Cimpress takes action after virus causes sales slump
Monday, May 4, 2020
Orders at web-to-print giant Cimpress crashed by 65% at the end of March as the effects of the Covid-19 pandemic hit the group’s small business customers around the world.
Cimpress has temporarily suspended some of its financial covenants and has raised $300m (£242m) in new capital as part of a raft of measures taken to ride out the virus crisis.
The group said that sales and EBITDA profits in February had been up on the prior year, but it experienced “materially reduced demand” during March as customers worldwide were gripped by the severity of the pandemic situation.
Sales in March were down 30%, with bookings collapsing by around 65% in the last week of March and first week of April.
However, Cimpress stated that by the third week of April the rate of decline had reduced to 40% “as our customer and product focus has evolved in reaction to the current situation”.
Its preliminary results for the three months to 31 March show sales down 10% at $598m and an operating loss of $88m. The firm is also making a $101m goodwill impairment charge due to the challenging outlook for various businesses. This includes a writedown related to its $29m investment in San Francisco apparel business VIDA, which was sold after the period end.
Cimpress has taken a raft of measures to preserve cash and reduce its fixed costs by the equivalent of $140m a year, including redundancies, restrictions on new hires, travel and training.
“We reduced advertising, ceased temporary labour contracts, and furloughed or reduced work time for manufacturing and customer service team members, all in line with the abrupt pandemic-related decreases in revenue,” the firm stated, but said it would also protect key investments “in technology, data infrastructure and customer value improvements”.
The $2.75bn turnover business has also agreed to delay more than $20m of payments that would be due before June to its suppliers and landlords.
In a statement, Cimpress founder, chairman and CEO Robert Keane said: “We have positioned Cimpress to stay on offense during and after this pandemic by taking actions that allow us to continue to fund key projects that we believe will benefit our customers and long-term shareholders.
“Even though deep economic recessions are painful, they also create opportunities and accelerate competitive advantages for companies with strong business models that focus on execution, invest in key projects, and improve customer value. Our recent actions ensure that Cimpress remains financially robust during these uncertain times so that we can do exactly that.”
The $300m investment from funds managed by Apollo Global Management will be used to pay down some of the group’s existing term loan.
The five-year, subordinate debt has a 12% coupon, with Cimpress able to pay up to 50% as paid-in-kind.
Apollo also has a seven-year warrant to buy around 3.9% of Cimpress ordinary stock at $60 a share.
Cimpress’ share price had more than halved during March, falling from $119.04 to $46.05. It picked up at the end of last month on news of the Apollo investment, rising to $75.09 last week.
Some of its manufacturing locations had to be closed temporarily due to the pandemic, but Cimpress said the “vast majority” had managed to remain open or had reopened.
The firm’s subsidiaries include Vistaprint, Pixartprinting and National Pen. Its sole UK facility is Tradeprint in Scotland.
Cimpress moved its HQ to Ireland last year for tax purposes.