A strong pound and a damaging price war with its major rival put paid to any thought of profits growth at networking and Unix products distributor ilion Plc last year. And the outlook in the first part of this year is still mixed, the company said. Net profits for the year to December 31 were down 10% to 3.8m pounds while earnings per share fell 20.5% to 15.5 pence. The group has grown at a phenomenal pace in the last five years, with revenues rising from 14m pounds in 1992 to 203m pounds last year. At the interim stage, ilion was planning to use its expanding size to squeeze out the smaller players by driving down prices. Instead, it was ilion that got squeezed, in a disastrous price war with arch rival, Azlan Group Plc. The ensuing loss of margins forced a profits warning in November last year, and the share price evaporated. The price fell 9% again today as the group announced profits at the low end of its November warning. Ilion grew revenues handsomely in its two major markets, France and the UK, where it claims to lead the field, but gross margins fell by four points in the year, and chairman Wayne Channon says this fall will continue. Six months ago, Channon was aiming for operating margins of 5%. In 1997 he achieved just 3.3% and it look unlikely that this will be bettered in 1998’s less predictable environment. A substantial 23m pounds increase in stocks and debtors at the year end also took ilion to a net cash outflow from operations of 2m pounds. The directors are recommending a final dividend of 4.0 pence, increasing the total for the year by 5% to 6.0 pence per share.
