Local profit sees PaperlinX stick to its guns

PaperlinX management remains committed to its ambitious turnaround strategy, with its Australian and New Zealand division leading the charge with solid profits in its 2013 interim report. The determined paper merchant delivers year-on-year improvement in almost all areas and predicts positive performance in its second half, however, a lower than expected up-take of its hybrid share exchange offer could threaten to slow its return to profitability.

The tortuous PaperlinX SPS hybrids saga will draw to a close at 7:00 pm this Friday, February 28^th, the final cut-off for hybrid security holders to take up the company’s offer to exchange the SPS units for 250 ordinary PaperlinX shares. With less than a week left on the clock, however, PaperlinX reports only 4.57% uptake on the offer leaving over 95% of the contentious hybrids still up in the air.

PaperlinX continues to emphasise the benefits of the offer to hybrid holders. A spokesperson confirmed to Print21 that while the uptake hasn’t been what the business had hoped, the February 28^th cut-off will indeed be final and represents the last opportunity for unit holders to accept the current market premium. According to board chairman, Robert Kay, the simplification of PaperlinX’s capital structure continues to be an important step on the business’s road to recovery.

“It may be difficult for hybrid holders to realise their units ‘on-market’ in light of the limited liquidity for those securities. However if the offer does not receive full take up, the company will continue to implement its operational turnaround strategy, but it will just take longer to achieve,” said Kay.

In its half-year report, the company announced total revenue of $1.48 billion, a 2% increase on the corresponding 2012 interim results. Australia, New Zealand and Asia collectively turned over $221.4 million and contributed the strongest regional profit for the company at $8.8 million before interest and tax, up from $7.6 million. Wayne Johnston, PaperlinX deputy chief financial officer, told Print21 that the local market contributed a good chunk to the regional profit.

“We are very happy with how Australia has tracked. Asia has had some tough trading conditions but, again, is still profitable. Looking forward, we’ll just focus on running the business and continue to implement the turnaround strategy as planned,” said Johnston.

PaperlinX CEO, Andrew Price, agrees that the results demonstrate that the turnaround strategy is delivering improvements to the business, highlighting out the strong Australian performance as a positive indicator for the business.

Despite a lift in revenue and regional profits the business reported an overall loss of $28.4 million, a resounding improvement on last year’s $58.6 million interim loss. Net debt rose 28% to $177 million due to trading losses, but the company still predicts a profitable second half overall.