New initiatives

The search for new or replacement business prompted a review of skills sets to see what additional products or services we could offer our broad customer-base.

Procurement skills are implicit within a solutions-based printing and related products business that sources various consumables and develops relationships in many industries. We therefore promoted our procurement service, going beyond printed materials to items that may or may not involve a printing solution, including protective clothing and even cups and saucers.

To further develop our partnering and consultancy platform, we introduced our Smartpaper website. The site invites visitors to get in touch with Lithotech if they are concerned about cost pressures in the paper and printing industry. Our consultants make clients paper-smart while saving them money. We not only highlight ways of reducing printing costs through access to our advanced processes, we can use our warehousing and distribution capacity to increase cost-efficiency.

We continued to grow the market for full-colour digital personalisation of mail-pieces, especially for high-end work. In the two years since we introduced this technology, we have established ourselves as industry leaders. Our ability to engage in dynamic composition on the fly when working on high-volume direct mail runs allows us to achieve unique differentiation for many categories of customer. Significant new business gains were achieved, including a contract for mailing solutions for Johannesburg metropolitan council.

The recapitalisation of the Silveray factory achieved the anticipated benefits and helped us restore our leadership position in the stationery business. The advantages of our new technology were evident in a successful back-to-school season.

To support our one-stop positioning we established a small polypropylene extrusion factory to produce transparent sleeves, wrapping and file dividers. The plant uses locally produced raw polypropylene rather than imported material. Polypropylene is more environmentally friendly than plastics.

The acquisition of Pretoria Wholesale Stationers at the end of the period will strengthen our position in major metropolitan markets.

Risks to the business

Insolvencies moved higher as the economy contracted, but our debtors’ book is well managed and credit risk is well controlled. Currency market risk has increased as we look to win export orders to compensate for a sluggish domestic market. It is our policy to buy forward cover.

Technology risk is well managed via Eforma.

The major long-term risk remains limited access to skills as industry-wide training has collapsed. The problem is not critical at the moment because of falling demand, but remains a strategic concern.

Organisational culture

The resourcefulness of local teams came under the spotlight in a difficult year. Our people are adaptable and resilient. Their ability to innovate and create new solutions for customers created competitive advantage.

Future

A challenging first half is in prospect. Improvements in volumes and utilisation are anticipated in the third and fourth quarters. The World Cup effect will be positive for several businesses. Export efforts into Africa and the international project market also look promising. We believe a single digit percentage increase in revenue is achievable, with a corresponding rise in trading profit.

We have rightsized our business without jettisoning key skills and are well placed to optimise any upturn.

On a three- to five-year view, we foresee sustained growth. The business has been successfully rebalanced to reduce dependence on traditional print products. Personalisation business is a growth area, as is electronic bill presentment. Pressure on the labels business is intense at the moment, but there is potential for strong growth once the economy recovers.

We remain alert for acquisition opportunities.

PRINTING AND RELATED

Personalisation and mail

The team put in a strong performance, achieving pleasing growth in both revenue and trading profit. Lithotech Afric Mail is strongly placed as South Africa’s leading provider of high-volume mailing solutions.

Our full-colour digital capability is being embraced by major organisations and the business is well positioned to maintain momentum in the year ahead, especially if the economy shows signs of recovery.

Printing and conversion

The business came under increasing pressure. Volumes came down drastically in the second half. Big reductions in marketing spend drove down brochure production and other print work.

Sales and distribution

Teams experienced mixed fortunes. Demand for printed products was down, but demand for fulfilment services rose as customers looked to us to provide solutions in a tighter market.

Alternative products

E-mail business continues to enjoy sustained growth, albeit from a low base. Public acceptance of e-mail statements grows year by year. Email Connection is the market leader and maintains strong growth through high levels of customer retention matched by incremental growth at the expense of (or as a supplement to) traditional statement solutions.

Packaging and label products

The Rotolabel acquisition has bedded down well. Mixed results were achieved. Lower manufacturing output adversely affected packaging operations while de-stocking by many customers put pressure on volumes. Margin squeeze became intense in the second half of the year.

Stationery distribution

The business put in a strong showing and gained market share as the benefits of recapitalisation and new technology became evident. As the year progressed, margins came under growing pressure. Consumers began to buy down.