Datrontech shares dive to all-time low

Distribution Share value down to 60p after issue of profit warning.

Datrontech Group was forced to issue a profit warning last week which caused its shares to tumble by almost a third in value to an all-time low of 60p.

In an unexpected announcement on 12 August, the distributor said: 'During the past three months, in common with a number of other distributors of PC-related products, the group has experienced a sharp decline in business compared with the first four months of the year. In particular, sales and margins in the component distribution divisions have suffered as a result of reduced demand and a consequent increase in price competition.'

Datrontech stated that the fall in sales would lead to first half pre-tax profit to 30 June of about #2.6 million, below the #3 million tipped by analysts. It was expected that full year profit would hit #5 million, down from last year's #6.1 million and below market expectations of #8 million.

Mark Mulford, Datrontech chief executive, said: 'Memory prices collapsed in 1996 and still haven't recovered, so we have been repositioning to more value-add areas. Also people are concentrating on upgrading their software, not their hardware, in the run-up to the millennium.'

One City trader stated: 'It surprises me Datrontech released a negative trading statement at the moment it would cause a fall like this. Given the market conditions, you would have thought it would have waited until the sector stabilised.'

In response to the Datrontech announcement, Ideal Hardware released a statement aimed at reassuring the market after shares slid 25p to 247.5p: 'Ideal has traded well in the final quarter and within target margins.'

Mulford was unable to comment on the resignation of Gerry Connolly, Datrontech financial director.