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November 30, 1995

NORTHAMBER REMAINS CAUTIOUS AS FIRST HALF PROFIT IMPROVES ALMOST FOURFOLD

By CBR Staff Writer

The watchword was caution at Northamber Plc as the board expressed itself as more confident than for some time, which perhaps is not saying much bearing in mind the company’s experience over the past few years. A year ago the Chessington, Surrey-based distributor of personal computers, printers and peripherals reported its first interim profits for four years. It has continued its profits growth, but a slowdown in the UK economy in the summer has stunted the company’s sales growth. In the recession of the early 1990s Northamber declined to get involved in the price wars in the personal computer industry, believing that negligible or negative gross margins were not worth squabbling over. The consequence of this was restrained sales growth, compared to some other companies, according to chairman David Philips. Margins are still tight for Northamber, even for the personal computer industry, but it is looking to expand into higher margin areas to improve things. To this end, it recently set up two businesses, CTi, for computer-telephony integration products, and Meganet, to distribute networking products. Interim pre-tax profits were up to ú2.0m, from ú526,000 last time, on turnover that rose a healthy 29% to ú95.7m. The markets was expecting at least as much however, and the shares lost 16 pence, or 6.4% to stand at 250 pence. Phillips put the sales improvement down to price-cutting purely to gain market share becoming less fashionable in the industry. The aforementioned slowdown in the UK economy was exacerbated by what Philips described as cautionary general press comment at the time of Microsoft Corp’s launch of Windows95 – a somewhat bizarre way of describing national newspapers falling over themselves to gush praise over and exaggerate the importance of what was, after all, just an operating system. The interim figures also included significant rebates from suppliers. But finance director John Graham declined to specify how much these were, or how they compared with a year ago. Philips had praise for the company’s bankers, to whom it switched a year ago after a tough time with the previous ones, saying their support helped Northamberreap the benefits of longer-term economic recovery. The emphasis on higher margin products will be coupled with an expansion of the logistical and distributive services. The interim dividend was up by a fifth at 0.6 pence.

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