Grafenia (LON:GRA) is a company which caught me a little by surprise. It's not often I see companies I have never seen before in any capacity pop up on my screeners (a problem with screeners, you might rightly suggest), but I certainly hadn't heard of Grafenia, and the metrics were interesting. They're predominantly a printing services group who are diversifying - and focusing more and more resources and attention - into 'software as a service' solutions for other printers and related businesses. This is something they have a bit of expertise with, since they've run a franchised network for a number of years. Digging into their annual reports quite quickly explained my perplexity - Grafenia, for all their snazzy new name and business segments, used to be known as Printing.com. And Printing.com is a company I had heard of!
What's in a name, then, and what's happening at Grafenia?
Out with the old..
The old Printing.com was basically a part-run, part-franchised printing group. Working mainly with small companies, they do the sort of stuff you'd expect any business printer to do - flyers, business cards, posters and so on; all the usual jazz. In 2010 they bought a Dutch company in a similar vein; in this case, the company owned three websites and then subcontracted printing. Essentially, in one way or another, Printing.com was involved in most stages of print management; they did some printing, they did some selling and they franchised out the selling. Simple enough - when you're running a capital intensive business like a printer, you really want to be maximising your capacity utilisation and working your assets as hard as possible, since that represents the easiest way of keeping returns competitive. Having lots of channels strikes me as the easiest way of doing this.
Over their time as Printing.com, they had an excellent track record of payouts - there's a great cumulative return graph you can find in their annual reports (found here). They made good, steady profits and management earned themselves at least a small green tick by distributing most of it to shareholders. It's since then that's been the real question mark, though, and the name change is only really a signpost for a fundamentally changing business. The graph in the top right shows the problem - all measures of…
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