Eurocopy shares dive after profits warning

Eurocopy yesterday became the latest in a long line of photocopier dealers to announce a profits warning. Shares in the company, the last quoted photocopier distributor to operate purely in the UK, almost halved yesterday after it said that profits for the next five years could be hit by competition. The group's share price fell 45 per cent to 32p.

Speaking as the group announced flat half-year profits to March of pounds 2.4m, Cyril Gay, chairman, said that giant photocopier manufacturers like Canon and Sharp had been aggressively cutting prices to recoup market share from large and acquisitive US dealers like Danka.

"We have budgeted to lose 30 per cent of our copy volume over the next three and a half years," said Mr Gay. "The manufacturers are all desperate to win back market share. If we are up against a manufacturer and price is the only thing that matters, we will lose."

But while Mr Gay expects to lose a third of his customers in London and the South, he did not expect the manufacturers to compete on smaller contracts elsewhere where price was not an issue: "To cover the UK properly you need at least nine depots, plus engineers and training courses. There is a lot of overhead in that. A lot of manufacturers will want to stay in London and the South."

As well as switching to smaller customers, Eurocopy is planning to use its pounds 12m spending power on small acquisitions of roughly pounds 1m. The photocopier market in the UK is highly fragmented with over 1,000 private players. "I would be disappointed if I wasn't talking to you about at least two acquisitions before Christmas."

Mr Gay, who with his three daughters owns 30 per cent of the company, said Eurocopy could be a tempting bid target to dealers like UK group Danka or Alco which operate in the US, though he stressed there were no ongoing talks.

"We know both these companies very well. We are the only public company left in the UK. Building up market share by buying small dealerships takes an awfully long time," he said.

Investment column, page 18.

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