A dramatic day yesterday for printing group, PMP: it was forced to issue another profit warning, saying second-half earnings would fall by close to 50%; it announced a big revamp and the ACCC confirmed that the company had been involved in providing some of its clients with misleading information.
New CEO, Richard Alley buried revealed the earnings downturn and slump in business over the past three months in a briefing on the revamp to the market and major investors.
Mr Allely – who gained the CEO’s gig after Brian Evans’s unexplained departure in January – said PMP had lost market share in its letterbox distribution business, but that he was striving to rebuild PMP and turn it into a ”business that connects on a very honest and a very open relationship.”
PMP shares were little changed yesterday, losing one cent to 40 cents.
ACCC chairman, Graeme Samuel said in a statement released yesterday that ”During 2007 and 2008 PMP Distribution, a wholly owned subsidiary of PMP Limited, provided some of its customers with reports that included incorrect pamphlet delivery statistics – claiming deliveries had taken place in certain areas where they had not,” the ACCC chairman Graeme Samuel said.
"The irregularity came to light as a result of an internal audit by PMP Distribution.
"When it discovered the problem, it contacted affected customers and approached the ACCC to resolve any Trade Practices Act concerns," Mr Samuel said in the statement.
The news confirmed media reports earlier this year of rorting of delivery figures for clients of PMP’s home distribution and delivery system.
The news added to the pressure on the company after Mr Evans’ exit as the slowdown cut demand for its printing services, forcing the company to start a major review and restructuring that saw facilities closed in several states and hundreds of jobs cut.
PMP said the savings generated in phase one of its revamp would enable the company to deliver about $54 million in earnings before interest and tax (EBIT) for fiscal 2009, before significant items and a year end net debt position of about $220 million.
PMP forecast earlier this year that it was expecting EBIT of around $95 million for the 2009 financial year, so yesterday’s figure is a significant reduction.
That figure is before significant items, which will total some $66 million in cash and non cash costs. So the company will incur a loss for the 2009 year.
The first half EBIT of $33 million will be wiped out. It reported a bottom line loss of $11 million. That will now more than double for the full year.
The company also said had been expecting to have debt of around $200 million for fiscal 2009, according to a forecast with the interim results earlier this year. Now that’s going to be up $20 million, or 10%.
PMP said yesterday phase one had delivered annualised savings of $26 million so far, largely due to redundancies.
"This will significantly reduce the break even point of the business, in line with declining print volumes," PMP told the ASX.
PMP said phase two, which will be implemented in the first half of fiscal 2010, will create a low-cost, customer-centric operating model to re-energise the business and position it strongly when market conditions improve.
Mr Allely said the transformation plan would give PMP a sound operating model and return the company to best practice.
"We now have a very clear outlook and confidence in our ability to grow earnings beyond the 2009 level, once the economy recovers," Mr Allely said.
“Despite these challenging market conditions, which are likely to continue until the economy recovers, all our businesses have remained financially strong, displaying their resilience and solid fundamentals.
"However, prospering in this new market requires a reduced cost base and a more flexible and agile business that can respond to changing customer needs.”
Key elements of the overall plan include: aligning specialist print production facilities to customer product markets; reducing complexity by streamlining processes; and creating a customer-focused culture.
“The restructuring involves overhauling our planning, scheduling, supervision, logistics and administration processes. These changes, together with a much stronger customer relationship model, will eventually deliver significant operational benefits.”
He said the plan was a swift and decisive response to the changing shape of the market, which has seen a significant reduction in volumes and price levels, particularly in the final quarter of the current financial year.
Mr Allely said the transformation plan had the full support of the company’s banks and that no debt facilities would require refinancing until 2012.
PMP cut 67 full-time positions at its printing plant in Victoria in April and 76 positions at its operations in Queensland and South Australia in February.
