P&P pulls out of 'box shifting'
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Your support makes all the difference.THE COMPUTER distributor P&P is pulling out of its lowest- margin 'box shifting' operations, saying it is no longer possible to make any money in its original core business.
The stock market reacted warmly to the news, pushing the share price up 3p to 42p.
David Southworth, managing director, said yesterday: 'It is no longer a game we wish to be in. The industry has changed out of sight.'
The businesses to be shut down made sales of pounds 52m, about a quarter of P&P's turnover, in the year to November, down from pounds 100m two years ago. Mr Southworth estimated that prices for personal computers had fallen 30 per cent last year, cutting into already wafer-thin gross margins in what has become a commodity business.
He said that distributing computers had suffered from severe working capital pressures. Big suppliers such as Hewlett Packard demanded payment within 15 days while customers often failed to pay bills for up to 90 days.
One analyst said: 'In those circumstances it just isn't possible to make money. The company had no choice but to pull out'.
The withdrawal from distribution showed up as an pounds 8.9m extraordinary charge in P&P's full- year figures to cover stock and fixed asset write-downs.
The results indicated a marked recovery from a collapse in profits in 1991. Pre-tax profits jumped to pounds 2m from pounds 711,000 on flat sales of pounds 223m ( pounds 228m). In the peak year of 1990 P&P made pre-tax profits of pounds 13.1m. A final dividend of 0.7p makes a total for the year of 1.4p, down from 4.33p.
Mr Southworth said the company could now concentrate on selling computers direct to big corporate customers and on niche areas of the distribution market where margins remained attractive.
P&P will still supply Apple computers through its Principal subsidiary and an increasing proportion of profits is likely to come from providing maintenance and training for its customers, where margins are good.
Mr Southworth said a 5 per cent return on sales was a realistic target within the next two to three years.
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