Region’s largest printer is back in the black as a result of concentrating on doing what it does best – printing and distributing retail catalogues.
Declaring a return to profit and signalling the company will be debt-free by 2017, a remarkably rejuvenated PMP is not only preparing to give money back to its shareholders after next year in dividends and/or share buybacks but it’s building a war chest for the upcoming consolidation battles it expects to see take place in the high-end heat-set web market.
In his presentation to the AGM, chairman Bickford-Smith, said the company was now in a far stronger financial position after two years of maximising cash flow and significantly reducing debt. Intimating there will be no major equipment purchases, he said there are only relatively minor opportunities for PMP to invest in its own businesses and besides, these are already budgeted for.
However he did identify a sector shakeup as a major opportunity for which the company must be ready. The more significant opportunity, to participate in the rationalisation of the Australian heatset market has not yet presented itself. While there has been some potential consolidation within the heatset market, as yet nothing of any significance has been consummated. As we have said before, consolidation is necessary. We are sure some form of rationalisation will occur and we are ready to access each opportunity if and when they present themselves.
(The un-consummated consolidation he is talking about is undoubtedly the lapsed merger earlier this year between IPMG and Blue Star, the second and third largest players in the sector.)
The quite buoyant presentation this year is in stark contrast to the seemingly endless years of loss and growing debt. It comes after the appointment of Peter George as chief executive and managing director. As the architect of the company’s transformation programme he identified clear strategy and disciplined execution [as] achieving the anticipated results. He claims the three phase transformation strategy had delivered cost savings that cushioned the impact of the revenue decline in the print business.
Operating revenue in 2014 was down 7.8% to $899.2 million from $975.8 million the year before. With earnings (EDITDA) of $63.4 million he is forecasting a reduction next year to $56 million.
He expects print prices to remain subdued given the influence of the industry’s over capacity even as magazine print volumes have rebounded slightly from last year’s decreased numbers in the first quarter. However, catalogue numbers are down this year and paginations are variable reflecting retail conditions.
PMP’s distribution arm, Gordon & Gotch suffered a volume drop of 5.3% in 2014, mainly due to reduced magazine circulation. However unaddressed volumes were up 12% as major retail customer increased their use of catalogues.
He identified the use of a more flexible workforce in print, with the company better managing peak times with casual workers.
Printing margins are also under pressure in NZ even as PMP claims an increase in market share. The sheetfed operation is gaining traction offsetting heatset reductions. Heatset volumes continue to decline in the first quarter 2015. Community newspapers provided a bright spot with increased volumes.