HP Inc. (HPQ) has reported a 0.53 percent fall in profit for the quarter ended Oct. 31, 2015. The company has earned $1,323 million, or $0.73 a share in the quarter, compared with $1,330 million, or $0.70 a share for the same period last year. On the other hand, adjusted net income for the quarter stood at $1,687 million, or $0.93 a share compared with $2,014 million or $1.06 a share, a year ago. Revenue during the quarter dropped 9.48 percent to $25,714 million from $28,406 million in the previous year period. Gross margin for the quarter expanded 12 basis points over the previous year period to 24.70 percent. Total expenses were 96.47 percent of quarterly revenues, up from 93.28 percent for the same period last year. That has resulted in a contraction of 319 basis points in operating margin to 3.53 percent.
Operating income for the quarter was $908 million, compared with $1,908 million in the previous year period.
However, the adjusted operating income for the quarter stood at $2,328 million compared to $2,741 million in the prior year period. At the same time, adjusted operating margin contracted 60 basis points in the quarter to 9.05 percent from 9.65 percent in the last year period.
"In these challenging markets, we are taking decisive actions that will protect our core business which generates the majority of our cash flows" said Dion Weisler, president and chief executive officer, HP Inc. "We firmly believe in our strategy and, given our scale, innovation, channel reach and brand, we are well positioned to gain profitable share in the markets where we choose to play."
For Financial year 2016, HP Inc. expects diluted earnings per share to be in the range of $1.50 to $1.60. The company expects diluted earnings per share to be in the range of $1.59 to $1.69 on adjusted basis.
For the first-quarter 2016, HP Inc. expects diluted earnings per share to be in the range of $0.27 to $0.32. On an adjusted basis, the company expects diluted earnings per share to be in the range of $0.33 to $0.38.
Operating cash flow drops significantly
HP Inc. has generated cash of $6,490 million from operating activities during the year, down 47.38 percent or $5,843 million, when compared with the last year. The company has spent $5,534 million cash to meet investing activities during the year as against cash outgo of $2,792 million in the last year. It has incurred net capital expenditure of $3,179 million on net basis during the year, up 5.61 percent or $169 million from year ago.
Cash flow from financing activities was $1,344 million for the year as against cash outgo of $6,571 million in the last year period.
Cash and cash equivalents stood at $17,433 million as on Oct. 31, 2015, up 15.20 percent or $2,300 million from $15,133 million on Oct. 31, 2014.
Working capital increases sharply
HP Inc. has recorded an increase in the working capital over the last year. It stood at $9,596 million as at Oct. 31, 2015, up 49.70 percent or $3,186 million from $6,410 million on Oct. 31, 2014. Current ratio was at 1.23 as on Oct. 31, 2015, up from 1.15 on Oct. 31, 2014.
Cash conversion cycle (CCC) was almost stable at 1 days for the quarter, when compared with the last year period. Days sales outstanding went up to 24 days for the quarter compared with 22 days for the same period last year.
Days inventory outstanding has increased to 15 days for the quarter compared with 14 days for the previous year period. At the same time, days payable outstanding went up to 38 days for the quarter from 34 for the same period last year.
Debt increases substantially
HP Inc. has witnessed an increase in total debt over the last one year. It stood at $24,665 million as on Oct. 31, 2015, up 26.33 percent or $5,140 million from $19,525 million on Oct. 31, 2014. Total debt was 23.08 percent of total assets as on Oct. 31, 2015, compared with 18.92 percent on Oct. 31, 2014. Debt to equity ratio was at 0.88 as on Oct. 31, 2015, up from 0.72 as on Oct. 31, 2014. Interest coverage ratio deteriorated to 2.86 for the quarter from 13.07 for the same period last year.
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