Foreword

Business performance

Corporate governance & compliance

Improving customer experience

Providing customers with a responsible solution

Engaging employees

Influencing sustainability outcomes

Minimising our environmental impact

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The Fuji Xerox Story of Sustainability

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Business performance

The year ending 31 March 2010 was characterised by the impacts of the global financial crisis and the slow emergence of the economy out of the crisis during the second half of the year.

The Fuji Xerox Group in Australia experienced 1.6 percent revenue growth against 08/09 during this period. While we failed to meet our stated objective of 5 percent revenue growth, the underlying financial strength of the company and robust annuity revenue streams saw us through a challenging period.

One adverse consequence of the economic climate was an increase in bad debts by over 50 percent, predominantly in our graphic arts and small and medium enterprises (SME) customer bases. However continued careful management of costs ensured favourable product margins and resulted in a significant improvement in profitability.

The gradual increase in the value of the Australian dollar compared to the Japanese yen and United States dollar during the course of the year decreased the inter-company costs of products and therefore assisted product margins.

The group increased its total asset position by 10 percent to $1 billion, reflecting growth in finance receivables, although capital expenditures had been contained in response to prevailing economic conditions. Our robust balance sheet, conservative gearing and strong banking relationships ensured our ability to access the funds needed to continue to grow our business despite the global financial crisis.

With effect from 1 April 2010 we acquired a wide format business that predominantly services the engineering sector. This involved re-acquiring the distribution rights to Fuji Xerox technology previously managed through our dealer, Triangle Corporation. Since the close of the year under review we have also acquired Upstream Print Solutions, expanding our leadership position in the managed print services market.

Total revenues of $792.4 million in 09/10 reflect a solid performance for Fuji Xerox Australia in a tough economic climate. We have maintained our market leadership position in our key market segments.

However the business continues to face significant challenges in maintaining and growing market share in a highly price-sensitive marketplace. Increasing commoditisation of traditional product lines offered to customers, together with larger customers moving to a tendering process, has created a consequent pressure on profit margins.

In response, we are undertaking significant organisational development to support a new vision and mission that will take our business forward. We are learning to better orient ourselves around changing customer needs by innovating new solutions, expanding value propositions and developing appropriate sales and marketing strategies and capabilities.

Revenue from equipment sales declined marginally (2.5 percent) impacted by the worsening economic market conditions, especially in the first half of 09/10. While sales of black and white office units decreased by 14 percent, sales of office colour units increased by 4 percent. Sales of production colour units increased by 24 percent on the prior year mainly due to the successful launch of the new 700 Digital Color Press, a light production device.

Our equipment sales were supported by the positive impact of the investment allowance, a key government strategy to offset the impacts of the global financial crisis.

Annuity revenues grew by 4.6 percent. This revenue stream is derived from our support services agreements. Its growth reflects the ongoing increase in both units of equipment in the field and in the number of impressions produced on that equipment and the continuing trend to colour. Around 13.6 billion prints were produced on our equipment representing a 0.8 percent increase over the prior year, with production of black and white volumes falling 5 percent year on year and colour prints showing growth of 15 percent. This is a very positive trend for our business as colour printing creates more profitable annuity revenue streams.

Revenues of our Supplies division, impacted by the slower economic conditions fell 1.8 percent, whilst margin improved by 3.6 percent aided by the strengthening of the Australian dollar. The percentage of business transacted through the division's dedicated website increased to 66 percent.

Global Services experienced a modest rate of growth given the prevailing conditions, with services-based revenue increasing by 3.5 percent. This increase was achieved through organic growth despite heavy dependence on financial services customers. In this sector we experienced lower activity on existing contracts and delays in customer decision-making processes, which resulted in less new business than anticipated.

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