Xerox revenue and profits down in first results since separation

01 February 2017

Commercial

Xerox has reported Q4 and full-year revenue and profit declines in its first financial results since the firm officially completed its separation from Business Process Outsourcing (BPO) business Conduent.

In the results released yesterday (31 January), the Connecticut, US-based business said revenue from its continuing operations was $2.73bn (£2.16bn) in Q4, down 7.2% year-on-year from $2.95bn in Q4 2015.

Equipment sales accounted for $677m of the firm's Q4 turnover, down 12% from $770m in 2015, while annuity (post-sale) revenue – encompassing outsourcing, maintenance and rentals, supplies, paper and other sales and financing – accounted for $2.06bn, down 5% from $2.18bn in Q4 2015.

The firm’s operating margins for Q4 were up slightly to 14%.

For the full-year the company’s revenue fell by 6% from $11.47bn in 2015 to $10.78bn in 2016. Pre-tax profit for Q4 fell by 38% from $287m to $179m while for the full-year it dropped by 39% from $924m to $568m.

The results relate only to Xerox Corporation, which now solely handles document technology following the completion of its corporate split on 31 December. Conduent’s financial results will be reported separately in the discontinued operations section of Xerox’s 2016 annual report, due later this month.

Xerox said it recorded total separation costs of $159m in separating from Conduent. During 2017 it expects to incur additional separation costs of around $15m. The anticipated $174m total is consistent with the lower end of the firm’s previously communicated range of $175m to $200m.

The business also said it exceeded its first-year savings target with its Strategic Transformation programme, which it launched last year.

Jeff Jacobson, who took over as chief executive for remaining chairman Ursula Burns following the separation from Conduent, said the firm is on track to deliver an annual average of at least $500m of cost savings from 2016 to 2018.

“While post-sale revenue declines were stable, equipment revenue was soft, somewhat owing to the timing of product launches but this is an area of focus to drive better results,” said Jacobson.

“This is why pursuit of our strategic growth areas is so important and will be featuring in our commentary going forward as we drive to improve our revenue trajectory over time.

“Overall, our results demonstrated continued progress in our productivity and cost-saving initiatives and our ability to generate strong cashflows.”

Xerox's share price fell by 4.46% from $6.95 to $6.64 shortly after the results announcement but have since recovered to $6.93.