Northamber revenue rises as it maintains full-year margins

The AIM-traded firm said it generated a continued increase in gross margins of £0.66m year-on-year in the 12 months ended 30 June, to £8.47m.

It said that, despite “pleasing” sales and gross margin growth for the year, performance in some of its focus areas was still impacted by the gradual recovery from Covid-19, with continuing uncertainty for resuming events and large venue installations, as well as market disruptions from rapid changes in sterling, particularly against the dollar.

“We remain optimistic and confident in these focus areas and believe that we can deliver significant long term value and growth in these segments for our partners and shareholders,” said non-executive chairman Colin Thompson.

“Distribution costs increased significantly from £4.59m to £5.56m as we continued to invest in developing the team for our significant growth ambitions.

“We were also affected by significant increases year on year on carriage costs - our biggest non-payroll cost.”

The company said the fall in the value of sterling translated into a swing from a foreign exchange profit of £0.22m in 2021 to a loss of £0.16m in 2022, which was the main driver in increased administration costs of £3.36m, from £2.84m.

“It is frustrating that factors over which we have no control have led to increases in distribution and administration costs, which have outweighed the margin growth,” Thompson explained.

The impact of carriage costs and a weaker sterling, totalling about £0.3m, resulted in a reduction of EBITDA year-on-year to a loss of £75k, and an operating loss for the year of £0.45m, swinging from a profit of £0.38m in the prior period.

“We feel strongly, however, that to drive significant long term profitable growth it is important that we continue to invest for the future, albeit these investments are measured against the ability to generate value.

“We made a deliberate decision to profitably support our partners by maintaining sufficient stock in the country during the uncertainty of chip shortages together with continued impact on supply chains of Brexit, the war in Ukraine and Covid-19,” the chairman explained.

As a result, stock levels increased to £10.6m at year-end on 30 June, from £8.5m in 2021.

The investment in inventory meant that cash reserves fell to £4.7m from £7.45m on 30 June 2021.

With a fixed assets book value of £6.92m, including three unencumbered freehold properties, the group's overall financial position was “very sound”, the firm said.

Net assets at 89.8p per share were “considerably in excess” of the average price of the ordinary shares throughout the period.

“Since the end of the financial year, the Board took the decision to relocate AVM into existing premises and to sell the freehold office where they are based,” Colin Thompson said.

“The company has exchanged contracts for the sale of the office and completion is scheduled to occur on 28 November.”

The consideration would be £1.48m before costs, payable in cash, against a net book value of £1.43m, with the net proceeds to be added to cash reserves.

Northamber’s board proposed an interim dividend of 0.3p per share, for a total cost of £81,695, to be paid on 18 January to shareholders on the register as at 16 December.

“In keeping with prior outlooks that we shared, we remain cautiously optimistic that the investments we have made in supporting our partners will allow us to continue to drive growth of strategic business units,” chairman Thompson said of the firm’s prospects.

“We have yet to fully benefit from these investments, given the ongoing impact of Covid-19, foreign exchange movements and supply chain issues which together with wider economic uncertainty due to rising interest rates, inflation and subsequent cost of living impacts, necessarily mean we must remain cautious about the near term.

“We do feel strongly, however, 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.

“The strength of our balance sheet allows us to continue to do what is best for the business strategically and we continue to review organic and non-organic opportunities for growth which meet our strict criteria and add value for our shareholders.”

Reporting by Josh White for Sharecast.com.