SBG shares collapse as interim earnings halve: Photocopier leasing firm warns of possible dividend cut

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The Independent Online
SHARES in Southern Business Group crashed 43 per cent from 74p to 42.5p after the photocopier leaser said that interim profits more than halved and warned of a possible full-year dividend cut.

Yesterday's figures were the latest setback in an 18- month period that has seen the company admit fraudulent sales techniques by some of its staff and undergo an investigation by the Office of Fair Trading.

David McErlain, chief executive, said costs were being cut to match sales, which fell 9 per cent in the first half to pounds 26.9m. But he warned that the company remained cautious about trading prospects.

Pre-tax profits were slashed from pounds 7.2m to pounds 3.1m and the dividend held at 1.27p. But Mr McErlain hinted at a full- year cut, saying only that the final payout would be 'at least equal' to the interim. Last year's final was 2.45p.

Sales in the second quarter were particularly poor in the run-up to the publication in March of an OFT report that asked for wide-ranging changes in the industry. Photocopier leasers had come in for increasing criticism of their complex contracts.

SBG has cut its longest contract from nine years to five and now maintains that it exceeds OFT requirements.

In February 1993 it admitted that some salesmen had altered meter readings to inflate their commissions, triggering the OFT investigation.

The controversy heightened last summer when it was revealed that the director who had resigned after taking responsibility for the sacked salesmen was still being paid and had kept his company car.

Analysts reined in forecasts for the full year from about pounds 12.5m to pounds 7.5m and predicted a dividend of 2.6p compared with 3.72p last year.

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