St Ives, at one time the country’s largest web offset magazine printer, is in transition and being the biggest in magazine printing is not part of its long-term vision.

The company has just posted its first loss (a pretax loss of £7.2 million compared to £30.6 million pretax profit in 2008) since joining the stockmarket 20 years ago and a new management team is at the helm with ambitions to grow the business and transform it; into? That is the question. Exceptionals of £14.5 million, associated with closures and divestments, were behind the loss.

It is easier to define what it will not be. Top of the list is ‘volume magazine printer’.

This is quite a shift for a company whose expansion began with the acquisition of Severn Valley Press, took in Chase Web Offset and took in Riverside Press and what used to be Chapel River Press among others. All were magazine printers. Now the sector is subject to what ceo Pat Martell describes as “structural change”.

This suggests that magazine publishers are suffering a significant disruption in markets, as opposed to the cyclical movement in advertising volumes that change with shifts in the economy and where after recession, volumes bounce back. That is not going to happen in magazines this time, Martell believes, and the changes that St Ives has made, including the closure of its Andover plant this summer reflect that. Over capacity in the sector has led to what are euphemistically described as ‘sub-economic’ prices.

“Magazine volumes are down,” he says. “But we are winning new titles where there’s a need for quality and service. But we will not chase commodity volumes at any price.”

As well as title closures, print runs were reduced and paginations fell, culminating in a 12% decline in revenue from magazines. It has retained almost all the customer base following the closure of Andover.

In the financial statement, he explains: “We are not expecting (or waiting for) a significant change in the current market conditions in this sector and so have acted quickly and decisively to reduce our cost base. We will not hesitate to take further action should it be required but believe our well-invested modern facilities and reputation for quality and reliable service will enable us to generate an acceptable return, albeit from a smaller base. We believe there remains a long-term need for high quality printed products and exceptional service which is not satisfied by online products. Our strategy is to focus on these products and not to chase volume at ever reducing prices.”

The company has sought to achieve a better balance between weekly and monthly titles in order to even out workflows and he says it has achieved agreement on changing shift patterns to reflect the seasonality of the business. But this will not change the direction that the magazine sector is headed. Martell explains: “In business to business publishing the shift to online advertising is going to have a significant effect. I assume that publishers will still have to be paid for their content as the change in the business weekly sector has been profound. In the consumer magazine sector the outlook is more clear: there is no online alternative to the quality glossy magazine.”

The magazine sector still accounts for £73 million of the group’s £386.6 million sales and is well invested with new presses and binding lines in place at Peterborough, Plymouth and St Austell. While there are no plans for further closures he says, nor are there plans to expand the division.

However, its future will surely form part of the group wide strategic review that is underway. “We want to identify growth opportunities and products and services for the future,” he says. The company has credit facilities for £70.0 million in place until 2012, while at the same time it has cut debt levels in the financial year.

Finance director Matt Armitage says that debt will remain much as it is, though may increase if it takes on large clients to join Royal Mail and Sainsbury’s and needs to fund that growth. Equally, while both explain “there is nothing in our sights at the moment”, St Ives has the cash to fund acquisitions where they fall in line with the strategic review.

Outside the magazine division, the book business, though suffering a knock on impact as publishers were hit by the collapse of distribution in last year’s pre-Christmas period, once again performed well.

Direct mail volumes were lower in anticipation of the national postal strikes says Martell. The future here is in shorter run products but with greater personalisation. The Retail work suffered in line with the high street, as did the large format outdoor and events sector where many events were cancelled. “There is some sign of confidence coming back,” he says.

But it is a story of a company undergoing change as it grapples with the way the market is moving. St Ives wants to stay with difficult to manage and produce print and so standard magazines inevitably are becoming a less important part of the story.