Drop in debt sends share prices up

THE HORIZON Technology Group took the market by surprise yesterday announcing a €31.3million drop in debt since January resulting in an immediate 25% hike in the share price to 25 cents.

Revenues for the six months to the end of June were up almost 15% to 193million euro, while earnings before interest and tax came at 4.1million euro, compared with a loss of 148,000 euro the previous six months.

However, the share price is well off the heady days of February 2000 when the shares hit 14 and even well behind the stock’s January 2002 year high price of 65 cents. Horizon’s debt now stands at just 3.4million euro.

Company founder and executive chairman Samir Naji who is to re-take the post of chief executive at the end of the month, said the group’s strategy is to concentrate on the

development of systems integration, consulting and distribution businesses in partnership with major IT vendors focusing on the British and Irish markets.

“Current market conditions remain difficult and there is little evidence of a general upturn in IT expenditure. The directors do not anticipate any significant upturn until well into 2003. However, the high operational efficiencies which the group now enjoys have enabled it to gain market share in a number of key segments,” said Mr Naji, who owns 50.8% of the company.

Stockbroking analysts reacted favourably to the interim results, with Merrion Capital’s John Coolican saying if the company net debt can be maintained, it will significantly reduce the financial risk associated with the shares which at 0.20 (yesterday’s opening price) “are trading at 4.7 times our projected 2002 earnings”.

“However, margins at 15.6% were lower than expected due to additional competition as well as the lower proportion of higher margin consulting revenues.

“The distribution channel showed an 8% contraction in sequential revenues as demand for hardware has slowed with the overall contraction in IT budgets.

However the division has managed to improve margins very slightly to 6.4% (6.1% in 6m to Dec 2001),” said Mr Coolican.

Davy’s Bernie Lardner said the lower net profit figure was due to exceptionals of 7m related to restructuring costs and the removal of loss making businesses.

“While the debt level is expected to increase in the second half, this performance dismisses any worries on Horizon’s ability to survive the cycle, which has been holding back the share price.

“In particular the level of profit generated from continued operations of 3.45c leaves us with a higher level of confidence on both this and next years earnings numbers, with little growth needed on continuing operations going forward to achieve our forecasts,” said Ms Lardner.