Cimpress posts Q1 loss

Jo Francis
Thursday, November 3, 2016

Web-to-print giant Cimpress will not be increasing the prices of the products it imports to the UK market because of the weak pound – yet.

Speaking as the firm announced its first-quarter results, chief financial officer Sean Quinn said: “We are not thinking about re-pricing [due to the fall in the value of the pound]. We do have an active currency hedging programme… and we have full visibility on our full-year 2017 rates for the pound.

“We’re covered in terms of that volatility. Eventually we will have to deal with the structurally lower rates to the extent that they persist.”

President and chief executive Robert Keane added: “We also have offsetting. We do try to stay focused on the brand side, for instance a brand selling into the UK, on what works best for the market conditions. We don’t mandate that down.”

Keane also joked about the potential fall-out from Brexit. “Until Scotland leaves England and goes to the euro – which I think is at least 10 years out – all kidding aside, we have a pound-based facility for our upload and print business.”

Cimpress acquired Dundee-based Tradeprint in 2015.

Recent investments across the overall business have “depressed near-term profitability” but Keane said he was confident about the group’s prospects for the year despite posting a $27.8m (£22.3m) loss in Q1.

In the three months to 30 September the company again posted double-digit sales growth, with revenue rising 18% to $443.7m. But a number of factors affected profitability, and the loss from operation was $27.8m compared with an operating profit of $12.1m in the prior year.

Flooding at its largest production facility in Windsor, Ontario, occurred at the end of September when a freak storm resulted in a 48-hour state of emergency being declared in the region.

Quinn said: “The flood was in the last two days of the quarter so it did push some of our revenue into Q2. All our employees were safe and there was minimal impact to customers because of the great job the team did there.”

Cimpress is also taking a hit by reducing shipping costs for certain Vistaprint customers, because delivery charges were proving a turn-off to customers ordering relatively low-value items.

“This had a $4.9m profit impact on the quarter and will be $20m for the year. The bigger impact is going to be the timing and extend of the roll-out,” Quinn explained. “We’re early in this cycle, collecting a lot of data and learning a lot. In the three markets where we have rolled out pricing reductions – the UK, France and Germany – we’re seeing good things. Material improvements in customer satisfaction relative to conversion rates and repeat rates.”

A strong performance from German upload and print firm WirMachenDruck, acquired at the end of last year, also resulted in increased earn-out payments. Cimpress acquired the business for €148m (£131.3m), with potentially a further €40m payable in earn-outs.

“We’re seeing a continued strong performance of that business, so each quarter we need to update the valuation of that earn-out. Overall we see this earn-out as a positive, we actually want them to achieve it. It’s good for the seller and good for us as well,” Quinn said.

Cimpress said Exagroup, in which it has a 70% stake, was performing “on track with its reset expectations”.

At the end of its 2015-16 financial year Cimpress admitted that it had over-paid for Exagroup, and made a $31m write-down in the value of its $124m investment.

However, it also said Exagroup remained “a strong company with a clear and differentiated value proposition and solid future prospects” and that the lowered valuation did not take into account the potential future benefits of connecting it to the Cimpress Mass Customisation Platform.

There has also been recent speculation that Cimpress could have another UK acquisition in its sights.

On the topic of potential M&A activity, Keane said: “We don’t speak about our M&A pipeline, we speak to many different companies and have done for years. We try to be very picky, and it can be quite lumpy. There could be long stretches where we don’t do anything and spurts where do quite a few.”

Regarding the group’s overall performance, he added: “Despite many moving pieces, we’re happy with the way the quarter ended and confident of what we’ll be doing for the remainder of the fiscal year.”

Cimpress’ share price fell sharply after it released the Q1 results on 27 October, falling from $97.21 to $83.22 (52-week high: $104.18, low: $67.89).



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