Good morning! Another quiet morning for results.
Northamber (LON:NAR)
Share price: 33p
No. shares: 28.2m
Market Cap: £9.3m
This is an IT distributor. I'm beginning to wish that I hadn't started the day with this company, as trying to decipher the Chairman's report has already given me a headache. It's not quite gibberish, but every sentence has to be read two or three times to work out what it's trying to say.
Mind you, the Chairman owns 61.5% of the company, so is free to write whatever he likes!
Preliminary results - for the year ended 30 Jun 2014 have not impressed me. Turnover is down 19% to £62.9m, and the company only eked out a tiny 6.8% gross profit margin of £4.3m. Overheads were considerably more, at £5.5m, thus generating a loss before tax of £1.2m, slightly worse than the similar loss for last year.
Balance Sheet - this looks fairly strong, with £21.5m net assets. No breakdown is given of the £8.3m in fixed assets, so I've checked back to the 2012 Annual Report on the company's website (the 2013 AR doesn't seem to be on there yet), and note that fixed assets is almost entirely land & buildings, most of which appears to be the company's freehold warehouse, bought for £6.4m in 2012.
My opinion - this is an interesting asset-backed situation where the company's market value is less than half its own tangible net assets. As the company is loss-making, the first key question to ask is, "why does this company exist?" The logical thing to do would be to shut it down, and liquidate the assets, thus generating a better return for shareholders than continuing to trade at a loss.
There is no point in anyone trying to force the company to do this, as the Chairman holds a controlling stake, so could block any attempts by activists to force a change of direction. I therefore feel that the company is essentially a play-thing for its Chairman, and cannot be taken seriously as a potential investment, if nothing is likely to change.
Dividends are being paid, but are not covered by earnings, so if the trends below continue, no reliance can be placed on the continuation of dividends, although today it is announced that a 0.3p final divi (same as last year) is to be paid, in addition to the 0.3p interim divi.
The outlook statement…
