Difficulties At Omas In Bologna ?

[gmax]

I placed an online order with Omas in January, and received it soon after they completed their annual inventory.

 

For several days their website has been displaying a message saying "E-commerce temporary not available, coming soon".

 

I hope that Omas can work through their difficulties and come back in a stronger position

[katanankes]

Hi! I found an update on the Omas saga:

 

http://www.ilsole24ore.com/art/impresa-e-territori/2016-02-05/per-omas-speranza-bolognese-063642.shtml

 

It is an Italian news article published on a leading economic newspaper. So it is very reliable. The bullet points:

1) Omas in on "liquidation" (or voluntary receivership can also be a translation). It is now being administered by a "liquidator" "receiver". This is the first step before declaring bankruptcy or, more likely, selling all assets and finding an agreement with creditors before closing shop. It is a long process during which only "ordinary business" is permitted. Not sure whether this includes launching new pens. Probably not.

2) The workers' buy out attempt failed. O luxe said no (not enough money on the table).

3) Currently another company based in Bologna (they do not disclose the name, they just say that it is not a company in the same sector) put forward a new proposal.

4) An answer is waited for February 12th.

5) 16 people remain employed.

6) Apparently O Luxe took this step because of shrinking market share that made the company not viable anymore.

 

So overall grim news, but there might be a positive development pretty soon. If I find any update I will post it.

Edited February 9, 2016 by katanankes

[KyleKatarn]

So, the amount of debt that OMAS has amassed is such that O Luxe prefers bankruptcy to the workers buyout option and, unless someone shows up who is able to service that debt and put some more money on top, they are going to let it close. Would you agree with this interpretation?

 

Also, since they own the brand they will probably be able to recolocate production to China and do things more cost effectively, right? Although, with that option they will have much more problems to sell the brand as a luxury one... Not to mention the design, although in that front they may be able to employ italian design bureaus.

 

Anyway, just plain sad news. I'm crossing my fingers for the success of the bid from that bolognese businessman.

[youstruckgold]

Hi! I found an update on the Omas saga:

 

http://www.ilsole24ore.com/art/impresa-e-territori/2016-02-05/per-omas-speranza-bolognese-063642.shtml

 

It is an Italian news article published on a leading economic newspaper. So it is very reliable. The bullet points:

1) Omas in on "liquidation" (or voluntary receivership can also be a translation). It is now being administered by a "liquidator" "receiver". This is the first step before declaring bankruptcy or, more likely, selling all assets and finding an agreement with creditors before closing shop. It is a long process during which only "ordinary business" is permitted. Not sure whether this includes launching new pens. Probably not.

2) The workers' buy out attempt failed. O luxe said no (not enough money on the table).

3) Currently another company based in Bologna (they do not disclose the name, they just say that it is not a company in the same sector) put forward a new proposal.

4) An answer is waited for February 12th.

5) 16 people remain employed.

6) Apparently O Luxe took this step because of shrinking market share that made the company not viable anymore.

 

So overall grim news, but there might be a positive development pretty soon. If I find any update I will post it.

THankyou for the update. There still appears to be some hope. At least 16 people are still there - the same 16 people who have been providing such a great product for so long. I will maintain my #SaveOmas-UseOne! campaign and continue to hope that somehow this wonderful, innovative fountainpen brand will somehow be sustained.

[Joban]

Thank you for the update. Fingers crossed for a new owner.

[katanankes]

So, the amount of debt that OMAS has amassed is such that O Luxe prefers bankruptcy to the workers buyout option and, unless someone shows up who is able to service that debt and put some more money on top, they are going to let it close. Would you agree with this interpretation?

 

Also, since they own the brand they will probably be able to recolocate production to China and do things more cost effectively, right? Although, with that option they will have much more problems to sell the brand as a luxury one... Not to mention the design, although in that front they may be able to employ italian design bureaus.

 

Anyway, just plain sad news. I'm crossing my fingers for the success of the bid from that bolognese businessman.

 

Without more information of course this is pure speculation, however...

 

1) The article does not quote the level of debt. However, even if Omas is debt free (somewhere else the press speaks of a restructuring that already took place a year ago), O Luxe may still want to liquidate the company to avoid future losses (that would make business sense). By the way, I once saw the financial statements of Omas (years ago anyway, it is a public document by the way, anyone can download it paying a small fee to a government agency), and I was shocked that the total turnover was only a few million dollars and that revenues could not cover even 50% of the costs... so all in all Omas is penuts for O Luxe, but still they may want to limit their losses if they see no future.

 

2) They may have refused to sell because they did not see the offer fair. If the liquidation is voluntarily, O-Luxe has appointed the liquidator and he will do what they say. The situation is made more complicated by the fact that there is also a minority shareholder, LVMH owining 10%. The liquidator must also protect its interests.

 

3) The main assets of Omas are of course: brand and goodwill, machinery, raw materials and any inventory, patents (?) and other intellectual property if any. In a liquidation these assets are normally sold to cover the debts. It is theoretically possible that one of the shareholders (i.e. O Luxe) steps in to buy some or all of these assets at fair values. However, for a shareholder buying the assets of a controlled company in liquidation is very risky business, they may face criminal charges if not enough money is left to cover the outstanding debts.

 

4) I never bought the idea that O Luxe wants to relocate production to China because Omas production is so dependent on the local expertise and the "made in Italy" factor. I just think that they want to get rid of a small company accumulating losses every year. Just portfolio management for a conglomerate. However, if in the end they decide to retain the brand instead of accepting an offer... well then all options are on the table. It really depends where the brand will go after the liquidation is completed.

 

Let's see what happens in the meeting on 12 February (it is a public meeting with trade unions and government representatives, so we will see some news around afterward).

[Ghost Plane]

Oh dear. Glad I bought while I could. Pity I just I discovered their italics.

[sakayume]

I'm sorry to hear the workers' buyout attempt failed. Hopefully there will be a successful bid. Although I'm not hugely interested in current Omas products (too many huge pens ), I'd be very sad if they had to close just when it seemed they were coming out with new products -- the re-release of the 361 and more nib options.

 

 

4) I never bought the idea that O Luxe wants to relocate production to China because Omas production is so dependent on the local expertise and the "made in Italy" factor. I just think that they want to get rid of a small company accumulating losses every year. Just portfolio management for a conglomerate. However, if in the end they decide to retain the brand instead of accepting an offer... well then all options are on the table. It really depends where the brand will go after the liquidation is completed.

 

 

I fully agree with this, and could never understand all the fears of O Luxe moving production to China. O Luxe are surely aware of where the value in their brand lies. Just because they're a Chinese company doesn't mean they'd be eager to move production to China.

[katanankes]

Since I had some spare time (Lunar new year...), I downloaded Omas latest published financial statements (you need to access an Italian government website and pay a fee). Quite interesting reading. I can share this information since it is not confidential in any way, it is a public record according to Italian company law. The latest available financial statements refer to 2014.

 

1) Turnover/revenues was 1,278,000 euro down from 2,258,000 in 2013. A staggering decline.

 

2) Net income was negative. The loss posted in 2014 was 669,000 euro up from 436,000 in 2013.

 

3) With 22 employees the costs of personnel were around 1 million euro in 2014 (remember high taxation and social security costs in Italy), plus half a million in other external services/consultancy (probably including also some advertising). Raw material was a mere 300,000 euro. Given the tiny size of the structure, I would say that personnel costs were basically compressed down to the limit. The staff included 6 factory workers and 14 white collars. We know that this number is today even lower.

 

4) The company is virtually debt free. No debt with banks (basically zero!) and just normal commercial debts toward suppliers that are balanced by the commercial credits. The balance sheet is clean and could count on 5 million euro provided by O Luxe through one of its fiduciary companies.

 

5) In 2014 there were around 200,000 euro in investments to build up the ecommerce and to introduce new productio techniques (namely marble, I guess for the Michelangelo limited edition).

 

According to these data, that I do not think changed considerably in 2015, Omas has been a declining and dying company for years and apparently has reached the bottom.

 

The real problem with a company like Omas is the fixed costs. No matter what you do, it is difficult to go below 1.5 million euro in costs when running a company with a factory and 20ish employees. You cannot cut costs, but Omas seemed to be unable to raise its revenues. My estimate is that the company in 2014 sold no more than 4000 pens worldwide. With these numbers it is impossible to maintain a global distribution network and a factory, you can only have a workshop (Edison Pen Company style...).

 

The balance sheet also sheds some light on the "value" of Omas. Of course there are so many valuation systems, but let's just focus on the main hard assets:

Omas owns its factory with a value of 2 million euro

Other 1.3 million euro is the historic value (before amortizations) of the machinery

Inventory: 3.3 millions euro in raw material and finished and semi-finished products (a lot of pens!!!)

There are also around 2 millions in historic value for what I believe is display cabinets and other merchandising material provided to stores and distributors. This money is amortized in the balance sheet and I discount it since it would probably need to be renewed in the near future (the big investment was made by LVMH management in 2005).

So we are speaking of just 6.6 millions for just the scrap value of the hard assets, then you can imagine O Luxe that wants to be paid back for all the previous investments. 10 million euro anyone?

Interestingly, the value of the goodwill (that would include the brand) is not made explicit in the balance sheet (this is an accounting choice, so we have no benchmark to determine its value).

 

Now, with 10 millions you buy a dying company... to reverse its destiny you would probably need other 5 millions in investments. I do not think there are many people with this kind of money ready to take the risk.

 

I am very sorry since Omas is my favorite brand and I am a big fan.

[katanankes]

A quick follow up. To put things in perspective I also accessed Visconti financial statements. In 2014 Visconti posted 5.4 million euro revenues (slightly down from 2015). Their cost for personnel was just 30% higher than Omas. The net result was a mere 50,000 euro (basically the company is just breaking even). 1 million revenues came from Italy, 1 million from other European Union countries and the rest from extra EU countries. Omas revenues were distributed in a similar fashion (with a mere 230,000 euro coming from Italy). Also worth noting that raw materials accounted for 2 millions in Visconti's income statement, II guess reflecting their high end production with gold and diamond.

 

These patterns are hardly surprising, most small and medium Italian enterprises are under-capitalized and lack investments in marketing and R&D.

Edited February 10, 2016 by katanankes

[youstruckgold]

A quick follow up. To put things in perspective I also accessed Visconti financial statements. In 2014 Visconti posted 5.4 million euro revenues (slightly down from 2015). Their cost for personnel was just 30% higher than Omas. The net result was a mere 50,000 euro (basically the company is just breaking even). 1 million revenues come from Italy, 1 million from other European Union countries and the rest from extra EU countries. Omas revenues were distributed in a similar fashion (with a mere 270,000 euro coming from Italy). Also worth noting that raw materials accounted for 2 millions in Visconti's income statement, II guess reflecting their high end production with gold and diamond.

 

These patterns are hardly surprising, most small and medium Italian enterprises are under-capitalized and lack investments in marketing and R&D.

 

Thankyou for keeping us up to date.

[Ghost Plane]

Appreciate the info. Suspect the bad investment banking climate in Europe isn't helping matters.

[Moruk]

What a pity. Conway-Stewart after 100 years, now Omas after 90! Who might be next?

Edited February 10, 2016 by Moruk

[KyleKatarn]

A quick follow up. To put things in perspective I also accessed Visconti financial statements. In 2014 Visconti posted 5.4 million euro revenues (slightly down from 2015). Their cost for personnel was just 30% higher than Omas. The net result was a mere 50,000 euro (basically the company is just breaking even). 1 million revenues came from Italy, 1 million from other European Union countries and the rest from extra EU countries. Omas revenues were distributed in a similar fashion (with a mere 230,000 euro coming from Italy). Also worth noting that raw materials accounted for 2 millions in Visconti's income statement, II guess reflecting their high end production with gold and diamond.

 

These patterns are hardly surprising, most small and medium Italian enterprises are under-capitalized and lack investments in marketing and R&D.

 

Great research work katanankes, thank you for sharing it with us!

[john74]

I'd be really sad to see Omas go. Their nibs in particular are excellent - some of the best in my collection. I still need to secure a fine extra flessible nib - soon.

[FriendAmos]

A real shame. OMAS remains my #1 pen manufacturer, and I really hope they survive.

 

This also brings to mind Delta, which some people have been unhappy about w.r.t to its arrangements with Martemodena. Apparently some people think that Delta should not consider "unconventional" arrangements that ensures its survival, but should instead put a higher priority on the well-being of "long-time retailers" of Delta pens.

[FriendAmos]

 

These patterns are hardly surprising, most small and medium Italian enterprises are under-capitalized and lack investments in marketing and R&D.

 

A real shame, considering the quality (and style!) of some of the products.

[katanankes]

Now, respecting that there are jobs at stake and it is a difficult situation, I would like to make some speculative remarks.

 

How can you be profitable selling 4000 pens a year? You need a new business model. Clearly the traditional manufacturer-distributor-reseller value chain does not work for you.

 

One solution: sell directly, on line! This way they could both lower the prices and, at the same time, tremendously raising their profit margin! You will certainly lose customers on the way (like those buying a random pen as an expensive gift), but you could conquer an all new slice of market.

 

And you could still keep partner relationships with key stores offering them exclusive limited editions or, like Edison, a production line. You do not need to be in every pen store in the world. I am pretty sure some stores sell only one or two Omas per year.

 

This is my Monday Morning quarterbacking. I wish I had the capital to make an offer!

[Feanaaro]

By going for a stronger online presence at lower prices they would not necessarily lose the random person buying a random pen as an expensive gift (though I wonder how many of those are there really, and how many of those that there are would not just buy a Montblanc, or a Pelikan if you are really lucky), because said person would probably not go and check prices online before buying (and if they did, they would still buy directly from Omas at the lower price), but just stop in the store and exit with the pen like they do now.

As it is the case with the aforementioned Delta, which has given a special deal to a one specific reseller, but can still be found in other pen stores and bought at higher prices if one were so inclined.

Edited February 11, 2016 by Feanaaro

[by78]

The problem with Omas is that, and this is my opinion only, it occupies a unprofitable niche. To those who are familiar with fountain pens, Omas' pricing might be out of reach for many; but to those who only want to buy a fountain pen as a gift or status symbol, Montblanc and Pelikan are probably the first choices.

 

So Omas occupies a tough space, kind of like Volvo from not too long ago. Perhaps Omas should consider a new pricing strategy: make some models more accessible (sub-$300) and make up the revenue through volumes; preserve or even raise the price of higher end models for those who only want a name plate.