The changing landscape of the UK Print sector

Barry Sheehan | Apr 2017

Changing landscape of the print sector

The recent news that Anton Group, one of the UK’s largest sheetfed commercial printers, has fallen into administration, was yet another reminder of some of the challenges facing the Print sector. The industry as a whole is going through a period of structural change, fuelling M&A activity and a wave of consolidation.

So what is driving these changes?

The changes are driven by a number of factors which include the rise of new media and digital platforms, changing consumer habits, audience fragmentation, and content personalisation. These factors have significantly impacted upon demand for printed materials over the last five years and have implications for operators across the entire print sector:

  • Newspaper & Magazine Printing: Reduced volume circulation has led to reduced advertising sales revenue. According to eMarketer, UK print advertising spend has fallen every year since 2008, when it totalled £5bn. By 2016, the total had more than halved to reach £2.3bn. Despite print publishers improving their online offerings over the period, analysis suggests that digital revenue growth has not yet made up for the decline in print;
  • Books: Digital alternatives to printed materials such as e-books have grown rapidly over the last five years, although the rate has somewhat slowed as there appears to be a core readership loyal to printed books;
  • Retail: The rise of discounters such as Aldi and Lidl has increased margin pressure on the Big Four (Tesco, Sainsbury’s, ASDA and Morissons), which in turn has generated price pressure on providers of PoS and other in-store display solutions. This has been somewhat offset by the growth in short term offers;
  • Direct Mailing: Across Western Europe and North America, e-billing is becoming an increasingly popular alternative to paper bills.  In the US, e-billing has grown at a CAGR of 17% since 2008 and now accounts for over 20% of all bills presented; and;
  • Print Management: Print Management providers are also facing challenges as end customers, such as large pharmaceutical companies, increasingly require providers to offer a global solution, creating the need for incumbent providers to invest in international expansion to retain clients.

So what does this mean for M&A activity within the Print sector?

As with other industries that have faced material change, companies that fail to adapt fast enough will ultimately face financial difficulties – creating organic and M&A opportunities for operators in the sector that have a more sound financial footing. Over the last year, there have been a number of examples of this, including global marketing services provider and Livingstone client, Adare Group, acquiring Polestar Applied Solutions out of administration in July 2016.

But Print sector M&A activity is not just  limited to ‘distressed’ or ‘fast-track’ M&A activity. Top line pricing pressures are leading to industry consolidation, as operators look to improve margins through greater economies of scale and other synergies. Shareholders’ desire to reduce risk and diversify revenue streams through acquisition in new geographies is also fuelling M&A, as illustrated by Germany’s Hubert Burda’s acquisition of Immediate Media, for £270m, from private equity firm Exponent in January of this year. The deal was followed by Bregal-backed Onlineprinter’s acquisition of Solopress last month, a clear sign that the UK remains an attractive geographical market for acquirers from Continental Europe.

The ever increasing desire for personalisation and customisation of products within the print industry also creates opportunities and has been a driver of growth within certain print sub-sectors. Fast turnaround print and online-to-print services, particularly in the consumer and SME space, are also in high demand. The online greetings card sector is a good example of this as growth in this market has been driven by consumers’ desire for highly personal products from cheaper and more convenient online platforms. Operators in this space, such as start-up Moonpig, have therefore experienced rapid growth and have often been targets for M&A – Moonpig having been acquired by former Livingstone client Photobox for £120m in 2011 (Photobox itself being acquired by private equity investors Epiris and Exponent for £400m in 2015).

Future Outlook

These trends are set to remain and the industry will continue to consolidate in the near term, both where there are distressed situations and where there is emerging success in areas such as fast turnaround and personalised print. Operators that successfully adapt by investing in online and digital capabilities will be best placed to benefit from the evolving market dynamics and become industry leaders in the future.

Sources: MergerMarket, FinServ, eMarketer