The share price of PMP has skyrocketed following its forecast to triple its profits and pay down more than $30m worth of debt this financial year.
Australia’s biggest printer predicts EBIT of $25-26m and EBITDA of $57-58m, both of which are down slightly on last year as the company focuses on improving margins even if sales fall somewhat.
The company also plans to pay dividends to investors for the first time in more than three years, with $5m on the cards next financial year. It may also do a share buyback.
While the expected profits are not explicitly forecast, it says the $5m dividend is calculated as up to half its net profit after tax, which would triple it from last year’s $3.4m.
[Related: Ups and downs of PMP]
Debt will again be slashed, from $51.7m to $19m, as PMP continues its quest to become debt-free by 2017, having been $650m in the red during its darkest days. Free cashflow will increase to $34m.
PMP’s share price jumped 18.3 per cent to 55c on the news and has since climbed to 56c today, with analysts encouraging investors to buy now as its fair valuation could be as high as 70-80c.
The share price has risen 31 per cent overall in the past year, compared to just one per cent for the ASX average.
The positive forecast and intention to pay dividends again is the culmination of chief executive Peter George’s massive turnaround effort that has halved PMP’s workforce, slashed its press numbers, and shed a plethora of unprofitable businesses.
PMP attributes the results to ‘three years of intensive restructuring’ that have made it a ‘profitable, cash generative, and sustainable company’.
“Coupled with the emergence of improved market conditions, as indicated by more stable print industry volumes and heat-set prices, PMP now has a higher degree of confidence in the outlook for the business,” it says in the forecast.
Catalogues are the standout product, with a resurgence in junk mail putting increased focus on it to the point where it now accounts for ‘the majority of PMP’s EBITDA and remains the company’s core activity’.
PMP also has an eye on acquisitions, with George telling The Australian that the industry is ripe for consolidation because of the ongoing sub-par profitability of many companies.
The newspaper points out this is a drastic change in market trends from four years ago when PMP, Hannanprint and Franklin Web added 150,000 tonnes of printing capacity and began the heatset price freefall.
“Times were good,” George says. “We just didn’t realise how good.”
“We were trapped in a turf war and clearly that didn’t escape the notice of the big retailers’ procurement departments.”
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