VIP's sales slip as it walks away from low-margin products
Distribution group says quality of earnings have improved since year end
Distributor VIP Group has attributed a fall in annual sales to its decision to snub some low-margin product sales part way through the year.
The Warrington-based company, which also owns system builders CMS Computers and Ergo, saw revenues for its financial year ending 30 June 2015 slip four per cent to £218m, ending a run of three consecutive years of double-digit growth.
Profits at the components, peripherals and software distributor also fell, with adjusted operating profit down from £1.84m to £32,000 and post-tax losses hitting £747,000, compared with a profit of £698,000 last time around.
In Q4, VIP made the decision not to compete on very low-margin products, the directors report said.
The margin reduced to 6.0 per cent (from 6.3 per cent in 2014), which VIP said was due to the low-margin business transacted in the first nine months of the year.
"Following the new strategy implemented in quarter four, there has been a significant improvement in the quality of earnings and the sales benefit will become clear in the accounts to June 2016," it added.
VIP Benelux generated more than two fifths of group sales last year as its sales rose from £88m to £92.6m.
CMS Computers saw operating profit fall from £1.8m to £1.1m on sales down 17 per cent to £33.6m, which VIP said was due to "sector over-capacity and heavy destocking by major players".
Ergo, which VIP acquired in January 2014, remains about a year behind the original plan, VIP added. The Nottingham-based system builder arm posted an operating loss of £1.6m on sales that doubled on an annualised basis to £10.3m, VIP said.
"[Ergo's] results post-year end have been significantly better and a dramatic improvement is expected to be seen in the year to June 2016," VIP added.
Despite profits for the group being behind plan, VIP remained upbeat.
"The directors look forward to resuming profit growth based on a solid business model," the report stated.