Raj Marway and Jonathan Wilson, both students on the Foundation Degree course in Print Media Management at the London College of Communication, address the audience at the PrintIT! Awards 2010, talking about their enthusiasm for all things print. Filmed at IPEX 2010.

Times move fast for commercial printers. The recession, coupled with the breakneck speed of development in electronic media, means that commercial printers have to stay just as up-to-date with their business thinking as they do with their technology. A couple of weeks ago I wrote about overcapacity, demand and profit, the three points that map out a killing-field for commercial printers; the irony being that as little as two years ago, in a market where demand was at least stable rather than declining, strategies that yoked the three together would probably have worked. This week, after several readers got in touch with their views on profitability for commercial printers, we’re demolishing another profit-related shibboleth: the idea that sticking with fully-depreciated kit rather than investing in new kit is a good way to stay profitable, even in the short term. 

This idea was succinctly expressed to me several donkeys’ years ago by Harry Lambert, ex-proprietor of the Adare Group, who had at that time just subsumed into his empire a local newspaper that I’d been typesetting. “We own this old press,” he told me, “that we paid off years ago. Now every time we print something on it, it makes us a few bob – it’s pure profit.” 

Now, I don’t want to write off this idea as totally unsound. As ever, it depends on individual circumstances, and there are likely to be many print businesses whose own combination of factors – labour charges, customer demand and the age and value of the machine in question – may make that proposition a profitable one. However, it strikes me that the last two to three years have changed technology and market conditions to the point where most print businesses are likely to find it a complete fallacy. 

For a start, a fully-depreciated machine that’s not too far out of its credit agreement is a prime target for refinancing – in other words, its value is held as an asset on the balance sheet against investment in new or newer kit. If you’ve gone that route, then your fully-depreciated kit does in fact cost something. Plus, if the kit is a bit older, it’s likely to be costing more than you’re aware in maintenance and breakdown charges. There’s also the fact that some kit has got more compact in recent years, and there may be an opportunity cost in terms of floorspace to factor in. And think about how it may not produce such good quality output than your rivals, purely because technology has moved on; plus a newer model may also offer extra facilities that can usefully be offered to customers. 

Finally, if it’s older than about ten to fifteen years, the labour cost of running a fully-depreciated piece of kit – assuming it’s less automated than a more up-to-date equivalent – can be a killer. Labour charges are, of course, the biggest single item in the average list of print overheads. (So much so that the MD of one post-press equipment supplier tells me he describes his job as ‘selling unemployment’.) So it comes about that ‘saved labour costs’ – the salaries that you no longer have to pay if you put in a new piece of kit – are often the single biggest component of a finance deal on new kit. If you’re saving, say, one and a half members of staff at £20K/year, that’s a substantial contribution towards the five-year finance deal. From the point of view of those staff members, one would hope that we’re talking redeployment rather than unemployment, but of course that only makes sense if you can move them to, and train them up for, an area of the company that really needs them. 

So is it really right to hang onto your old kit to enhance profit margins? Sometimes yes, but I suspect more often no. These days, at any rate, the idea certainly isn’t the universal panacea that it used to be.