Increasing sales and higher profits indicate that the 2017 winds of change are benefitting Cimpress. Are its restructuring activities already beginning to pay dividends after just one year?
In the last two years a lot has happened at the world’s largest mass customization print provider. Acquisitions of specialty businesses that were rated industry leaders in their own specific fields and a sale that nobody, apart from a couple of Cimpress insiders, had really expected. Added to that was the “streamlining” of the group’s entire corporate structure. Given that so much has happened just internally within the group, how has this online print colossus fared in the last year since the restructuring was announced? It’s time to take stock.
Industry specialists obviously aren’t the only ones that have found Cimpress’ organizational structure “confusing”, given all the acquisitions plus organic growth in the last few years. Robert Keane, founder and CEO of the industry’s top dog, put the Management Board through a radical shake-up in 2017 – some significant cuts, both in HR and structural terms, were made. The objective was decentralization in order to boost the business units at regional level, to make them more agile and most important of all to retain or rather reestablish a sense of customer focus. Each one of the current 19 brands was to have its own focus, drive its own business forward and become (even more) profitable. The whole thing started in January 2017 – I reported on that in this blog – with the announcement of the restructuring. A year has passed since then.
To date the decentralization strategy seems to have helped make the main idea of having regionally based professional teams that are better able to meet customer needs a reality. The fact is that Cimpress is on the right track not only in terms of sales but also in terms of profitability. But it is sometimes difficult to see what impact the restructuring has had on specific results. However the sale of photo print specialist Albelli mid-2017, combined with the acquisition of National Pen in 2016, laid down a particular marker. Albelli, headquartered in the Netherlands, was resold after 6 years under the Cimpress umbrella – previously Vistaprint. The group’s management team wanted to invest the roughly 73 million Euros (90 million USD) that Gilde Buy Out Partners paid for the B2C print provider in developing its own mass customization platform. The objective was better interlinkage of the group’s production and procurement chains by smartly linking each brand and production location. No sooner said than done – a substantial amount of money was invested in the MCP and at the same time shareholdings were repurchased. But the conceptual design of the MCP was changed – instead of a centralized software platform for all sub-brands Cimpress has now opted for a smart network linking each sub-brand’s platform. This is a challenge that will keep the group occupied for a while yet.
“This positive performance speaks for itself – by decentralizing its operations, Cimpress has become faster, more agile and more profitable. That was needed too, because significantly smaller print providers were to some extent considerably more successful. But what needs to be done now is take this new strength into new market segments.” – Bernd Zipper
Robert Keane recently stated in a conversation he had with me that Cimpress now has more than 250 print and fulfilment partners just in Europe. This network expansion has certainly benefitted from the development of the MCP. Nevertheless in its 2017 fiscal year Cimpress spent more than twice as much as in each of the two previous years – at investment in and expenditure on restructuring, administration, marketing and technology, which is accounted for in no small measure by the mass customization idea, of more than 39.7 million Euros. And both of those years saw relatively major movement with the acquisition of druck.at, WmD, Tradeprint and Exagroup. That shows that the structural change that has impacted on the holding company and all brands has had major consequences. The entire online print industry is waiting with bated breath to see to what extent these consequences are reflected in sales figures.
With all costs put against total sales, Cimpress made a loss of some 37.3 million Euros for the 2017 fiscal year (07/2016 to 06/2017). So far so bad – you might think. But there is more to this than meets the eye. Although since the announcement or rather the actual start of its restructuring in January 2017 (Q3) Cimpress has not posted any downturns in sales, it has been burdened with huge costs, which just in Q3 and Q4 led to a loss of 42.9 million Euros. The relatively strong Q2 2017 was only marginally able to offset these losses. In this respect there is one mistake you shouldn’t make and that is thinking too short-term. That’s because the figures from mid to year-end 2017, which include Cimpress quarters Q1 and Q2 2018, tell a different story. Cimpress’ planning and budgeting is forward-looking – the action taken is beginning to pay dividends.
Obviously the sale of Albelli means that the “All Other Businesses” section is missing a few millions worth of sales, which you can see particularly in the second quarter 2018 (October to December 2017). That’s because in the B2C business the (pre-) Christmas trade is the period with the highest sales. But the “Vistaprint” and “Upload and Print” segments – core segments of Cimpress’ (small) B2B business – have made strong gains during the same period. If “Upload and Print” completes FY2018 in the third and fourth quarters at least as successfully as in the previous year, then sales just in this segment will have increased by around 65 million Euros (+ 11 %) compared to FY2017 – perhaps even more if factoring in growth. Things look just as good at Vistaprint. If the group’s largest segment continues sales growth of 12 % in the current and in the final quarter of Cimpress’ fiscal year, Vistaprint alone will have posted sales of 1.2 billion Euros for the first time at the end of FY2018. That’s not to mention what National Pen is set to contribute. The promotional media specialist joined Cimpress’ MCP network at the end of 2016 and will post sales of at least 230 million Euros. So it all points to the restructuring bearing fruit.
And even if multiple Cimpress brands are represented in several European countries and are increasingly offering similar products, there is absolutely no hint of cannibalization. The focus, according to Robert in his conversation with me, is on growing solely on the basis of the network and the existing brands at least until mid-2018. What’s also definite is that so long as the platform delivers the desired effect and specialized local providers acting as “affiliated” companies or partners generate the desired customer focus on a regional basis, Cimpress will not buy them up. But even if – at least officially – there are no acquisitions planned, Robert Keane et al have already cast their eye over profitable specialists in other geographical regions. I think that something will still happen in this respect by the end of the year…
My take: according to the figures, the movers and shakers at Cimpress have not only made great acquisitions but also made sensible decisions – and despite the massive cuts and huge amount of money invested last year have laid the foundations for further growth. Cimpress’ approach continues to give the online print industry a white-knuckle ride. That’s because the activities of the group, which prefers to keep a low public profile, often indicate new trends. And Cimpress still has a major objective ahead of it – it wants to get the B2B market rocking. That is likely to prove tougher than Cimpress perhaps imagines – but the B2B market, to a large extent the brand owner market, is the fastest growing segment of the online print industry. I wonder how that will pan out…