The AIM-listed company said soft demand in January and early February meant print volumes were materially lower than the same period last year, which will impact annual results.
Overall print volumes are higher than the previous year but margins fell as Grafenia cut prices to contend with fierce competition.
“As the trade print price war continues, we need to remain competitive and do not expect margins from the sale of printing to improve,” the company said in a statement.
“However, we are continuing to execute our transformation plan to transition our business into growth areas with more predictable subscription-based revenues and to other complementary product lines, such as website sales, ink-on-fabric displays and signage services.”
Grafenia has turned its focus to its more profitable web business as clients are increasingly using marketing spend on digital and e-commerce.
The group increased investment in its web design business Nettl, which now has 100 studios in the UK and in Ireland. A new service for same-day printing services, called "Nettl Now", has been launched to meet client demand.
Last month the company announced the acquisition of a Liverpool-based sign business, ADD Signs, which is “progressing well” and will produce a sign range to sell through Nettl and printing.com partners.
“We continue our search for further sign companies to acquire, roll together, unlock cost savings and rebrand as Nettl Business Stores,” Grafenia said.
While Grafenia has made progress with its transformational plan, it continues to be hurt by weak transactional print volumes, which account for a material part of revenues. It said it remains cautious on the outlook.
Shares dipped 1.64% to 7.50p in early trading.