PBL powers ahead with print: the full story

It was the decision which all those in the printing and publishing industries had been waiting months to hear: PBL Media would print ACP magazines itself. But what chance does the plan have of truly succeeding? Print 21 finds out.

Last week's long awaited announcement by PBL ended months of ongoing speculation and surmising over whether the company really did intend to pursue its own printing for ACP magazines.

In a statement sent to the media, CEO, Ian Law, described the company's decision as a cost-cutting measure.

"We have undertaken an exhaustive analysis of the printing options available to us and it became clear during the process there were compelling reasons to take control of the production of our publications," he said.

Interestingly, the announcement was made the same week as Tim 'Prince of Darkness' Parker, the new independent chairman of PBL arrived in Australia to assess the company's performance. Reports of Parker's potential interest in consolidating competing publications such as Ralph and FHM; Cleo and Cosmopolitan could mean that PBL will have fewer magazines to print. (Last year it closed down The Bulletin and New Woman).

The fine print
Expected to be complete by 2011 at the earliest, the location of the new print site has not yet been determined, though three sites have been identified by PBL in or around western Sydney, arousing suspicion that one of them may be IPMG's proposed greenfield site in Warwick Farm.

Other sources dismiss this as unlikely and say the two ventures are not in any way connected.

Once again touting his cost-saving rhetoric, Law added that most of the costs related to the establishment of the print facility will be funded through long-term leases of land, buildings and equipment.

"There will be little demand for up-front capital," he said.

Five new presses and bindery equipment are confirmed to be installed at the site. "This new technology available will deliver significant financial and operational benefits to the company when it is fully operational," Law said.

Given the reported parlous financial straits of PBL Media, with its current cash flow believed to be just sufficient to cover the interest bill on its $4.2 billion debt burden, the role of private equity partner, CVC Asia Pacific, will be crucial. The company has a track record of investing in the printing industry, buying out the ink manufacturer, Flint Group, in 2005 as well as owning paper mills and corrugated board plants and having a substantial stake in China's largest printing and packaging company, Hung Hing Printing Group.

PMP pushed out of print picture
For PMP, which prints the majority of ACP magazines, the news is a significant blow, but the introduction of five new heatset presses in the market, pumping out 15-20 million more printed pages per hour, will also have a major impact on the local heatset market.

Apart from PMP, the repercussions for other printing companies include Webstar; Rotary Offset, which prints the 700-page trade publication, Deals on Wheels; Rhodes-based printer, The Quality Group, which prints Rolling Stone (acquired from Next Media).

PBL's decision to go it alone was no surprise for Brian Evans, CEO of PMP; he notes that the two companies have been in discussion over what would happen for some time now.

"PBL were talking about it freely," he said. "We talked them through various options ... and we naturally think it is the wrong decision. Producing magazines for ACP is quite complicated."

Evans understands PBL's interest in saving costs, but is sceptical over whether the company taking charge of its own printing will bring about the cost savings it is looking for.

"PBL see this as an opportunity to bring its print and distribution together to save millions of dollars," Evans said.

"But these guys aren't printers."

A matter of time
PMP has managed to cover itself for the next few years by signing a three-year extension to its printing contract with ACP magazines on more favourable pricing terms and guaranteed volumes. The contract will revert to a five-year print agreement if ACP does not proceed to a greenfield site within the specified timeframe.

For Evans, who believes that "a three-year contract is normal", the potential to enter into a five-year contract places PMP in a "comfortable" position for the immediate future.

PBL's decision to extend its contact by up to five years with PMP is for some a telling sign that the new print centre will not be operational by 2011.

In his experience, Evans has found that setting up a print centre can take between two to two-and-a-half years in the hands of established print staff. Does he think that PBL has a chance of getting up and running by 2011?

"This is a tall order for them," he said. "There is no guarantee that this will go ahead."

He also believes it is unlikely that the location of the print site will be announced in weeks as expected.

"This is very complex; it will take months," Evans said. "There are financing, equipment and supply issues to look at."

Turning a new page
Now that a decision has been made, it is time for PMP to focus on new areas of growth. Evans intends to concentrate on catalogues, an area which he notes is growing by six to seven per cent a year.

"We could easily replace ACP volumes in the catalogue market," he said. "We are in the growth area."

PBL's Ian Law was not available to comment about any of these issues and, according to his PA, would not be speaking beyond what was announced in last week's release.