Elcom profits crash in Q2

Elcom Group has experienced a massive drop in its second-quarter net profits, which it blamed primarily on falling average sales prices of PCs and the hiked-up interest rates in the UK.

The US-based reseller said that although the shipment of PCs increased by eight per cent in the quarter ended 30 June, it was offset by a corresponding decrease in the average unit price.

Elcom also cited the effects of a slower than expected deployment of an Oracle-based enterprise information system and the penalty for that was a slowing down of its sales momentum.

Net income in the quarter dropped by 75 per cent to $515,000 from $2.06 million last year. Sales were virtually flat at $191.8 million, compared with $198.2 million in the previous year.

In the six months to 30 June, profits were down 53 per cent to $1.9 million from $4.02 million for the same period last year, with a turnover of $381.8 million.

In a statement, Robert Crowell, Elcom chairman and chief executive, who was appointed in March, admitted that he was 'not pleased' with the second-quarter results.

Speaking to PC Dealer, Tom Barth, vice president of corporate development at Elcom, added the rise in UK interest rates, from six per cent to 7.4 per cent during the second quarter, had an adverse effect on the reseller.

'Interest rates did go up, so we had to pay more to borrow money. We also carried more inventory than we should and we are going to re-evaluate how much we will stock,' he added.

Meanwhile, Elcom has extended its engagement of the investment bank it appointed last year to assess financial alternatives for its future growth.

Salomon Smith Barney was taken on a year ago to assist the reseller with its search for either a partner or buyer (PC Dealer, 30 July).

Despite suffering a number of delays in its quest to find a partner, an announcement is expected to be made in October regarding Elcom's strategy.