23 February 2020 Business

And then there were two as one third of Heidelberg's board departs

It can look like the body count of a murder mystery novel, but the departure of digital director Ulrich Hermann is an entirely logical response to the way Heidelberg is changing direction, the company says.

There is a simple reason why no UK printer has yet signed up for a Heidelberg subscription: Brexit.

“Because of that nobody would buy a five year contract in the UK right now,” says a Heidelberg spokesman. But elsewhere the subscription model is moving into gear. Currently, the company has 70 customers signed up and will have more before the end of the financial year on 31 March, though short of the 100 target. “It’s growing and demand is there, and we have signed deals in all territories,” he adds.

This, however, is not as pressing a problem as the negative cash flow. Heidelberg has to reverse this or find outside money to repair the balance sheet and pay the bonds as they mature over the next few years. The company has put around a third of its giant Wiesloch site on the block, aiming to attract buyers wanting to use redundant factory space for a high tech industrial park. There will be further sales of non core assets like Hi Tech Coatings.

The announcement of the 2020 Speedmaster generation four months away from Drupa is part of this drive. The exhibition falls at the end of the company’s first financial quarter. Waiting until the show leaves only nine months for the new models to have the necessary impact on sales. Alternately, the company will have to find an outside investor to either acquire the business or inject the necessary capital. It already has substantial shareholders in Ferdinand Reutsch, previously owner of Gallus, and Chinese manufacturer Masterwork. Both are looking at on-paper loses as Heidelberg's shares have dropped below €1 each.

The overall direction of the business is not changing despite the departure last week of its digital director Ulrich Hermann, which leaves a board comprising CEO Rainer Hundsdörfer and CFO Marcus Wassenberg, who only joined the business in September last year. The pair will report to supervisory board chairman Dr Martin Sonnenschein, another newcomer. There appears no rancour to Ulrich Hermann's unexpected departure. His picture was sent out with the release and he has spoken openly about stepping away from the business at this point.

And they will head a seven member executive committee, staffed mostly by employees with longer experience. The only name currently public is Ludwig Allgöwer, as head of sales and marketing. Other positions will take responsibility for product management, research and development, production, new business models (including subscriptions), service and financial control.

The new structure will officially take effect in the new financial year, ending a reorganisation that has seen the departure of product director Stefan Plenz, a long-term Heidelberger.

"When there was a business with 25,000 employees we needed four on the board to run it. Now it is a single segment business with 11,000 staff. The board does not need to be as large,” says the company. The idea is that the executive committee will be able to respond with greater agility and will continue the drive to make Heidelberg a digital business, built around data and service revenues as much as machine sales.

Over the next 18 months the focus must be to achieve financial stability and a transformation into a business that is sustainably profitable. As well as asset sales, the company is prepared to jettison unprofitable activities, currently accounting for 20-25% of revenues. The “evaluation of options for action” is at an advanced stage, says the company.

This will leave the core business stronger with Heidelberg leading the way to the smart print shop of the future. The product line up will be consolidated and further sharing of components to reduce the cost of manufacture will take place.

At the same time the company needs to establish the Primefire as a productive and cost effective response to the need for B1 digital printing, something that is taking longer than the company hoped at Drupa four years ago. For the coming Drupa, Heidelberg has adopted a two site approach, limiting the number of machines on the floor at the Dusseldorf Messe while running end to end demonstrations and discussions at the Wiesloch factory.

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Wiesloch will host Drupa presentations.

Wiesloch will host Drupa presentations.

Heidelberg needs to steady the ship, not for the first time in the last decade, with an increase in orders, sale of non care activities, or else finding an outside investor as the latest departure from its board is announced. The company is holding firm to its digital course despite the storms.

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