Paper merchant PaperlinX will change its name to Spicers and continue to diversify into signage, display and packaging in an attempt to claw its way back from a European adventure that turned into one of Australia’s biggest corporate disasters.
The company says it has identified a number of acquisition targets across Australia and New Zealand as it refocuses on its profitable ANZA businesses.
PaperlinX chairman Robert Kaye told the company’s AGM in Melbourne that the past year had been ‘both challenging and transformative’ against a backdrop of structural decline in the paper industry and ‘tough and worsening’ trading conditions in European markets.
The collapse of the company’s European operation resulted in losses of more than $300 million over the past year, as PaperlinX posted a total loss of more than $390 million.
Group revenue was $2 billion, which included $1.6 billion of revenue from discontinued and exited businesses in Europe and Canada. The company reported an overall loss of $392.3 million, with net assets of $128.7 million.
“Your company is now focused exclusively on the viable, well-managed businesses in Australia, New Zealand and Asia (ANZA),” Kaye told shareholders.
I want to assure shareholders that the ANZA businesses are profitable and viable and represent a solid platform for further growth. Continued diversification is essential for future sustainability. ANZA revenue was $404 million, down 5 per cent on the prior period due to ongoing structural decline in the Commercial Print business segment. The immediate focus is to develop the ANZA businesses through organic growth and acquisitions, subject to finding the right opportunities. The acquisition of a leading sign industry supplier in New Zealand during the year is a good example of the opportunities that exist for us in areas like Sign and Display.
Newly appointed Managing Director and CEO Andy Preece told the meeting the company was ‘now focused purely on the profitable Spicers businesses in Australia, New Zealand and Asia, without the distractions of the underperforming assets in Europe.’
The Spicers businesses in the ANZA region once again generated sustainable returns in difficult trading conditions within an industry in structural decline. During the course of the year these businesses delivered underlying earnings before interest and tax of $14.7 million. This represents a small decline from prior year, an acceptable performance given the backdrop of the continuing contraction of the commercial print market in these regions.
Preece said that while fine paper for the commercial print market remained 'a relevant and important part of our product portfolio,' the company would be equally focused on diversification.
A pleasing aspect of our diversified performance in 2015 has been a 33 per cent growth in revenues and a 36 per cent growth in margins from the Sign and Display and Industrial Packaging businesses. The Sign and Display segment has been the main driver of growth with enhanced supplier relationships and leveraging off acquisitions being the key elements to success. The acquisition of Total Supply in New Zealand has contributed positively to this result.
We will seek to grow both organically and through acquisitions, with targets already identified in Australia and New Zealand. Our mission is to drive overall profitability by managing paper business returns and re-investing to diversify into growth sectors. To do this we need to mitigate the decline in Commercial Print revenue as volumes fall and margins tighten.
Shareholders at the meeting voted in favour of changing the company's name to Spicers after Kaye told them it would ‘align the identity of the parent with its operating companies.’
The chairman also outlined plans to defend any legal action by owners of PaperlinX hybrid securities that were issued mostly to retail investors in 2007.
"The Company does not believe there are any matters that would give hybrid holders a right to forcibly redeem or realise their securities," he said. "Any claims to the contrary are misconceived and any legal actions brought by these parties will be strongly defended."