The latest Printing Outlook survey from the BPIF paints a relatively rosy picture, particularly on the demand front. Printers recorded their highest level of first-quarter order growth for two decades, with almost two fifths of companies reporting an increase in demand, slightly below those saying there had been no change.

The survey’s findings were not entirely positive, though. More firms lost staff than those increasing their workforce, selling prices remained under pressure, and a third of companies reported falling margins, against 9% reporting growth in margins.

Here, we highlight some of the key findings, including opportunities for the sector as well as the (often structural and long-running) threats to printers’ survival.

Orders and output

There was particularly good news regarding volume growth in demand during Q1 2014. The overall balance – calculated by deducting the percentage of firms reporting a decrease from those stating orders had increased – was +21, one of only five times in the past 20 years when there has been a positive order balance in the first quarter. On top of this, 36% said order books were better than normal for the time of year, against 12% reporting they were worse.

Meanwhile, more than half of printers boosted output in the quarter, and more than a quarter believe the UK print market will improve in the second quarter, compared with 69% who think trading activity will be static.

BPIF chief executive Kathy Woodward says anecdotal evidence from members suggested there had been a move away from traditional marketing cycles accompanied by a shift to ongoing, higher-value targeted campaigns, leading to the improvement in demand.

Financial matters

Anyone involved in the printing industry over the past decade will be familiar with some of the main problems which continue to blight it.

The foremost worry (reported by 79%) of printers continued to be competitors pricing below cost, followed by the survival of major customers, cashflow – with late payment by customers an increasing concern – and threats to their business from pre-pack administrations.

Responding to the concerns about customers’ financial health, Woodward said printers “have to work with the full supply chain to weigh risk and benefit. Most of our members are aware of the options open to them including the impact on margin”.

Although the proportion of respondents who felt pre-packs represented a big threat fell to 10% from 18% three months ago, almost a quarter said that they had been affected by pre-pack sales in the past 12 months.

The BPIF highlighted its worries about pre-packs last month, in its response to a government consultation on insolvency practitioners, when it called for a ban on any IP advising a company before a pre-pack sale from becoming the administrator for that company. It hopes this would obstruct attempts by IPs to “secure new business by inviting distressed businesses to enter a pre-pack before other options (such as open marketing for potential sale) have been properly explored”.

Despite the continuing concerns about the overall financial health of the industry, in print and packaging there was a decrease in the level of ‘critical’ financial distress, defined in Begbies Traynor’s Red Flag Alert report as County Court judgements totalling £5,000 or more and/or winding-up petitions and related actions. The figure of 20 was the lowest first-quarter total since 2007.

However, there was an increase in ‘significant reports’ – County Court judgements of less than £5,000 or sustained or marked deterioration in key financial ratios – from 871 to 891, the highest figure since Q1 2007. 

Opportunity

Web-to-print is gaining a greater foothold in the market, with 43% of respondents active in this area compared with 34% three months earlier.

Rarely a month passes without reports in PrintWeek of printers launching new web-to-print services, but for most this has not yet translated into a major shift in the origins of orders. 

According to the survey, two thirds of companies making sales through web-to-print generated less than 20% of total turnover from this platform, although a small but significant minority of 12% achieved at least half of their turnover this way. 

And finally…

Although the report offers a broad view of conditions in UK Print PLC, there is a caveat concerning the number and types of responses to the Q1 survey compared with the previous report. The latest summary is based on responses from 80 companies employing almost 3,800 people and accounting for a combined turnover of £400m. But this compares unfavourably with the previous quarter – when 103 companies with combined sales of £1.1bn and more than 9,500 staff took part – as information gathering took place in the build-up to Easter. Also, the responding companies employ almost 50 staff on average, making them larger than – and therefore not necessarily representative of – the majority of print businesses.  

OTHER KEY FINDINGS

• More than a third of firms operated at 80%-89% of capacity and 9% reported a 100% operating rate
• No companies operated at less than half of capacity, compared with 4% in that position three months ago 
• Input prices were “generally under control”, although energy prices remained a concern
• 14% said paper and board prices had fallen, compared with rises for 7%. Almost nine in 10 of those faced with increases were able to pass on at least some of the additional cost to customers
• More than 90% plan to invest in training or product/process innovation, but most plan to spend the same as over the past 12 months