Reprographics 101

In the post I did just previous to this post, I mentioned “ZweigWhite.”

The other day, I purchased (for $5) an article from ZweigWhite’s web-site, and, I’d like to share a couple of “cliff notes” from that article. (I am not going to reprint the entire article; if you want to read the entire article, then do what I did, go to ZweigWhite.com and purchase it.)

The article I purchased pertained to this subject:

> Successful A/E and environmental services firm leaders share strategies that have helped them stay afloat during the current market meltdown.

One of the sub-headings in that article:

Tactical toolbox: Overhead flexibility

Quoting the CFO of a 65 person Architecture firm, the article went on to say:

Here are several examples that JS, CFO at 65-person architecture firm XXXX Associates (City, State), says his company is doing to build flexibility with its overhead:

I am only going to reprint one of the items that CFO listed:

* The firm contracts with a reprographics firm to provide general office help and reprographics equipment and supplies on a per use basis.

And, this was the CFO’s further comment:

“In downtimes, these programs allow us to easily scale back costs, which is a much less disruptive fashion than staff layoffs,” JS says.

Joel’s comment:
For more than 25 years, I have been a huge proponent of FM (OnSite) programs for A/E/C firms. The comment made by this firm’s CFO could certainly be construed as a testimonial for vendor-provided FM (OnSite) services.

Ian Rusk, CEO of ZweigWhite, authored and published an interesting article reprographers should take note of.

For those reprographers who are not aware of who ZweigWhite is, I’ve copied into this e-mail (see below) some “about ZweigWhite” information that appears on ZW’s web-site.

As to the article, “The 2010 AEC industry outlook from 30,000 feet,” here’s the web-address of that article:

http://www.zweigwhite.com/article.aspx?articleID=107

About ZweigWhite:
At ZweigWhite, we exist in order to help leaders in the architecture, engineering and environmental consulting industries achieve their business and personal goals. Since 1988, when the firm was founded by Mark Zweig (and later joined by Fred White), we have offered an ever-increasing and improving array of publications, services, and events designed to provide firm leaders with the tools they need to succeed. What began with a simple newsletter has grown over the last two decades to become a comprehensive suite of products and services, including newsletters, market research reports, seminars and executive education offerings, business conferences, and management consulting services covering virtually every aspect of business management.

This article appeared on MarketWatch.com this morning…….

CONSTRUCTION DOWN SEVEN STRAIGHT MONTHS

By Greg Robb
10:11 AM ET Jan 4, 2010

WASHINGTON (MarketWatch) — Spending on U.S. construction projects fell in November, marking the seventh straight monthly decline, the government reported Monday.

Overall, spending on construction projects fell 0.6% in November, the Commerce Department said. This was close to consensus forecasts of Wall Street economists.

Adding to the sense of weakness in the report, there was another large downward revision to the prior month’s data.

The government said spending fell 0.5% in October, compared with the initial
estimate of no change.

The trend of large revisions to the construction data in this recession has irked
economists.

Year over year, construction spending is down by 13.2% in November.

One area of strength in recent months — spending on private housing — fell 1.6% in November. The sector had been bolstered by the tax credit for first-time home buyers that sparked some home buying this fall. The tax credit has been extended until next June and broadened to include almost all home buyers.

Spending on private commercial construction projects fell slightly in November for the eighth consecutive monthly decline. Non-residential construction is down 20.6% in the past year.

Economists said that tight credit and the weak job market are two factors in a grim outlook for private nonresidential construction in 2010.

Overall private construction spending fell 0.7% in November after falling 0.8% in the previous month. Year-over-year private spending is down 20.0%.

Government public construction spending fell 0.4% after remaining flat in October. Government spending is up 2.7% over the past year as the government has been spending money trying to stimulate demand.

In a separate report, the Institute for Supply Management reported that its national manufacturing index rose to 55.9 in December from 53.6 in November.

Since ABC Imaging is a privately held company, we don’t hear a lot about ABC, even though ABC Imaging is among the five largest A/E/C reprographers in the world. I found this article on OCE’s web-site:

ABC Imaging defies recession and invests in Océ

London, UK, 20 October 2009—Two hundred people turned out for a launch party for ABC Imaging, the reprographics and on-site print management company, which has rebranded and moved into a larger office and production site in Britton Street in the city of London.

More than 20% of the partygoers were new prospects for ABC Imaging, which is entering new markets as part of expansion. Guests included representatives from international banks, retail outlets, the legal sector, architects, construction and engineering companies.

ABC Imaging, formerly called Mediashore, and employing 50 people in the UK, of whom 15 are based in a separate West End office, is now on the acquisition trail as part of a growth programme to increase its £4million turnover five-fold within five years.

Mediashore, which was formed in 2001, became part of US-based ABC Imaging in June last year and rebranded a month ago. The party was a ‘thank you’ to suppliers, customers and prospects.

ABC Imaging UK Managing Director Ray Hawkins said: “These new premises have created the extra space we will require for our growth plans. We will be expanding through organic growth and through acquisitions.”

ABC Imaging President and CEO Medi Falsafi, who flew in especially for the event, said: “Whereas everybody seems to be cutting back, we are investing. I am very positive about the future and know there are terrific opportunities for us, particularly in developing countries that include Russia and those in the Middle and Far East. Clients there need to have a provider from London or elsewhere in the UK, and Mediashore is a perfect fit for us. Ray Hawkins and his team are doing a terrific job and will make things happen in a big way. The best defence is having an excellent offensive.”

The £500,000 investment in the new premises includes taking on Océ’s award-winning technology such as the Océ VarioPrint 6250 printing system and Océ ColorWave systems. These are in addition to investments in four Océ VarioPrint 2090s, two Océ VarioPrint 2165s, two Océ TCS500sytems, two Oce TDS800s and TDS600s.

Bron Curley, Managing Director of Océ UK, said: “ABC Imaging knows its markets well and has continued to invest despite the difficult marketplace. Digital is obviously a high-growth opportunity and I was delighted to see at first-hand what’s been achieved in a short space of time.”

Well, it is THAT time of year. Time to reflect, time to ponder, time to plan and time to make your resolutions for next year.

2009 has certainly been a very, very challenging year for most people. A recession for most, a depression for those involved in A/E/C and in A/E/C reprographics. Keep going, recessions (and depressions) don’t last forever, there’s always an “upside” around the corner. Keep the faith.

To all my friends and associates (and to those of you who’ve found my blog but don’t know me), my best wishes to you and your families for a Happy, Healthy, New Year.

Joel

….. is the title of a recent (Dec 21, 2009) article published on Reed Construction Data’s web-site.

Here’s the address of that article.

http://www.reedconstructiondata.com/news/2009/12/nonresidential-building-recession-will-persist-through-most-of-2010/?nid=4792

Jim Haughey, author of the article, included several tables with statistics and trends; quite interesting. Tables included “Retail”, “Office,” “Industrial,” and “Institutional.”

About 3 weeks ago, I saw that Service Point had recently reported its results through Q3 2009.

You can find that press release at this web address:

http://www.servicepoint.net/es/press/docs/PR_3Q09_091109.pdf

The lack of transparency in Spain-based, public-company-reporting is very interesting.

The press release makes it sound like “all is well” (only 7+ percent off.)

They don’t mention anything specifically about Q3 2009 (or Q3 2009 vs. Q3 2008), but when you do the math to extrapolate what their Q3 sales were, comparatively y-o-y (the math I did do), one can easily see that Q3 was an awful quarter for them, comparatively speaking and (and trend-wise) compared to the y-o-y comparative results for the 1st half. (I am pretty sure, but not certain, that Q1 was plus only because it benefited from acquired growth, y-o-y; they no longer, I don’t think, have the benefit of using the acquired growth to pump up their numbers.)

If I did the math correctly, Q3 2009 Sales were off approximately 18% compared to Q3 2008 sales.

Service Point REVENUES ONLY
(amounts are in Euros)

2008 – 2009 – change

Q1- 56- 59- 5.36% -Q1 y-o-y change
Q2- 59- 54- -8.47% -Q2 y-o-y change
6MO- 115- 113- -1.74% -1st half y-o-y change

Q3- 60- 49- -18.33% -Q3 y-o-y change
9MO- 175- 162- -7.43% -9 month y-o-y change
Q4- 63- -not yet rept’d
Full year- 238- -not yet rept’d

Reported for 1st 9 months 162
Reported for 1st half -113
extrapolated as Q3 sales 49

This post only pertains to Sales Revenues; I was too lazy to look at net income.

As some of my friends (and blog-site readers) know, I am working, part-time, in Europe.

There are some very interesting differences (and a lot of them) between Europe and the U.S. Some of those differences are “cultural” and some of those difference are “languages,” “currencies,” and “measurement.”

A very funny situation came up during my current trip. (Well, it was funny to me, but I do have a very weird sense of humor, so not all of you will find this one to be funny.)

This situation happened during a meeting with several people from different countries – The Czech Republic, Russia and Poland, and, of course, I am from the U.S.

During this meeting, we were discussing “Marketing”, and, since I have a tendency to ask stupid questions, I asked, “ what is the native-country-language word, in each of your countries, for ‘marketing’ ”.

With straight faces ……

Our team member from Moscow said that “the Russian word for marketing is “marketing.”

And, our team member from Warsaw said that, “the Polish word for marketing is “marketing.”

And, our team member from Prague said that, “the Czech word for marketing is “marketing.”

(When I was in Budapest, Hungary, later in the week, my Hungarian associates also said that “marketing” is the Hungarian word for marketing.)

Update: Same thing happened when I visited Croatia last month (same question, same response.)

DO YOU KNOW WHY “MARKETING” IS THE NATIVE-LANGUAGE WORD IN THOSE COUNTRIES?

Since I am the ultimate “contemplator”, I had to think about this for a while. And, I did so until I finally came up with what I think is the right answer.

I am not going to put the answer (the explanation if you will) here right now. Instead, I’m going to let my blog-site readers guess at the answer for about one week. Afterwards, I’m going to amend this post by adding the answer/explanation.

UPDATE: OKAY, SEVERAL PEOPLE E-MAILED ME WITH THE CORRECT ANSWER. For those of you are still wondering about this, the word, “marketing”, did not exist in most of the former European communist countries when they were under communist rule because there was no marketing, no need for marketing, marketing was an activity that did not exist. So, after the fall of the Iron Curtain, these former communist countries, needing to add “marketing” to their languages, took the easy route and simply used the English language word, “marketing.” Not altogether different from this is when you see a sentence in a foreign language, a sentence that’s talking about something on the web, you will see a bunch of foreign language words mixed in with English language words such as “Internet” and “routers.”

Well, this deal was “major news” to reprographers! Caused a lot of e-mails flying back and forth.

One friend, who is in the reprographics business in Europe (owns a very large enterprise), was not happy about the deal – said that Canon offers low/mid quality equipment and poor customer service, and that OCE offers outstanding equipment and good customer service.

Just to the opposite, two friends in the U.S., both of whom are senior executives – and “players” in the reprographics business/industry – had a different point of view – they (basically) said the same thing – they are not unhappy about the deal – they said that OCE has been difficult to deal with and Canon easy to deal with.

Okay, what do I think about this deal? (Not that anyone cares what I have to say about this deal, but, this is my blog and, in typing this post, I get to practice my typing, if nothing else.)

OCE (for the most part) makes excellent, reliable, dependable, high-end, mid-range and low-end, large-format imaging equipment. OCE also makes excellent, reliable “higher-end” small-format imaging equipment (higher range cpm/ppm copiers and printers and transactional digital printing equipment.) In 2005, OCE paid around $685 million to acquire Imagistics, and, with that acquisition came Imagistics’ (formerly called Pitney Bowes) line of mid-range and low-range copier/printers. I thought that was an “interesting” deal, for OCE paid a lot of money to acquire what was, essentially, a crappy line of low and mid range copier/printers. Not nearly engineered as well as OCE’s own small-format equipment. And, they paid a lot of money for Imagistics. That deal never made any sense to me. Yes, there are some that would say that that particular marriage allowed OCE to “fill out its line.” But, why do that when the equipment isn’t as good as the stuff they were making themselves? One of my friends said that part of OCE’s financial-results-problems were being caused by that acquisition (lower margins.)

Canon makes excellent quality, mostly reliable, small-format imaging equipment. I’m not a fan of Canon’s toner-based wide-format imaging systems. I do like Canon’s ink-jet wide-format equipment.

FUTURE REVISED LINE-UP FOR CANON PRODUCTS (OCE stuff included)?: (these are simply my opinions as to what’s going to happen, post-acquisition):

The comments below do not talk about OCE’s “display graphics” equipment business. That’s because this blog is devoted to the “reprographics” business and industry and because “display graphics” still only accounts for probably less than 20% of reprographics industry revenues.)

1) the Imagistics line-up of low and mid range small-format, copier/printer equipment (which was re-branded OCE after OCE bought Imagistics) will be discontinued. Absolutely no reason for Canon to keep that stuff, since Canon already covers that range of equipment and since Canon’s own stuff is better. (That will also put a lot of people out of work, I think, due to consolidation of sales, service and manufacturing – i.e. “consolidation.”) (Comment: Imagistics, $685 million down the drain.)

2) Canon will probably stop manufacturing it’s toner-based large-format imaging systems – since OCE has superior equipment. (That will also put a lot of people out of work, I think, due to consolidation of sales, service and manufacturing – i.e. “consolidation.”)

3) Canon’s large-format imaging, ink-jet based imaging equipment may likely be merged with OCE’s current line-up of large-format, ink-jet based imaging equipment (here, I’m referring to the equipment primarily used for CAD plotting/printing.)

4) The merger of OCE’s “FM” business with Canon’s “FM” business will create a very, very significant player in the FM business. For my reprographer friends in the U.S., I hope that the Canon/OCE “FM” business will stay out of the A/E/C market space (For my European reprographer friends, I’m hoping that Canon will discontinue OCE’s FM business in the A/E/C market space in Europe – but I’m not going to hold my breath on that one.)

All in all, a VERY interesting deal. Two, well-respected companies, combining forces.

When Ricoh purchased IKON, that took some of the wind out of Canon’s sails (since IKON was a dealer for both Canon and Ricoh equipment and IKON stopped selling Canon equipment sometime after that deal happened.) So, the Canon/OCE deal helps Canon in that respect (picks up some of the market share that Canon lost when Ricoh bought IKON.)

As many of you know, the Federal Reserve, each month, publishes what’s know as the “beige book,” which is basically a running narrative of business conditions across the 12 Districts that make up the Federal Reserve System. The October beige book contains the report on business conditions in September; the November beige book, not yet out (at least that I’m aware of), will contain the report on business conditions in October.

I spent a few minutes, this past week, to “peruse” my way through the October 2009 beige book (which, as I said, reported on business conditions as of September.)

In particular, my “perusal” was limited to scanning the “REAL ESTATE” and “FINANCE AND BANKING” sections. Below, in this blog-post, I’ve “extracted” comments from certain “Districts” about the “real estate” and “finance and banking” conditions those districts. PLEASE NOTE: I did not read all of the District reports; I only read the specific reports for 4 different districts, but I also read the “overall” (what I guess you would call the U.S.-country-wide) summary.

As you read the portions I’ve extracted (and reprinted below), also keep in mind that the District and Overall reports do talk about “residential” real estate activity and “loan” activity related to residential, but, since the lifeblood of reprographers comes from the “non-res” real estate market, I’ve extracted (and reprinted) below ONLY information that talks about “non-res” real estate activity (or, should I say, lack thereof) and commercial property financing.

One last comment: There is that old saying, “follow the money.” I’ve been saying, in many of my blog posts, that the non-res (commercial real estate) market, and the bulk of printing reprographers do, will not come back to life until the money begins to flow. Admittedly, I am a peon (would “idiot” be a better word?; maybe so) when it comes to economic research and forecasting real-estate project financing and non-res development, design and construction activity. But, the news, blog readers, is not particularly good.

One of my reprographics industry friends, Shaun Meany, President of ARC’s PEiR Group enterprise, did a very recent blog post ( just a few days ago, on his blog-site: http://peirgrouppointofview.blogspot.com/ ) about his attendance at the Eastern Regional Reprographics Association Convention. At the ERRA, he listened to speaker Robert Singerline (of McGraw-Hill) talk about the forecast for the Construction Industry in 2010. Here’s part of the article that Shaun posted about that guy’s presentation:

“I also enjoyed the Construction Industry Forecast presented by McGraw Hill’s Robert Singerline. The outlook for 2010 is expected to be better than 2009 (thank God!) and there are definite bright spots ahead in 2010.

Singerline sees an increase in construction ahead for all all areas of the country in the coming year. South Atlantic, South Central and the West are all expected to see double digit growth. It is important to keep in mind that even with so rosy an outlook the industry is down so low that these positives really do not translate into big numbers – especially when compared to 2006 when construction was at its peak. Residential construction should signal the early stages of a recovery. Next year, Singerline says, there will be continued growth in government projects along with some institutional and non-building construction.”

My opinion…… as expressed in an e-mail I sent to Shaun about his blog post:

“Dear Shaun,

Last week, I mentioned a couple of AIA articles on my blog-site (http://reprographics.blogspot.com/) and the opinions expressed in those articles – as to forward growth and the outlook for 2010 – run contrary to what Singerline evidently said at the Eastern Regional.

Certainly, everyone is entitled to their own opinion.

However, I don’t see where anyone, at this point in time, can forecast an upside to construction activity in 2010. A clear signal would have to come from two different things.

1) some indication that the financial markets are (for financing projects is) unfreezing. It is still locked up.

2) a positive movement in the ABI index. It is still very negative.

Regards,

Joel”

As to the projections the guy (who spoke at the ERRA meeting) presented, I’m thinking that he must have been using, a) a weegie board, b) an abacus, c) a crystal ball, d) a palm reader, e) tarrot cards, f) tea leaves, g) a fortune teller ?????

Okay, let me now get to the information I extracted from the Fed’s Beige Book report:

SUMMARY OF COMMENTARY ON CURRENT ECONOMIC CONDITIONS

BY FEDERAL RESERVE DISTRICTS

OCTOBER 2009

From the “summary of all districts” section of the report:

Commercial real estate continued to weaken across the 12 Districts, although even this sector had scattered bright spots. Each District indicated that demand for private commercial real estate was weak, with New York, Philadelphia, Cleveland, Atlanta, Chicago, St. Louis, Kansas City, and San Francisco all characterizing activity as declining further since the last report. An inability to obtain credit was often cited as a problem for businesses that wanted to purchase or build space. High vacancy rates were noted as a key concern especially for landlords who were not offering concessions. And, while industrial real estate in the Richmond District was generally weak, renewed interest by retailers to revisit postponed expansion plans was also noted. Finally, public nonresidential construction activity funded by federal stimulus projects was a source of strength in the Cleveland, Chicago, Minneapolis, and Dallas Districts, but gains were often offset by state and local government cutbacks. Sources reported that lending by nondepository financial companies remains limited, especially for real estate and construction.

3rd District (HQ in Philadelphia)

from the “real estate” section of the report:

Nonresidential real estate firms indicated that leasing and purchase activity declined during the past few months. Vacancy rates continued to rise for apartments and office, industrial, and retail buildings. Contacts reported that tenant downsizings and business terminations were resulting in the return of space to the market. There has also been a substantial increase in sublease space coming on the market. Rents have declined, especially for older buildings. Contacts expect nonresidential real estate markets to remain soft for some time. One contact said, ―markets will struggle through the remainder of this year, and they will still face challenges in 2010.

5th District (HQ in Richmond)

from the “real estate” section of the report:

Industrial real estate activity in most areas of the District was often described as ―dead, and new construction of industrial or office buildings was further deterred by difficulty obtaining financing.

6th District (HQ in Atlanta)

from the “finance and banking” section of the report:

Commercial contractors noted that tight lending conditions had restrained commercial development.

and, from the “real estate” section of the report:

Private-sector commercial real estate activity weakened further in September. Vacancy rates continued to rise across all segments, and contacts continued to cite downward pressure on rents. Developers reported fewer backlogs, and more projects were delayed or cancelled. The outlook among contractors remained unchanged since last reported, with most anticipating activity to continue to decline into 2010. However, contractors in some parts of the District noted that federal stimulus monies were starting to help spur some public-sector activity.

12th District (HQ in San Francisco)

from the “real estate” section of the report:

Reports suggested that demand for housing continued to improve slowly, while demand for commercial real estate eroded further.Conditions continued to deteriorate in the commercial real estate market: demand for office and industrial space fell further, and financing for new development and purchases reportedly remained ―frozen.

from the finance and banking section of the report:

Lending standards remained relatively restrictive, with scattered reports of further tightening, especially for commercial real estate lending, and credit quality continued to deteriorate. However, on net bankers and other contacts noted improved *access to financial capital in recent months.

(*Joel’s comment: I’m not sure what that sentence implied. Could mean that bankers aren’t having problems getting money (Fed is giving money away, near zero interest rates for banks who want to borrow from the Fed; does not necessarily mean that investor/developers are getting improved access to loans!)