HOW HAS 2023 BEEN FOR THE WIDE-FORMAT DIGITAL INKJET PRINT SECTOR, AND HOW DO WE EXPECT IT TO PERFORM IN 2024? THAT WAS THE THEME OF THIS YEAR’S ANNUAL WIDTHWISE DISCUSSIONS WITH PSPS AND SUPPLIERS. HERE’S THEIR THINKING…
The PSP participants:
Richard McCombe, Matic Media, managing director
Greg Forster, Embrace Building Wraps, managing director
Shevy Kapoor, Eastern Exhibition and Display, managing director
How do your benchmark your business? If understanding how you’re doing in relation to your colleagues and competitors is part of your measurement criteria you’ll want to read on.
Early this year Image Reports conducted its 16th annual Widthwise Survey of domestic PSPs operating in this space. We had 176 responses, allowing us to publish an in-depth Widthwise Report in the summer on how the sector was performing and feeling. The overriding message was one of optimism, with many reporting increases in turnover and margin, and expecting market and business growth. So how are things looking now - and how do we expect things to pan-out over the coming couple of years? I recently held two Widthwise discussions - one with PSPs and another with suppliers - to get their take. Here’s a precis of those chats - the full video interviews can be found on the Image Reports website.
As I’ve mentioned, when we conducted the Widthwise poll at the start of 2023, the mood was one of real optimism. So, my first question - are you now more or less optimistic for your business in the near term than you were at the start of 2023 - and why?
Forster: I’m very optimistic. Of course, at the start of each year you wonder what’s going to happen - there’s no crystal ball - but we tend to look at our business over a ten-year period and monitor each year compared to the one before. Over the last ten years or so it’s been moving in an upwards trajectory. The year before last we had a record year so it’s quite hard to compare this past year to that one when we had a couple of really big projects. But overall the business is continuing to show growth, and we’re also increasing our margins.
McCombe: We’ve changed direction with our business. In 2017 we decided we wanted to move away from project-based work where we didn’t feel we had control of the outcomes - things like installation which perhaps
didn’t go as smoothly as we’d hoped. So we looked at where we were most successful and could control things
ourselves and from there formed Graphic Warehouse, something on which we felt we’d get compound growth by having customers coming back time and again. We have seen that so I am optimistic. Our target is 25-30% growth and we’re seeing that with this new business model.
Kapoor: I’m actually mildly pessimistic. Increased raw material and staff costs are a major issue. The real living wage for example increasing by 10% is all great, but it needs to be funded from cashflow.
So, do you think doing business in Britain is now harder or easier than it was at the start of the year - and what needs to change in the general economic/political landscape to make things better?
Kapoor: There are too many external political factors locally in Scotland and UK that have an impact on client budgets. Political decisions made that impact business by the Green Party who just don’t have the knowledge or experience of business. Red tape is now a massive issue working in Europe and increased costs will make UK firms less competitive in the exhibition market for example.
McCombe: The sales guys, who are heavily influenced by what’s said in the media, then start using that to try and rationalise our data on things like customer engagement etc. But I’m always trying to take a bit of a different view. I’m not entirely convinced that we’re that affected by
what’s stated in the media.
Forster: Our focus is really on the construction business and that industry is pretty buoyant and has been pretty busy throughout the last four years or so - even through Covid it was doing quite well because of the nature of the beast. In a way we have had to become cattle herders because there are so many people involved in the chain - often up to ten parties on our projects where a lot can happen between year one and year three.
Almost two-thirds of those polled in the Widthwise survey had seen turnover grow over the last year, a large proportion by more than 10%. Crucially, almost half had seen a rise in profit margins. How are your turnover and profit margins faring now - and what’s having the biggest impact on them?
McCombe: I think Covid was actually quite good for a lot of businesses because it made people sit-down and have a proper look at how they were operating, what their margins were and where they might be experiencing difficulties. For me, I’d realised that one of our biggest costs were our installation crews. I don’t mean to be disparaging but when you need overtime it doesn’t seem to be available and when you don’t it appears the job is taking a bit longer that planned. I was never very happy with that, so that was one area where I wanted to strip out expense. We now no longer do installation, or creative, and that has really reduced overheads.
There are obviously areas that we don’t have any control over, such as electricity costs, and of course things like materials costs, but I think the biggest issue is staffing costs. What I hear from colleagues across Scotland is that we’re all under pressure to increase salaries and offer additional benefits to remain competitive in the jobs market. We’ve been lucky that staff haven’t moved from here, but across Glasgow alone we’ve seen people moving from one business to another, and then competition between two firms to offer the right package to get that person. Salary expectations have been pushed up to a point where that can’t be sustained.
Forster: Our partners’ installation costs have increased so ours will increase - that’s outside our control because we don’t want to shop around, we want to stick with people we know and trust. Materials costs, especially flexible substrates, have gone up in cost too. And then there are things like rising energy costs. There’s a lot we have to take on the chin because a lot of it you have to absorb and not pass on to customers. Last year our margins dipped but our revenues grew substantially. Over the last ten years I’d say margins have stayed around the same overall though.
Kapoor: Turnover is steady but margin pressure is an issue. Raw materials and staff costs are my biggest area to manage.
More than six out of ten said they expected the UK wide-format market to grow over next two years. Do you think we can expect the wide-format digital inkjet market to keep growing?
Forster: Because we work on a long-term basis I know how much revenue I already have written down for next
year and that’s already about a third of what we’ve done this year - so that’s a good place to be. And we can see new sales leads staring to convert to there is certainly buoyancy.
McCombe: For us it’s about how we can grow our customer-base. A lot of that is looking at how to be more proactive, on things like the use of sustainable products etc, which capture customer attention. We see it as our role to promote that kind of thing. Also, we invested quite heavily last year in dye-sub, for flags, and we’re trying to get that off the ground. It’s not grown as we’d have liked it to this year - it’s a bit shy of target - but we are looking at areas where we can specialise and add services to make customers increase their spend.
Kapoor: I doubt it will grow over next two years. There’s no reason to suggest why it would.
We’ve seen lots of diversification over the last couple of years, with many PSPs offering new services and applications to new markets/customers. So are large-format PSPs increasingly ‘generalist’ rather than ‘specialist’ in the array of print/services they provide - and how do you compete if that’s the case?
Forster: To be honest we tend to offer a fairly limited range of products because of our marketplace, construction. We’re not becoming more generalist so it’s a difficult question for me to answer.
McCombe: I think our whole issue was that we were trying to offer services to everybody, to in turn help them become more generalist in what they could sell. I am on the board of Print Scotland and I do see more print companies starting to offer a wide gamut of print applications and if that opens up more print
opportunities I think that’s good.
Kapoor: We consider ourselves as specialist in what we do - graphics and joinery.
Nearly half of the print bosses interviewed in the Widthwise poll said growing turnover was their top ‘must-do’ over the coming months. What are your top priorities for 2024 and beyond?
McCombe: Fabric! That’s where we’re really looking to focus. That and higher capacity flatbed applications. Our hope is to have moved by 31 March 2024 to give us the space and scope to do that because we think we’re missing some opportunities, especially in soft signage as a trade service.
Forster: We’ll continue to look into sustainability and the offerings we can deliver in terms of PVC-free
product. And to be honest, the best way to grow your business is through fantastic account management.
Kapoor: Increase turnover, reduce headcount and to create more efficient work practices. Widthwise data continues to paint a confused picture when it comes to the environment.
Where do environmental issues/actions sit on your list of priorities?
Forster: Sustainability is the number one priority for this business - apart from health and safety. In terms of product offering we’ve secured a considerable amount of business on the back of PVC-free solutions. We use Kavalan as our chosen flexible substrate, something we started testing back in 2020, and we’ve done some really big campaigns using it now - the most recent was about 3,000m2 for Ikea at Oxford Circus. Also, each month we fund the planting of new trees with our partner Ecologi. We also have a Banner Karma initiative too, where banner taken off scaffolds is taken back to the warehouse and then taken away by local farmers to use as agricultural coverings. We also work with a partner who can turn our wraps into tote bags, and we’ve just started working a waste-to-energy project with Reconomy. We recently shipped 4,000m2 of PVC mesh to a facility on Oldham to be turned into energy, and we have a certificate to prove that’s been done!
McCombe: I recently had a meeting with Scottish Enterprise about how they could support us in producing a Net Zero plan. I stared the audit and have found it really quite challenging - I wasn’t sure how I could fit the information into the language they using. We’ve done a lot over the last ten years - we’ve got rid of solvents and we’re moving onto LED inks etc. But going forward I think our biggest challenge is educating our customers. There is this perceived cost prohibitation when it comes to switching to greener products. There are good alternatives but it’s very difficult to get them to move away from PVC-based
solutions. We have made a lot of videos and blogs to try and promote it but engagement is low - as yet. I feel cost is still the driver and the perception of more ecofriendly solutions been costlier is the problem.
Kapoor: There’s a lot of noise around this and we have made great strides by having a impact assessment carried out showing our carbon footprint decreasing by 46% and our plan to get to net zero by 2035.
Investment in technology is quite flat across the sector according to the Widthwise data. Are you spending money on your business - and if so, where is it going?
Forster: We’re investing time and money in developing our website. Likewise, in keeping on top of the sustainability of the business. We are not currently investing in new print machinery etc.
McCombe: Our investment in technology is continual. Our operations director is a software developer and we
have spent, and continue to spend, a lot on developing software that runs the backend of our Graphic
Warehouse website. Apart from automatic workflow it ties in our CRM, social media, webchat support etc.
But we’re also looking at Cap-Ex, and considering a 3.2m hybrid printer for delivery pre-move in March
2024, and the following year we’ll look into getting a wider dye-sub machine and associated finishing kit.
Kapoor: We have spent significant on plant and technology. Our new Clarity workflow went live in February and has been a great move. Data collection on jobs much better that allows us to make better decisions.
If you could ask for one key development, what would it be?
McCombe: I don’t have a massive wish at the moment. I’m a bit of a pessimistic optimist in that I’m constantly looking at where our gaps are. I think the thing we’re looking at is packaging - by which I mean how to package our print consignments - because that does give us some real headaches due to each delivery
being a unique size.
Forster: My ‘wish’ would be for more time. Having enough hours in the day to convert leads into business
is where my frustration comes.
Kapoor: To educate politicians on how to run a business.