Gordon and Gotch has become the 800lb gorilla in magazine distribution as Australia’s largest magazine publisher quits its distribution business.
Gordon and Gotch has become the 800lb gorilla in magazine distribution as Australia’s largest magazine publisher quits its distribution business.
Despite operating in a falling market, PMP’s distribution arm will receive a massive $1.5 billion boost in sales over the next five years after taking over rival Bauer Media’s distribution division, Network Services Company.
Bauer, which publishes more than 60 magazines in Australia and sells over 65 million copies a year, late last year announced it was closing its distribution business Network Services. It has transferred all of its own and other publishers’ retail magazine distribution to Gordon and Gotch, in order to focus on content, not logistics. The agreement is subject to Bauer satisfying its employee consultation obligations.
NSC and Gordon & Gotch have operated as sole rivals in the magazine distribution business since 2010 when IPMG folded its NDD following the shift of its biggest client, News Magazines, to Gordon & Gotch.
In an announcement to the ASX, PMP has revealed the financial details of the mega deal, which leaves Gordon and Gotch with an overwhelming, almost monopoly share of the magazine distribution market in Australia.
The new contracts are expected to generate circa $300M sales per annum with around $100M in fiscal 2016. The additional margin, negative working capital benefits and capital expenditure in 2016 are not material and have already been incorporated into the 2016 AGM guidance.
The agreements will allow for Gordon and Gotch to provide magazine distribution services to Bauer Media over the next 5 years and to also supply distribution services to other publishers for which Network Services and Netlink Distribution (Bauer’s New Zealand distribution unit) currently provide distribution services.
The closure of the Network business is expected to take several months. PMP said that in order to accommodate the increased distribution volumes, Gordon and Gotch would lease Bauer’s existing warehouse space at Moorebank for its Sydney operations and purchase the equipment located there and in Victoria.
“We are excited about the opportunities this arrangement will deliver for our business in the long term and for our publishing and retail partners,” said David Hogan, GM, Gordon and Gotch Australia. “I am delighted that Bauer Media has shown the confidence in Gordon and Gotch to outsource this important component of its business.”
PMP CEO Peter George added: “PMP is delighted to provide magazine distribution services to Bauer Media as this complements our existing long term printing relationship, provides Gordon and Gotch greater efficiencies in light of the ongoing decline in magazine distribution volumes, and ensures ongoing services to support the magazine industry in Australia and New Zealand.”
In an email, PMP assured newsagents that the new deal would create ‘efficiencies.’
It will simplify. You will hold one account instead of 2, which will create all sorts of efficiencies. We see this as a significant positive for the Newsagency channel and look forward to seeing the outcome.
Meanwhile, in a separate market update regarding the collapse of Dick Smith Holdings (DSH) – a PMP customer for print and distribution services – the print company said its exposure was estimated to be about $A4 million.
DSH is a customer of PMP for print and distribution services in both Australia and New Zealand. At the date of its voluntary administration PMP’s maximum one off bad debt exposure is $A4.0 million for this customer. No discussions have yet taken place with the administrators regarding the ongoing viability of DSH and the level of recoverability of the existing debt.