PMP has cost-cut its way to profitability after a difficult 2012, as revenue continues to fall with tough market conditions still hurting Australia’s biggest printer.
The company just made it into the black, with a mere $770,000 profit shown in today’s half year result. This is welcome relief after losing $24.3m in the same period in the previous year.
However the turnaround was thanks to a 17.3 per cent reduction in expenses, rather than a growing market, as revenue fell 11.3 per cent to $465.9m and EBITA was down 16.8 per cent to $16.47m.
PMP blames the revenue drop on falling magazine distribution volumes (down eight per cent), reduced directories activity, and a one per cent drop in catalogue volumes. Its letterbox distribution volumes rose 9.1 per cent, but this strong showing was dampened by reduced print prices.
In Australia, PMP’s converted tons of printing fell 8.3 per cent, letterbox distribution was up 7.7 per cent and magazine distribution was down 6.3 per cent.
PMP’s directories woes are likely to get worse as Telstra’s takeover of Sensis threatens the future of the Yellow and White Pages continuing in print.
[Related: PMP shares up 8.86%]
Operating cash flow was stagnant but the company did manage to pay down $53.2m of debt, reducing it to $81.3m. Net assets fell 13.3 per cent to $262.5m.
The company spent $9.4m on redundancies and equipment relocation costs as it moved to dramatically cut costs to get back in the black.
Chief executive Peter George says PMP has completed the first two points in its three point plan to fix the business – reducing cost base and financial risk – and can now focus on building a more competitive company.
“The company has been totally transformed over the past eighteen months,” he says.
“From a greatly strengthened position we believe the company will be able to more effectively participate in the rationalisation that the industry desperately needs.
George blames the market for the company’s woes but expresses optimism about the future.
“The industry we operate in continues to be challenged by cyclical and structural factors with forecast industry volumes remaining volatile and excess industry capacity creating downward pricing pressure,” he says.
“However there are some early indications that this pricing pressure is beginning to reduce and that recent aggressive pricing practices are moderating to a more sustainable level.”
He expects to reduce debt to $60-65m and EBITA to be at $60-64m by the end of this financial year.
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