Having been founded as a large-format trade print operation in 1992, Macro Art had been enjoying a significant growth spurt when it underwent an MBO in 2014. At that time, the new management team were confident of continued expansion. Now the Saint Neots-based company is making its first acquisition and opening a London branch. I asked commercial director Michael Green about the expansion. By Lesley Simpson
When current MD James Jennings, sales director Matthew Guise and your good self completed the MBO of Macro Art in summer 2014, it was on the back of a £6.7m turnover and 8% growth forecast for the year ahead. Continued growth was very much on the cards then, but you told me the limitations of the site meant it wouldn’t be of the magnitude seen in the previous couple of years. What has happened between then and now?
We’ve grown 30% since that £6.7m turnover – it’s now £8.8m. Profitability is at good levels too.
Basically, the last two years have seen us grow and develop in markets where we were already establishing ourselves before the MBO, so the events and exhibitions sectors largely but also an element of retail.
Investment in kit has been a tremendous help - especially in the 5m Durst, which we did about three months into the MBO - that has given us very impressive quality and the kind of turnaround you need in the events industry because it’s so reactive. And we’ve invested in people too, so brought on board new project managers etc.
The kit we’ve bought, the people we’ve brought in and the reorganisation of this site has enabled us to grow to where we are. On this site I’m comfortable with us being able to reach £12m.
So what’s the thinking behind the expansion into London?
Realistically, we’ve been looking at setting up a London operation for the past year because we see it as a key contributor to our growth - it’s part of the longer-term strategy. A lot of our client base is in London, agencies, design houses…and we see a lot of growth coming through them so we want to get closer to them on the ground. Also, we’ve won a couple of big venue specific contracts in London, where we need to be able to react very quickly.
I’m going to head up the operation - which is just getting off the ground now - and I’ll be working with two or three project managers, including new hires. The office is in The Metal Box Factory, just behind the Tate Modern, and a couple of the agencies we deal with are either actually in the building or round the corner!
Initially it will be a sales/project management centre, but that’s not to write off doing some production in London at some point.
So how is this latest expansion expected to impact upon your offering, customer-base, turnover and profitability?
I would say, that by the end of the next financial year - so May 2017 - we should be at a turnover of about £10m, not just from London of course, across the whole of the company. And that includes acquisitions that we’re planning.
The London site is about service and fishing where the fish are. With the type of projects we’re involved in people want to sit around the table, not conference call or whatever. And in terms of the new venue contracts, one of the venues is a 20 minute walk away from where we’re based and given that we’re going to need to hit that site quickly it’s really imperative that we have people locally, not travelling from the main Macro Art operation here in Cambridgeshire. It’s all very lovely being out here in the countryside, and people love coming here - but sometimes it’s just too far off the beaten track.
So what’s what now in terms of your customer breakdown? Matt Guise said at the time of the MBO that within five years - so by 2019 - that the company would be “at the top of the tree in terms of retail and exhibition graphics”. Have the goalposts moved since then?
Trade work is still about 40% of turnover. Retail is about 15% of what we do now and the rest is a mix of events, exhibitions, sports, museums and some signage.
Macro Art entered the textile print market in November 2010. In 2013 James Jennings said dye-sub turnover was close to 2m. And that gross profit percentages on dye-sub were 10+% above those of UV/solvent. What’s the situation now and how’s that impacting upon your development strategy
Turnover from textiles is probably close to £3m now. In terms of margins, I’m not being coy but it really depends on the market you’re servicing - some of the fabric work has become somewhat commoditised and so the margins have started to fall through the floor, but other areas are still enjoying good returns. We are lucky that we have a spread of work across different areas.
Also, there are more machines about - the washer/drier systems for instance, a road we didn’t go down because we weren’t convinced about the quality and reliability of such kit, so we still use the two-stage dye-sub process and invested in the eight-colour Durst Rhotex about eight months ago. We got rid of one of the Mimaki’s because, though it had done very well, it was on its last legs, though we still have the other two.
We’ve been in the textile market for a good while now and our knowledge of materials and systems, including tension framing etc., is a big plus for us. It’s not our sole focus of course but it’s something we’re proud of and know we’re good at doing. And it’s something people actively seek us out to do. But we try to stay away from those areas where the washer/drier systems have brought prices down.
What about printing onto rigids? I know the MBO team felt that had been a gap in the company’s offering until it got its first hybrid UV flatbed/roll-to-roll printer in the summer of 2014.
Being able to handle rigids has been very helpful to us and given us more control because before we had the hybrid we put that work out. Do we do a huge amount of rigid work now? No. I see it as a need-to-have capability rather than a real focus. Do I see us investing in a high-speed flatbed? No.
Even though plenty would say that focusing on bespoke rigid print is where the best margins are made?
At the moment what we have serves us very well. That’s not to say we’re not trying new materials etc. on what we have because we know there’s profit to be made. But it’s not the main focus.
So what do you see as your growth markets/services?
We do see growth from the bespoke/flatbed part of the business. We also see it out of [textile tensioning] systems and out of acquisition.
Which of course brings us to the pertinent question about the deal currently on the table.
Yes…but there’s not a lot I can say right now because the ink is barely dry on the paper of the acquisition just going through. But we are looking at a number of complimentary businesses that will help us increase our offering and bring something we don’t currently have.
At an Image Reports Widthwise Round Table discussion towards the end of 2014 Matt Guise said “Everybody around this table has enough work to grow, and not have to worry about exploring difficult and emerging markets.” What are your thoughts on that now?
I think we have always been looking at new and emerging markets - look at how early we got into dye-sub. We’re always looking at new technology - for instance 3D printing. For the systems type work we do, extrusions and that kind of stuff, a 3D printer will be an absolute godsend. I think we’ll have some sort of 3D printer within a year. Will it be a massive thing to make props? No.
Also digital screen technology is something we’re looking at - at how we can use it to animate textile etc. It’s really early days for that kind of thing but we believe it will take off, and when it does it will be really exciting.
We have a very good new hire who’s looking at strategic development so we’re very aware that we need to keep our eyes and ears peeled. But in terms of large-format printer investment I think we probably have what we need for a while. For the immediate future it’s getting London to work properly and the acquisition sorted and consolidating our growth. We’ve grown a lot in a short period of time and we really need to manage that carefully.