PMP suffered a substantial drop in revenue from its Australia print business, down by $40m in the six months to December.
The company says its inability to replace lost print contract volumes, a general sell price decline and customer hesitation prior to the merger being approved all contributed to reduced print revenues by $28m or 24 per cent. After adjusting for these factors, heatset print volumes fell by 2.1 per cent.
PMP half year revenue was up 27.7 per cent at $496.6m, compared to $390.5m, an increase of $106.2m in the previous year, this was almost entirely die to Gordon and Gotch winning the Bauer distribution business.
The company suffered a net loss of $14.5m compared to a $1.8m profit prior corresponding period (pcp), although prior to significant items the net loss was $2.9m.
Sales at Gordon and Gotch in Australia and New Zealand were up $112m on the back of higher volumes from the new Bauer contracts.
The EBIDTA before significant items is at $11.1m, down $17.9m pcp. The free cashflow is at $5.7m versus $17.5m previous year, down $11.8m.
Peter George, CEO, PMP says, “As we informed the market last year, PMP’s first half results were significantly lower pcp. The half was adversely impacted by extremely unusual print market conditions in the lead into the expected industry consolidation.”
“With every major heatset print operation pursuing industry consolidation in the first half, the printers were very aggressive in competing to retain existing contracts. Understandably, prospective print customers were wary of signing contracts where the future competitive market was not clear.
“As a result of the challenging market conditions, we were unsuccessful in replacing lost volumes, as well as from customers that went out of business in the last financial year. Profitability was also affected by postponing cost-out responses to the lower activity levels in anticipation of the IPMG merger going ahead as planned.”
[Related: ACCC gives green light to PMP IPMG merger]
PMP says trading in the second half of fiscal 2016 was adversely affected by hesitant customer activity in the lead into industry consolidation
Statutory profit after tax fell from $1.8m pcp to a loss of $14.5m in the first half due to a lower EBITDA and $9.1m of significant items, mainly due to $6.7m of redundancies and other restructuring and $2.3m of merger costs.
Griffin Press had lower revenues after a customer loss and higher operational costs from the transition to the digital platform.
A spokesperson for PMP says, the number of customers should remain the same after the ACCC approval.
“All the customers of both companies are as is, they have contracts in place. I do not know of real change, it is almost business as usual at that level. I don’t think there is any shift in contracts because of this,” he says.
“The ACCC approval provided certainty going forward, we think the combined offer rather than the separate companies offer the strengths both bring. From that point of view it will be a more comprehensive offer, there is not a lot of change that is possible the strengths of Hannan and PMP are a strong, potent offer,” they added.
[Related: PMP: catalogues are our future]
George says, “It was pleasing to see the successful integration at Gordon and Gotch of the new magazine distribution contracts with Bauer in both Australia and New Zealand. This underpins PMP’s capability to successfully integrate businesses and major contracts.”
PMP says once the IPMG merger completion occurs in early March, the merged group with move quickly to finalise and execute a transformation/integration plan.
George says, “We are delighted to be able to complete the merger. It creates the opportunity for us to build a more competitive and sustainable company with significant synergy benefits and an enhanced manufacturing capability.”
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