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FP has a strong franking machine business. As number three in the world market, the company has clearly focused on the segment for small and medium mail volumes. To a certain extent, this is an advantage, as individual customers are sending fewer and fewer letters and are therefore more likely to switch to smaller franking machines. However, this does not compensate for the overall decline in the sale of franking machines year on year due to the shrinking mail volumes.
Over the past five years, the installed base of FP has shrunk by more than 20 percent in Germany alone, although this is lower than the overall market decline. Along with it, the demand for consumables and services associated with this base is also falling.
Digitalisation is spreading rapidly in many areas, and the Corona pandemic may accelerate this development further. We cannot yet accurately assess the impact today: will mail volumes decline more sharply on a once-off basis as a result of the pandemic, or will they also shrink at an accelerating rate in subsequent years? However, the trend is irreversible and we must act urgently. FP already has a few digital products, but the revenue share here is still too small to compensate for the declines in our franking business.
Products developed from a technical perspective often provide no clear benefit for the customer. We will change that by transforming existing products and building new ones with a clear value proposition for customers, as well as with business models that create an attractive customer experience.
With Future@FP, we will transform the FP Group into a sustainably-profitable international technology group with innovative software solutions.
With the clear objective of picking up speed in the digital business and to start growing, we are concentrating our activities in four business areas:
1. Franking and office solutions
2. Software & business process automation
4. Mail services
These business units have clear responsibility for market development (go-to-market) as well as their respective product roadmaps, development and delivery. They will own full P&L responsibility. This will empower them and enable us to serve our customers and markets better and more efficiently.
We will adapt our existing "Franking and Office Solutions" business to the changed market requirements in order to safeguard and further optimise profitability in this area. We will also expand our range of office and business solutions so that we can offer relevant added value to our more than 200,000 customers worldwide, even in a world without paper.
The franking machine is one component helping companies handle the broader set of physical, financial and information flows needed for conducting business. Similarly, helping our customers deal effectively with physical, financial and information flows presents opportunities for our SaaS and PaaS-based solutions such as FP Parcel Shipping, Vision360 (Mail Cost Accounting), FP Sign (Digital Signature), TransActMail and more. Put simply: We make people’s (home) office lives easier.
As such we are moving away from largely hardware-focused products to SaaS business models that are validated as a solution with a clear value proposition for customers. It is our intention for the medium term, that the digital business areas will strongly contribute to the profitability of FP.
With the above-mentioned adaptations and our PaaS and SaaS solutions, we are driving forward the transformation of FP into an international technology group by enabling sales across several markets.
In order to drive this transformation forward in a targeted and timely manner, we are currently building the foundations for tomorrow's success. Therefore, the fiscal year 2021 will be a transition year. We will align revenues and costs through the measures "right-sizing" and "right-shoring" across functional areas.
The introduction of a new uniform ERP/CRM system is crucial in improving both effectiveness and efficiency and thereby profitability since it helps us to move to a much simpler and KPI-driven way of working.
To bring FP into the future we need to quickly align our cost base to our business needs, but that's just one of several initiatives. Broadly speaking the transformation programme Future@FP is not about cost reductions but about development and relevance. Future@FP captures the actions we will take for increasing profitability, achieving growth through (re)-building new and existing SaaS and PaaS solutions, while still mantaining a strong focus on the franking machine business.
With the measures already initiated, we are not only setting the course for a successful future, but are also clearly speeding things up on our way to becoming a strong, sustainably-profitable international technology company. Without further delay.