HPE UK sales crash after infrastructure projects delayed, but PC-flinging HP Inc watches Brit biz rise

The pandemic and a tale of two HPs


Hewlett Packard Enterprise's UK operation recorded a 20 per cent slide in revenues during pandemic-struck 2020, according to the latest filing at Companies House.

The business, which sells a range of infrastructure gear and related services, turned over £837.7m in sales for the fiscal '20 ended 31 October as customers sent their staff home and postponed all but the most essential of projects.

"Revenue declined 20 per cent during the year mainly as a result of the challenging economic environment related to COVID-19 pandemic and related lockdowns," said HPE in statements accompanying the financial numbers.

"The company is continuing to launch certain initiatives that aim to generate revenue growth in future years, improving our service delivery for higher quality and lower cost," it added.

A breakdown of the revenue haul between the product types, or "segmental analysis", was not provided as the directors felt "any disclosure would be seriously prejudicial to the interests of the company."

Cost-reduction programmes that have been a feature at HP and HPE for the past six or seven years featured again in fiscal '20, although it seemed to involve areas like real estate reduction rather than headcount rationalisation. The average employee count in the year was 2,238 versus 2,160 in the prior year for the biz, primarily in sale and marketing.

Gross profit went up 21 per cent, "predominantly attributed to a favourable movement in foreign currency movement" and partially offset by some restructuring charges. Profit before tax came in at £21.94m compared to a pre-tax loss of £4.78m.

As for the outlook? Cloudy with Greenlake: HPE intends to sell its entire portfolio-as-a-service from 2022 to appeal to customers that prefer to pay as they consume tech. Not everyone is a fan of this model but HPE made its intentions known in 2018 and Dell and Cisco have since followed in a bid to compete with cloud rivals.

HPE said in the P&L accounts that the pandemic "curtailed the movement of people, goods and services worldwide" and slowed "economic activity." It did but that didn't stop AWS, Microsoft, Google, and others from expanding rapidly.

Also filed at Companies House recently were the financial results for HP Ink UK, the PC and print offshoot that undocked from the parent group in 2015.

The government-imposed lockdown dynamics of the past 18 or so months have arguably played to HP's strengths: what with computers being the in-demand device and people printing more at home, albeit not printing in the office.

For the year to 31 October, HP revenue grew to £1.756bn, versus £1.644bn a year earlier. "The higher sales during FY20 was in consumer PC business due to huge demand." If anything, the problem for HP has been the shortage of certain components that prevented it from selling more machines.

Again, the directors refused to provide a breakdown of the product mix comprising the revenue haul.

The average employee headcount in the year fell to 682 from 734, with the reduction felt mainly in R&D, the accounts confirm. As such, staffing costs fell in the year to £77.56m from £80.97m.

The gross profit margin dipped to 7.2 per cent due to the "increase in the cost of purchases of products for reselling." The profit before tax margin fell to 1.14 per cent from 1.3 per cent "due to higher restructuring costs." Profit before tax fell to £19.99m from £21.39m.

"HP Inc UK Limited aims to execute further cost reduction strategies within the organisation to continue to stabilise, if not improve, profitability for the next financial year," the company said in the accounts.

With a huge backlog of orders still to be delivered, Windows 11 necessitating a hardware refresh, and more people gradually returning to their place of work, albeit for fewer days a week than before, the market would seem to be HP's to lose. ®

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