Xerox is on course with its growth strategy, but greater than expected headwinds are increasing the pressure on business and will impact the full year results.
Thus at Q3 revenue from equipment sales increased but pressure elsewhere means that revenue for the quarter dropped to $1.87 billion ($1.96 billion) and Xerox reported a pretax loss of $1.0 billion ($300 million loss). Equipment sales rose to $393 million in the quarter ($383 million) thanks to growth at the entry level and at the production print end, where there has been an increased marketing effort and refresh of the portfolio.
CEO Louie Pastor says: “This quarter, print equipment revenue grew and adjusted operating margin doubled as we continued to execute against our three priorities: stabilise revenue, increase profitability and reduce leverage.
“We are seeing results in the areas where we have focused our execution, but the headwinds affecting our outlook have intensified, creating greater near term pressure than we expected. As a result, we are lowering our full year adjusted operating income and free cash flow guidance.”
It has announced an extension of its debt repayments pushing these out two years to 2030, prompting further pressure from Czech investor Starteepo which suggests that the company should cash in on Xerox Financial Services operation to reduce debt levels.
Print has responded well to the change of approach, which included the acquisition last year of Lexmark to boost the entry level range. Revenue from the print segment for Q3 fell from $1,74 billion to $1.69 billion but with an increase in operating profit from $64 million to $136 million.
The Lexmark effect shows up in increased entry level sales of $156 million ($129 million) and the rebuilt production print portfolio with an increase in sales of $81 million compared to $71 million a year ago. The mid range segment fell to $151 million ($178 million).
The company now expects to book revenue of £7.6 billion for the year with operating profit around $450-475 million compared with earlier forecasts of $55-605 million.
