01 April 2018 Business

UK rides high as Heidelberg adjusts to changing market

The UK has grown service and consumables revenue while promoting the high performance of Heidelberg’s printing presses. It means a different approach to the new pay as print approach for the British printer.

Heidelberg UK is ahead of the corporate curve. The press manufacturer is changing. It wants to spread the load across consultancy and the recurring revenues from consumables and service. There is recognition that the company’s overhead cannot be shared across fewer presses shipped.

As the demand for commercial print declines, Heidelberg must either take market share from its rivals, move into new sectors or increase the revenue from each customer by increasing the products it sells them.

The decline is greatest among the smallest printers Heidelberg UK works with, says managing director Gerard Heanue, is down to serving 1,643 live accounts. “The drop is biggest in the companies with a sub £500,000 turnover. These are companies that are not investing in new technology.

“The number of medium turnover companies is increasing while the number of larger business is staying at about the same level.”

While it can sell digital presses, the Versafire machines manufactured by Ricoh do not have the margin that products it can produce itself carry, nor can it exploit service and consumables opportunities. Its B1 inkjet press is a high cost item that for the immediate future must remain a niche product.

It is migrating successfully into packaging with a strategy that includes finishing and workflow as well as printing.

But in commercial printing the pressure is on. To some extent the company is its own competition through ever more productive press heading towards Push to Stop machines.

It needs therefore to expand revenues in consumables and service and that means pushing customers to produce more sheets from the presses it has. This lies under the subscription model introduced with great fanfare at the start of this year.

It is built on observations that many customers in North America are far from productive, printing say 20 million or 30 million B1 sheets a year on presses that are capable of 70-80 million impressions per annum. As printers in the UK have proven.

The UK can also claim 12% of the consumables market for Saphira inks, blankets, plates, coatings and chemistry sold in the UK. The average for other countries, Germany excepted, is 5%. And every B1 press sold in the last three years is accompanied by a service contract as are most of the B2 machines, says Heanue.

Consequently revenues from service are up 20% in a market that is declining with a customer base that is down 7% over the last few years. “This is because the UK is a high productivity market, because the UK printer is sweating the assets and that means service contracts, supported by a network of 150 engineers in the UK. It is a big USP.” Heidelberg UK is top of the class for the shift that the rest of Heidelberg is now undertaking. Consequently it has been excused the subscription model.

But Heidelberg has not achieved three gold stars. It has been dropping market share compared to Komori in the B2 press space and to RMGT’s assault on B1 printing with the SRA 1 format RMGT 9. This has been a format thought to belong to Asia, but research has shown that many B1 printers are printing 8-up A4 pages on SRA1 sheets. The full scale B1 press is not always needed.

Add in the lower investment needed, LED UV curing and Apex Digital Graphics has created a package that has appeal to a growing number of UK printers. Heidelberg has had to respond.

Equally the gap between its ageing SM74 press and the high performance XL75 has been too great. In comparison with similarly priced B2 presses, the SM74 comes off badly. And not every printer can justify the XL75. Into this space comes the CX75.

Both presses were introduced at the company’s open house last month along with a pricing model that borrows from the subscription model, at least for these new machines. The Impression Plan is a scheme to reduce the initial cost of investment by bundling service, consumables and training to bring the capital cost down by up to 30%.

Printers will need to sign a five-year contract, promising to buy consumables from Heidelberg, to cover the element not covered by conventional finance. The press supplier will also provide its Prinect software, six days’ training a year and full service and maintenance.

But there is an opportunity, Heanue says, with these two presses where users may not be as efficient as customers for XL series machines. A customer with 12 million impressions a year will end up paying 1.8p per sheet printed, falling to 1.3p a sheet as print volumes rise above 15 million impressions a year thanks to efficiency gains and training.

With the CX75 there is also recognition that not every printer needs the performance, nor can afford the XL75. “We have been pushing for the CX75 for a number of years,” says Heanue. It is expected to replace sales of the SX74 at the entry level. While the CS92 lacks the compact format of its RMGT rival and the perfecting option, it has the advantage of printing nine A4 pages, three six-page leaflets for instance, to view.

The Impression Plan scheme will be offered after an audit of print volumes, ink coverage, average run lengths, consumables usage and shifts operated to calculate the benefit to the customer.

This will lead to an offer based on improvements in productivity from the existing levels as well as the financial commitment required. Should there be a poor month where volumes dip below the 1 million impression minimum, Heidelberg will be willing to take a three-month view on trends. Equally a break clause will be part of the contract.

While no guinea pig has been announced for the scheme, Heidelberg had spoken to target customers ahead of the open house and also to finance companies. The financial risk for its element is taken on board by Heidelberg, which means it will be careful about qualifying companies, and will ease the risk for the finance companies. Not only is their exposure reduced, the machine they are funding will be serviced maintained by the manufacturer.

After five years the printer will either take full ownership of the press, or can sell it as a relatively low impression count full service history press. The challenge for Heidelberg now is that by taking this approach it may be competing not only with Komori, but with dealers handling secondhand XL75s.

Heidelberg’s pair will fill gaps in the market

You wait for years between Drupa for a new Heidelberg press, and two come along at once – and with no international exhibition in sight.

Both new machines were on show for the first time in the UK last month, the CX75 aimed at printers looking for a good value B2 press rather than the highest productivity offered by the XL75, and the CS92, an SRA1 format press that is pitched at a growing niche of the market.

This reverses the format creep that press suppliers have engaged in recent years. For example, Heidelberg introduced presses at 104cm, 105cm and now 106cm while maintaining the 102cm classic B1 format. Others have followed suit. But with printers looking also at a product mix dominated by standard A4 sections, the SRA1 format capable of the same 8pp sections as the larger machines, has become in demand.

The CS92 was introduced to the Asian market in 2015 and market trends have led to the decision to bring it to Europe. The press continues to be assembled in Heidelberg’s Qingpu factory in China. It is built on the chassis of the CX102 using adapted plate, impression and transfer cylinders. This enables Heidelberg to print nine A4 pages to view, perhaps arranged as three three-page products.

“It can deliver the lowest cost per copy of the SRA1 sector,” says B2 and B1 product manager Matt Rockley. “It accepts a Euro pallet, 1320mm high in the feeder and delivery with plenty of room which also adds to the efficiency.”

There are thoughts about packaging applications. It comes in four-, five- and six-colour configurations with coater options and it is able to handle 0.6mm boards. But the press is not capable of being mounted on a plinth for specialist carton printers.

The smaller format equates to a 20% saving on plate material, Rockley says.. “For large volume plate users with a five- or six-colour press, this is a significant saving.”

At the open house, the CS92 was fitted with Heidelberg’s own LED UV unit, which only fires the diodes when paper is underneath the lamps, further reducing the energy levels needed. It can also run with an LE-UV system or conventional hot air/IR unit.

“The press will sell for 15-20% of the price of a CX102,” says UK sales director Jim Todd. “And if high job volumes are part of the work mix, the saving on aluminium can be quite important. But as a printer you have to be certain you can work within the limits of the 92cm press.”

This is not a problem with the new B2 press. In the UK, Heidelberg predicts that sales of the SX74 will fade away as a consequence. It is a machine concept that Heidelberg UK has been pushing for some years, says Heanue. It combines the engineering of the XL75, with functionality that suits a more cost conscious user. The company hopes to sell six to eight of the new B2 machines in the first year.

Like the CS92, the CX75 runs with Intellistart and EasyControl, for measuring and ensuring colour accuracy, but not with InpressControl, Heidelberg’s inline spectrophotometer. “It is about reducing the complexity of the XL75,” says Rockley. “It has the same print units as the high performance press with the pricing of the SX74. It will deliver the lowest cost per copy for printers producing 25-30 million impressions a year.”

Options are four, five and six colours with coating, but those wanting perfecting will be directed towards the XL75. There is a full range of drying options and a calliper range up to 0.6 mm for carton work. The delivery can be extended to give more drying time before reaching the stack.

Gareth Ward