lnTechnology shares crash to year low after profits warning

Shares in InTechnology, the IT infrastructure provider, bombed to a 12-month low yesterday, after the group warned that a squeeze on margins in the run-up to Christmas was likely to mean its full-year profits would come in below expectations.

Shares in InTechnology, the IT infrastructure provider, bombed to a 12-month low yesterday, after the group warned that a squeeze on margins in the run-up to Christmas was likely to mean its full-year profits would come in below expectations.

In a statement released yesterday morning, the company said that while revenues and trading volumes in its UK distribution business had performed in line with predictions, margins had fallen over the past three months of 2004. It added that if the trend continued over the next three months - the final quarter of the company's financial year - profits would certainly be below analyst forecasts.

Although InTechnology - whose chairman is Lord Cecil Parkinson, the former conservative minister - said it was continuing to win new business at a steady rate in its managed services division, it also conceded that it had been experiencing delays in implementing new contracts.

Charles Cameron, the chief executive of InTechnology, said the margin squeeze in its distribution division was due to an increase in its prices by its suppliers.

"I think it's very similar to what you'll see across the industry, and have already started to see, reflecting the much sharper pressure on margins in the last quarter, and particularly in December," he said.

"The pressure on margins has always been there. What you always need to do is to start diversifying into more complex IT products, which have great margins - products that require a greater level of technical input and training. That's where we can offer more value.

Mr Cameron said that with new business levels and revenues continuing to hold up, the prospects for the business still looked good. He said that while profits may not be as high as he had first hoped, they would still be above those posted last year.

"We're definitely moving in the right direction, but just not as quickly as we may have hoped," he said.

Shares in the company fell almost 23 per cent in response to yesterday's news - the biggest single fall in the company's stock. It closed at 59.5p, giving it a market value of £83.9m.