PMP feels $20m of pain from decline in books but print margins keep getting better

The country’s biggest print group reported operating revenues of $621.9m for the six months to 31 December 2010, a 3.7% year-on-year fall from $645.4m. It posted earnings of $32.2m, a 7.8% increase on the $29.8m reported in the first half of 2010.

Net profit before significant items was up $900,000 to $17.1m, a 5.6% rise year-on-year. Net profit as a percentage of revenue was slightly up, from 2.51% to 2.75%.

However, these gains were driven into the red by $39.5m of significant items costs, comprising a $19.2m write-down of PMP’s Scribo book distribution business and $20.3m for restructuring in New Zealand.

This all added up to a net loss of $14.8m for the period, down from the $14.3m net profit posted a year earlier.

Allely told ProPrint that Scribo was at the mercy of rapid structural change taking effect across the traditional book publishing world: the shift to online retailers, growth of e-books and a decline in the number of new titles hitting the shelves.

“The launch of new titles [in 2010] was the lowest we had ever seen in the history of that business. Normally at the London Book Fair you would see 800 titles. This year there were 200.

“We have looked at all that and looked at Scribo – this is a business that has come under severe structural change so we took the conservative decision to write down those assets,” said Allely.

Although the Scribo impairment took a chunk out of the result for that business unit, the losses were offset by its Gordon & Gotch magazine distribution arm, which won significant contracts from the closure of rival IPMG business, NDD.

PMP’s core Print unit, which makes up around 40% of the business, also fell in terms of sales but posted a huge upswing in earnings.

Revenues were down 8.6% to $246.4m, but EBIT (earnings before interest, tax and significant items) were up 25.4% to $30.1m. This equated to an EBIT ratio of 12.2%, a step up from the 8.9% margin for H1 2010.

“If you look at the operating earnings line, that is where you will see that major shift in our Print business. Our margin on our revenue has improved dramatically and continues to improve. I don’t need to print everything, but I will print those things for which I can get the best return from our equipment.”

Allely said that the Print division’s performance was being affected by the falling magazine circulations, but these drops in volume were being offset by growth in catalogue pages.

PMP’s Distribution business also seems to have thrown off the problems that plagued it in 2009. It posted sales of $49.5m for the period, a 6.7% increase on the same period last year. However, earnings of $1.4m were driven down by a charge for significant items of $4.6m, resulting in a loss of $3.2m for the division.

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