11 June 2017 Business

Grafenia loss grows as reshaping continues

Grafenia is expanding as it tackles tight margins and legacy costs, with expansion in signs and now into the Netherlands.

Grafenia has opened four Nettl outlets in the Netherlands, its first venture outside the UK with the web design to print initiative. This builds on top of more than 100 stores in the UK where, according to chief executive Peter Gunning, there is capacity for 300 Nettls.

The positive news balances then so good as the company reports a 2.65% decline in sales to £5.14 million in the first six months of the year thanks to lower prices. “The trade print market remains fiercely competitive and we do not expect print margins to improve,” says Gunning in the financial report. “It is likely that we will see further margin pressure in the second half.”

Ebitda dropped to £460,000 (£590,000) and an operating loss of £420,000 up from £180,000 loss in the equivalent period.

Under this pressure the company has been reshaping, reducing the depreciation period for software from five to three years and changing the status of money outstanding from the crash. At that point, says Gunning, Grafenia changed debts into long term loans with Printing.com partners. Under advice it has switched these to the liabilities side of the balance sheet despite payments continuing.

The simplification of pricing between printing.com and Nettl, both using the Manchester production hub for the same products, under the Oneprice initiative has helped increase volumes by 14%, but at lower margins. Its Marqetspace and W3P channels are under the same pressure but delivered an increase in sales to £1.81 million (£1.44 million).

The first move into fabric printing for foldaway displays is generating sales of £0.55 million a month with further growth expected.

But it is Nettl that will underpin future growth and insulate the business against the competition in trade print. These partnerships are aimed at smaller printers giving them the chance to offer website design as well as print. Many Nettl outlets have previously been printing.com partners.

Now Grafenia has appointed an executive to expand the concept in the Netherlands with four pilot stores set up. The marketing collateral and emphasis has been localised and the initial partners are getting what Gunning calls “enhanced support” for their assistance. Early stage conversations are underway with other potential outlets for the Nettl concept he says. “We want to grow the Netherlands to ten locations before we switch our attention to the next country,” he says.

And Grafenia needs to grow. It made its first acquisition of a small signage printer at the start of the year and is looking to combine this with a similar business in Liverpool to allow it to open Nettl Business Store as a sister to that opened in Birmingham last year.

The company as currently shaped is too small for PLC status, Gunning acknowledges, with any surplus earned wiped out by the additional cost of auditors and other fees needed by quoted companies. It looking for a new chairman to tackle this. “It will change the way that we talk to the market,” he says.

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Grafenia to Holland

Grafenia to Holland

Grafenia dips its toe in continental waters setting up Nettl stores in the Netherlands, returning to a country which gave the UK business its Flyerzone online print channel. When Nettl reaches ten partners in the country, it will begin searching for partners in a second country.

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2015: Loss as Grafenia reshapes

2016: Grafenia takes print back to high street

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