Gestetner Holdings Plc has seen profits rise this time despite difficult trading conditions and stagnant sales, so continuing the revival begun in the second quarter of the year (CI No 1,945). The London-based office systems and photographic company saw pre-tax profits rise 21% to UKP27m on fractionally improved turnover, up 0.2% to UKP900.3m. Gossip of […]
Gestetner Holdings Plc has seen profits rise this time despite difficult trading conditions and stagnant sales, so continuing the revival begun in the second quarter of the year (CI No 1,945). The London-based office systems and photographic company saw pre-tax profits rise 21% to UKP27m on fractionally improved turnover, up 0.2% to UKP900.3m. Gossip of a bid for the 24% stake owned by Chiltern Capital Plc (formerly AFP Group Plc) have been rife – last year, Ricoh Co Ltd bought its 24.2% share in Gestetner through AFP (CI No 1,827), but the company had no comment. The Evening Standard advises investors to discount talk of a bid from marketing group Inchcape Group Plc – the nearest thing could be a joint marketing deal. Gestetner’s Office Automation arm saw sales up 1% to UKP734m, with trading profits up 21% to UKP41m. Gross margins fell because of the declining sales of some high margin products, revisions in pricing and changes in product mix, the company said. The marketing effort needed to help maintain share in hostile conditions also cut into profits. But this was offset by lower operating expenses which have resulted from the cost cutting measures begun in 1991. The division saw UK sales fall 10.8% to 39.5m with European turnover down 6% to UKP448.7m; 1% of that was attributed to closure of the French desktop publishing business. Office Automation fared better than expected in also troublesome North American markets, where sales improved 2.6% to UKP164m, but Canada proved a disappointment and is to be restructured. Business was good in Mexico and Argentina which the company reckons offer good opportunities for future growth and, as expected, it continued to prosper in Asia. Australasia showed a small improvement.
The group says it will continue to focus on copiers, sales of which contributed 62% of total office automation sales. Growth areas include colour copiers, digital duplicators and faxes. Sales of graphics products and those famous stencil duplicators shrank. The services and supplies section contributed the remainder of office automation sales. The company noted that many customers now prefer to pay an inclusive price for machines and services, and changes have been made to satisfy this demand. Agreements that include the supply of a machine are sold off, where possible as non-recourse finance leases to banks. At October 31, the contingent liability arising from financing agreements with limited recourse was UKP5.9m. Sales in the Photographic Products Division fell 6% to UKP166m, with trading profits reduced to UKP4.7m from UKP9m. The camera business, which is subject to a conditional contract of sale contributed UKP84m revenues and saw trading profits of UKP1.1m. Photographic supplies, which is to be retained, saw UKP85m sales and trading profits of UKP3.6m. This business is now consolidated with office automation products and is managed on a geographical basis. Gestetner’s gross assets and liabilities were affected by sterling’s devaluation though shareholders’ funds were largely unchanged. Net debt, including convertible unsecured loan stock of UKP37.9m, rose to UKP94.7m from UKP64.4m last time. This related to translation adjustments of UKP29.4m on net foreign debt; working capital in relation to leasing activities increased 42.1% to UKP16.2m, with an additional UKP2.7m arising from acquisitions. Working capital for the rest of the business declined. Chairman Basil Sellers is cautious about the global economic outlook but optimistic about prospects once recovery arrives.