Soft trading and price war hit Grafenia
Thursday, February 23, 2017
Grafenia has issued a second profits warning ahead of its year-end, with soft trading combined with the price war in trade printing impacting the group’s performance.
Its share price fell to a new all-time low of 6p on the news, but has since recovered slightly to 6.5p.
The Aim-listed firm had already warned on profits in November. In a market update this week, chief executive Peter Gunning said that print volumes in January and early February had been “materially behind” the prior year, although business had subsequently picked up.
Intense price competition in the crowded trade printing sector has also resulted in reduced margins.
Analysts were predicting a loss of circa £300,000 for full year 16/17, but Grafenia said its results would now be “significantly behind market expectations”.
“As the trade print price war continues, we need to remain competitive and do not expect margins from the sale of printing to improve,” Gunning said in the statement.
He told PrintWeek: "The market is tough and we’re not expecting it to get any easier. However, our lower prices have attracted more new Printing.com partners than almost any other year in our history. Some people still think it’s a franchise, but it’s not. It’s some software and marketing to help printers sell more to their clients. I met a new partner at Expoganza earlier this month who told me that the Printing.com system has helped him add three grand a month to his sales. That’s always nice to hear.”
Grafenia is striving to transition its business into growth markets, and the company highlighted the progress made with its Nettl business, which recently reached 100 studios, its new signage offering, and plans for a same-day delivery print service with the Nettl Now service due to go live at the end of this month.
It will promote its Nettl and Marqetspace brands at next month's PrintWeekLive!.
“It’s taken a lot of effort from the team to reach 100 Nettl partners, but we’ve got traction now. It takes time to train account managers and geeks to be able to develop partners. We’re upped our investment in people and marketing to accelerate the growth of the Nettl network. We’re pulling together Nettl Anthology, a series of stories about how Nettl has changed our partners’ businesses. Some of these tales of transformation need sharing," Gunning stated.
Grafenia also said that it was encouraged by the performance of its Nettl of Birmingham Business Store pilot site, which offers a meeting place for local businesses alongside its other services. He said walk-in trade was increasing week-on-week. The site aims to cover its rent through the sale of coffee and snacks, and Gunning said this looked to be achievable.
“Perhaps most interestingly, some customers who have come in for coffee have now purchased websites, printing or displays from us,” he added.
Nettl of Birmingham is also looking at other additional services that would drive footfall.
The group had sales of £10.8m last year, but EBITDA fell by more than a quarter, and it made an operating loss of £260,000.