Printers: Rhondda
Overcapacity is seriously impacting the UK’s sheet-fed print industry, with too many firms chasing too little business, according to the world’s largest credit insurer. Lower barriers to entry are leading to an oversaturation of players in the market and decreasing profit margins.
Sheet fed firms are finding it tough, with significant overcapacity, there is simply not enough work to go around, with another victim of the tough trading conditions, being Hackman Printers. SFP – the nationwide insolvency practitioners – was appointed as Administrators on September 17th, The company employed 65 people and despite a turnover of approximately £7 million, experienced serious cash flow difficulties.
Hackman Printers provided commercial printing on purchased stock materials including stationery, invitations and labels on a job order basis. The company also provided direct mail and marketing services that included inserting, metering and sealing, labelling, ink jetting, matching, collating and tabbing for direct mail pieces, programmes, catalogues, books, newsletters, magazines, brochures, flyers, and pocket folders.
Thanks to SFP’s intervention, the firm continued to trade while a buyer was sought, and although ultimately unsuccessful in achieving a sale of the business as a going concern, the premises was sold as well as all tangible assets: “Hackman had a good reputation for the services it provided, and despite the firm not continuing to trade, we were successful in marketing the assets to another firm,” says Simon Plant, Partner at SFP says.
Insolvency levels in the printing, paper and packaging industries were largely in line with the national picture showing a 3.4 percent improvement since September 2012. Other print sub-sectors also continue to struggle, including energy and cost-intensive web offset printing, reflecting the financial health of businesses nationally, with 44 percent fewer large companies showing significant problems, while 52 percent more SMEs fell into that category in Q3 compared to Q2, according to research by Begbies Traynor.
Offset print businesses in the UK are over-reliant on the commercial magazine sector, an industry that has been driven by new title launches and advertisements. However, new technology is playing an increasingly larger role when it comes to advertising and, as a threat, is unlikely to diminish.
It is not only the printers, however, that are suffering. The squeeze on the print industry is being felt by other associated businesses, including print managers. Print management agencies have leveraged over-capacity in the print sector whilst contributing to pricing pressure, but their business model may be under threat if their sole philosophy is to drive prices down.
Companies providing direct mail – which was a former growth area but is now reasonably saturated – are feeling the pinch and have been significantly affected by the consumer backlash against ‘junk mail’ and the recessionary impact on finance-related correspondence.
Furthermore newspaper and book production is declining. The business model of newspaper suppliers is under serious pressure, with regional publications coming under the most strain due to their reliance on advertising income. Similarly, with physical book sales down seven percent in 2011 and 11 percent in the first quarter of this year, the mass high street book retail model no longer appears to be viable.
There has been a number of failures of significant players in the print industry in the past year or so, including Pindar (web offset print production), Alito Color (commercial printing) and Polestar (the UK’s market leader in web offset and gravure printing). Part of the reason, Simon says, is that banking facilities are still restricted: “Cash flow continues to be a key concern for many businesses, as demonstrated by the failures that we have already seen,” he adds.
“Print companies need to work out where they can provide true added value, and capitalise on events such as the 2012 Olympics to boost business,” Simon concludes.
