Survey of label companies shows optimism in consolidation

BPIF McInnes Corporate's managing director Marcus Clifford presented the results of a recent survey of UK labels companies regarding their strategic intentions at last week's meeting of BPIF Labels special interest group at Xaar Cambridge, the leading manufacturer of ink jet print heads.

Seventy per cent of respondents are expecting consolidation in the sector to increase in the next two years of which 45 per cent believe the process will be mainly driven by insolvencies compared to 47 per cent who cite merger and acquisitions as the main force: ‘Over 55 per cent of companies in this 500 million market are actively pursuing or currently considering a merger, acquisition or disposal strategy,’ said Marcus Clifford. ‘Most are looking for businesses to complement or supplement their own within the labels and packaging sector in the UK although a small proportion is looking overseas to the Continent.

‘It was particularly pleasing to see that 56.5 per cent of companies had undertaken a strategic review to help formulate a plan of action and it certainly shows more management time is being spent on strategic issues.
‘However whilst more than half of the respondents were optimistic or very optimistic about their own businesses, with only 20 per cent pessimistic, only 12 per cent of respondents were optimistic about the sector as a whole.’

The BPIF McInnes Corporate survey was supplemented by sector specific data from the BPIF’s own Printing for Profit survey report which confirmed that, whilst overall the sector performed below the national average for the printing industry, there are some extremely wide variations in performance. Over the past 10 years, larger companies have been growing faster than smaller companies (4.2 per cent compared to 0.1 per cent) whereas on average smaller companies are more profitable (9 per cent compared to 5 per cent).

‘It’s clear that there is an opportunity for companies to use consolidation effectively to boost company performance and shareholder returns in this sector, however it must be underpinned by a clear and robust strategic plan whether it be for growth, differentiation or a new business model,’ concluded Mr Clifford.

The online survey was sent to a wide range of UK companies alongside members of BPIF Labels and over 40 returns were received representing approximately 30 per cent of the UK roll label market.

BPIF McInnes intend to develop this survey across other sectors including, packaging, screen and digital, finishing and binding and publish an annual update on the structural and strategic changes that are taking place.

The meeting, which was hosted by Xaar at Jesus College, Cambridge and included a tour of their R&D facilities, also heard from their Business Development Manager, Peter Addington, about the current and future developments in ink jet print technology.