Evans says this is consistent with market consensus and above the previous year’s EBIT result of $72.1m.
Achieving the earnings forecast, which was originally announced at PMP’s November AGM, will require the second half to be significantly above last year, but Evans says he is confident PMP can deliver.
“We expect the second half of fiscal 06 to be stronger than the first half largely due to the benefits associated with the recently commissioned Man Roland presses, acquisitions in New Zealand and further restructuring of the business,” he says.
In the Print business in Australia, four new recently commissioned Man Roland presses are now fully operational. While the first half of FY06 received some of the benefits from this investment, the full cost benefit will only really be apparent from December 2005 – boosting second half performance.
This additional capacity will be taken up by growing client demand.
“In my meetings with our major clients over the past month I have been encouraged by their desire to want to give more work to PMP,” says Evans. “With our new presses now fully operational and our delivery in full on time (DIFOT) improving, I’m confident of some modest revenue growth for the business. That said, it’s important to point out that our forecasts do not include any real revenue increase.”
Further cost benefits will come from January 2006, when the Australian Print business will move to state based business units, with each business unit having accountability for their respective P&L.
This restructuring will drive decision making to the local level while still allowing Print to leverage its national network.
Evans says implementing a new manufacturing based ERP system will also deliver improved efficiencies in the business. Given the system is a commercial off-the-shelf implementation it is expected to provide a return on investment almost immediately, with minimal disruption.
The system will be integrated into all the Australian printing plants commencing on July 2006 and will include sales estimating, order management, production scheduling, shop floor data collection, direct machine interface, shipping and billing functions.
In PMP’s other areas of business:
– The PMP letterbox distribution business in Australia grew at 15 per cent while the market grew at just eight per cent. This trend is expected to continue.
– In New Zealand the company has spent $20m acquiring three business: Times Color, Saxon Print and First in Print, which is set to boost PMP’s second half performance.
– Magazine distribution arm Gordon and Gotch delivered a poor performance last financial year, but a turn-around is expected in fiscal 2006.
– The Digital Pre-media business delivered an operating loss last financial year of $2.3m (before significant items), but initiatives currently under way are expected to deliver a significant improvement in the current financial year.
Overall, PMP expects interest expense for the full year to be similar to last year at approximately $25m. Most free cash flow is expected to be used to pay down debt, which is targeted to be less than $295m at December 31, 2005, falling to less than $265m by June 30, 2006.
Net capital expenditure is forecast at approximately $55m for the full financial year to June 30, 2006. This includes the New Zealand acquisitions of approximately $20m and the benefit of proceeds from property, plant and equipment sales of approximately $19m.
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