Book and magazine producer St Ives prints its digital future

When Patrick Martell was appointed chief executive of St Ives in 2009, the London-listed printing company that produced books and magazines from Harry Potter to The Economist was in crisis.

Its share price had tumbled more than 90 per cent since peaking at the turn of the millennium as the internet undermined the publishing and leaflet sectors that relied on its printing presses.

Five years on St Ives, which reported its first-half results on Tuesday, has returned to growth thanks to a radical turnround under Mr Martell, a motorbike enthusiast who started his career as a 16-year-old apprentice at Clays, St Ives’ book printing business.

The transformation involved disposing of many of its core printing assets, slashing costs at the divisions it retained, and – most radically – entering a new line of business: digital marketing.

“The question was about survival,” he says. “There was a very clear sense of crisis and burning platform.”

Having made the leap, St Ives is once again increasing its revenues and profits – and regaining the confidence of investors. Since its low point in 2009, the group’s market capitalisation has quadrupled to about £250m, its share price rising twice as fast as the wider stock market.

The heart of St Ives’s turnround was getting its printing operations in order. This involved selling off its magazine business in 2011 and a direct mail business last year.

There was a very clear sense of crisis and burning platform

At the same time, the company implemented a “ruthless” cost-cutting process at its three remaining print businesses, which do everything from printing monochrome books to producing giant banners for use in exhibition halls.

Mr Martell, 50, says the divisions he retained are “service propositions“ rather than “manufacturing propositions”, and are therefore less vulnerable to competition than traditional bulk printing businesses.

For instance, he says Clays has become a logistics business that gives publishers the ability to get small batches of books into shops at high speed, which reduces the need to hold large amounts of stock in warehouses.

On a like-for-like basis, St Ives’ printing revenues grew by 2.4 per cent to £122m in the six months to the end of January, compared with the same period in the previous financial year. The division’s underlying profits rose to £8.8m.

But the fastest-growing part of the company is its marketing services division, which has been built through eight acquisitions since 2010.

St Ives had experience in marketing services because it printed leaflets and fliers for use in mass marketing campaigns. But as its customers changed their tactics, Mr Martell realised that “marketing was going to be much more targeted and personalised”.

“We thought a sweet spot for us would be marketing services execution, things like building databases, building websites, search engine optimisation and field marketing,” he recalls.

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Having previously spent about £30m a year on printing equipment, St Ives diverted that money towards acquisitions. Its biggest purchases included Occam, a database specialist whose clients include John Lewis, and Amaze, a digital consultancy that has worked for Coca-Cola and Unilever.

The strategy appears to be paying off. The marketing services division’s revenues rose 50 per cent to £46.7m in the first half. Stripping out the effect of acquisitions, revenues increased 14 per cent.

Mr Martell says the group is searching for fast-growing businesses “where there’s a strong management team who want to stay”.

Last week the company bought digital marketing agency Realise Holdings for about £22m in cash and shares, and committed to paying up to £18m more if it hit certain financial targets this year and next.

If all goes to plan, St Ives wants to make more than half of its underlying operating profit from its marketing services businesses by 2016, up from 35 per cent.

To hit that target, the company will need to spend about as much on acquisitions in the next three years as it has done since 2010.

“Everything we’ve done in the last three years we’ve got to do again.”