St Ives, the parent company of book printer Clays, has warned of lower profits for the final quarter of 2016 and the next financial year because of “global economic uncertainty”.
The company, which is mainly a marketing services provider, said worldwide economic problems is leading to greater caution in allocating marketing budgets.
“Recently, and within the digital segment in particular, we have observed an increase in this level of uncertainty and caution within our client base which has led to the cancellation and deferral of a number of significant projects,” the group said. “We are implementing targeted cost saving measures where appropriate but will not do so if this results in long term damage to the business.”
In the books business, revenues are currently slightly down from last year (1%), but gains from a recent deal with Penguin Random House have been offset by destocking in the market, which was caused by the reduction in publisher warehousing capacity and printing business moving overseas.
The costs related to the PRH contract have also “adversely” affected operating margins.
Clays declined to comment further when contacted by The Bookseller.
Matt Armitage, chief executive of St Ives, said in a statement: "It is disappointing to have to report this marked deterioration in the near-term outlook, but we remain clear on our long-term growth priorities and have the financial strength to continue to support our strategic ambitions. We continue to believe there is further scope to expand our higher margin strategic marketing activities both organically and through acquisition, and to invest in our growing international operations and client offerings in the US and Asia."
For the company’s half-year results, for the 26 weeks ending 29th January, underlying profit before tax was up 5% to £16.1m on revenue of £185.7m.
The group’s shares fell by 46% following the announcement.