Smaller Companies: A performance that is well worth copying

A HISTORY of unsavoury sales practices has left the photocopier industry in the doghouse. Users feel they have been mucked about by unfair contracts, with expensive get-out clauses, hidden in a sea of small print. The companies themselves admit that customers' gripes are often justified.

The City is little happier, with shares in quoted companies, such as Eurocopy and Southern Business Group, periodically hammered by fair trading inquiries and a drip-feed of bad press. The Office of Fair Trading is due to pronounce on unfair practices later this year. It is rumoured to be weighed down by the size of the task and unlikely to have anything to say before 1994.

Hardly an auspicious background for one of the stock market's most stunning performances so far this year. Shares in Danka have more than quadrupled in value since November, from a low of about 200p to 900p last Friday, at which level they were split into four units worth 225p each to help marketability.

But then Danka is unlike the rest of the industry. For a start it is an American company, which has a London quote only because Mark Vaughan-Lee, its chairman, spotted a neat tax dodge in the mid-Eighties - marrying profitable US companies with the attractive tax losses of UK shells.

Dan Doyle, Danka's ebullient chief executive, says the industry just does not have the same image in the US. The long contracts that have been the bane of UK office managers do not exist there. One-year contracts are standard and dealers maintain a healthy arms-length distance from leasing companies.

That and an attention to service have encouraged explosive growth. Turnover grew almost 15-fold between 1984 and 1992. Profits in the year to March jumped 63 per cent to pounds 17.5m. A performance-related bonus scheme for Mr Doyle was becoming so potentially expensive that he was persuaded to sell the liability back to the company.

Mr Doyle sees plenty of growth left in the US. The company is strong in its south-eastern heartland but there are plenty of gaps to fill. Its share of the fragmented market is still tiny.

Last month Danka took its first step into the UK market with the pounds 9m acquisition of Saint, a Hull company making profits of about pounds 750,000, following a long search for a UK company that shared Danka's 'clean' approach and could be used as a base for UK expansion.

Like its US parent, Saint, now renamed Danka UK, has seen dramatic growth over the past six years, with compound earnings growth of 35 per cent. Like Danka, it makes most of its money from high-margin service sales and it sells one-year renewable contracts, which keep customers happy.

For the year to next March NatWest Markets, the house broker, has pencilled in profits of pounds 26m for the enlarged group. It expects further growth to pounds 31m the following year. That puts the shares on a prospective p/e of 20 falling to 17, which sounds demanding but compares with earnings growth of 20 per cent to March 1995.

The shares, which arguably no longer belong in this column, are still good value.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Claims Administrator

£16000 - £18000 per annum: Recruitment Genius: A position has arisen within th...

Ashdown Group: Development Manager - Rickmansworth - £55k +15% bonus

£50000 - £63000 per annum + excellent benefits : Ashdown Group: IT Manager / D...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss