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HP Ink's UK profits tumble nearly 85% – of course Brexit to blame

Currency fluctuation and rising component costs fingered

If there is something missing on this sunny Friday, it could well be a collective yearning among Reg readers to know how HP Ink Inc is faring in the UK. Fear not, for we have the latest financials.

The PC and print arm that undocked from the mothership back in 2015 turned over £1.4bn in sales for the 12 months ended 31 October 2017, up 13.7 per cent year-on-year, according to a filing at Companies House.

The cost of those sales went up 17.8 per cent, hit by rising components prices that HP's CEO complained of last year. Distribution overheads were essentially flat and admin expenses went up 60.4 per cent. All this left operating profit at £12.67m, way down on the £29.36m generated in the prior fiscal year.

El Reg isn't quite sure why admin expenses soared to £16.8m but it certainly wasn't due to a rise in headcount, which actually fell by 66 in the year to a total of 721. The drop in personnel was mostly in the sales and services department.

Accounting for interest income, interest payable and tax, HP banked £2.86m in net profit, diving 84.6 per cent from the £18.67m pocketed in fiscal '17.

These results were "in line with company expectations", HP said, with "higher sales" coming from the commercial PC side of the house due to "new product launches".

"The gross profit margin decreased from 7.9 per cent in the previous year to 6.2 per cent in the current year on account of an increase in the cost of purchases for reselling," HP said in the Profit & Loss accounts.

"The profit before tax margin decreased from 1.9 per cent in the previous year to 0.7 per cent in the current year due to the strengthening of GBP in 2017 by 8.7 per cent against USD, resulting in an exchange loss of £7.34m."

Ouch. The value of the British pound did slide versus the US dollar following the EU referendum in 2016, but vendors including HP, Dell and Lenovo raised sales prices on several occasions to offset this.

Lenovo raised price not once but twice and for its part, HP UK was estimated to have put its price up by 30 per cent since the Brexit vote, as of September last year.

HP might want to shake up the department that does its currency hedging or negotiate better bulk purchases of the components used in its machines.

Globally, HP Inc pulled in sales of $13.9bn in fiscal '17, up 11 per cent on the prior year. Net income was up 29 per cent to $660m. ®


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