Cimpress has received an investment of $300 million from Apollo Global Management, a private equity provider that has been active since the pandemic struck and lockdown has slowed business activity.
Like the small business sector that has been hardest hit, which Cimpress focusses most of its business on, the company has also been hit hard by lockdowns in various countries around the world. Until the end of February, the company says it was on course to meet projections with sales up slightly on the previous year.
But March ended with sales 10% lower than the previous year and at the end of April the company was tracking around 40% lower, though it points out that the impact varies according to country and by product. In preliminary figures for the first three months of the year (Q3 in the Cimpress financial year), sales were $598 million, down 10%.
The immediate action has been to slash advertising, furlough staff where possible and close some facilities in order to save cash. It has also imposed changes to working practices to keep staff safe, ranging from deep cleans of facilities, monitoring of body temperatures, home working and the compulsory wearing of face masks or shields while at work. This action will save $140 million over the year.
But it has not been enough. The company warns that it “expects to experience cash outflows from working capital as revenue declines”. In short it will be trading at a loss and drawing on a working cash pile that stood at $437 million. The loss for the quarter is put at $88 million following the inclusion of $101 million of impairment charges.
The money from Apollo will be used to part pay back a loan, so is among a number of measures to reduce outgoings. The company has also sold its stake in online textile design site VIDA back to the management team, just two years after taking it on.
The Cimpress share price rose 23% on the announcement, recouping some the damage done by the pandemic. Shares had previously fallen 50%. It is taken as an indication that the core online print and mass customisation business is sound.
This is something that CEO Robert Keane argues, commenting: “We have positioned Cimpress to stay on offense during and after this pandemic by taking actions that allow us to continue to fund key projects that we believe will benefit our customers and long term shareholders.”
The company is continuing to invest in technology, productivity and quality enhancements. It will also take on people with the right level of experience and talent while curtailing general recruitment and removing some positions permanently as part of the reorganisation measures.
The company is confident that it has the cash to survive, even if the impact of the pandemic is worse than management anticipates. Says Keane: “Even though deep economic recessions are painful, they also create opportunities and accelerate competitive advantages for companies with strong business models that focus on execution, invest in key projects and improve customer value. Our recent actions ensure that Cimpress remains financially robust during these uncertain times so that we can do exactly that.”
The crisis offers opportunities for Cimpress, says CEO Robert Keane, even though it is suffering s ashore decline in sales revenue. The company has attracted an investment from private equity and is on the offensive, says the CEO.