Gestetner price dips on sales warning
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Your support makes all the difference.Gestetner's investors, including its chief executive and finance director, were left considerably poorer yesterday as the share price plunged by more than a third after a shock warning about trading in Canada.
The office equipment company's ordinary shares dropped 34p to 69p, the lowest price in 11 years. The ordinary capital shares fell 50p to 78p.
Gestetner's warning was prompted by a 20 per cent drop in Canadian sales volumes in the first quarter of this year.
But the decline was not uncovered until the last few weeks because of problems with the integration of new management information systems in the fourth quarter of last year.The systems were designed to improve controls on businesses acquired by Gestetner during a spending spree in the early 1990s.
Trading losses in Canada could top C$30m (pounds 14m) this year if sales fail to recover. Analysts have slashed full-year profit forecasts for the group from pounds 25m to pounds 7m before tax and the expected pounds 15m exceptional cost of restructuring the Canadian business.
In-house problems in the Canadian activities have been compounded by fierce price competition in the photo-copier market.
Gestetner's main fight for market share is against Danka Business Systems, Alcoa Standard, Xerox and Canon.
Canadian operations contributed a positive pounds 1m profit in 1994. The whole group made a pre-tax profit of pounds 16.1m, against the pounds 31.3m lost in 1993.
Pain from the share price slump was felt personally in Gestetner's boardroom.
Greg Melgaard, chief executive, bought 2.5 million ordinary shares at 104p each in early December, and is now sitting on a paper loss of pounds 875,000. Stephen King, finance director, purchased 100,000 at the same time; and 20,000 shares were bought for 119p each two days before Christmas by Sir Ronald Halstead, a non-executive director.
Gestetner's directors face an uphill task in rebuilding confidence among investors, with analysts yesterday saying that the latest calamity was one too many. Last October, the company disclosed it had lost pounds 6.1m on interest-rate swaps.
Richard Harwood, analyst at Collins Stewart broking house, said: "The share price is not going to go anywhere because the institutions are feeling too nervous. If this happens in Canada, it could happen anywhere."
Analysts believe that the board will come under considerable pressure from large investors such as Ricoh, the Japanese electronics company with a 28.65 per cent stake, and Inchcape, the UK motor distributor and insurance group, which has 14.96 per cent.
A spokesman for Inchcape, which paid 129p for its shares and has two non-executive directors on Gestetner's board, said: "We are being kept in touch, and I imagine meetings will be taking place."
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