Marketing changes hit SBG shares

SHARES in Southern Business Group crashed 16p to 67p yesterday after the photocopier supplier said it was planning fundamental changes to its marketing policies, writes Neil Thapar.

The move follows long-running criticism over Southern's aggressive sales techniques and photocopier contracts. In February it admitted to 'improprieties' at a subsidiary, involving the manipulation of meter readings on photocopiers and overcharging customers.

That disclosure led to a sharp drop in Southern's shares from a 12-month peak of 140p and triggered a wide-ranging investigation by the Office of Fair Trading into the office equipment market. The inquiry is expected to be completed late this year.

Southern said yesterday that it had decided to make 'fundamental changes to the way in which its contracts are marketed and administered'. This would enable customers to monitor and manage their copy volumes at regular intervals.

'Photocopier users are demanding higher and higher standards and we have to respond by giving them better control and choice over their contracts,' said David McErlain, joint managing director. In addition customers were likely to pay less for their photocopying, he added.

But the changes will lead to a pounds 3m charge in the second half and trim the group's profits margins by four percentage points to 24 per cent.

As a result, analysts predicted taxable profits would fall from pounds 15.3m to pounds 12.5m for the year to 30 September. In contrast, interim profits, reported yesterday, rose from pounds 7.11m to pounds 7.19m before tax. Earnings increased from 4.93p to 4.99p. The dividend was up 10 per cent at 1.27p.