New gravure and web presses, combined with the potential release of some 60m of old web offset capacity at Quebecor World in Corby, would make the long-run market "extremely challenging", said managing director Brian Edwards as the group revealed its year-end results.
"The fact is more capacity is going in, but the market is not expanding enough to fill it. Long-run web is in for a pretty rough ride," he stated.
St Ives improved its underlying profitability in the 12 months to 30 July: pre-tax profits rose 7.5% to 39.7m, and operating margins improved to 9.4% (2003: 8.3%), thanks to the group's cost reduction programme and focus on added-value. Sales fell across all St Ives' markets, leading to an overall drop of 6% to 410.3m, although currency fluctuations also contributed to the reduction in turnover.
Direct response grew sales and profits in the UK, and German wing Johler Druck more than halved its losses.
Restructuring, relocation and redundancies lead to exceptional costs and a goodwill write-off of 24.75m, resulting in a retained loss of 14.6m for the year.
It's been an eventful 12 months for the group, which closed its Case-Hoyt operation in America in the spring. In addition it subsequently closed Marlton, a litho plant in New Jersey that served its financial printing division. It also relocated its Kent multimedia business to its more modern factory in Crayford.
Separately, St Ives tackled its pension deficit by injecting 25m into the fund and changing the accrual rate.
Chairman Miles Emley said the results were creditable and "not bad in the circumstances". The group is concentrating on more specialist work and less on commodity products, and is adding to the services it offers clients beyond print in books, for example, it has added ancillary services such as direct delivery of books to retailers, price stickering and shrinkwrapping.
St Ives had 26m in cash at the year-end, but has since spent this on the acquisition of SP Group, for which it will pay a maximum of 36.92m in cash and shares. As a result the group will be geared going forward for the first time since 1996.
Shares rose 3p to 381p as PrintWeek went to press.
St Ives: how its businesses fared
Books Sales down 6% to 66m, largely because last year's performance was boosted by the hardback edition of Harry Potter and the Order of the Phoenix. Margins improved as St Ives added ancillary services to its offering.
Direct Response and commercial Sales down 5% to 182m. In the UK the group grew sales of specialist products, sales increased overall and profits rose. Continued price pressure in commodity products. German market subdued and although Johler Druck's performance improved it is still loss-making. In America closed Case-Hoyt but has retained 10-20% of the volume. "Some progress" despite weak demand and price pressure.
Financial Sales down 3% to 33.8m. More activity in the US, still moribund in the UK and Europe. Maintained market share in report and accounts, although trend is for buyers to reduce product specifications to save costs. Also more non-specialist competition in the R&A market. Closed Marlton plant in US with loss of 60 jobs.
Magazines Sales down 8% to 104m. In the UK increased price pressure particularly apparent on long-run, less time sensitive titles. Paginations volatile in general, and overcapacity overall. The picture in the US was similar. The group has moved to reduce its cost base with a swathe of new investments, including new presses at Peterborough and Roche and a major investment in Ferag bindery kit at Peterborough that reduced the headcount at the plant by 50.
Multimedia Sales down 8% to 24.4m. Market overall described as "subdued", but the decline in singles was offset by special packaging for CDs and DVDs. Consolidated its operations in Kent. Holland had a "better year".
Story by Jo Francis
