PMP profiability persists on sales drop

PMP is still in profit despite weakening catalogue demand and intense heatset competition, but is looking ahead to better times with $20m of new business kicking in from April.

Australia’s biggest printer turned a $4.3m profit for the 2015 half-year, more than five times the $800,000 of 2014, as it slashed operating expenses another nine per cent to $418.4m, including cutting staff costs by 9.3 per cent – at a cost of $2.1m in redundancies.

Revenue was down again, this time by 7.7 per cent to $427.3m, as PMP gets out of low margin business and the subdued retail environment hit catalogue sales. EBITDA fell 6.7 per cent to $31.4m.

Book printer Griffin Press benefited from the rejuvenated Australian book market and boosted revenue by 26 per cent with new contract wins.

New Zealand was a win with EBIT up 17 per cent and sheetfed sales up six percent, although overall sales were down by 7.7 per cent.

The company payed off $41.3m of its debts, cutting them in half, and expects to be only $17-22m in the red by the end of the year – well on its way to being debt-free by June 2016.

[Related: Ups and downs of PMP]

Chief executive Peter George says PMP has shed unprofitable and low-margin business and is now focused on its core print and distribution strengths in books, magazines, and catalogues.

With only $4m spent on restructuring this half-year, George says PMP’s transformation into a sustainable business is now complete and it is in a position to bring in higher revenue and profit in the future.

He says this is evidenced by $20m in recent contract wins that will start bearing fruit in the fourth quarter. He says 75 per cent are in heatset printing and 25 per cent for distribution.

“We can offer nationwide bundled printing and distribution solutions to our major customers, delivering the benefits of the co-location of our print and distribution services and realigned functional workforce,” he says.

“These strengths allow us to offer our customers a competitive, integrated service in a timely manner.”

Gone is PMP’s unprofitable directories business after volumes collapsed by 72 per cent last year for a $50m revenue hit. George says the company is still printing a few local directories by will be completely out of the market by the end of the financial year.

The company also decided not to re-sign low-margin catalogue contracts worth five per cent of its volume and took a one per cent hit from lower pagination as retailers tighten their budgets.

George says PMP is a ‘strong believer’ in the future of catalogues and says they are the best way to sell many different products.

“Catalogues continue to be a critical element of retail marketing and we expect this core part of our business to strengthen in line with the retail sector as it has done through previous economic cycles,” he says.

[Related: More financial reports coverage]

After being 2014’s biggest bright spot with a 10 per cent volume rise, the fortunes for PMP’s distribution business went backwards as volumes fell 8.5 per cent.

Australian catalogue volumes fell eight per cent, of which the company says four per cent is from one client going bankrupt and three per cent from one cutting delivery frequency, such as from weekly to fortnightly.

The news is worse for magazine distribution business Gordon and Gotch where sales were down 11.8 per cent with 6.5 per cent lower volumes.

George says Griffin Press has installed a new digital printer for fast turnaround work as publishers increasingly order on demand with print runs as small as 500.

In Australia, converted tonnes of printing fell 5.2 per cent to 89.1 million, but rose 1.6 per cent in New Zealand.

George says ‘the worst of the price freefall is over’ and Australian heatset printing prices appear to have stabilised with no further softening over the past six months.

“Heatset continues to be challenged by structural factors such as excess industry capacity in Australia, although there are indications that this situation is gradually improving,” he says.

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