Grafenia sets sights on US expansion

Jo Francis
Wednesday, November 28, 2018

Grafenia has posted a big jump in sales at its Nettl business and is readying plans to launch the brand in America, while at the same time reducing its exposure to the hugely-competitive trade printing market.

Alongside its interim results for the six months to 30 September, chief executive Peter Gunning said the group had already made progress with plans to roll out its Nettl offering in the US, where regulations will require it to be a franchise offering.

The group previously had a master licence agreement in Florida and Georgia that operated from 2007, but has now expired. It plans to officially launch Nettl of America in early 2019.

“We’re very excited about it and we are planning an Expoganza type of event in Orlando in March, aimed at finding new and previous partners,” Gunning said.

Overall sales in the first half of the year increased by 23% to £8.31m, in part due to the inclusion of the Image Everything business acquired in the summer of 2017.

The Nettl Business Store format drove a 12% increase in sales on a like-for-like basis, with plans to open a second Nettl Business Superstore in Exeter over the coming six months, following the acquisition of local business AG Signs & Print in July.

Group operating losses almost tripled, rising from £470k to £1.36m, on the back of a £1.18m increase in overheads to £4.63m. This included costs related to acquisitions and the start-up investment related to the US expansion plans, as well as additional spending on store and partner performance personnel and the group’s finance team.

“Our Netherlands business involved a significant cash cost to start up, but is now profitable on a month-to-month basis. Likewise the US is a cash cost to start up,” Gunning explained.

The group now has 25 Nettls in the Netherlands and Belgium, and 10 in France.

The firm said it was “overhauling the entire finance organisation” and rebuilding its processes in order to be scalable and ready “for a much larger Grafenia organisation”, and this had involved substantial costs.

Grafenia described the trade print market as “tougher” with prices continuing their downward trend. “To address this we aim to become less reliant on litho trade print every day,” it said.

Sales via its trade and online channels including Marqetspace and FlyerZone fell from £1.7m to £1.45m. “Whilst we value the business from clients of these sites, we do not currently find the customer acquisition and lifetime value metrics to be scalable,” the firm stated.

“Almost all our material costs have increased, yet trade prices are still falling,” Gunning said. “It just seems to be a continual race downwards. At some point that’s got to change, you would hope.”

He said the firm was still attracting new trade print clients every month and was selling more print directly through its co-owned outlets and branded partners.

“We think our systems save an hour of admin time in the lifecycle of a job. All of the micro-steps involved, we automate as many of them as possible. We say to people ‘how much is an hour of your time worth?’. By being efficient and cutting people admin, they can focus on value-added activities instead.”

Grafenia said it was cautious on the outlook for the rest of the year, “given the political and economic situation”.

“Brexit is such a zapper of everyone’s time and focus, I wish it would just be done,” Gunning added. “It’s not an easy time to be in business, but we have to keep trying to transform into the company we know we can be.”

The firm’s shares were effectively static, rising by 0.05p to 10.55p on the announcement (52-week high: 20.7p, low: 9.65p).

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