Updated: Cimpress expects new strategy to pay off

By Jo Francis, Friday 28 July 2017

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Cimpress has posted a bigger than expected loss after a year of substantial change, but chief executive Robert Keane believes the global print giant's fresh strategy has improved its future prospects.

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Cimpress: MCP likened to Lego

There is also more change to come at the group, which has announced the sale of its Albumprinter photo album business for $92m (£70.3m) in cash. Albumprinter is headquartered in Amsterdam and its brands include Albelli and Bonusprint. Cimpress acquired the business in 2011. The buyer has been revealed as Netherlands-based private equity investor Gilde Buy Out Partners (see story here).

Group turnover in the year to 30 June jumped by 19% to $2.1bn. The increase excluding exchange rate differences and acquisitions was 8%.

The firm filed an operating loss of $45.7m compared with an operating profit of $78.2m the prior year.

Cimpress said a combination of factors contributed to the loss, including acquisition charges, restructuring costs, increased investment and the end of two substantial partner agreements at Albumprinter and in its Corporate Solutions wing.

Sales at Vistaprint were up 7% at $1.3bn, although gross profit per customer reduced, in part due to Cimpress taking a hit on shipping price reductions. The firm said it continued to acquire higher-value customers and order repeat rates were improving.  

The Upload and Print division posted sales of $588.6m for the year, up 36% including acquisitions or 13% on a like-for-like basis.

The division includes the UK’s Tradeprint operation as well as Exagroup, Pixart Printing, WirMachenDruck, Printdeal, Druck.at and Easyflyer. Cimpress paid a $34m earn-out deal during the year due to a stellar performance at WirMachenDruck, which was acquired in Q1 2016. The business has achieved the maximum earn-out at the time of acquisition of $40m.

However, Cimpress said there was a mixed picture in the division, with some businesses performing above expectation, some inline, and “two for which we have reset expectations”.

The company previously admitted to over-paying for Exagroup and has made a $31m write-down in the value of that investment.

Cimpress made a big acquisition during the period with the $218m deal to buy National Pen, which posted a six-month contribution to sales of $112.7m. The group also embarked upon a major restructure involving decentralising its operations at the beginning of 2017. It also opened up its Mass Customisation Platform (MCP) to outsiders.

In his letter to investors, Keane said Cimpress had narrowed the focus of the MCP, and likened the technology to an increasing number of Lego blocks fitting together. “It should become easier, faster and lower cost for additional parts of Cimpress to use these block to plug into what will be a continually growing network of supply chain, product selection, technology components and related services,” he said.

He also said that the decentralization was effectively a fundamental strategic change at the corporate level.

In addition, Cimpress has changed its primary financial metric from net operating profit to unlevered free cash flow, and was in the process of changing its internal financial management systems as a result.

Separately, the disposal of Albumprinter is expected to complete by the end of September. German giant Cewe had been tipped as a potential buyer.

“Although Albumprinter’s capabilities clearly fall within the sphere of mass customization, we believe that we can more attractively invest this capital elsewhere,” Keane said.

Albumprinter produces some products for Vistaprint, and Keane said he expected Cimpress would continue to partner with the company after the sale.

The proceeds will be used to reduce net debt.

Commenting on the group’s overall performance, Keane said he believed it had “improved its future prospects through continued focus on our uppermost strategic and financial objectives”.

Shares in Cimpress fell by $6.24, or 6.86%, to $87.15 on the news (52 week high: $103.17, low: $79.70.)

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