Ilion dumps Germanic arm as shares drop to record low

Distribution Would-be purchaser makes overtures as networking subsidiaries makes loss.

Ilion has retrenched its operations into the UK and France afterbsidiaries makes loss. being forced to offload its German, Austrian and Swiss units.

PC Dealer can exclusively reveal that Ilion, which issued a profit warning in May, has been approached by a potential purchaser to take on the Germanic companies with the possibility of concluding a sale within the next four weeks. It was estimated that Ilion's German and Swiss subsidiaries sustained losses of #1 million.

However, in November, when it issued its first profits warning for its 1997 results, Wayne Channon, chairman and CEO at Ilion, stated: 'Germany has sustained larger losses than anticipated.'

He added: 'Germany remains a strategically important area for the Group and the directors confidently believe the subsidiary will move into profit before long.'

Ilion acquired German company Microwave International Marketing in July last year for #1.4 million.

An industry source said the City was pleased with the decision to jettison the Germanic subsidiaries as it will allow the networking distributor to focus on the UK and its more lucrative operation in France, which experienced 71 per cent growth in the first half of 1998.

The distributor sustained profits of #1.2 million for the six months ended 30 June.

Ilion's share price dropped further on 28 August to a record low of 57.5p - only 10p higher than its rival Azlan.

The distributor experienced a share price freefall three months ago when prices dropped by 75 per cent, leaving stocks below the #1 mark (PC Dealer, 3 June).

However, a source said: 'The large institutions that are buying shares are very savvy, but some people are selling ahead of the market while others are hoping the results will not be good.'

Turnover for the six months hit #125 million, while margins increased by 1.5 points to 11.5.

However, following the Ilion profits warning issued earlier this year, it is anticipated that earnings will fall in line with revised market expectations of #5 million rather than the previously forecast #8 million.

Channon refused to comment on specific figures, but said: 'I am confident about the results. I believe they will be received well by the City.'

The results will be announced to the City on 2 September.