During this morning’s PMP Annual General Meeting (AGM) CEO Peter George addressed the company’s proposed merger with IPMG, telling investors that industry consolidation is inevitable as PMP battles to remain competitive.
George says there has been a growing case for consolidation due to tough market conditions, a case which he says has never been clearer than at present.
“When I joined PMP’s board in 2002, print was a growth industry. But industry revenues peaked in 2007 and, since then, they have effectively dropped off a cliff,” George says.
“In the last decade, hundreds of printing companies have either been absorbed by competitors or simply gone out of business. For years, PMP along with the rest of the industry has battled to remain competitive, with razor thin margins.
He continues, “This is why we have taken decisive action to address and control the inevitable industry consolidation.”
The ASX-listed print giant revealed last month it had entered into an agreement to merge with privately owned IPMG, flagging challenging industry conditions as the cause.
The transaction is subject to approval at a meeting of PMP shareholders scheduled for December 16.
The deal will also require approval from the Australian Competition and Consumer Commission (ACCC), which is slated to hand down its decision on December 22.
During the AGM, George indicated a reduction in ‘under-utilised and older capacity’ equipment as a result of a future merged press fleet.
However, he was less clear in addressing potential company staff cuts, telling investors, “As the businesses are integrated, we will review everyone’s skillsets and make sure the management structure leverages the substantial leadership talent we will have in the merged group.”
He continues, “I see the proposed merger as an important opportunity to create a more efficient and sustainable company able to continue its strong cash generation capability.
“The merged company will be better places to serve customer needs and adapt to the challenges facing the print industry. Importantly, the proposal is expected to generate $40m in annual cost savings, supporting PMP’s long-term sustainability.”
During the AGM, PMP chairman Matthew Bickford-Smith also reviewed the company’s markets, praising PMP’s multi-million dollar investment in a high speed inline end to end digital book printing line, unveiled in September at Griffin Press.
Bickford-Smith says while eBook sales have fallen, publishers are now requesting short runs of print books.
“Despite dire predictions that eBooks would kill the printed book market, the fact is that consumers today are buying more than four times as many printed books as eBooks,” he says.
“This may sound like good news for printers, but today’s book printing industry is fundamentally different. Publishers used to order huge print runs then warehouse the books until they sold. Today, they want books printed to order. That means very short print runs – sometimes with just a handful of copies.”
For its magazine business, Bickford-Smith welcomed the closure of Bauer Media’s magazine distribution businesses earlier this year, with PMP’s Gordon & Gotch taking on this distribution work.
“In Australia and around the world magazine circulations have been steadily falling,” he says. “The closure of Bauer’s distribution business was a welcome development in a market with considerable over-capacity.”
He advises the company’s future core business will remain in catalogues, printed books and magazines.
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