The trans-Tasman group posted a 7.8% increase in earnings before significant items to $100.1m, despite a 1.5% fall in revenue to $1.19bn for the full-year to 30 June 2011.
Its PMP Print division was a star performer, with a 16% increase in earnings before significant items to $55.4m, off the back of a 4% fall in revenue to $472.4m. Its earnings-to-sales margin was 11.7%, up from 9.7% in 2010 and 6% in 2009.
The company also managed to pay down $27m of debt to reach “a record low” of $141m.
PMP chief executive Richard Allely said the margin in print was the standout of the full-year results, calling it “arguably the highest EBIT margin of any print company in the world”.
“The real highlight of this report is not the debt level, which is just an outcome of the operating performance. If you generate a lot of cash, you can pay down debt,” he said.
“The thing that drives that is the profitability of the business. Here is an industry that is in structural decline, and yet off lower revenues and lower volumes, our print business delivered an operating performance up year-on-year.
“If there is one highlight you can take out of this, it is that we have repositioned the business to be low cost, so even in a declining market it is growing its earnings. That is outstanding,” said Allely.
However, the company’s bottom line result was once again dragged into the red by exceptional items, in this case the closure of its Scribo book business as well as continued “transformation” in New Zealand.
It posted a net loss for the year of $11.3m, down from a $20.6m profit in 2010.
Allely promised this would be the last year that one-off items took the shine off operating improvements.
“The short answer is we won’t have significant items next year. In fiscal 2012, we are not doing any more restructuring. We have done our restructuring. We are now running the business on a low-cost model.”
The group has long said that future growth would come from its PMP Digital arm, which comprises marketing and creative services offerings such as Pacific Micromarketing and photography operation Dimension Studios.
But the PMP Digital division suffered one of the biggest falls, with a 96% drop in earnings to $100,000.
Allely conceded the digital business needed more attention, and hinted at investment plans to be announced by October.
“It is not bearing fruit because we have not invested in the growth strategy. You are seeing a collection of assets in PMP Digital where there are gaps in their market offering.”
He would not give specifics on the plan, though it is clear one missing piece of the puzzle is the lack of any creative services/agency-type businesses, which have appeared in the diversification strategies of rivals Salmat and IPMG.
According to PMP’s chief financial officer Geoff Stephenson, PMP’s current debt-to-equity ratio of 40% is well below its target gearing of 50-75%, leaving significant headroom for investment.
The market reacted warmly to the results, with PMP’s share price jumping more than 10%.
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