New data from Sageworks, a financial information company, show that commercial printers are finding a way to grow sales and profits despite the shift to digital alternatives such as eBooks and online communication.
Sageworks’ financial statement analysis of firms that provide printing and related support activities also indicated improving profitability in recent years, as well as stable financial metrics related to liquidity.
“Sales growth has been fairly constant over the past five years at somewhere between 3 and 5 percent,” said Sageworks analyst Jenna Weaver. “In the year ended January 20, sales increased about 4 percent. That shows us this industry is still growing its revenue, even though the popular opinion is that this industry is dying or really struggling. Our data shows that’s not the case, at least with these private companies.”
Weaver noted that net profit margin has increased to 5.2 percent from 1.4 percent four years ago. “That’s a real positive for the industry,” she said. Data on profit growth for the most recent period wasn’t yet available, but Sageworks’ preliminary results indicate another year of growth, which would follow four years in a row of double-digit percentage gains in pre-tax net profit. Weaver said the factors driving the sales increases and improved profitability are unclear, although outside reports have indicated some printing companies are diversifying, relying more on added services such as shipping, packing, signs, and graphic design. She noted that printing companies in Sageworks’ database have grown sales and net profit margins more slowly than have firms in other industries. Liquidity ratios for the printing and related support industries have been positive, and the debt-service ratio has improved, she added.
“Overall, while this industry’s ratios may be a bit lower than some of our shining stars or even the average for all private companies, there are no glaring indicators that they’re not going to be able to meet their debt or that they’re losing money,” Weaver said. “They are still growing sales, and they are improving profits.”
Firms classified within the printing and related support activities category include: commercial screen printers; lithographic, flexographic and gravure printers; book printers; and firms providing binding and prepress services. Government statistics show the number of establishments and employment in the industry have each declined by more than 20 percent since 1997.
Most commercial printers in the U.S. are privately owned and have fewer than 10 employees, and the four largest firms in the fragmented industry account for less than a quarter of industry revenue, according to industry and market research firm IBIS World.
In September, the National Print Owners Association said its survey of member companies, which offer printing, copying, mailing and sign-making services, found that nearly 44 percent of firms projected significant to moderate sales increases for 2014, with all respondents projecting an average 2.4 percent increase in sales.