Loss-making Northamber 'cautious, to say the least' about Brexit

Gross profit and gross margin improved last year

Northamber's chairman David Phillips has said he is "to say the least, cautious" about the possible impact of Brexit on the distie, as it reports falling sales and widening losses for the year ending June 2016.

But the firm did say that gross profit and gross margin were on the up, and that positive steps have been taken to improve the business.

For the 12 months to 30 June, total comprehensive losses widened to £1.2m, compared with £888,000 a year ago. Over the same period, revenue fell 5.5 per cent to £61.8m.

"As we continue our transition into more consultative, solution-driven sales, I am pleased to be able to announce an increase in gross profit to £4.8m, driven by a gross margin improvement to 7.8 per cent," said Phillips. "This is a significant increase from just over seven per cent for the previous year, especially against a challenging industry background and shows the traction we are making in evolving the business.

"Unfortunately, while margins increased, so did losses. This stemmed from increased administration costs, of which recruitment was a significant contributor, as we invested in building our future presence in these strategically important categories and sectors organically."

He added that the reduced turnover was partly due to its increased focus on higher-margin solutions sales, and moving away from lower-margin transactional business.

Northamber is split into three main units: wholesale, retail and solutions. The last of these is promising, Phillips said.

"The far more promising, newer technologies and higher-margin added-value areas we labelled Solutions, increased its gross margin year-on-year contribution significantly despite investment and staff recruitment costs," he said. "This division is an area with a strong potential that we are focusing on heavily.

"In order to fully benefit from the strategy of providing higher-margin solutions, we have made significant investment in recruiting and training more experienced staff who can add value to very specialised products and gain the additional levels of margin. While we are confident that this strategy will prove successful, and will be more fully reflected in the outcome for the current financial year, we cannot avoid the impact of the additional staff recruitment fees."

Phillips added that the "gloom" predicted following the Brexit vote has yet to materialise, but said he has some concerns about what might happen once the wheels are set in motion for the UK to actually leave the EU.

"The short and medium-term future is fraught with uncertainty," he said. "In view of the history of the last few years I am, to say the least, cautious. We are hopeful that the moves we have made in the profile and structure of the business will continue to develop the more profitable sides of the business and that we shall be in a position to move towards profitability some time in the not too distant future, although I do not expect to reach that position within the next 12 months."