The company’s annual report says a reduction in machine capacity associated with the plant upgrade, unfavourable product mix and pricing reductions in the second half of the year significantly impacted profitability.

The upgrade meant major magazine and retail customers in some instances had to be turned away as the capacity was not available for higher margin spot work.

During 2004/5 PMP more than doubled its net profit after tax and significant items (NPAT) to $35.9m from $17.5m in the previous year. This NPAT increase resulted from a reduction in significant items and borrowings costs and was achieved without the tax benefit of the previous year.

However, net debt increased from $237.9m to $291.7m because of a number of small acquisitions, initial payments associated with the print equipment upgrade and an increase in book working capital due to permanent timing differences associated with year-end close dates.

“It is disappointing to report that earnings before interest and tax (EBIT), which reduced marginally, did not meet our internal targets for the year,” says chairman Graham Reaney.

However, Reaney says PMP is in the second year of a three year strategic plan, which is designed to improve operational performance. The plan involves a $124 million re-equipment program in print and the development of a direct marketing services program to align group-wide offerings aimed at improving customer service.

“The performance improvements associated with this strategy have been slower to reach the bottom line than originally anticipated due to greater than expected restructuring in Gordon and Gotch and PMP Digital, and the performance issues affecting the printing division,” explains Reaney. “These issues are currently being addressed and should improve performance in the current year.

Comment below to have your say on this story.

If you have a news story or tip-off, get in touch at editorial@sprinter.com.au.  

Sign up to the Sprinter newsletter