Better than expected Q1 for output and orders – tougher times ahead as pricing and cost concerns dampen forecasts

The UK printing industry continues to defy its own forecasts as both output and orders displayed positive growth, above the expectations for Q1 – unfortunately the Q2 forecasts reveal that concerns remain. The latest Printing Outlook survey shows 43% of printers increased output levels in the first quarter of 2018. A further 37% held output steady whilst 20% experienced a decline in output. The resulting balance (the difference between the ups and the downs) was +23; up on the forecast of +12 for Q1 and greater than the +19 recorded in Q4. Whilst the Q4 period was notable for the absence of a seasonal boost, it seems that some of that trade may have carried into the first quarter. This is the first time for seven years that Q1 output has outperformed Q4. Furthermore, the current Q1 output balance is slightly greater than the trend line for growth over the last four years (which sits at a flat 20% balance over the entire period).

Recent forecasts have turned out to be on the pessimistic side, Q1’s above-trend performance has done nothing to dispel the pessimism. In fact, the expectations for Q2 have now fallen into negative territory, and to a level that has not been experienced since Q1 2016. 29% of respondents predict that they will increase output levels in Q2, a further 41% expect output levels to hold steady. However, 30% forecast that output will fall in Q2. The forecasted balance of -1 would, if realised, be a significant downturn from Q1.

The output balance of +23 was above the forecast of +12 for Q1. A balance of -1 is forecast for the coming three months.

Confidence in the general state of trade in the printing industry flatlined in Q1 – whilst it remained marginally above the negative forecast, the expectations for Q2 show that confidence has eroded further. It seems the industry is expecting a tough trading period in Q2, and an intensifying battle to maintain output and minimise cost pressures. On this occasion the Q2 period may well be characterised by supply-chain cost and delivery concerns, wage pressures coming through and new legislative costs and burdens coming into force.

Competitors’ pricing below cost continues to be the most voiced business concern – the proportion selecting it this quarter is unchanged from last quarter; it remains at 70% (it was 65%, 70% and 81% in the preceding quarters). Paper and board price concerns remains the second ranked concern; this was selected by 63% of respondents, up from 60% last quarter (and 47%, 42% and 32% in the quarters prior to that). Access to skilled labour remains the third ranked concern, with 27% of respondents selecting it (down from 32% previously).  Access to skilled labour remains above late payment by customers which has returned as the fourth-ranked business concern.

We have been collaborating with Begbies Traynor to develop further relevant industry and sector analyses; some of which we are introducing in the latest Printing Outlook report. We have now compiled a detailed financial health analysis of data for the 5,000 largest print and printed packaging companies (as selected by total asset value ranking). The financials for each company have been rated and updated over time – analysis of this will provide some interesting insights and benchmarks.

Looking at the financial health chart, and working from the bottom up – the green proportion shows the share of the top 5,000 companies that are in a strong and secure financial position. The yellow section shows the proportion of companies with a less strong financial position, representing an average credit risk.

The orange shading depicts the share of the top 5,000 companies that are considered to be a higher credit risk due to their financial results, past trading history, the lack of available information or the presence of detrimental information against them. Finally, the red section is for high risk companies with poor credit scores and/or serious detrimental information filed against them and companies that have undergone insolvency or have a striking-off action registered against them.

The BPIF Printing Outlook Q2 2018 report goes into further detail.

Kyle Jardine, BPIF Research Manager, said:

“Producing the Printing Outlook report is only possible with a high reliance on collaboration – from responding members, other industry trade associations, sources of economic information and other relevant contacts. We are now working with Begbies Traynor and Red Flag Alert to develop our industry analyses. Not just so we can represent the industry but to provide more useful information back to the industry. We will continue to work with Begbies Traynor to develop the industry model and showcase more analysis from it.”

Charles Jarrold, BPIF Chief Executive, said:

“Brexit has taken a bit of a back seat this quarter as we wait to see what happens next during the negotiations. However, our latest Brexit Barometers suggest that the economic outlook confidence during negotiations has become slightly less negative whilst the post-Brexit outlook become more negative. In the meantime there are plenty of other matters for businesses to focus on. Costs pressures are mounting and margins are being squeezed further, as it remains difficult to raise prices. Companies must therefore keep a close eye on job profitability, work mix, and, as ever cash flow.”

Summary of key findings:

  • The UK printing industry continues to defy its own forecasts as both output and orders displayed positive growth, above the expectations for Q1 – unfortunately the Q2 forecasts reveal that concerns remain.
  • Confidence in the general state of trade in the printing industry flatlined in Q1 – whilst it remained marginally above the negative forecast, the expectations for Q2 show that confidence has eroded further.
  • Competitors’ pricing below cost continues to be the most voiced business concern – the proportion selecting it this quarter is unchanged from last quarter; it remains at 70%.
  • As Brexit progresses the UK printing industry continues to voice a diverse range of opinions and emotions – overall confidence has continued to become slightly less negative.
  • Capacity utilisation exhibited a welcomed pick-up in April in comparison to January, despite the Easter period falling amidst the survey period.
  • Recruitment growth slowed in Q1 and ducked below the forecast, but it does remain positive.
  • Average prices in Q1 have continued to reside well below recent forecasted levels – as a result the expectation for Q2 has dropped in comparison to the recent forecasts.
  • All cost areas have continued to be under significant upward pressure in Q1 – paper and board increases grab the headlines once more.
  • The relentless pressure on margins is showing no signs of abating.
  • Printers have reported a more pressurised profit distribution in April, with more in the red zone in comparison to January.
  • Export orders exceeded 5% of turnover for 22% of respondents; for these companies export order growth was surprisingly only marginally positive, on balance, in Q1.
  • Exactly one-quarter (25%) of respondents reported that they had conducted a pay review in Q1 – 51% expect to do so in Q2.
  • UK consumption of printing papers and boards fell overall in 2017, though packaging cartonboard experienced some growth.

Featured in Printing Outlook this quarter:

  • The BPIF’s Brexit and Post-Brexit Barometers.
  • Costs – paper & board, ink, labour and energy.
  • Pay Reviews – activity and average % changes.
  • Data on capacity, productivity, margins, and more.
  • Consumables – paper consumption and printing ink data.

For further information on Printing Outlook go to www.britishprint.com/printingoutlook

 

Lionel Barber, Editor of the Financial Times, to speak at The Printing Charity’s Annual Luncheon

Lionel Barber, Editor of the Financial Times, to speak at The Printing Charity’s Annual Luncheon

Lionel Barber, Editor of the Financial Times and The Printing Charity’s 2018 President, is this year’s guest speaker at the charity’s Annual Luncheon on Thursday, 22 November, at Stationers’ Hall, London.

The Printing Charity’s Annual Luncheon, now in its 191st year, has always been an opportunity for people in the industry to network with colleagues and friends, as well as listen to the guest speaker’s insights into ‘The Printed Word’, and hear about what the charity is doing.

Neil Lovell, The Printing Charity’s Chief Executive, says: “Our guest speaker, Lionel Barber, is at the helm of an organisation embracing traditional media and the digital age. He has helped position the FT as one of the first publishers to successfully transform itself into a multichannel news platform. We look forward to an enlightening address.

“We would like to thank Agfa for sponsoring the event’s drinks reception and we look forward to welcoming our industry friends and supporters to our 191st  Annual Luncheon.”

Tickets for the Annual Luncheon cost £99.50 per person. To book tickets, please email lucy@theprintingcharity.org.uk or call 01293 649 367.

BPIF Launch British Book Design and Production Awards 2018

The British Printing Industries Federation (BPIF), Oxford Brookes University, The Publishers Association, The Bookseller and The BookMachine are calling for entries to the British Book Design and Production Awards 2018. These are the only industry awards to promote and celebrate the excellence and craftsmanship of the British book design and production industry.

All books published between 1 July 2017 and 29 June 2018 are eligible for entry in this year’s awards.  There are 18 categories that reflect the many various forms books can take including;

  • Literature
  • Digital
  • Limited Edition
  • Educational
  • Children’s
  • Trade
  • Self-Publishing

 

There is also a category for aspiring students to enter their work, with the chance to win a cheque for £500 as well as a short internship with a leading designer, publisher or printer.

Industry experts from the areas of design, publishing and production will judge the entries and stamp the book that outshines the rest with the title of ‘Book of the Year’.

The deadline for entries is Friday 29 June 2018.  The awards will be presented at a dazzling ceremony on 22 November 2018 at the Montcalm London Marble Arch Hotel.

For further details on the awards please go to www.britishbookawards.org or contact Heena Bulsara at the BPIF on 020 7915 8338 or heena.bulsara@bpif.org.uk.

 

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