Azlan hit hard by #7.9m loss

Troubled distributor Azlan has blamed problems with stock and static margins for its pre-tax losses in the wake of a rights issue.

The results revealed a pre-tax loss of #7.9 million and sales of #141 million, an increase of 11 per cent. At the same time as a two-for-one rights issue, Azlan chairman and CEO Barrie Morgan had previously announced an estimated loss of up to #8 million (PC Dealer, 15 October).

In a statement by the chairman, the 'disappointing' results for the six months ended 4 October were put down to 'continuing pressures on product margins'.

Morgans also commented: 'The stock business was further constrained by an inappropriate stock profile and by the company's cash constraints during the period.'

Azlan's results revealed gross margin for the product business unit had dropped from over #26 million for the six months ended 5 April to #13 million.

Morgans disclosed that the company had up to #48 million worth of stock at the beginning of the year. 'We have driven it down to #21 million and we have seen a fall in margins, but it is what we planned,' he said.

The interim results had shown a net debt of #26.5 million, compared to net cash of #7.7 million.

Azlan cited 'the payment of trade creditors resulting from high stock levels at the year end' as the main reason for #32.2 million shift.

Morgans said: 'The inventory hasn't had the ideal profile but unfortunately we could not bring the products into the market.'

The #24.2 million rescue rights issue issued by Azlan has received a 95 per cent acceptance level (see news story, page 8).