v.1 2016 - semperresources.semperllc.com/wp-content/uploads/2016/01/1_27... · 2016. 1. 1. · in...

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Semper InternationalIndustry Insight

Survey ReportV.1 2016

1-877-377-4687 • www.semperllc.com • [email protected]

Executive Summary: Economic Insights for the coming year

Unfortunately, the storm clouds we witnessed in the past survey have continued to gather steam, and the industry faces some significant economic headwinds as we head into 2016.

This survey continued to see a marked deterioration in positives. In fact, of the many data points we gathered, we only found one rising result.

Our hypothesis suggests that the end of the Fed’s quantitative easing and the recent rise in interest rates, coupled with the significant international economic and political turmoil, have caused our economy to significantly slow.

Many of you will be familiar with the phrase “earnings recession” currently in vogue among financial pundits. It appears our industry is not immune from this downward trend with profits reducing, lay-offs planned, and a slow start to sales in the New Year.

Despite the pressures, a majority in the industry are forecasting an increase in sales for the First Quarter 2016, and capital investment and diversification efforts are still ongoing.

Looking Ahead: What this report means for the industry

While economic pressures continue to loom large, firms reporting base pay increases rose nearly 100% this quarter. This jump in base pay level is an area closely watched by the Federal Reserve to determine inflation.

We seem to be in the crux of an economic conundrum. While it appears that Macro-economic energy is causing growth to slow, the Fed may be reacting to this lagging indicator.


What’s next for our industry? The jury is still out on whether the United States follows our international peers into a marked slowdown, or we can continue to lead out of these troubling economic times. Keep in mind this is an election year, and in the printing and marketing industries that always brings a strong demand for services.

Further, with the recent political resolution of the Federal budget and other areas of business uncertainty (such as extending the debt ceiling), this storm could very well blow past quickly.

Let’s get on to the survey report.

David Regan, CEOSemper International LLC

David Regan is the CEO of Semper International, the nation’s largest and most trusted supplier of skilled staff for the print, pre-media, graphic and interactive media industry. With over 20 years of service, David and the Semper team have placed more than 50,000 team members in top companies from Staples and Jack Morton to small and midsized printing and production companies.

Dave cut his teeth early in printing working in—and ultimately managing—his family’s small commercial print shop. Always an entrepreneur, he founded several small startups during that time including one of the first MAC rental companies and a Boston-based bulletin board network, precursor to today’s community forums. From these humble beginnings, his first company PressTemps eventually expanded from one small office in Boston to the Semper International of today with ten offices nationwide and two sister companies: PrintWorkers.com, the top printing job board in the nation, and Semper PT, a corporate wellness benefits provider. David lives in Massachusetts and in his spare time he races sailboats and practices Jujitsu.


Table of Contents: 14 Key Insights from the Fourth Quarter Survey

Part I: Dollars and Cents • Insight 1: Profitability declines • Insight 2: Net margins drop for the second straight quarter • Insight 3: Two-week trailing sales decline • Insight 4: Sales outlooks Improve to over 50% anticipating growth

Part II: Competitive Threats and Company Responses

• Insight 5: It’s the economy, stupid (again) • Insight 6: Diversification rates drop down for nine straight months • Insight 7: When it comes to sustainability, firms are still searching for a golden goose • Insight 8: End-Stage production profits decline • Insight 9: Capital investment rates drop 18%

Part III: Staffing Trends

• Insight 10: A chill in the air for hiring • Insight 11: Rising labor costs, plus slowing demand equals…will we slow or not? • Insight 12: Online ads and flex staff hiring surge • Insight 13: Profitability is job No. 1 • Insight 14: Survey participation reflects the normal bell curve

Part IV: Demographics


I. Dollars and Cents

The first set of questions focus on where the rubber meets the road: sales, revenue and profit.

Insight 1: Profitability declines

The first question in our survey brings with it the first taste of bad news, with only 70% of firms reporting profits for the last quarter of 2015.

Put in context, this is a return to the profitability dip we witnessed last year, which had rebounded by the second quarter back above 84%. Unfortunately, the fourth quarter saw profitability levels dropped brought back down to the levels we saw over a year ago.

Unfortunately the earnings recession mentioned above seems to be reflected in our industry numbers as well. If we were being graded in school, we would have dropped down from about a B+ to a C in the past 6 months.

Question: Did your company have a profitable fourth quarter 2015?

Was Your Quarter Profitable?


Insight 2: Net margins drop for the second straight quarter

The data we find in Insight Two underscores and clarifies our profitability declines. Here, we see that 60% of reporting companies sit below 5% margin, a dramatic change from the 25% of firms netting anemic income last quarter.

If 70% of companies are currently profitable, many of them are making returns by the skin of their teeth. Keep in mind this is a new question in our survey, and we are still establishing a general baseline for net revenue

Question: What was your overall revenue as a percent of profits?

Revenue as % of profits Q4 2015


Insight 3: Two-week trailing sales decline

In the third quarter of 2015, two-week trailing sales data was one of the bright spots, rising 29%. Today, we find that uptick losing all the prior quarter’s gains and then some.

By brass tacks, firms experiencing increased recent sales dropped from 42% to 28%, while companies seeing sales stay the same grew from 36% to 45% of those responding. Finally, we see an 11% increase in companies reporting a decrease in sales at the end of 2015.

One final factor to consider in this data: seasonality. With the end of the holiday season, this particular question can be impacted.

Question: How have your sales changed in the last 2 weeks?

Sales Changes in the Past Two Weeks


Insight 4: Sales outlooks improve to over 50% anticipating growth

Insight Four brings us to the single bright spot in the Fourth Quarter data. Companies expecting sales to grow in the First Quarter of the year increased from 48% to 53% - bringing us back above the 50% mark. To us, this indicates a growing market.

Question: How do you expect sales to change during the first quarter of 2016?

Anticipated Sales Change for this quarter


II. Competitive Threats and Company Responses

These questions relate to outside threats and pressures.

Insight 5: It’s the economy, stupid (again)

Economic concerns have been the leading concern facing our industry (in fact, all industries) for the last seven plus years. Here’s another quarter of the same – and, unfortunately another deterioration. This quarter, more than one in three companies see the Economy as their largest threat, up from 28% in the third quarter.

In order, the major threats for the final quarter of 2015 are: • The general economy at 35% • Lower priced competitors at 20% (down from 22%) • Operating costs holding at 14% for the quarter, and • The cost of upgrading technology at 11%.

Also interesting in this data is that companies are less concerned with the costs of investing in technology. This may indicate they are more concerned about survival.

What is Your Greatest Competitive Threat?

Question: What is your greatest competitive threat?


Insight 6: Diversification rates down drop for nine straight months

The reduced levels of diversification we reported in the third quarter of 2015 continued through the end of the year, with very little change in strategic investments.

This data continues to reflect uncertainty in the economy. Like we said last quarter, as companies experience flagging profits, they tend to retreat to survival mode, and clamp down on investments in growth.

Question: Are you currently diversifying your business?

Business Diversification


Insight 7: When it comes to sustainability, firms are still searching for a golden goose

For those companies continuing to invest in growth, Insight Seven provides some hard number insight into their sustainability planning.

Wide format printing dropped from 25% to 22% of all investment. It’s in fact nice to see these investments reduce a bit, as we remain concerned that this area is not a large enough niche to support the diversification attempts of the entire industry. Along that same vein, direct mail and graphic services also dropped, from 24% to 18% and from 19% to 12%, respectively.

Rising just a bit, web media investment saw a 1 percentage point increase to 15% in the Fourth Quarter of 2015.

CEO’s note: Sustainability in our industry requires diversifying into other areas sufficient to compensate for our gross margin loss – no small feat! Finding areas for margin growth will take a lot of trial and error and the ability to take on non-inconsequential risk. But, stakes are high in a game of survival, and we have no choice but investing in the future.

There is an economic philosophy I was recently reminded of called Tarzan economics, where disrupted industries hold on so long to their old swinging branch that they fall when grabbing for the branches of the future – rather than taking calculated risks to soar into the next growth cycle.

Question: What area are you diversifying into?

Market Diversification of Responding Companies


Insight 8: End-stage production profits decline

As noted in our last report, many of the profitability centers in the third quarter were end-stage production, such as bindery and fulfillment. In this quarter, we see an overall slowdown reflective of the overall economic malaise.

Here are the slight adjustments to profit centers at the end of 2015: • Digital Print stayed at 17% • Traditional Print dropped from 17% to 15% • Bindery went from 16% to 13% • Prepress went from 14% to 12% • Mail and Fulfillment held at 13%

Today we see a general demand issue on a macro level, and not trending specific to our industry. We feel positive that with the coming election cycle and the budget agreement stimulus we will soon see the growth everyone is expecting for the First Quarter of 2016.

Question: What are the primary profit centers in your organization?

Corporate Profit Centers in the Past 12 Months


Insight 9: Capital investment rates drop 18%

Another one of last quarter’s bright spots clouded a bit for the end of 2015 as capital investment rates declined 18% in the past quarter. Today 33% of all responding companies plan to make new investments in capital growth.

Looking at specific investment types, we saw that 25% of companies invested in traditional presses, 22% went with digital presses, 5% opted for wide-format printing, while the rest of reported investments were allocated into pre-media, software, 3D printing and other finishing equipment.

Question: Did you make a major equipment purchase this past quarter?

Major Equipment Purchases


III. Staffing Trends

Finally, this group of questions focuses on hiring and staffing plans in the fourth quarter.

Insight 10: A chill in the air for hiring

Hiring signifacantly slowed down in our latest survey, with firms expecting to hire dropping from 45% to 30%. Despite aggressive hiring numbers in many of our previous reports, companies planning to hold at current rates rose from 48% to 61% of all companies.

Our major warning area: Those expecting to eliminate positions rose 350% for the Fourth Quarter of 2015, from 2% to 9%.

This is part of the conundrum that was mentioned earlier. While Insight Five showed base pay rates rising, an indicator of inflation, here we see macro-economic headwinds seeming to signal a slowing in the economy. The hiring data below (coupled with rising base pay rates we saw earlier) illustrates the Fed’s dilemma perfectly.

Question: What are your current hiring plans?


Insight 11: Rising labor costs, plus slowing demand equals… Will we slow or not?

When looking at rising labor costs, please keep in mind that this data lives in the past tense – it’s a lagging indicator – and does not reflect the current economic state or near-term future.

Still, we can find trending data here, which can help us anticipate future economic machinations. When asked about the most dominant labor cost increases at the end of 2015, three major factors rise to the forefront:

• Healthcare Costs: 38% • Overtime: 21% • Base Pay 16%

As we mentioned last quarter, concerns over health insurance costs rose slightly this quarter, as most renewals happen in January and July, and these cost concerns take preeminence at these times of year. Note that any time labor cost increases, firms start to look at reducing headcounts and increasing per-person productivity – particularly during times of depressed profits. These rising costs are likely why we saw such a sharp increase in staffing reduction plans this survey. So, will demand slow or not? At this point it’s a coin toss, but the odds of a contraction happening is rising.

Question: Regarding labor costs, what component of the costs increased the fastest last quarter?

Largest Labor Cost Concerns


Insight 12: Online ads and flex staff hiring surge

Despite a possible chill in the hiring air, nearly one in three firms plan to add headcount in the next three months. Here, we ask where will they go looking?

According to our data, the top four sources of skilled talent (in order) are: Online searches (32%), internal referrals (31%), flex hiring (15%), and help wanted ads (13%).

This question reveals a few changes in the past three months. Help Wanted Ads were the leading source of talent in the third quarter at 40%, but fell to fueling just over one in ten searches at the end of 2015 due to online searches and seasonal variation.

Similarly, flex talent didn’t crack the top four sources in our previous survey, but rose to nearly 15% of all staffing searches today. Hiring a flexible staffer is a smart choice, as this talent is often a proven source of known quality that you have been allowed to “try before you buy.”

Question: What are your primary sources for skilled staffing?

Primary Sources for Skilled Staffing


Insight 13: Profitability is Job No. 1 For the second quarter in a row, maintaining profitability and keeping staff productive is the Number One concern facing respondents in this question.

This is probably not surprising given our survey data above. With demand slowing, global dysfunction, the Fed manipulations and the rapid appreciation of the dollar (and subsequent falling of asset prices), it’s no wonder that the previous quarter was a challenge.

Question: What is your biggest staffing challenge?

Largest Staffing Challenges


Insight 14: Survey participation reflects the normal bell curve

This survey shows a nice spread of company sizes, with over 72% of responding companies coming from small or midsized firms (by profits), which is a normal demographic curve for the industry at large. On the other end of the spectrum, we find just under 22% of companies making more than 10 million annually, which helps represent where big dollar investments and big dollar concerns are focused.

Question: What was your company’s estimated revenue last quarter?

Current Estimated Revenue


IV. Demographics

Company Size by Number of Employees

Reporting Industries: Q1 2016


Survey Respondents Company Location

0%

>1%

1-3%

3-6%

6%+


About Semper

Semper International, LLC, is the nation’s largest and most trusted supplier of skilled staff for the print, pre-media, graphic and interactive media industry. In over 20 years of service we have placed more than 50,000 team members in roles from Production Technicians to Experienced Managers in flex, flex-to-hire and direct-hire positions.

Literally translated, Semper means “always,” and that is something we take to heart. Our experienced, reliable team personally screens and rigorously tests every applicant before we recommend them for placement. We are experts at making things happen, and we have earned a reputation for quality hires who produce Day 1, and have built a loyal base to draw from – in fact nearly 20% of our flex staff have been working with us for over 10 years.

We were born and raised in the industry, so know that staffing is more than just filling a slot. Rather than just deliver a need, we become part of the team, so that your success is our success.

Tell Us What You Want to Ask!

Over 12 years ago, Semper recognized that our position in the industry afforded us unique a vantage point to see economic trends affecting our industry. From the beginning, our goal has been to aggregate information from our database of over 50,000 companies, and provide this material for free as our gift back to the industry we serve.

Over the years, as the survey has become more popular, and we have watched the industry itself change, we have refined and improved our questions and processes. As we continue to improve our survey and data collection techniques, we are finding our pool of respondents increasing. We feel the results are becoming much more accurate and valuable as a result of these efforts.

We want to hear from you! Please click here to let us know what other questions you would like to see in next quarter’s survey.

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