Grafenia boss likens first half to Squid Game
Monday, November 22, 2021
Grafenia has almost halved its losses in the first half, with CEO Peter Gunning likening the period to “a perverse, real-life Squid Game” as business activity was affected by a series of green and red lights.
Turnover in the six months to 30 September increased by 20% to £6.31m, but was still 25% lower than the same period pre-pandemic.
The group improved at the EBITDA level by more than £500,000, turning around the prior year’s £125,000 EBITDA loss to post a positive EBITDA figure of £392,000.
Pre-tax losses were cut by nearly 40% at £783,000.
The business has already cut costs and restructured its operations.
Sales at Nettl Systems were up 30% to £3.45m, while at Works Manchester sales increased by 10% to £2.86m. Within that, signage sales were flat at £1.92m compared with 2020 when Covid-related signage filled the demand gap.
“We have a very different cost base compared to pre-pandemic. Prior to covid, we’d just completed combining two factories and upgrading software and kit. Our breakeven point is much lower than it was,” Gunning said.
Trading has improved in the second half of the year, although still “not quite” back to 2019 levels.
He also said the business was making progress on its ambitions to boost its Works Manchester production hub with additional work from outside its network.
“We’ve been able to win more bespoke litho work than before. The catalyst for this has been the development of ‘Plans’ in our platform,” he explained.
“It’s cut so much manual handling and means that we’re quoting faster and don’t need any admin to process non-standard work. We’re rolling those tools out to our partner network, so they can do more self-service too.”
In the face of rising input costs the group has increased its wholesale and retail prices in H2 “and it seems likely they'll have to increase again”.
“Our competitors have been forced to do the same. It's highly likely that increased energy and input costs, coupled with not-yet-back-to-normal demand and the removal of government support will be too much for many printers to bear,” Gunning noted.
The easing of restrictions has also allowed Grafenia to reboot its plans to expand its Nettl network in the US.
“We’ve added several new Nettl partners in the US in the first half. With the absence of events, we’ve had to change our marketing funnel. It’s driving sign-ups in a different way and we’re growing the network. We’re booked to return to Printing United in Las Vegas next year,” he explained.
The WorksThing software-as-a-service offering for managing sign and graphics installations will launch next year, and Grafenia is inviting sign fitters to register on the platform.
The group is still interested in acquiring software businesses that serve vertical markets.
Regarding the outlook, Gunning said the group was coming out of the pandemic in better shape.
“We're focusing our attention on building more recurring revenue streams. That's by a mix of buying software companies. And by building tools to licence to professionals in the graphic arts, print and sign sectors. And to give our Nettl stores and partners access to the best systems, to deliver a client experience that's beyond what they're used to.”
Grafenia shares rose by 10.53% to 5.25p following the announcement.