St Ives hit by contract loss
Wednesday, February 8, 2017
St Ives has been dealt another blow with the loss of its contract to produce monochrome books for HarperCollins, which will result in a multimillion-pound hit to the group’s sales and profits.
The PLC, which released a profits warning last month, said that it had been informed that the publisher would not be renewing its contract with Clays, which expires on 30 June.
St Ives’ share price fell by 7p, nearly 10%, to a new 52-week low of 65.75p on the news.
PrintWeek understands that rival book printer CPI Group has won the work. CPI had previously lost out to Clays over the Penguin Random House contract.
St Ives said the non-renewal of the HarperCollins contract would not materially impact its results for the current financial year, which runs to 28 July. In the following year it will result in group sales decreasing by circa £11m and a £3.5m hit to adjusted EBITDA.
It is taking steps to reduce the cost base at Bungay-based Clays, which will involve a £3m non-cash impairment charge this year, and £1.5m in costs, most of which will be charged in the 2017/18 financial year.
The HarperCollins contract accounts for around 16% of sales at £68.6m turnover Clays, and circa 3% of group sales, which were £367.5m in St Ives’ most recent results.
In a statement chief executive Matt Armitage said the group was “not prepared to chase volume at uneconomic prices”.
"Although we have recently seen some increase in demand for book production overall, the market remains competitive and we are not prepared to chase volume at uneconomic prices. We will be taking decisive action to ensure that the cost base of our books business reflects the future level of volumes we now expect,” he said.
Further details about what the restructuring at Clays will entail were unavailable at the time of writing.
HarperCollins is part of News Corp and publishes around 1,000 books a year (including colour books) in the UK. Its authors include bestsellers such as Booker Prize winner Hilary Mantel and George RR Martin, whose A Song of Ice and Fire series was adapted for television as Game of Thrones. The publisher has been a major client of Clays’ for at least 15 years. The printer won an exclusive trade and general book contract with the publisher back in 2002.