Cimpress impairs Tradeprint outlay

Cimpress has written off most of its £20m investment in Tradeprint, it has emerged, but remains confident that the future performance of the business – which is poised to roll out a new software platform – will bounce back.

The web-to-print giant made the writedown in its financial year to 30 June 2017, the same year that it wrote off $31m (£22.4m) related to its acquisition of Exaprint. It said at the time that it had “reset expectations” for two businesses in its Upload and Print division.

During the same reporting period Cimpress also switched its primary financial metric from net operating profit to unlevered free cash flow.

The details regarding Dundee-based Tradeprint have recently emerged in a Companies House filing. It said it had taken the decision to write-off £15.7m of its investment because “the outlook for the business is lower than estimated”. The impairment was based on estimated future cash flows for the company.

Tradeprint made an operating loss of nearly £2.4m on sales of just under £12m in the year to 30 June 2017, a period that also spanned the merger with Exaprint’s UK business.

The business took a £930k hit to gross margins because of “suppressed selling prices” in the hyper-competitive online printing arena, while an increase in headcount due to the replatforming initiative cost £730k. A further £610k in charges related to revised amortisation and depreciation charges, as well as restructuring.

The number of employees increased from 121 to 160.

In the prior period, which was for 11 months, Tradeprint posted an operating profit of £530k on sales of just over £10m.

Cimpress gained its first UK manufacturing facility when it acquired award-winning Tradeprint in a £20m deal in 2015. In the year before it was acquired Tradeprint made an operating profit of £2.1m on sales of £9.1m. 

Cimpress vice president of investor relations Meredith Burns told PrintWeek: “The reason for the impairment is that we found the outlook for returns for the business were not consistent with the initial expectations set in our deal model, and therefore not consistent with the value we placed on the business at the time of purchase.

“That said, we believe in the Upload and Print opportunity broadly, and in the UK. We believe in Tradeprint, and we are investing in it, which should help improve the outlook and return potential of the business. Our Upload and Print businesses across Europe are performing very well as a portfolio, and we are confident that the group will achieve great returns relative to the capital we have invested over the last several years,” she said.

The new Tradeprint platform is linked to the Cimpress Mass Customisation Platform (MCP) that connects all the group’s manufacturing sites. It will become the first Upload and Print business to fully transact through the MCP.

Managing director Simon Cooper said it allowed Tradeprint to add new product categories very quickly, and was already being tested by some customers.

“There’s no denying it has been a very challenging time, but we haven’t let that get in the way of focusing on our customers,” he said.

“Now we are really on the cutting edge and customer satisfaction is going up and up. We can add new products in a matter of minutes, it really is very powerful. The future is bright and we are really optimistic.”

New product categories include items such as cut-to-shape labels and stickers, and promotional products, apparel and garments (PPAG).