Northamber swings axe but profits improve

Redundancy costs prevent distributor returning to net profitability for Q3

Northamber made an unspecified number of job cuts in its last quarter as it returned to operating profitability.

The distributor brought forward its trading statement for its fiscal Q3 to 31 March, following this week's news that it has acquired its own warehouse for £6.35m.

In a generally buoyant release, Northamber revealed it had returned to the black on an operating level as it claimed its strategy to focus on higher-margin business is beginning to bear fruit.

Gross margins also improved by one point on an annual comparison, which it said vindicates its decision to abandon vendors with "empty" or net loss revenue. Cash rose by £1.1m to £11.2m year on year.

However, the costs associated with a round of redundancies in its logistics function prevented the distributor posting a profit at a net level.

The move was necessitated by its recent decline in sales revenue, caused by savage price erosion in the IT market, it said.

"This is a regrettable fact of life and one which we tried to postpone whilst seeking better alternatives," Northamber stated.

"Eventually we had to be realistic for the benefit of all staff and the company. The savings arising from such action are not immediate because of the redundancy costs but will come through as the calendar year progresses."

Sales for the third quarter were only £609,000 below Q2, Northamber added.

Of the improvement in its bottom line, Northamber – which had a change of top management in February – said: "In our view, these are positive indications that the company is tackling the challenges of the marketplace.

"This represents an effective achievement, when viewed against the general uncertainty within the economic climate and the reported losses or reduced results posted by a large number of UK companies."

Looking ahead, Northamber said it is too early to determine with accuracy whether the "green shoots" it had seen in Q3 were assured.

"We remain cautious for the remainder of the current financial year, albeit perhaps with a little more optimism than we observed several months ago," the distributor said.