Lesley Stones
2 December 2008
Johannesburg — TOUGH times that have seen shares in the global printing company Xerox plunge more than 50% during the past year are not reflected locally, with its South African business enjoying a healthy growth in revenue and profits.
Global economic woes are making Xerox president Ursula Burns increasingly grateful for its operations in SA and 22 other African countries through its partner Bytes Technology. The emerging markets are helping to counteract the dip for US and European businesses.
This week Bytes will begin selling Xerox printers through Game stores after signing a new distribution deal. It has also won contracts to provide managed printing services for several large organisations, including the University of Johannesburg.
Overall, Bytes Document Solutions should hit a revenue of R1,8bn in Africa this year, said MD Rob Abraham.
Revenue for his division rose almost 25% for the 12 months to February this year , with a 13% rise in equipment sales and 11% for its services. Profits climbed by a similar amount, and the solid figures were continuing in this financial year.
"We have been waiting for the downturn and it's not happened yet," said Abraham.
"Every month we look at how we have performed and it delights me. Currency is an issue because imports cost more, but we were fortunate to have bought quite a bit of stock when the currency was better."
The global slump had yet to affect its performance in SA and the local operation might manage to escape the crisis, Burns said.
"The South African economy has been more resilient than the developed economy."
Xerox was protected to a degree by operating in emerging markets that were not being totally destroyed -- and maybe never would be -- by the economic downturn, she said.
Globally, Xerox will slash its workforce by 5% over the next six months, losing 3000 people and incurring a $400m restructuring charge.
It has also lowered its forecast for the fourth quarter after disappointing the market with its third-quarter figures, though Burns said the company had met its own expectations.
"Our third-quarter results were fairly strong, but our share price has been affected by this global turmoil. I believe the company is significantly undervalued at $7, but since we don't determine the share price, what we can do is to deliver on our strategy and meet our commitments quarter by quarter to ensure it will prosper when the markets become more stable."
One strategy is to sell document management services rather than just sell printers, creating a much stronger relationship with clients and guaranteeing annuity income.
The take-up for that was initially slow in SA, but demand was growing nicely, Abraham said. Both globally and in SA Xerox now earns about 74% of revenue from annuity contracts, and only 26% from new equipment sales.
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