12-07-2004 - Printing.com - Printing.com plans AIM Flotation:Placing to raise GBP 1 million - Printing.com Plc
Placing planned to raise approximately �£1 millionTurnover to 31 March 2004 was up 21% to �£9.3 million
Profit before tax up 84% to �£941,000
Earnings per share (post notional tax charge) up 84% to 1.69p
Outlets increased by 40% to 70 in the year to 31 March 2004
Additional revenues from current pipeline of new franchises
Committed to achieving 175 outlets by September 2005
Plans for second Hub in Kent
Expansion into North West Europe
Longer term opportunities in North America
Optimistic about future prospects
For further information:
Printing.com plc
Tony Rafferty (Chief Executive) 07966 51 73 36
Alan Roberts (Finance Director) 07977 277 521
Beattie Financial
Brian Coleman-Smith / Jo Clewlow 020 7398 3300
07802 724 400
The Directors of Printing.com plc take full responsibility for this announcement.
PRINTING.COM PLC
(â??Printing.comâ?? or â??the Companyâ??)
Specialist retail chain with 25 Stores and 57 operational franchises across the UK
Printing.com plans AIM Flotation
Placing to raise �£1 million
Flotation on the Alternative Investment Market
The Directors of Printing.com feel that the Company has now reached a stage in its development where it would benefit from the increased public profile that a quotation on AIM can offer. Accordingly the Company plans to move its share quotation from Ofex, where it is presently listed, to AIM in the near future.
The Printing.com business
Printing.com combines a franchised customer-facing high street presence with a state of the art centralised printing hubto provide a high quality and low cost printing solution for small and medium sized enterprise and small office/home office customers that competes with on demand printers (â??ODPâ??) in the UK and Ireland such as high street digital imaging and photocopy bureaus, small commercial printers and print shops. A wide range of full colour print items such as leaflets, brochures, booklets, posters, postcards, promotional cards, invitations, letterheads and business cards are offered in its buying guide which is made available to existing and prospective customers.
Service is provided within the UK and Ireland from:
�· its estate of 25 high street Stores (of which 11 are Group-owned and 14 are franchised);
�· 57 â??bolt-onâ?? franchises within established print, copy and graphic design shops whereby an established ODP business is embraced as a distribution partner, with a licence to utilise the Printing.com brand and system; and a division which markets to various accounts under the banner â??Printing.com@the Agencyâ??.
The Printing.com model is based on a centralised Production Hub (â??Hubâ??), located in Trafford Park, Greater Manchester, coupled with localised outlets. No lithographic printing takes place at Printing.com Stores, instead the Groupâ??s Hub prints orders with the entire process is controlled and linked to the Stores by â??Flyerlink�®â??, the Groupâ??s proprietary software, which operates over the Internet. The centralising of production allows many independent print orders with a common specification to be grouped together thereby exploiting the usual efficiencies of a mass production process. It is this alternative business structure that gives Printing.com its competitive advantage.
The outlet network
The Group operates through a network of Printing.com-branded Stores across the UK and Ireland together with a wider network of Bolt-on franchisees. The majority of the Stores are operated under franchises. Each Store sits within a territory in which Bolt-on franchises can be granted to established printers, copy shops and graphic designers. It is the responsibility of the Store to seek out and support new Bolt-on franchisees.
Franchised Stores and Bolt-on franchise outlets offer Printing.comâ??s products at the same price point as any Group-owned Store, with the Hub charging a predefined â??transfer priceâ?? for the fulfilment of each order. This ongoing income in respect of each order provides the majority of Printing.comâ??s income stream from franchises.
Ongoing expansion is founded on the Groupâ??s Territory franchise driven business model. This model has been configured in such a way that each additional outlet should yield a positive contribution at all stages of its operation both before and after opening. The model is designed to insulate the Group from the negative contribution that would normally be incurred in the initial stages if a new Group owned outlet was opened. The model is also designed to insulate the Company from the negative contribution that may be incurred by an under performing Store.
Across the UK 66 Territories have been defined with each Territory being designed to accommodate the development of between three and eight Bolt-on Franchises. If successfully exploited, this structure could result in the Printing.com estate exceeding 300 outlets.
The benefits of adopting a franchise strategy
Prior to 2002, all outlets were directly operated by the Group whilst the details of the business model were being developed and refined. However, since then a franchising strategy has been adopted to facilitate a rapid rollout of the outlet network whilst reducing the investment required and the exposure to financial risks in such a rollout.
The Directors consider that the principal benefits are that:
�· the finance for further outlets is provided by the franchisee without depleting the Groupâ??s cash reserves or exposing the Companyâ??s shareholders to potential dilution from further issues of Ordinary Shares;
�· each new franchised outlet should make an immediate positive impact on the Groupâ??s earnings as the initial support and licence fees should cover the corresponding training and support obligations and contribute to investment in central infrastructure thereby insulating the Group from the negative contribution phase of a new Group owned outlet; and
�· the Group is shielded from the negative contribution from an under-performing outlet.
In addition, the Directors believe that expanding through franchising allows the Group to focus on the provision of a robust and scaleable Hub and infrastructure without being distracted by the details of day to day Store operations.
Market and competitors
The UK ODP market is estimated to be worth in excess of �£1 billion and may be in excess of �£2 billion if small commercial printers are also taken into account. With the exception of the Kall Kwik and Prontaprint chains the sector is highly fragmented.
The Directors believe that there are significant barriers to entry for new competitors to the Group including:
�· that the Directors are not aware of any â??off the shelfâ?? software package that replicates the functionality of Flyerlink�®;
�· that the high volume of orders that are required to efficiently and profitably exploit the Printing.com centralised model would not be available to most of the Groupâ??s existing competitors;
�· that the Groupâ??s larger competitors would have to radically restructure their business models to replicate the Printing.com model; and
�· no other competitor has experience of operating all of the components of the Printing.com business model.
Financial track record
The financial track record of the Group is below:
Year ended 31 March
2002 2003 2004
�£000 �£000 �£000
Turnover 5,598 7,694 9,328
(Loss)/profit/ on ordinary activities before taxation (776) 511 941
Shareholdersâ?? funds 194 2,123 2,718
Loss/earnings per share (post notional tax charge) (2.41)p 0.92p 1.69p
Number of outlets 38 50 70
Until 2002, losses were incurred whilst Printing.com was gaining sufficient critical mass. Profitable trading was achieved during the year ended 31 March 2003 as more units, predominantly franchises, were added to the estate and this profitability has progressed as the number of franchised outlets has further increased during 2004.
Prospects
The Directors believe that additional ongoing revenues will be derived from the current pipeline of new franchises and that additional suitable franchise partners will continue to be found. The Hub still has sufficient unutilised capacity to permit additional revenues to be enjoyed with only a marginal increase in central overhead. With newly launched, franchised outlets expected to yield increasing contributions and the strong pipeline of prospective franchisees, the Directors are optimistic about the future prospects of Printing.com.
The Directors remain committed to the previously stated objective of achieving a total of 175 outlets by September 2005. Future plans include the development of a subsidiary Hub in Kent which would be well positioned to service a network of outlets in north-western Europe as well as southern England. The Directors believe that there are also opportunities in the longer term to transfer the Printing.com model to North America and other territories by means of master franchise agreements or joint ventures.
Potential tax reliefs for investors
The Company has obtained approval in relation to previous share issues that it is a qualifying company for the purposes of investment under the EIS legislation. The Directors anticipate that the Company will continue to be treated as a qualifying company following the proposed transactions, although no guarantee can be given in this regard.
Directors
Reginald George Hardie FCA, FCT (age 65) - Non-executive Chairman
Commonly known as George, he qualified as a Chartered Accountant in 1965. After being appointed as group financial director of Richard Johnson & Nephew Limited (which subsequently became Firth Rixson plc), he became joint group managing director in 1989. In 1994, he led the buyout of six subsidiaries of the Firth Rixson group. Apart from the Group, he is a non-executive director of three other companies. George has extensive experience in financial and general management, in both large and small companies, and in mergers and acquisitions. He joined the Group in 2000 and is chairman of the Remuneration Committee.
Anthony Rafferty (age 36) - Chief Executive
Tony studied electronics and electrical engineering at Sheffield University from 1987, developing an interest in marketing and promotional activity whilst managing Student Union entertainments. He worked in First Leisure plcâ??s Superbowl division briefly in 1990 before operating as a self-employed print broker. In 1992 he founded a printing company which subsequently became Printing.com Europe Limited and which was acquired by the Company shortly before its admission to Ofex in 2000. He has shaped the Group over the past decade and devised its business and sales models. He also designed and developed the Flyerlink�® system which defines the Groupâ??s work flow.
Alan Quine Roberts ACMA (age 48) - Finance Director
Alan qualified as a Chartered Management Accountant in 1981 at Moon Brothers Engineering Limited. Following a period as Divisional Accountant at Edward Billington Group Limited he joined Dalgety plc as group accountant for its Merseyside production facilities. He moved to CQR Limited in 1987, which was acquired by Expamet International plc in 1988 and was subsequently appointed as financial director and company secretary of that company in 1991. After Expametâ??s acquisition by Channel Holdings plc in 1995, he was appointed operations director in 1997. He joined the Group in 1999.
Peter Robert Gunning MA (age 29) - Operations Director
After obtaining his Masters degree in accountancy and finance from Heriot-Watt University in 1997, Peter joined the Design Foundry Scotland Limited where he was responsible for the development of a variety of corporate accounts. Since joining the Group in 1998, he has been responsible for developing the Printing.com store concept and the associated marketing and operations infrastructure. He was appointed to the Board in 2001.
Leslie Alan Wheatley FCA BSc (age 52) - Non-executive Director
Les joined Liverpool Football Club and Athletic Grounds PLC in May 2000 and was appointed to the Board, as Finance Director, in August 2001. Prior to joining Liverpool he was Chief Operating Officer at Newcastle United PLC. He gained logistics and change management experience at Ernst & Young before leading the employee buyout of GM Buses (South) Limited, where he subsequently became Chief Executive and which was sold to Stagecoach Group PLC in 1996. Les brings experience in the fields of corporate governance, finance, logistics, change management and affinity marketing to the Board and is Chairman of the Audit Committee. He was appointed to the Board in 2000.
Background note:
Printing.com
Printing.com offers a broad product range including leaflets, postcards, promotional cards, invitations, letterheads and business cards to consumers and small and medium sized companies. Unlike its competitors, Printing.com Stores do not have any printing equipment on location. The Companyâ??s printing and ancillary equipment is based at the centralised Production Hub with the head office in Manchester. All work is produced in full four colour rather than two colour. Delivery to the customer is usually within three days. The printing sector has traditionally been served by smaller printing companies or other On Demand Printers and is estimated to be worth some �£1 billion.
Printing.com has four routes to market: Franchise Stores, Bolt-on Franchises, Company owned Stores, and via the Companyâ??s website where online design and ordering are facilitated.
Printing.com Outlets
Company Owned Stores Region Town Post Code
Manchester Store North West Manchester M3 4BQ
Sheffield Store North East Sheffield S1 4GF
Hull Store North East Hull HU1 2AG
Nottingham Store Midlands Nottingham NG1 6DQ
Birmingham Store Midlands Birmingham B5 4JL
Ealing Store London Ealing W13 8SB
Bristol Store South West Bristol BS1 3LZ
Edinburgh Store Scotland Edinburgh EH3 6QY
Edinburgh Store Scotland Edinburgh EH3 9LY
Dublin Store Ireland Dublin Dublin 2
The Hub North West Trafford Park M17 1FG
Franchised Stores
Plymouth Store South West Plymouth PL4 0AU
Liverpool Store North West Liverpool L2 2HF
Newcastle Store North East Newcastle NE1 5EE
Glasgow Store Scotland Glasgow G3 8LZ
Oxford Store Midlands Oxford OX2 7HT
Ashford Store South East Ashford TN24 8UU
Leeds Store North East Leeds LS1 3DL
Central London Store London Baker Street NW1 6UY
Hampstead Store London Hampstead NW3 5HS
Lancaster Store North West Lancaster LA1 1XN
Watford Store London Watford WD17 1RA
Harrow Store London Harrow HA7 2QJ
Leicester Store Midlands Leicester LE1 1LB
Reading Store London Reading RG1 4TA
Operational Franchises Region Town Post Code
Color Co. - Bristol South East Bristol BS1 5HH
Color Co. - Edinburgh Scotland Edinburgh EH2 2PA
Expocentric - Wardour London Soho W1V 3AU
Color Co. - Canary Wharf London Canary Wharf E14 4PZ
Expocentric - Dover London Mayfair W1X 3PH
Color Co. - Chelsea London Chelsea SW10 0XF
Colour Box Design North East York YO23 1NA
Granthams - Preston North West Preston PR1 2UQ
Granthams - Blackpool North West Blackpool FY1 4PE
Bradbury Graphics Northern Ireland Belfast BT7 1BS
Print Design Warehouse North West Marple SK6 7AD
Full Colour Store London Clapham SW17 9SH
Kaleidoscope Midlands Leamington Spa CV31 1BZ
TRS Graphics South East Croydon CR2 6EB
RAS Limited North West Chester CH3 5AG
Xpress Creative Northern Ireland Newtonabbey BT36 4PU
Print Express London Colindale NW9 5DL
0800 Promote London Finchley N3 1TR
Printer Net Services London Wimbledon SW19 8TY
Albry Printing Company Midlands Wallingford OX10 9DA
Pollyprint London Ealing W5 4UA
Final Imaging Midlands Sawtry PE28 5SB
Felix Communications South East Rochester ME2 4HZ
Silverback North West Isle of Man IM1 2LA
Mailboxes North West Stockport SK1 1LE
Dove Signs Midlands Nuneaton CV11 6GX
Platinum Promotions Midlands Bingham NG13 8AQ
Multiprint Midlands Normanton WF6 2AF
Anneset South West Weston-Super-Mare BS23 3DE
Quantum Publishing North West Liverpool L18 6HB
London Print Company London Shaftesbury Avenue WC2H 8EB
Custard Creative Midlands Northampton NN3 6WL
Presto Print South West Christchurch BH23 1QD
Printhouse London Nottinghill W11 3HT
Malthouse South West Taunton TA1 3EP
Palladian Press South East Colchester CO2 7EZ
Cre8ive Design Midlands Kenilworth CV8 1JD
For Colour Midlands Newark, Nottingham NG24 1LE
0800 Promote London North Finchley N12 9QG
Sign It Midlands Beeston, Nottingham NG9 2AY
Print House Direct North East Bishop Auckland DL14 0LZ
Ozmedia Print Midlands Barrow Upon Soar LE12 8JH
Blah D Blah North Wales Bangor LL57 1NY
Mooney Media Northern Ireland County Down BT32 4QD
The Factory North East Leeds LS12 2DS
Printel North West Widnes WA3 8LG
ER Design & Print North West Alsager CW2 5PR
Studio Direct South East Chelmsford CM2 6HE
Pewter Design Midlands Market Harborough LE16 7DS
Lussh Creative South East Chesterfield S40 2BY
St Ives Quickprint Midlands St Ives PE27 3WS
Maskerade Design North East Sunderland SR2 7PR
Impact Advertising North West Timperley WA15 7SP
Pro-Actif Communications North East Darlington DL3 7TD
Masterprint North West St Helens WA10 1DH
Artichoke Design Midlands Birmingham B18 6NN