HP UK suffers 85% drop in profits
Tech giant blames a strengthening pound, but its costs also rose over its latest financial year
HP UK has seen its profits for the financial year slump by almost 85%, according to a recent filing.
The filing to Companies House last week showed that HP UK made 1.4 billion from sales during the 12 months to the end of October 2017, up 13.7% from 1.2 billion the previous year.
However, this was undermined by rising costs, with HP recording a 16% increase to the cost of these sales, resulting in gross profits falling 10% overall.
Profits after tax were down substantially, with the company only taking in 2.9 million for the financial year, compared to 18.7 million in 2016 - a drastic drop of 85%.
"The results were in line with company expectations," HP UK stated in its filing, adding that the modest increase in sales revenues was largely due to new product launches during the period.
"An increase in the cost of purchases of products for reselling," it added, was to blame for its gross profit margin shrinking to 6.2% from 7.9% the previous year.
A shortage in the number of PC components coming to the UK market in 2017, coupled with the fluctuating price of the pound following the vote to leave the EU, has forced many manufacturers to up the asking price of their hardware.
HP Inc, Microsoft, Dell, Apple and others increased their prices by as much as 30% over pre-referendum figures, but a revival of the pound compared to the dollar since then has meant HP UK's profits have taken a hit when exchanging currencies.
"The profit before tax margin decreased from 1.9% in the previous year to 0.7% in the current year due to the strengthening of GBP in 2017 by 8.7% against USD, resulting in an exchange loss of 7.34 million," HP UK reported.
While this has certainly affected HP's results, it's not entirely clear what else is causing the drop in profits. Aside from the currency exchange loss, admin expenses soared by 59% during the period, hitting 16.7 million, despite staff expenditure being down.
An HP spokeswoman told IT Pro: "The numbers are a snapshot of a 12-month period which can be impacted by a variety of factors, including those outside HP's control." However, aside from the currency fluctuations highlighted in the Companies House filing, HP didn't point to any other factors in particular.
The spokeswoman added: "HP Inc. reported its Q2FY18 earnings last month including revenue and profit growth up 13% year on year. In the UK HP holds number one market share positions for both personal systems and print."