Woes continue at Northamber after PC, server franchise breakage

Three things in life are certain - death, taxes and perennially declining turnover at Blighty's oldest tech distributor Northamber, which this morning reported another double-digit sales slump.

The LSE-listed wholesaler, which plies its trade from Surrey, revealed revenue for fiscal Q3 ended 31 March was down 20 per cent year-on-year - albeit better than the 22 per cent sales drop in the first half of the year.

David Phillips, chairman at Northamber, said falling demand for PC and server hardware and subsequent price and margin erosion "show no sign of abating".

Northamber split with IBM in January - the oldest vendor relationship it had, spanning some 28 years. It parted ways with memory maker Kingston Technology in February, and was given its marching orders by Fujitsu too.

"The search for new products and our own exit from some major PC and Server franchises has not [been] harmless and [it] will be no surprise that the reducing turnover trends previously reported, have continued," said Phillips.

Clearly the chairman is still in desperate-realist mode.

Phillips said Northamber continues to seek out higher-margin kit in more demand from resellers, and pointed out that these efforts led to a "very" slight rise in operating gross margin for the first nine months of fiscal 13. These efforts will be accelerated as Northamber tries to transform itself, the firm said.

But the embattled chairman noted:

"Such a major and ongoing reduction in turnover and its dilution of overhead costs inevitably causes difficulties in maintaining overall profitability. The continual need to restructure costs and align operations with revenue takes time and with it significant staff restructuring," he said.

Northamber cut headcount last spring, some months after long serving group MD Henry Matthews hung up his boots. He was replaced by John Henry who has since been joined by Peter Hamnett as chief exec.

The chairman said today that Northamber is maintaining "careful oversight of costs, being wary not to decimate the business whilst mindful of the need to invest and develop alternative strategies, which cater to the shift in user expectations".

Operating expenses are down 14 per cent for the nine months compared to the same period last year when Northamber made the job cuts, but this could not prevent the company from remaining in the red: though it did not specify the operating losses.

"Despite cost savings, the inevitable result was an operating loss for the nine month period which exceeded that made in the comparative period last year," Phillips confirmed.

The update on the trading position is not "comforting" said the chairman and a "turnaround will not be immediate" but "there are opportunities … which we shall endeavour to maximise over the shortest feasible time".

In its favour, Northamber remains cash positive with zero debt or borrowings and a asset base that means "we are not restricted in being able to effect change".

Change is obviously needed as the company has struggled to reach the sales peak of fiscal 2001 when turnover hit £299m.

Northamber's share price is down 3.3 per cent at the time of writing to 29.5 pence. ®