Gestetner loses pounds 45m before tax: Office equipment group makes charges for redundancy and write-downs

GESTETNER, the world's largest independent distributor of office equipment, has made an interim pre-tax loss of pounds 45.4m after charging the same amount to cover redundancies and asset write-downs, plus a further pounds 2.9m for goodwill on disposals.

Gestetner made profits of pounds 7.8m in the equivalent period last year. Last month, however, it warned shareholders to expect the exceptional costs when Inchcape paid pounds 37.9m for a 15 per cent stake in the group, with an option to increase its holding to 25 per cent.

But the figures also mask a decline at the trading level, where profits on continuing operations fell from pounds 17.7m to pounds 11m. The company blames poor trading conditions in important European markets, which contribute 55 per cent of its revenues and where turnover fell by 3.5 per cent on the corresponding period.

Basil Sellers, the newly non-executive chairman, said conditions in both the office automation and photographic markets continued to be difficult.

He remained cautious about the world economic outlook and Europe, but said Gestetner remained confident of its future prospects as the big economies strengthen. In spite of the losses, the interim dividend was unchanged at 1.8p.

Group turnover for the half year was pounds 498m, against pounds 440m last time, although Gestetner said the increase was only 2 per cent in constant sterling terms.

In the office automation division, there was good growth in plain paper fax machines and sales of colour copiers. Copier sales in general increased to represent 64 per cent of turnover in office automation.

A 3.9 per cent rise in sales, however, could not offset the pressure on gross margins and operating profits fell by 37 per cent to pounds 14.5m.

Margins did improve slightly on the photographic side. Turnover fell by 5 per cent to pounds 85m but trading profit, aided by the margins and lower expenses, increased to pounds 1.8m from pounds 500,000. The photographic supplies business reported turnover of pounds 48m and trading profits of pounds 2.2m.

Net debt increased from pounds 95m at the year-end to pounds 148m, giving gearing of 72 per cent. Yesterday the shares rose 1p to 114p at the close.

(Photograph omitted)