Profit slips as Ideal looks to services

Ideal Hardware saw profits slide for the year ended 30 July 1999, but said the company had turned the corner thanks to its new services focus. Ideal, the distribution business arm of the InterX Group, today posted pre-tax operating profits of £7.6 million, down on last year's £8.9 million. Sales grew by over 38 per cent – with UK turnover at £274.6 million (£193.5 million last year) and £43 million (£36.5 million) from mainland Europe. Overall pre-tax profits before exceptionals for InterX were £6.6 million, down on the previous year's £8.7 million. Turnover rose 38 per cent to £318 million, against £230 million last year. Earnings per share, after exceptionals, was 6.27 pence, from 28.13 pence. Exceptional costs of £3.7 million went into developing the IT Network, the group's Net-based products and information service. Restructuring costs within Ideal and InterX totalled almost £1 million. Ideal cut nearly 20 per cent of staff during the year – from 442 to 345, mainly in sales, product management and supplier services departments. This was part of its cost-cutting re-jig outlined in June, when newly appointed CEO Ian French admitted that critical errors of judgement at board level had left the distributor "dysfunctional and disorganised". James Wickes, InterX CEO, said margins had fallen significantly, resulting in "a material reduction in the cost base" and the end of 30 distribution agreements. "Market conditions in the second half of the year were challenging, particularly in the area of high-end storage solutions, which has historically been higher margin business," added Wickes. But he said investment in service areas, announced last week, would ensure that profitability and market share were maximised. The company also stated that the recent Compaq distribution agreement had kept turnover rising in the UK. ®