Grafenia makes progress with new offerings
Tuesday, November 11, 2014
Half-year sales are down again at Grafenia, but margins are up and the firm’s new Marqetspace offering is on course to be a £1m business by the year-end.
Turnover in the six months to 30 September fell 15.7% to £8.5m, and EBITDA was also down, by 5.4% to £1.22m.
However, operating profit rose by 23% to £376,000 and operating margins grew to 4.4% (2013: 3%). Pre-tax profits increased by 19.4% to £371,000.
Grafenia’s share price hit a 52-week high of 24.5p on the news (low: 12.38p).
The firm also boosted its net cash position by more than £500,000, to £1.08m from £530,000.
Chief executive Tony Rafferty said: “We’ve focused on the bottom line in the last six months; we’ve generated a higher level of profits and we’ve improved our cash position.”
The business is in the process of transitioning to become a provider of software solutions in the face of decline in its print operations.
Grafenia went so far as to describe the traditional retail print market as being “in demise”.
“You can put your head in the sand or realise things need to change, and that’s what we’ve done,” Rafferty said.
The group’s print revenues fell by 17.3% from £9.51m to £7.86m, with more decline at its Printing.com franchise where sales were down by more than £1m, to £3.26m (2013: £4.39m).
“While the Printing.com franchise remains an important and cherished formula, we are very mindful that the retail print market is changing, hence the reason we have developed the Nettl formula to potentially supersede the group’s retail offering,” the PLC stated.
It did, however, point out that sales were up at Printing.com franchises that had converted to its W3P web-to-print offering.
Sales at Flyerzone and Drukland, Grafenia’s Dutch and Belgian businesses, also fell in the face of increasing price competition and unfavourable exchange rates. Sales at the online variants of Flyerzone in the UK and Ireland also fell. The group said it would not chase volume at the expense of operating margin in this part of its business.
Its BrandDemand offering was effectively static, with sales of £330,000.
There was positive news about progress in its new Marqetspace trade printing service, which launched in June. More than 400 customers have used it since, and Grafenia anticipates month-on-month growth for the service.
It described Marqetspace as showing “encouraging promise” and said the offering was “scalable”: "We believe it is realistic that on an annualised monthly run rate Marqetspace will exceed £1m by March 2015."
Grafenia is in the process of offering its new Nettl service cross-media design service to franchisees, and will also offer a bolt-on format. The group’s own Printing.com branch in Birmingham, which was the first to convert in September, has seen an increase in underlying sales of around 30% in the following two months as a result.
Its London, Dublin and Manchester branches have now also converted, and Grafenia expects to sign the first franchise contracts imminently, with expectations that it will have more than 25 Nettl outlets by its financial year-end in March 2015.
Rafferty said: “I’ve been criss-crossing the country talking to people and have seen 50 partners to date, and will meet with a further 40 this week. The first wave will be signed up before Christmas”.
The firm stated that the Nettl formula would gain “significant traction” by the close of its financial year.
Rafferty added: “With Marqetspace for the trade and Nettl in terms of reaching out to the final client, we’ve got the ability to get increased momentum."
The firm is also poised to invest in additional digital printing firepower for its Manchester print hub, which currently runs a relatively small amount of digital kit.
“With continental competitors, the price might be low but if the quality isn’t right the disruption and annoyance further up the supply chain just isn’t worth it,” Rafferty added. “What we can compete with is quality, speed and reliability, as well as price.”