical and horizontal teams selling across the range but this was reduced and people were placed within specialist divisions.'
Ilion's share price had shrunk by 30 per cent to 143p at the time of the profit warning in November. Following Ilion's announcement last week, its share price rose 12 per cent on 5 February and closed at 198.5p on 9 February.
The distributor will make an announcement about its preliminary results on 19 March.
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