The Semper International Blog

First, Thank You all for the huge number of responses. 

We honestly use this survey as a benefit for the industry in general 

and not for commercial reasons.

 

I think we all can be glad the first quarter is over; except for the fact that the 

second quarter, so far, seems to be even worse then the first. The last 2 

months have seen a severe contraction in most areas of the economy and 

in all geographic areas. The Fed’s actions last Summer came several sessions 

too late to avoid this contraction. The relentless negativity from the media over 

the last two years reached a crescendo of hysteria in August that has scarcely 

abated till just recently. We all are grateful for the news media’s recent more 

positive bias!!

 

A Big question now is have the stock markets hit bottom? If so, then the 

recovery will be approximately six months from that bottom. If you look at the 

current stock charts for Apple, the Dow and the NASDAQ over the last two 

years, It appears that we have hit the bottom and are on the upturn (barring 

another terrorist shock). If the charts are correct, then we should start to see 

improvements as early as September - October. Flex Staffing tends to be a 

leading indicator, like the stock market, so we at Semper should see improvement 

three to four months after the bottom. We will let you know. 

 

Another BIG change in the Industry this year was the demise of Annual report 

printing. One manager I spoke to, mentioned that last year they printed 100 Annual 

reports- this season only four. The result of the SEC allowing companies to post 

the reports “online.” This single change has had a huge negative impact in that 

segment of the industry. I think of what will happen to Blockbuster and the movie 

theatre chains once the movie studios release first run movies directly online. It 

will likely be a similar issue- MAYBE I should sell any holdings.

 

Now to the survey results:

 

As you recall, the results are in the new easier to read and understand format 

which reduces the need for commentary.

 

The question on profitability I am sure is high on everyone’s list. The trend line is 

clearly indicative of the stress we would expect to see ; this is a MACRO issue 

not just your firm.

 

The question on profitability I am sure is high on everyone’s list. The trend line 

is clearly indicative of the stress we would expect to see ; this is a MACRO issue 

not just your firm.

 

The hiring question reinforces the above two responses. Hiring has dropped off, 

but it seems staying at the same staffing level is the course most firms are going 

with. Maybe others agree that things will improve sooner than later. (br>

Clearly, keeping expenses limited is on everyone’s mind, with base pay and benefit 

costs showing big jumps in concern from respondents. Supply costs in general are 

now the largest percent concern of firms as opposed to technology issues.

 

In closing, we see positive news here in the expectations of sales for this quarter. 

Take a close look at the actual results and feel free to ask questions or give 

feedback - daver@semperllc.com

 

Click here to view the Survey:

http://www.semperllc.com/printing_survey/Semper_Survey_2008_Q2.pdf

                                                                  

Thank You

Q1 Survey Analysis - January 2008We have reorganized the survey for this quarter. The new format makes it easier for you to track the changes historically, allowing you to spot trends. It also reduces the need for our commentary.The feds surprise reaction today is exactly the tonic that appears to be needed based on this survey-This survey shows several distinct trends:-This is now the third quarter in a row with a significant drop in companies reporting profitability.-The expectations for the coming quarter has dropped now for the second survey.-The decrease in hiring and the number of layoffs have both increased over the last survey - Both have accelerated.On a positive note- Companies are reporting a strong increase in orders over the last two weeks and this is the first survey in a while that Technology is less feared.The Quebcor news has many pluses and minuses for the industry as clients potentially shift vendors.If you have questions or would like us to add a question or topic please feel free to contact me directly - daver@semperllc.com Click here for the Results PDF 

We have reorganized the survey for this quarter. The new format makes it easier for you to track the changes historically, allowing you to spot trends. It also reduces the need for our commentary.

This survey has a few notable items: This is the second quarter in a row with a significant drop in companies reporting profitability. Keep in mind our industry is not alone so watch your AR closely.

The question relating to labor costs again highlights base pay increases causing concern. This type of pricing pressure is significant for its inflationary implications.

Many respondents indicated they expect business to decrease or stay the same, with a full 19% indicating they did not expect increases. The last quarter of the year traditionally is a busy time. We noticed last year for the first time in many years, that the busy-time failed to occur. We wonder if others noticed and suspect a trend?

If you have questions or would like us to add a question or topic please feel free to contact me directly - daver@semperllc.com

Click here to view the Survey, PDF Format

The goal of your business is to make money. You need to show a profit on your P & L or all other business goals are moot. One obvious action is to cut expenses. But, At some point you need sales as well. We all know what a P&L looks like pluses and minuses are simple: sales are a plus and expenses are a negative. The goal is to have sales higher than the expenses. At what point does cutting expenses start hurting or become ineffective? When does looking for the lowest price end up costing the most?

Basically the above questions are similar and I’m using them to help round out the discussion. Lets use this current mortgage mess as an example. A homeowner looks to get the lowest priced mortgage possible; they find a 7-year ARM they can switch into. Four years ago that would mean $850 a month on a $250,000 note, the deal is done. In hindsight, maybe not such a great move. Here is another example: a new home buyer purchases a house for $250,000 with no down payment, a fixed rate for 7 years and interest only payments. They get a great LOW monthly payment and one would expect a first time buyer to make the minimum payments allowed. This would also allow their standard of living to rise higher than it should. Both of these are examples of bad decisions. The impact will, of course, be felt by all of us since many people made these bad decisions- IE lowest cost per month. In printing this happens many times with our clients, they play us off each other price wise, and we let them. It seems to me, it is too easy to get caught in a downward spiral with printers always competing on price alone. One solution is to buy all your competition and then drive the rest of the printers out of business. This oligopoly type situation sounds familiar, no?

Printers themselves are forced to push costs down to survive. With labor costs, sometimes they push to the point that they cannot attract the skills they need. Check out this blog: CLICK

In the end we can never cut expenses as much as we need to increase sales. I am a strong advocate of running a lean operation, but sales are by far and away the more important part of that P and L equation. And sales, is about quality, reliability, relationship, trust, and value. The sooner we get our clients and ourselves to start weighing the whole picture the better.

Just some thoughts.

Q3 Survey Analysis - August 2007

The second quarter responses are now in and they indicate a large drop in profitability last quarter. Respondents reported a 17% drop from the previous period. If your firm experienced a similar situation, you’re not alone. Printing Impressions reports RR Donnelley with a 69.4 million dollar loss for the time significantly.

The question related to sales volume the two weeks before the survey showed a 7% drop in respondents with increased sales. 31% indicated an increase in sales while 49% indicated sales held as is and 21% showing a decrease in sales. Respondents reporting a decrease also dropped.

For the 3rd Quarter a full 72 % of companies feel sales will increase, 23% feel sales will stay the same and 5% are expecting a decrease. This is an overall improvement over the last quarter’s responses. Employers are staying the same regarding hiring, hedging their bet that business will pick up in the coming quarter.
We see some changes in investing in new plant and equipment. Most areas are either staying at the same level or increasing capacity. Under the current economic environment we question the wisdom of this. We understand investing to meet client requirements but the overall capacity of the industry has been growing compared to demand for many quarters now. Several respondents even feel “Too much capacity in this competitive industry” is the biggest concern facing their business. We feel this is part of the reason the consolidations are hitting with such force.

Last quarter we started asking what business segment had the most pricing pressure from clients. Offset had the heaviest pressure at 47%. Strangely this survey shows a drop for offset to 37% and an increase in the copy segment from 18% to 45%. This could be a seasonal variation. As we continue to collect data, we will see trends more clearly.

Two more areas of interest include the question regarding labor costs and hiring issues. Labor costs showed a much higher rate of concern on health insurance costs than the last quarter. We feel that this is due to the time of year, renewals typically hit mid-year so respondents are more aware of the pricing. The second highlight is that hiring issues jumped to the forefront of concerns facing businesses. Please note that labor costs have a separate area, so this section shows an increase in the scarcity of qualified labor. We have recently written an article that may be of interest to companies facing this type of issue: CLICK HERE

In summary, we feel this quarter will likely be a trying one for our industry (55% chance of downturn) as well as the economy in general. Some positives would be a surprise rate reduction by the Fed, or at least an improvement of the bias from inflation to growth. A continued reduction in the price of fuel would also have a positive impact. We feel the current debt scare is actually causing a serious hesitancy in the economy. People are truly concerned and aware that the shake out will take quarters, not weeks, to correct. We feel flexible costs and production planning are the way to go over the next quarters to help ride out this period.
We do hope our prediction is incorrect or that external events act in a very positive manner countering the hesitancy we see. May your quarter be a good one!

Housekeeping issue: we remind all, this quarter’s survey comes at the peak of the vacation season so the pool of responses is at it’s worst. We ask that each quarter you help all of us by immediately responding when you see the survey email. We are always looking for more people interested in taking the survey - referrals are welcome!

Review the report here - CLICK HERE