Ilion issues a profit warning

Market Ilion passes the blame on to Azlan for its drop in margin, causing a drop in profitability.

Networking specialist Ilion has blamed Azlan's move to shift excessausing a drop in profitability. kit for a #2 million drop in profit as the distributor was forced to restate its bottom line.

Ilion issued a profit warning and experienced a 30 per cent reduction in share price after citing a weak market, a slump in UK margins and distributor Azlan's recent financial troubles as affecting the fall in profit.

The distributor now expects to post a pre-tax profit of between #6 million and #6.5 million as opposed to the previous City expectations of #8 million for the year ending 31 December.

Wayne Channon, chairman at Ilion, said its margins were the lowest they have ever been. 'The gross margin has dropped by four percentage points with a large fall between mid July and mid September,' he said.

Channon also pointed out that Azlan's past financial problems have added to the margin drop. He said: 'We overlap, but the Azlan situation will be short-lived and will return to normality.'

Azlan chairman Barrie Morgans conceded that Ilion was justified in naming the financial problems at Azlan as a contributing factor to the drop in shares.

Both Channon and Morgans said the City was concerned about the prospect of a price war which could bring down share prices.

Both were quick to quash fears that the price war would continue and Channon had met with investors to offer reassurance.

'The investors all agreed that the share price went down far too fast and the city over-reacted,' said Channon.