Ilion turnover leap belies profit fall

Distributor blames dim year-end result on Azlan's four point drop in margin.

Ilion has expressed pessimism over the state of the market, with the margin. release of its year-end results showing a 38 per cent jump in turnover but a drop in profits.

The Chessington-based distributor reported turnover of £203.1 million for the year ended 31 December 1997, compared with £146.9 million in 1996.

However, pre-tax profit fell from £6.8 million on last year's figures to £6.2 million for 1997 - in line with Ilion's expectations after it was forced to issue a profit warning in November (PC Dealer, 26 November 1997).

At the time, Wayne Channon, chairman at Ilion, said the revision was due to a competitor's failure to react to changes in the strong pound and added that Ilion decided to match the competitor's prices and suffer reduced margins.

For the year-end results, Ilion, which blamed a four point drop in margin on rival distributor Azlan's attempts to address its ongoing financial difficulties, reported 16.8 per cent on gross margins, compared with 20.6 per cent in 1996.

Channon said: 'Distribution grows faster than services - which is higher margin - so this slows down figures. It is the same with Unix technology, which is not growing as fast as networking.'

He commented that the recent profit warning issued by both Azlan and Ideal Hardware pointed to the market becoming a less predictable environment.

He added: 'There is a move into the lower value SME, while there is no longer a reason for people to buy into PCs on a high-end scale.'

Ilion also sustained an exceptional cost of £100,000 for the closure of an office belonging to the recently acquired Microwave.