Where are we in wide-format?

Is large-format print still a money-spinner? That was the question that kicked off the 2016 Widthwise Round Table discussion between the leaders of seven PSPs, brought together because they represent a cross section of those operating in the sector - the intention being to get grassroots debate on the state of the market as we head into 2017.

‘Yes’ was the common response to that lead-in question from those around the table, hardly surprising given the findings of the 2016 Widthwise survey (downloadable as a PDF at: http://www.imagereportsmag.co.uk/widthwise). But that’s where the commonality ended, each of the group presenting a different take on the issue of profitability. And indeed on its relationship to turnover, given that 37% of those polled ranked ‘growing turnover’ as a top priority while under 20% said it was to improve margins.

“Are we chasing turnover rather than profit, and is that wise? Well, that’s rather a complicated story,” said Richard Leach, MD of Leach Colour (which is 125 years old this year and designs, manufactures and installs interior graphics for brands, retailers and museums/visitor attractions). “Large-format printers are now on a three to five year replacement cycle. The next machine is faster, so you get more capacity. So you take on more work to fill that capacity and still you remain profitable. So that means you can reduce job prices and still be profitable. Prices drop, the market plateaus and then margin can go up again.”

Greg Craigen, MD of Amayse (formed through the merger of Esher-based SignAway and Danish companies LogoPaint and 5mPrint in the spring of this year to become a specialist in 3D signage for televised sporting events) admitted that he normally “gives clients two options: a budget and a higher end offering. I’d say half go for the higher end version, which is more profitable for us. I have to admit, that last year we had the Rugby World Cup, so this year we’re trying to make up on that.”

Mark Perton, MD of Acton-based Perton Signs (which has been in the family for over 150 years and produces and installs event graphics and signage) responded saying: “That’s why I don’t like one-off big jobs”, a comment that created something of stir with much comment on the ‘value’ of customised jobs as opposed to higher-volume and repeat orders.

“We have moved away from the usual business model because I can’t stand the idea that you need to spec each job, deal with seasonality etc. I’m furious with that whole thing,” said Richard McCombe, ex-teacher and founder of Matic Media (a Scottish-based company that works closely with the public sector and has strong W2P offerings).

“We have to be profitable or I have to go back to teaching. That has made me look at how we can become more efficient, and we’ve spent years mapping out the whole process from order to delivery. We wanted to get to a point where the customer is having all of the hassle, not us - so they deal with design, preflighting, pre-pay etc. We’ve just launched a system (see: http://www.imagereportsmag.co.uk/features/business/7376-putting-it-all-together-with-web-to-press) that will do that. It means we can print it, pack it and ship it. It’s also something we’re talking to a large manufacturer about taking on. It’s taken ten years and been a headache, but we think it’s the route to real profitability.”

“Low touch is certainly where profitability lies,” followed-up Ed Currer, founder of Vinyl Impression (a design-focused surface graphics specialist that produces large-format digital prints for interiors). “It may be lower margin, but you can push so much through the system. The technology now available means that those without years in the graphics business can do a really good automated job.”

But in the words of Raccoon chief Richard Clark, “we’re in a cock-up industry” and given that, what Chris Berrisford, co-founder of Insite Graphics (which designs, produces, delivers and installs events and exhibitions graphics) pointed out, is highly relevant: “The technology must be there to ensure the right person is accountable when things go wrong.”

According to McCombe, Matic Media’s new W2P offering should deal with those problems, “because it will flag up issues as they appear on the job. If a customer wants a reprint because something has gone wrong, the transparency of the system will show exactly where it went wrong and who’s responsibility it was.”

Repeat processes are where we’re going to find maximum profitability,” added Currer. “There are so many companies offering lots of different media etc for different jobs, so I decided to specialise in interiors and use repeatable processes (on HP Latex printers) so that we have a smaller stockholding, and fewer mistakes in the production process. Diversification is something we don’t do much of – sticking to what you know you are good at is how I think you stay profitable.”

Berrisford at Insite agreed, but added that customised installation had become a profitable part of the business. “Bringing services in-house is really important to my mind - it is key to you having control that the job is delivered at the right quality and on time.”

Discussion on the addition of services to a PSP’s portfolio segued into talk of diversification, warts and all. “I’ve run my business for 25 years next year and I’ve never made as much profit since! I’m nearly 49. If I was nearly 29 I’d be getting more involved in the new technology end of things and have a different focus for the business - I’d want someone else to handle the production side of things,” said Racoon’s Clark.

“We’re known for vehicle graphics but five years ago we moved into vehicle hire - so that we could get more wrap work out of it. Now we’re starting to make money on the vehicles we’ve bought, but the bottom-line is that large-format print is still where I make most money.”

With diversification into new markets such a hot topic for so long now - largely due to the technical advancements creating new applications possibilities - the Round Table panel hardly reflected the Widthwise survey outcome where only one in seven PSPs considered ‘finding new markets’ to be a top priority (even though almost quarter of PSPs said the rationale behind their overall planned investment in technology was to enter new markets!).

Practically all around the table already had diversified and continue to look at new markets, but Perton said: “No, I’m not interested. It would mean developing a completely new business model to the one I have. I have the kit, and know about all the consumables and possibilities but I wouldn’t want to entertain that level of change to my business.”

And there’s the nub of the issue - changing business models.

“How do you take a new product to a new market? Well, you get told you shouldn’t. But if you never go into this red area you never do real R&D,” enthused McCombe, who added: “You have to be prepared to make mistakes.”

“If you don’t take chances and diversify your clients will run away,” Craigen ventured. “Our clients - in sports sponsorship - want us to do everything. So you have to keep abreast of possibilities.”

He went on to wow the assembled by showing examples of two-way graphics for sports pitches - made possible via a clever routing and print technique. “And it means we not only keep the client but we can charge more for the same amount of print on the substrate because it’s novel.”

“Ah yes, but you have to keep it real - within a five to ten percent change of what you’re already doing,” replied Currer. “If you start looking at doing something completely different you get to the point that Mark mentioned - you need a complete business model restructure.”

“What we’ve done is gone into producing structures for graphics - and that’s pushing our natural repeat business as it were,” said Leach. “Richard [Clark] has gone from vehicle wrapping into the vehicle hire business which is a completely different business, and I admire that.”

At this point the topic of printed textiles raised its head, being one of the key areas of perceived growth and opportunity for large-format PSPs.

“I think it’s the future,” launched Berrisford, who’s company already does a lot of textile print for exhibition graphics. “And we’re looking at interiors. As far as I can see we’ve barely touched the surface when it comes to fabric print.”

McCombe and Clark said they both offer textile print as an add-on service but do little of it, but Leach was more enthusiastic. “Yes, we’re doing textile print. There’s so much going for it - you can pack it easily and ship it worldwide, and it’s immediately usable. We’re using a Durst UV roll-to-roll printer with flexible inks, and I’ve got to say I think it’s the ink where the issues still are.”

“We use a Vutek with UV ink,” said Craigen. “Shipping benefits of textile print alone makes it worthwhile and we’re increasingly doing more.”

Perton said he prints “bucket loads of textiles”, and that it’s a “horses for courses” solution, a comment followed up by Currer who thinks the race is on. “We have a HP Latex 360 on which we handle fabric graphics for retails, office and events. A lot of industry trends start with the big brands, and they are putting back-lit textile panels in stores at a pace. I think that will filter down the chain.

“It comes back to that low-touch thing too - we can ship a fabric graphic to a shop where an in-store person can fit it immediately.”

So did the panel expect to see many from outside the current large-format digital print community to get in on the act? “Not unless they’re mad!,” said Berrisford. “You wouldn’t go into it as a novice.”

“No, the learning curve is steep. I think a lot of companies will look for trade printers with the capability and build up knowledge and demand first,” added Currer.

A tea break later and the panel were back round the table and the thorny question of Brexit.

“I thought we’d have a slow down in decision making in the run up to the vote on Brexit, and we did,” said Clark. “Then we saw things pick up again, but I think that next year the reality will set in and we’ll start to see a slow down again so we have to be prepared for that. It will take a generation until we know what Brexit really means. In the long term I’m positive about what it means for us, but we need to have a plan in place for the near term.”

“We saw a dip in June and July but things have come back strongly since August,” added Leach. “We’re catching up on projects that were put on hold pre-vote. The biggest factor impacting us is the exchange rate. We’re dealing with substrates from abroad and seeing inflation. How much of that are customers likely to accept that?

“Yes, I think we need a war chest,” added Perton. “We may not need it, but I think it would be wise to have one. I think that the exhibition industry will be impacted by the Brexit vote in 2017. I think Europe will want to trade with us, but there may absorptions we have to accept in terms of increased costs.”

Berrisford has different concerns: “I have to admit that I’m worried. We do six to eight overseas events a year, and if I turn up at Calais and they open my vans to check everything then that’s going to disrupt the job timeframe, and that could impact on my business as a whole. There are basic practical things to do with paperwork etc that concern me. I think it’s going to be a massive headache working in Europe.”

But not everyone was so negative. “We send products to 70 countries and we’ve seen a real uplift in business since the Brexit vote because we’re now cheaper,” said Currer. “I think we’ll see more ‘Buy British’ messaging in our industry. So let’s show the rest of the world what we can do.”

“We’re actually currently marketing ourselves as a ‘British’ rather than ‘Scottish’ company because we don’t know how the latter would be perceived,” added McCombe.

Currer pretty much summed it up: “I think we’ll see positive stuff come out of all this over the next few years. It’s about adapting. It’s our reaction to whatever comes our way that counts.”

So does that adaptation mean more mergers, acquisitions or partnerships are likely in the sector? Currer was first off on the subject. “I think we will see more PSPs looking for relationships with companies with expertise they don’t have themselves - especially in areas like app development and W2P. I think we’ll see more subscription type commerce, whereby you get customers signed up to a £250 a month deal on renewable graphics etc. But you need the know-how to do that.”

“Yeah, our whole W2P development programme is because we see we can sell the software platform modules,” enthused McCombe. “Nobody will want to acquire us, but they may want formal partnership.”

“What I’d say, having gone through an international merger quite recently, is that mergers in the UK are very long-winded and difficult which puts people off. Merging with two Danish companies was so much easier - it was done in three days.”

Leach, having ruled “acquisitions a risky business” was more upbeat about strategic partnership, especially overseas. “I went to Shanghai last year and the POS is not so different to that produced for London. So why can’t I get a piece of that action. We’re at early stage relationship forming to do that and I think we’ll see more of that sort of thing happening.”

“I think that as the sector has matured it has become much more relaxed and people are happier now to have relationships with other companies because we’ve all learned who to trust and who not to trust,” added Clark.

“And it’s much more about inclusion because quite honestly, there’s enough gravy to go around,” added Berrisford. “I think that we’re about to see a lot of people developing app technology that will drive print possibilities - and the actual production will be handled by outsourced print people like all of us.”

Key Widthwise 2016 data

Almost half of the 238 responding PSPs had five employees or fewer. But, 9% had over 100

40% had a turnover under £250,000, while 10% were making more than £5m

79% expected large-format turnover to grow in 2016

Over half expect wide-format print revenue to increase as a % of theit total company turnover - and don’t forget that over 7% said wide-format prin is already 100% of turnover,so it can’t increase! Only 3% said it would decrease

Nearly 37% ranked ‘growing turnover’ as a top priority. Under 20% said it was to improve margins

39% said latge-format profit margins increased in 2015, though 17% said they fell

While 44% said margins better than in other parts of their business, 13% said they were worse.