Heidelberg is now offering a more modular way for customers to use its subscription package and expects its “digital eco system” for printing industry services to eventually outstrip traditional machinery sales.
At an analyst and investor conference today (6 June), Heidelberg reaffirmed its financial performance in 2018/19 and cautious outlook for 2019/20, due to headwinds such as trade disputes, global economic uncertainty and the ongoing lack of clarity around Brexit, which resulted in a downturn in UK orders.
Overall sales increased by €70m to €2.49bn, while order intake fell by €29m to €2.56bn. Major investments in digital projects, the Innovation Center in Wiesloch, and the instigation of new business models saw negative free cash flow balloon from €8m to €93m.
EBITDA excluding restructuring charges increased by €8m to €180m.
Heidelberg said it aimed to become “less susceptible to economic fluctuations” and would “vigorously pursue” its digital transformation and reorganisation plans.
“The future belongs to our subscription model as well as digital packaging and label printing,” the firm’s management board said in a letter to shareholders. “They are core elements of Heidelberg’s future growth story.”
It is now offering modular access to its subscription model, with options for customers to select software, service, consumables and equipment and gradually build up their package, as required.
The aim is for a third of overall turnover to eventually come from subscriptions.
Heidelberg said around 8% of its current order backlog already involved some form of subscription contract and consumables consumption in Germany had increased by around 10% on the back of the subs model.
“In the future, customers will also be able to combine and utilise individual components from this offering over a defined period of time and in line with set standards. This will enable them to switch to usage-based service models in a phased process,” Heidelberg explained.
In the UK Heidelberg is yet to sign up any 'full blown' subscription packages including presses, but sales director Jim Todd said the business had some "strong prospects" in the pipeline, while other customers had already embraced its Prinect software via a subs model, as well as service and consumables. "Software has become a subscription product and is being received really well by customers," he said.
“There is no alternative to the ‘Heidelberg goes digital!’ strategy. We will continue to see the fruits of our strategic activities. Unfortunately, current economic developments are dampening our growth dynamic, even though the market potential for digitisation in the printing industry and for digital packaging printing remains high,” stated chief executive Rainer Hundsdörfer.
This week’s acquisition of cloud-based software specialist Crispy Mountain is part of Heidelberg’s plan to build a “digital eco system”, HEI.OS, for the print media industry. This will be shown for the first time at Drupa next year.
The firm has reined back on growth plans and said sales and profit for the financial year 2019/20 were likely to be similar to the past year. “With underlying economic conditions making companies more reluctant to invest in new technologies the ramp-up in the area of digital printing can be expected to be more conservative than originally planned. Postpress sales will grow at a slower rate as the antitrust authorities blocked the acquisition of MBO. In addition, the downturn in trade in consumables is likely to be greater than expected.”
Heidelberg now has 30 installations worldwide of its Primefire B1 sheetfed inkjet press and Labelfire inkjet label press. “We have reference sites in each main region and that’s important,” said a spokesman.
Heidelberg has produced an elaborate annual report to show off the tactile and stand-out qualities of printed matter, featuring Johannes 'Johnny' Gutenberg wearing a virtual reality headset produced using inline cold foiling.