Being width wise

“It’s the unknown of Brexit that’s the issue.” That comment by Andrew Burdett, MD of Very Displays at the opening of the 2018 Widthwise Round Table on the state of business in the UK/Ireland large-format print sector, pretty much set the tone for the whole afternoon’s discussion, which this year brought together print chiefs from five PSPs representing the broad swath of players in this market. Plenty of other topics were of course up for discussion, but time and again we came back to the issue of Brexit. 

“Yes, it’s the uncertainty that’s the killer,” agreed Signbox MD Mark Bartlett. “When I look at our business, which mainly handles London-based signage contracts for the architectural market, I can see that the contractors are still very busy. But the work we’re doing was pre-ordered five years ago. Architects here are now starting to talk about work slowing down over the next few years. We come in at the end of the build cycle, so we expect to see that slowdown hitting us. Added to that, there are many other places in the world were people are continuing to invest. If parts of the City [London] relocate to other countries we’ll see even more reduction in what we get. That in turn is impacting how we look at things like investment and growth plans.” 

“We’re already very clearly seeing a dip in business because of the state of the UK economy. The minute we had a vote for Brexit we saw business slow down,” added Andy Wilson, joint MD of PressOn. “This year has felt slightly recession-like as far as I’m concerned. Turnover is static. It’s the whole ‘wait and see’ mentality that is doing the damage.”

At this point Wilson’s sparring partner Richard Clark, MD of Raccoon, admitted: “I’m a Brexiteer - I hold my hand up! And I agree that we have to get through this as soon as possible and get a deal of some sort that keeps the UK as a trading partner with Europe.” He added: “The argument to my mind, is that we in Britain start making more and selling to other countries,” admitting that Raccoon “doesn’t sell into Europe, but we do buy.”

“We need to remember that Europe is not our only trading partner. I’m still taking enormous amounts of money from companies outside of Europe,” interjected Wilson, trying to lift the mood. “Those opportunities will remain post-Brexit. The Pound is in the toilet but it gives us an opportunity to do business with new people.”

But Stuart Maclaren, founder of YourPrintPartner (YPP), was not to be appeased. “I think Brexit is a nightmare,” he said, highlighting issues he’s facing with foreign workers leaving the business. “We have EU people working with us - with the skills I can’t find elsewhere - and they’re leaving the country because they just don’t feel welcome in the UK anymore.”

“But that’s not a Brexit issue,” countered Clark. “That’s a problem with UK people not wanting to do those kind of jobs.”

“It is a Brexit issue in that foreign workers feel unhappy here since the Brexit vote - speaking for Lancashire anyway - and that impacts the skilled labour workforce I need for my business,” came back Maclaren. And so it continued…

Speaking of skills requirements in the sector, Burdett pointed out that hiring people with foreign language skills is a focus for Very Displays. “I came in as MD in January and since then we’ve been fighting Brexit negativity. We’re having to work harder than we ever thought we would, but In our first year we’ll do £5m worth of business, a third of which is from outside the UK. 20% of business is in large-format print, the rest is in display hardware, and we see big opportunities in the UK and abroad. Hence we’re looking to open a business in the Euro currency, and to hire people with language skills.” 

Will newcomers include those capable of speaking Chinese, given the company does a lot of trade there, a situation that has its own issues. “We buy a lot from China to try and keep costs down, but even there it has become much more expensive,” said Burdett. “I have to now go further north to buy cheaper supplies and travel about from region to region to find the right products at the right prices.”

“We buy from China too and find prices are getting higher,” said Maclaren, pointing out that rising costs across the UK and Europe are impacting business, and that “the dollar issue is massive for us”.

“The thing is, materials prices have shot up, from wherever you source them,” outlined Bartlett. “Our turnover is still around £4.5m but margins are down because we have to tender for projects a year in advance, and for us the money is not in the job at the price you’re committed to doing it for.”

“And price pressure on the print we deliver is such that we can’t put prices up. We’ve seen people in Bulgaria selling print for more than we are - and that’s on textiles where the margin is supposed to be,” laughed Maclaren. “And that’s without considering transport costs etc., that are also going up. I find it’s now cheaper to ship to parts of mainland Europe than to Ireland for instance.”

“Our turnover is static but margins down because costs have gone up,” added Wilson. “We work hard at trying to work the shortest supply chain to keep things in check, but the prices just keep going up, especially in regards to self-adhesive vinyl and textiles. I find it quite unpalatable that once a few biggies put prices up, everybody else follows, even though they can’t all possibly be in the same boat. We’ve dropped suppliers because of that.”

Clark put the situation in a nutshell: “Creeping costs are the norm. One day you look at your system and you realise that since the last time you looked a roll of material has gone up from £400 to £500. You can’t afford to not keep constant watch.”

Continuing on the theme of rising costs, Bartlett re-entered the fray on the issue of staffing. “We’re definitely seeing a pressure on wages. We are based close to Heathrow, which has a huge workforce and pays well, so finding the right people at the right price is a real issue for us. Plus, youngsters are pressurised to earn well because of their own costs - they come out of university with a £50,000 debt, have high housing cots etc.”

“Similarly, I’m damned if I can recruit the right person to bridge the gap between marketing and customer service. In 12 months I’ve take on three people, one of whom didn’t even start because they were offered more money somewhere else. Millennials come in, fancy a change and go,” said Wilson, to which Clark added: “It’s that Tinder mentality. They’re never satisfied with what’s in front of them.”

“Also, people are ‘sold’ this better life/work balance philosophy, which can be really hard on a business where you need people who will put the work in when it’s needed,” continued Wilson, with Barlett joining in: “In the US people tend to work where and when needed. Here staff want six weeks holiday, not to have to travel far…”

“Sub-contractors and freelance can be the answer, which is why we’re seeing so many more in areas like installation,” stressed Wilson.

When it comes to in-house staff recruitment, designers are a point of focus, unsurprising given the findings of the Widthwise poll which flagged up creative design as a key area of investment and development.

“We’ve taken on a designer who was made redundant from John Lewis to help bridge the gap between us and clients wanting more experiential/creative projects,” said Clark, who already diversified his one-time vehicle wrap specialist business into bespoke vehicle rental (and more) a few years back, though large-format print still accounts for over half of turnover.

“The thing is, we get a lot of visuals with a brief that doesn’t really explain what the client really wants. They don’t really know! So we’re left to interpret sketches etc. and present back to them, with prices, so the client understands how it all comes together. We’ve invested in the kit and software to do that but you need someone who can put it in front of them and talk them through the project in terms they’ll understand. Basically, we’re filling in the gaps for clients who no longer have the in-house staff at their end to talk to us properly about what they want.”

To nods of agreement that the ‘professional print buyer’ is dead if not yet buried, the conversation turned towards customer development - and how that is impacting PSP’s strategic planning. Attention focused on Maclaren as he explained that as of November the YPP structure was changing rather significantly to reflect a growing focus on the consumer market for personalised printed products.

“We want to be the Moonpig of large-format Web-to-print in the personalised gift market,” he said, to what were practically gasps around the table.

“We are changing massively. The £3m turnover YPP soft signage business will have a new commercial director, and Santa Sacks, our £500,000 online personalised Christmas gift business, will run separately, as will the new CustomerGifts online business which is just kicking off. (see feature: http://bit.ly/2ILgXtV). 

“The new service offers almost 3,000 products that consumers can personalise online, including many branded to the likes of Warner Bros etc. Around 70% of the production will be handed by us, but we also have two other licensed printer partners to fulfil orders. The whole point is that we have the kit [which includes a newly ordered 140m2/hr 1.8m wide Mimaki TS55] and staff to run production overnight without impacting on what we already do during the day!”

To a barrage of questions from other Round Table participants, Maclaren pointed out that as more dye-sub printers are coming to market with a better ROI and easier operation (eg inline fixation), and thus competition in the textile print market becomes more fierce, “we thought we needed to step it up”.

“I think the consumer market is the way to go,” said Maclaren, prompting comments that we’ve become used to in relation to both that sector and to Web-to-print.

“But dealing with the general pubic is a nightmare,” said Wilson. “Managing expectation is really difficult. If I have someone who wants a one-off car wrap for instance, I hand it to someone else. And if you have a kit failure and 50,000 personalisation orders you’ll end up on the national news!”

“Also, so many people expect free delivery, free returns etc. - wanting a fab product at a rock bottom price,” added Clark. 

Maclaren was not to be dissuaded, accepting that: “Web-to-print in large-format is not easy because people think you can turn a tiny crap image into a something high res and fab. But we think we’ve got a very workable service.” He’s got pluck - and a vision that’s driving him. “I want to make as much money as I can, as fast as possible, and exit this business by I’m 35.”

That created a stir and got people talking about online development. Barlett pointed out that Signbox has invested in its eshop (for non-printed signage products), much of which was funded through R&D tax relief. “We do quite a lot of R&D and have got back £165,000 in tax relief on projects conducted over the last two years,” enthused Bartlett.

Burdett too said R&D tax relief had been forthcoming, prompting general discussion on the what’s, how’s and why’s of claiming. But of course, not all services offered by PSPs are developed in-house. Indeed, plenty are outsourcing to test new markets or to provide ‘additional’ services to keep investment - and risk - in check.

Bartlett for instance pointed out that: “Large-format print is a very specialist part of our business, accounting for around 40% of our turnover. The rest is metal bashing for signage. We’d need to make a major investment in a new unit to grow at all because we are so tight now for space. Our Dursts handle glass manifestations and HPs our wallpaper requirement. When it comes to other print it is cheaper and more sensible to outsource than to make the decision to invest in the space, kit and staff we’d need to take on to do the job ourselves.”

Wilson said he’s seen a big increase in trade work, now a significant part of the company’s business, while Burdett flagged up that Very Displays “sells only to the trade, a growing opportunity because printers don’t want to invest themselves necessarily right now, especially not in specialist kit.” Thus we came full circle.

So just what exactly is going on when to comes to investment? 35% of those PSPs responding to the last Widthwise poll said they had a zero spend on kit/products across their whole business in 2017/18. 47% said they were not planning to buy a new LF printer in 2018/19, only 3% said they have invested in Industry 4.0. Almost 75% of the rest said they didn’t plan to do so in 2018 either. 

“Don’t underestimate the level of kit capability already on the market,” said Wilson. “Companies that have invested over the last few years now still have really good kit.” 

“Yes, kit longevity is better than it used to be, especially with all the firmware updates now available, and thanks to the modularity of many systems,” added Maclaren. And then there’s the possibility of buying secondhand kit with plenty of equipment on the market via administrators etc., though the feeling among participants was that you could get new kit at similar prices in the current climate.

“As for Industry 4.0, what is it?” asked a baffled Clark. “I’ve probably invested in it but don’t know it.” And given conversation about his use of Point Cloud Surveying technologies, it seems he has. “I was asked if we could do one of those,” said Bartlett, explaining the building scanning tool and talking of the trend towards value-add technological investment for closer customer relationship building.  

And what about robotics and production automation? “It’s just not palatable to our generation,” said Wilson. “The likes of me enjoy the craft part of the business. At what point do we just sit at home pulling in the cash?” That sounded aspirational to some, like Maclaren: “Our W2P orders are fully automated. The system even prints off the barcoded labels for shipping.” 

Perhaps the environment would be more of a unifying topic as the Round Table grew to a close. Well, perhaps not! As expected it divided the group, with Bartlett saying that there’s little call for things like plastic-free products in the architectural market as yet, Burdett pointing to the “waste scrapheaps in China” where he does much business, and Maclaren saying he’s “never been asked for ‘green’ certificates”. 

On the other hand, Wilson said clients such as HS2 need information down to engine compliance on its delivery vehicles, and that “PVC is a big concern”. Clark went as far as to say its ‘sustainable’ range of products is bringing in business, with the likes of designer and environmental champion Vivienne Westwood becoming a client. “We’re talking to her too about upcycling graphics products into something else. So the conversations are happening.” 

Overall the Round Table participants were sanguine about prospects for 2019 and beyond. Wilson put it well: “There’s plenty of opportunity in large-format print, but you need to be on your toes. There isn’t the margin anymore to be anything other than on it 24 hours a day. What’s important is to build sustainable communication channels with your customers. My 11 year old daughter will be our next generation of customer. We need to ask ourselves how we’ll relate to them?”

Key Widthwise 2018 Data

• 151            PSPs responded to the 2018 survey 
• 60%    have up to 5 employees - 5% over 100
• 51%+    have a turnover up to £250,000 - nearly 15% a turnover £1m+ (almost 10% over £5m) 
• For 30%       large-format (LF) print is under 20% of turnover - for just under 6% it is 100%
• 44%    said LF margins increased in 2017 - nearly 18% saw a decrease
• 43%    said LF margins better than other parts of their business - almost 10% said worse.
• 40%    said they were concerned about their business’s prospects, but less so than in 2017 - 11% felt more anxious than in 2017
• 20%    said Brexit will be harmful to business - 10% said beneficial (rest not sure)
• 35%    said they had a zero spend on kit/products across their whole business in 17/18. 
• 47%    said they were not planning to buy a new LF printer in 2018/19) - 37% said they were.
• Only 3%       said they have invested in Industry 4.0. 
• 75%    of the rest said they didn’t plan to in 2018 either
• 45%    said it’s more important to offer green print options than it was two years ago, but 22% said less important! 
• 25%    said no shift – that has never been important!