Paper merchant Spicers, formerly PaperlinX, has bounced back from the collapse of its European operation to post a statutory profit after tax of $6.3 million for the six months to 31 December 2015, compared to a loss of $90 million for the prior corresponding period (pcp).
Paper merchant Spicers, formerly PaperlinX, has bounced back from the collapse of its European operation to post a statutory profit after tax of $6.3 million for the six months to 31 December 2015, compared to a loss of $90 million for the prior corresponding period (pcp).
“I am very pleased to report a profitable result for the half, notably the first group profit delivered since 2008,” said Spicers CEO Andy Preece. Total revenue fell 3.1 per cent to $202.6 million, from $209 million.
The result represents a return to profitability for the Company after a period of significant losses stemming from the underperforming European businesses, which led the Company consolidating its operating footprint. Spicers is now focused exclusively on Australia, New Zealand and Asia (ANZA), with a platform of profitable businesses from which to implement its ongoing diversification strategies, said a company statement to the ASX.
However, while the New Zealand and Asian business performed well, a continued structural decline of the commercial print market hit the Australian operation.
The New Zealand (NZ) and Asian businesses delivered EBIT results ahead of pcp. NZ in particular delivered a strong performance demonstrative of a well-diversified business. The Australian business, whilst remaining profitable with solid gross profit margins, delivered an EBIT result behind pcp due to continued structural decline in the Commercial Print market and competitive pressures caused by the depreciation of the Australian dollar over a sustained period.
The Australian business provided a profit in a challenging first half of the financial year. Sales revenue fell by 7.2 per cent, with structural decline and competitive pressures in the Commercial Print market partly compensated by robust organic growth in diversified revenues. Underlying EBIT was $3.6 million, versus $6.1 million pcp, a result down on prior due to difficult market and trading conditions. Australian dollar depreciation over a sustained period resulted in significant increases to inventory carrying values.
These tough trading conditions in the Commercial Print segment were partly offset by strong growth in diversified margins and ongoing initiatives that successfully reduced trading expenses. Benefits from ‘right-sizing’ actions taken in Victoria and New South Wales during FY 2015 contributed across the whole period.
“To deliver sustainable shareholder value, Spicers will continue to concentrate on developing its portfolio in diversified segments in order to overcome the ongoing structural decline in commercial print,” said chairman Robert Kaye. “This improved result is reassuring and validates the strategic decisions to focus on the profitable ANZA businesses.”
The decision to exit Europe had significantly cut down on operating costs, the company said.
Discontinued operations reported a statutory profit of $4.9 million (pcp statutory loss $84.3 million) after taking into account the impact of deconsolidation of the German business and management of exit costs relating to the European businesses. The German business, now in insolvency proceedings, is classified as a discontinued operation.
The former PaperlinX announced in October 2015 that it would change its name to Spicers following the failure of its European business.