Northamber maintains stock levels as margins expand

Technology distributor Northamber reported a “strong” balance sheet in its full-year results on Friday, with £6.2m of unencumbered freehold properties at depreciated cost, together with cash balances of £7.45m, down from £10.97m year-on-year.

The AIM-traded firm said revenues increased 13.57% for the year ended 30 June, to £60.01m, with £3.32m of that growth put down to the inclusion of Audio Visual Material (AVM) for a full year, rather than five months in the comparative period, with the remaining £3.86m from organic growth.

It said that more significantly, that revenue growth was combined with a “significant increase” in its gross margin, leading to a £2.33m increase in gross profit to £7.81m.

The company said the margin improvement was the result of an evolving product mix towards higher-margin, more technical products through Northamber and AVM.

Operationally, the firm said stock levels were higher than last year at £8.5m, up from £5.9m, as it focussed on maintaining sufficient stock amid logistics uncertainty due to Covid-19 and Brexit.

Northamber said its flexibility on local stock levels was a “key driver” of its “strong” partner relationships.

Net assets at year-end totalled 92.1p per share, up from 91.5p a year earlier, and were “considerably in excess” of the average price of the firm’s ordinary shares throughout the year.

The board recommended a proposed final dividend of 0.4p per share, up on the 0.3p distribution it made for the 2020 financial year.

“This reflects the board's confidence in the group's financial position and the strength of the group's debt free tangible asset strong balance sheet,” the directors said.

Looking ahead, Northamber said the addition of new Supplier partners during the year supported its mid-to-long term optimism.

“We will continue to utilise the strength of our balance sheet to do what is best for the business strategically whether that is tactical actions such as increasing our stock levels to pre-empt shortages or continuing to review organic and non-organic opportunities for growth which meet our strict criteria and add value for our shareholders.

“Whilst there are a number of factors such as Brexit, the continued impact of shipping and product constraints, together with the future uncertainty of Covid and any further lockdowns, we remain cautiously optimistic that the investments we have made in our team and in supporting our partners will allow us to continue our growth over the coming years.

“We necessarily remain cautious due to the factors outside our control but feel strongly that our continued focus on strategic higher margin value categories provides a solid road map for the future with profitable growth opportunities and the ability to unlock long term value for shareholders.”

At 1301 GMT, shares in Northamber were up 18.26% at 68p.