12 August 2018 Business

Subscription business starts to roll for Heidelberg

Subscriptions are core to Heidelberg's digital transformation and this has had an impact of the company's figures for the first quarter of the financial year.

The average cost of a Heidelberg ‘Pay As You Go’ subscription contract will be around €1 million a year, giving the 30 contracts that the company hopes to sign in this financial year a cumulative value of €150million over the five-year duration of the contract.

And customers are queuing up to sign the innovative deal, more a pay per click digital press model than an equipment plus service contract package that is the traditional way of selling print production equipment. This will remain the dominant way that printers get their hands on new Heidelberg presses. The Pay Per Use contract covers use of the press, consumables and consultancy advice designed to drive up productivity, so has been considered most suited to printers with a lower volume of sheets per press.

However, one of the deals signed in the first quarter of the new financial year is for two presses for a Turkish packaging printer covering a B1 press and Heidelberg's largest format VLF press. It is dealing with high demand and says that “numerous contracts are currently in the process of initiation”. At the recent AGM, CEO Rainer Hundsdörfer said the company had identified 600 customers as prospects and was in negotiation with around 100 of them.

These are adding to the company’s order backlog (up to €714 million from €603 million)and rise in incoming orders. In Q1 new orders reached €665 million (€629 million), a rise of 6% over a quarter which covered the Print China exhibition last year. Sales were up 9% to reach €541 million (€495 million).

The subscription model is at the core of what Hundsdörfer has called the “digital transformation” of the business. The press will be always monitored for faults and to optimise performance. Ordering of replacement parts and all consumables will be automatic, part of the industry 4.0 strategy. It had sold 400 of the Push to Stop technology generation presses by the end of the 2018 financial year, equipped to operate in this way.

The equipment side of the business, now positioned as Heidelberg Digital Technology, with a rise in sales to €314 million (€272 million), was responsible for most of the growth. The Heidelberg Lifecycle Solutions division, responsible for consumables and software, notched a sales rise to €226 million (€222 million).

Operating earnings increased to €20 million (€14 million), with pretax products of €2 million. It keeps Heidelberg on course for the medium term target of €3 billion in sales. As well as subscriptions, digital printing is up, led by the Primefire 106, which is now shipping at the rate of one a month. Labelfire is in full production with at least 15 installations complete.

Hundsdörfer says: “The strong customer demand for our new subscription portfolio and digital packaging printing presses has exceeded our expectations.

“The establishment of the new business models is proceeding to plan and will at first make a relatively modest contribution to net sales and result, albeit one that will increase significantly in the medium term.”

Gareth Ward

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Rainer Hundsdörfer

Rainer Hundsdörfer

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