Bill Joss has a message for the print industry, which he reckons may prove to be unpopular. The chairman of Cats Solutions believes that the sector has been too slow to react to changes in the market and businesses are too dependent on too few customers.

"There are too many small players locked into one or two clients," he explains. "The industry has financial practices that are out-of-date and not responsive enough. You have to take cost out of a business and reduce your dependency on too few clients, as well as allowing for flexibility with suppliers. There should also be more partnerships in the industry."

Joss is speaking from a position of strength. He's been at Cats for around three years and has been chairman for two and a half. In that time, the company has gone from a loss-making operation to one that's in profit; last year it had a turnover of £11m and made £400,000. He adds that the projected figures for this year are looking solid too - turnover is likely to go up to around £11.5m or £12m, while Cats is estimated to make a profit of near £600,000.

These are the kind of financial results that will have several printers salivating. But Cats has turned its fortunes around by getting closer to its customers, picking up long-term contracts and identifying areas of its business that can yield better margins for the company. It's an approach that Joss reckons the rest of the industry should follow.

Geographical reach
Cats Solutions' core business is in digital print with its main site, or hub, in Swindon. The company produces documents 24 hours a day, seven days a week and aims to turn those jobs around in 24 or 48 hours. The group has a second hub in London - an ideal location to capture report and accounts work, as well as documents in the legal sector. In addition to those hubs, it has several satellite sites throughout the country; these include print rooms that the company operates for its clients.

"We take the high-volume or non-impact work at the Swindon site," explains Joss. "London is becoming a miniature version of the Swindon hub. The higher proportion of London work is on-demand. Our satellite locations are either on a customer's site or not. Across all of the sites, less than 10% is on-demand printing."

Prior to joining Cats, Joss worked extensively in the IT sector. In the late 1980s, he joined start-up company Compel Group and helped to oversee the firm's floatation on the stock market in 1994. It had gone from nowhere to a turnover of £320m but, in 2000, Joss retired from the group, which was eventually sold back into private hands.

"We started that business as a traditional hardware sales model, but it evolved into more of a service-orientated business," he adds.

In 2007, he was attracted to Cats and helped to buy out the family-owned business. Initially, he joined as a board advisor, but in May of that year he became chairman. Managing director Greg Smith, part of the original board of directors, has remained at the helm. Together, they have guided Cats successfully through the rough trading conditions, which have affected so many in the industry.

"Focusing on core areas has been critical," he says. "We have kept a constant review of costs and looked hard at all of the areas that make margin. We've also developed a deeper relationship with our suppliers."

The knock-on effect is that the company has won a host of lucrative contracts in both the public and private sectors.
For example, Cats has picked up work from universities, including Strathclyde and Northampton. Joss says that in the case of the latter, it has been able to take advantage of Cats' Swindon hub.

"Within six months of us winning that contract, volumes increased," he adds. "We were in a position to respond. It's important that you spend more time getting engaged with your client. Some of our customers have switched to virtually all digital print so they can order what they need. You may have a higher unit cost, but you have no need to stockpile, which can drive up costs. The balance is important and it's about what's appropriate for each client."

Buying power
In addition to winning new business, Cats has also been hitting the acquisition trail. In the past 10 years, the company has made 12 acquisitions - the most recent being Legal Document Services International (LDSI). It's a key purchase for the group and strengthens its data and document handling for the legal sector.

"Acquisitions are part of our growth strategy," explains Joss. "I believe you should achieve growth organically and overlay that with acquisitions. With LDSI, a number of circumstances came together. They are an authoritative player in the legal sector with sophisticated offerings - they have a very clever software-based product. It all just came together."

The move, which will see Cats' London hub take on board the new addition, demonstrates that Cats is keen to be viewed as more than just a print business. While its core offering will always remain digital printing, the data handling element gives the company an added value to its service - something that several in the print industry have been flagging up for some time.

This is one of many areas that Joss believes the industry needs to address. In the current climate, he reckons that print bears many similarities to where the IT industry was 20 years ago. "Print is that far behind," he says.

In order for the industry to move forward, Joss believes that printers should be more open to forming partnerships. Cats itself has partnered with a smaller litho printer, a deal that works for both parties: Cats is able to do more volume work and the printer expands its client base. This is a teaming that Joss says works well. The problem, he believes the print industry has, is that it's too set in its ways and he says the companies with turnovers of around £1m-£3m are the ones most at risk.
"They are too dependent on too few clients," he adds. "When a downturn comes along they are struggling."

Joss reckons that there are many in the industry with financial models that don't stand a chance in a downturn. It's a message he'll be sharing with BPIF members at the Federation's Finance and Investment Conference on 2 February. Joss has a feeling that many may not like what he has to say but, based on his experiences in both print and IT, the industry has to change its financial ways or risk shrinking at an even more alarming rate.

BEST PRACTICE TIPS: RAISING CAPITAL

Many companies that have successfully traded through the recession may find themselves with a weakened balance sheet.

For those looking at raising capital early in 2010, the reasons are either because of the current state of the business or the fact that real opportunities are opening up.

The banking sector will continue to struggle to lend to SMEs. The Enterprise Finance Guarantee Scheme – specifically aimed at getting funds quickly to those businesses in need – has not delivered on its headline aims. The real story is one of indecision, a huge bottleneck of enquiries and ultimately, for the vast majority of businesses, a turn down from the bank.
This leaves businesses looking for alternatives to their funding needs and private equity is one of those. For good businesses, funding does still exist. Private investors remain active, albeit they are more choosy and looking for attractive terms for their capital. The upside is that many private investors will play an active role in their investee companies and add value to the management team simply because, given that the money they invest is their own, they really do have the best interests of the business at heart.

Raising capital from private investors is never easy, however, at the lower end of the market, for example, for sub £1m, it can be a relatively straightforward process. The benefits to this are dealing with a single investor who is likely to have first-hand knowledge of the industry sector and a faster decision-making process.

Investors will be looking to back only quality propositions by committed management teams and will want to be able to see a clearly defined exit route.

In addition to the activity of private investors, more funds are coming into the market looking at turnaround propositions.
This doesn’t necessarily mean insolvency, but it does mean that the fund will seek a sizable percentage of the equity, in most cases a controlling stake.

If there is an absolute need to raise funding, then this avenue may be no bad thing. Retaining some equity holding and having an ability to fight another day is a better option than the business failing.

There are funding solutions for most businesses that have a need for capital, but business owners need to be realistic in their valuations and be prepared to be flexible.

Nick Young is the managing director of Beer and Young. He will be speaking at The BPIF Finance and Investment Conference at the Ricoh Stadium in Coventry on 2 February 2010.

COMMENT
At the start of a new year we all tend to create a resolution. Mostly these fizzle out as we set expectations too high or let other things get in the way. All too often, previous patterns of behaviour prevail, or we don’t get the right assistance.
This year, however, it’s worth making the effort to drive through necessary changes, provided we acknowledge that past assumptions, which have stood the test of time, must be rethought. Understanding the new business climate is crucially important.

As a sector, we have shown ourselves to be fairly resilient, flexible and adaptive, but circumstances in what is now being described as the ‘new normal’ mean we must accelerate the process of adapting and adopt more radical approaches in doing so.

There are some great examples of businesses who are bucking the trend because they are either setting realistic aspirations as part of a plan or have the energy and commitment to achieve their resolutions. If you talk to them, they will tell you that it’s by no means an easy ride, but it can be done. This month’s Business Inspection features Bill Joss and his experiences from the IT world, which are, in reality, very relevant to our sector.

Nick Young, from Beer and Young, another of our speakers at Finance and Investment Conference, provides our Best Practice Tips and makes clear his optimism regarding the opportunities in the marketplace and how funds are available to tap into the entrepreneurial spirit. Do join us at the conference on 2 February – it’ll help you turn those New Year’s resolutions into a reality. Places are still available – to book email heena.bulsara@bpif.org.uk

Marcus Clifford is the director of BPIF McInnes Corporate