Horizon Technology, a leading distributor of technology systems in Ireland and the UK, warned yesterday that industry margins were likely to contract this year and beyond as a result of increased competition.
"As indicated by other industry sources, intense competition among global IT vendors and within the channel is likely to lead to some contraction in industry margins," Horizon said.
Shares in the Dublin-based company slumped 10 cent, or 8.1 per cent, to €1.13 on the Irish Stock Exchange.
The trading margin at Horizon's distribution and channel services division, whose customers include O2, narrowed to 1.1 per cent last year from 1.5 per cent in 2004, leading overall trading profit at the business to slump 24 per cent.
"Management's view that further margin contraction is now likely in both parts of the business in 2006 and beyond is of concern," said Alan Daly, an analyst at Davy Stockbrokers.
Davy, Horizon's broker, cut its per-share earnings estimates for the company by 10 per cent for 2006 and 11.6 per cent for 2007.
"With volume increases being offset by reduced margins, this implies no underlying growth in the core business for 2006, which is disappointing."
Horizon, founded in 1988 by the entrepreneur and current chairman Samir Naji, was one of the stars of the Irish technology industry during the 1990s boom years.
But the firm was hit hard by the downturn in the technology industry and underwent a restructuring that resulted in declining turnover in both 2002 and 2003.
The company is now focusing on building additional partnerships with global IT vendors, such as VERITAS Software Corporation and EMC Corporation, and on acquisitions.
No single information technology vendor is expected to account for more than a third of revenues in 2006.
Horizon said yesterday that revenue climbed 5 per cent to €294.1 million in 2005, helped by a 10 per cent gain in turnover at the enterprise solutions division.
Enterprise solutions now accounts for 88 per cent of the combined trading profits of the group's two operating divisions.
