PMP has posted a significant drop in revenue from its Australian print business as it launches its recently approved merger with IPMG.
PMP Australia’s revenue in the six months to December 2016 was $151.4 million, down $39 million or 20.5 per cent on the previous corresponding period (pcp).
The company said the Australian results were adversely affected by unusual print market conditions, with every major heatset print company pursuing industry consolidation and aggressive competition to retain existing contracts which resulted in the loss of two major print customers ($16.3m), a fall in underlying heatset print sales and a decrease in distribution revenue.
PMP’s Griffin Press recorded lower revenues “after a customer loss and higher operational costs from the transition to the digital platform.”
The company’s Gordon and Gotch Australia business recorded a jump in revenue to $241 million, up $112 million pcp, and PMP New Zealand’s revenue was up $32.5 million to 103.6 million.
Overall, PMP recorded a net loss of $14.5 million, compared to a profit of $1.8m pcp.
“As we informed the market last year, PMP’s first half results were significantly lower pcp,” CEO Peter George told the ASX. “The half was adversely impacted by extremely unusual print market conditions in the lead into the expected industry consolidation. With every major heatset print operation pursuing industry consolidation in the first half, the printers were very aggressive in competing to retain existing contracts. Understandably, prospective print customers were wary of signing contracts where the future competitive market was not clear.
“As a result of the challenging market conditions, we were unsuccessful in replacing lost volumes, as well as from customers that went out of business in the last financial year. Profitability was also affected by postponing cost-out responses to the lower activity levels in anticipation of the IPMG merger going ahead as planned.
“It was pleasing to see the successful integration at Gordon and Gotch of the new magazine distribution contracts with Bauer in both Australia and New Zealand. This underpins PMP’s capability to successfully integrate businesses and major contracts."
PMP’s merger with IPMG is due to be completed today, with estimated savings on ‘significant’ synergies now estimated at $55 million.
“PMP and IPMG are now on track to extract synergy benefits that will make the merged company highly competitive in the Australian print market,” says George.