Reasons to be cheerful for Northamber in H1

Broadliner returns to growth and profitability as share price grows

In one of its most upbeat trading update for several years, London-listed distributor Northamber revealed a sales spike and continued profitability during its fiscal first half.

For the six months to the end of December, the Chessington-based company's sales rose six per cent to £67.7m. Pre-tax profits stood at £151,000, compared with a £41,000 loss in H1 last year.

But the broadliner pointed out that "competitive pressures resulted in a 0.6 per cent reduction in comparative gross margins". Consequently, Northamber aims to keep "a few specific product areas ... under very close scrutiny". A stringent cost control programme helped reduce overheads during H1, said the distributor.

Today's interim statement claims that Northamber remains free of debt and that, during the six months in question, stock turns, debtor days and creditor days were all reduced. However, the latter did result in net cash falling from £13.5m to £12.1m. Current net cash levels represent 47 per cent of net assets.

The upturn in trading fortunes appears to have had a positive impact on Northamber's share price, which has been on an upward trend for about six months. After sinking below 40p in September, shares have rebounded to around 60p since the new year.

Looking ahead, the distributor once again stressed the need for caution while it strives to rebuild the sales and profits that eroded during the troubles of recent years.

"We must not now ignore the probable effects from this latest squeeze on the UK economy and the adverse effects on those discretionary expenditure elements within our offerings," said the statement.

"The foretaste afforded by January's trading confirms our view of the future remaining one of caution with the need for close and tight management."