Presstek Aims For US$20m Profits Boost

Presstek has introduced a business improvement plan targeting US$20 million of annual operating profit improvements.

According to the company, the plan involves virtually every aspect of the business and includes creating greater efficiencies, productivity enhancements, addressing operating expenses and the optimisation of resources.

The company has also identified additional potential cash flow improvements of US$25 million, primarily through working capital reductions and the proposed sale of selected property assets.

Presstek's president and chief executive officer, Jeff Jacobson, commented: "We have developed a pathway to achieve, over the next 18 to 24 months, a goal in the range of 10 per cent operating profit.

The cash generated through these improvements will allow us to invest in our strategic vision whilst enabling us to achieve sustained profitability for years to come." Although Presstek said it expects to receive the full annualised benefit of its actions by 2009, a portion of it will be recognised during 2008.

The company is targeting operating profits, as a percentage of revenue, in the range of six per cent to eight per cent during 2008 and nine per cent to 11 per cent for 2009.

Those figures do not include the impact of expected restructuring costs of approximately US$4.0 million, other one-off expenses of approximately US$0.5 million and stock-based compensation expense, which the company is currently unable to estimate.

Presstek added that it anticipates that approximately two-thirds of the restructuring costs will be incurred in 2007, with the balance expected to be incurred next year.

The other one-off expenses are expected to be incurred in 2008.

Jeff Cook, Presstek's senior vice president and chief financial officer, commented: "The business improvement plan is a detailed programme designed to significantly improve profitability, strengthen our balance sheet and improve cash flow.

We have already started to implement many of the actions in the programme and we are committed to achieving these goals." The company said it is targeting gross margin improvements of US$10 million, including manufacturing productivity improvements, procurement savings, service business rationalisation and improved recovery of raw material increases.

At the same time, Presstek is looking at operating expense reductions of US$10 million, which constitute the remainder of the profit improvements.

The programme is expected to result in a net employment reduction of approximately per cent, including attrition.

Operating expense reductions will also include the centralisation in Des Plaines, Illinois (USA) of product warehousing and distribution activities for North America.

There will also be improved productivity and the rationalisation of sales activities, with lower general and administrative costs, as well as the consolidation of certain customer care activities in to the company's Hudson, New Hampshire operation.

Presstek has also announced plans for its growth.

The company will focus on a two-tiered channel strategy allowing it to enhance its products and services to its core customer base of small and mid-size printers, whilst expanding to larger printers that will consume an even greater amount of consumables.

In addition, the company added that it will focus on growing its international business, with particular emphasis on Europe, as well as growth opportunities and initiatives in the direct imaging (DI) and CTP product areas.

Jacobson added: "Our vision is to build a product portfolio whereby Presstek will provide high quality fully integrated digital systems and services to form all-encompassing relationships with our customers." The company said it also plans to enhance its partnerships, which not only allows it to fulfill its vision, but also to provide its partners with access to Presstek.

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