Despite yet another big slump in profits, Gestetner Holdings Plc claims to be well-placed for recovery come the end of the recession. The W1, London-based office systems group says that profits were generated entirely in the second quarter, reflecting an improved trading performance in its major markets. In addition, chairman, Basil Sellers, promises to continue reducing costs and controlling working capital, while investing for growth in areas of opportunity. Unfortunately though, pre-tax profits fell by 62.2% to UKP8.2m, and sales dropped by 2.4% to UKP440.1m. Trading conditions in both the office sytems and photographic divisions of the company were said to be difficult still. At the office systems division, turnover fell by 5.1% to UKP359.5m, although this was apparently in line with expectations. Trading profit fell to UKP17m from UKP31.4m. There was also a decline in overall gross margins, reflecting planned product mix changes and recessionary pressures. About half of this drop was anticipated due to reduced sales of some high margin products, but the remainder resulted from the disposal of excess stock at lower prices. Operating costs were maintained at the same level as the corresponding period last year. The photographic division saw no recovery in retail sales. Recession in all major markets made a significant impact and, after adjustments for currency translation effects, turnover decreased by 0.9% to UKP80.6m, while trading profit fell from UKP1.8m to UKP0.4m. The clearance of some fashion lines at discount prices apparently reduced gross margins, but the expense-to-sales ratio and absolute expenses were below that of 1991, thus partially offsetting the loss of gross margin. Net debt of UKP96.4m for the company as a whole, including convertible unsecured loan stock of UKP37.9m, gave rise to a cash-to-debt ratio of 40% against 114% last time. Working capital levels improved marginally, although lower stock investment was said to be offset by a small increase in receivables. And last year’s European distribution difficulties have been resolved now, offering Gestetner some comfort in an otherwise stagnant marketplace.
