In certain cases even a company’s name shows how it has come about, as is the case with Consolidated Graphics. Consolidation is often necessary because of over capacity that in itself brings about cost reductions as weaker companies attempt to stay in business by cutting prices, and in these cases the stronger companies are forced to absorb the weaker companies to protect their own pricing and market position.
In the UK the magazine printing industry has been consolidating for some time following a period of rapid expansion as many magazine printers invested heavily in the latest presses to try to expand their businesses. With the downturn that has been happening in UK magazine printing over many years there have been both failures of major magazine printers as well as a degree of consolidation.
The latest and biggest consolidation of magazine printers in the UK is just happening. In this St Ives Group, one of the largest printing companies in the UK has agreed to sell its magazine operations to private equity firm Walstead Investments for £20m (A$32m). St Ives Web has three large web offset production plants employing almost 700 staff and had an annual turnover in the last financial year of £70.5 m (A$112m). On this it made a loss of £5.1 m (A$8.16 m). The deal is subject to agreement from the St Ives shareholders and an extraordinary general meeting will be held on April 6.
Walstead was founded in 2008 in order to buy troubled UK printer Wyndeham. Following this it started on building a consolidated business when in July 2009 Walstead bought Southernprint from Newsquest and in October 2010 it acquired Apple Web from Trader Media Group. With the acquisition of St Ives Web the combined operations will become the largest commercial web offset printing business in the UK, producing 72 weekly and 712 monthly magazine and other periodical and specialist titles. Overall turnover will be about £150m and the group believes to be a 25 per cent share of the UK market. All the production sites will be branded under the Wyndenham name.
To show how the financial markets views this deal shares in St Ives rose 11 per cent on news of it after St Ives stated the sale would give it scope to diversify into higher profit areas. It is hoped that such consolidation that reduces the number of printers competing for major magazine contracts will have the effect of reducing competition and raising prices.
One of St Ives major competitors is Polestar, who have a history of driving prices down, and its CEO Barry Hibbert is quoted as saying “Fantastic, I hope it goes through and more to follow I hope.” A more reasonable comment comes from Andrew Pindar, CEO of Pindar Group that had pulled out of magazine printing some time ago. He stated “Its double or quits, isn’t it? Literally double the size.
One would anticipate that prices would rise on the back of it. If they are able to achieve that it will be a good thing because prices are currently inadequate.” A mid-sized web offset printer was quoted as saying “I wish everyone involved good luck. This is the sort of consolidation this sector needs – its good news for those of us that are left.”
The restructuring of the UK magazine printing industry has been brought about from both too much investment in high-speed modern web offset equipment, and a major downturn in the market as buying patterns changed reducing advertising and pagination, shorter run lengths, and title closures on the longer run magazines. In other UK markets we have also seen consolidation.
In newspapers the major groups are concentrating their production on ‘super sites’ where they have installed huge colour newspaper printing capacity. A large number of regional printing plants have closed down with production moving to the new sites. These sites, such as Rupert Murdoch’s Newsprinters, the biggest newspaper printing plant in the world, are also looking to expand their contract printing operations to handle other publishers’ work.
It appears that consolidation is the future for many parts of the printing industry in order to remain competitive and to be able to invest for the future. It is not just magazines and newspapers but also in books and direct mail printing. For smaller printers the future is increasingly to find a niche and specialize in it. Outside of these niches it will be difficult to compete with the large ‘super groups’ of consolidated printers.
Certain quotes in this article have been taken from UK magazine PrintWeek, and The Financial Times.
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