Grafenia plc Trading update (3773X)
21 February 2017 - 6:01PM
UK Regulatory
TIDMGRA
RNS Number : 3773X
Grafenia plc
21 February 2017
Grafenia plc
("Grafenia" or the "Company")
Trading Update
In our update to the market on 8(th) November 2016, we
highlighted the inconsistent nature of transactional print volumes
and this has continued. November and early December performed in
line with our internal budgets. However, print volumes in January
and early February were materially behind the same period last
year, albeit recovering to expected levels last week.
Although overall, our print volumes are higher than the same
period last year but the effect of our earlier price realignment in
a fiercely competitive market means we are paid less for each print
order. As the trade print price war continues, we need to remain
competitive and do not expect margins from the sale of printing to
improve.
However, we are continuing to execute our transformation plan to
transition our business into growth areas with more predictable
subscription-based revenues and to other complementary product
lines, such as website sales, ink-on-fabric displays and signage
services.
Our network of neighbourhood Nettl web studios has continued to
grow. We recently passed an important milestone, reaching 100 Nettl
studios in the UK and Ireland.
Nettl partners lead with the sale of websites, ecommerce web
shops and online booking apps. With clients increasingly
prioritising their marketing spend on digital, web and ecommerce,
we think it's important that designers are able to handle these -
often complex - web projects, so that they can retain the client
and importantly keep print work they might otherwise lose. Nettl
makes it easy and cost effective for our partners to do that.
Partners pay a monthly subscription of GBP399 for use of our
systems, marketing and know-how. We train them to win higher value
web work, using their team's existing skill set. They buy printing
and display at trade prices, pay us a fee for each website deployed
and small ongoing monthly hosting fees. We have helped many
graphics businesses make the transition into web and we expect to
assist more.
Now that we have gained traction with the Nettl model, we have
increased investment to scale it more rapidly. We have trained
additional account managers to pitch, sell, launch and support new
Nettl partners. We have recruited and trained new Nettl Geeks to
provide technical support. And we have founded the Nettl Academy,
to supply Nettl studios with skilled design graduates trained in
all things Nettl. We have increased our promotional marketing
activity and frequency of events to attract partners faster. Our
aim remains to significantly scale the Nettl network and be known
as the local go-to place for marketing to the SME community.
Early results from our pilot Nettl of Birmingham Business Store
are encouraging. We've received rental bookings for "The Great
Room" meeting space and walk-in trade is increasing week-on-week.
One aim is to cover the Business Store rent through sale of coffee
and snacks and that looks to be achievable. Perhaps most
interestingly, some customers who have come in for coffee have now
purchased websites, printing or displays from us. We continue to
explore other complementary services to drive footfall.
We're launching one such new service, "Nettl Now", to meet
client demand. In common with other industries, people are becoming
accustomed to 'instant gratification'. Nettl Now is for last-minute
printing, produced and delivered the same day, to address this
demand. Clients will be able to order a range of print and display,
manufactured and delivered in 4 hours. We will use our existing
equipment and dispersed network of local production partners to
fulfil the orders.
On 16 January we announced the small acquisition of a
Liverpool-based sign business, ADD Signs. Integration of ADD is
progressing well and we have started to productise a sign range to
sell via our Nettl and printing.com partners. We continue our
search for further sign companies to acquire, roll together, unlock
cost savings and rebrand as Nettl Business Stores.
Since we simplified the printing.com model, we have continued
attracting more partners. Studios pay GBP299 per month for use of
our marketing and systems. Over 30 new partners have joined in the
last 12 months and some have already upgraded to become Nettl
studios. We expect to add more partners this year.
Marqetspace.com, our online trade print division, continues to
be an important source of future partners. Once a Marqetspace
client has trusted us with their printing, our account managers can
talk to them about the challenges they have in their business. Many
of these are common problems and we can propose suitable software
to help, or invite them to become Nettl or printing.com brand
partners. Marqetspace has now traded with over 2,500 graphic
professionals and we continue to add clients through scalable
marketing activity.
Although we are making progress with our transformation plan, a
material part of our revenues continue to come from transactional
print volumes. Soft demand in January and early February will
impact our full year earnings and it is likely we will be
significantly behind market expectations. We remain cautious on the
outlook.
We intend to update the market with a pre-close statement on
Monday 10th April 2017.
For further information:
Grafenia plc
Peter Gunning (CEO) 07973 191 632
Alan Roberts (Finance
Director) 0161 848 5713
N+1 Singer (Nominated
Adviser)
Richard Lindley / James
White 0207 496 3000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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