PMP has entered into an agreement for state-of-the-art digital book presses which will make it the largest digital book printer in Australasia
PMP’s Griffin Press has entered into a leasing and services arrangement with Hewlett Packard to supply three new state-of-the-art digital presses and associated finishing equipment. The full announcement can be found here.
Griffin Press will now be the largest digital book printer in Australasia.
The seven year operational lease and service agreements will cost $3.2m p.a., however PMP state it “is expected to be initially cost neutral as the new lease and consumable costs will be broadly offset by operational cost savings on existing volumes”. Further to this the group states “operational cost savings of circa $1m p.a. are expected to be realised as further conventional processes are converted to digital”.
If PMP’s estimates are accurate, this appears mildly credit positive given the initial cash neutrality and future forecast costs savings, plus the competitive advantage of maintaining up-to-date technology in an industry which needs to continually adapt.
More generally, PMP’s credit profile has continued to improve as the group executes its agenda of being net debt free. This is supported by its solid free cashflow of circa $30m plus per year. During 1H16, net debt to EBITDA (pre significant items) reduced to its lowest level of just 0.2x (1H15: 0.7x) and interest coverage has improved to a strong 8.2x (1H15: 6.4x).
With minimal debt and good cashflow PMP exhibits a lower risk credit profile. PMP’s September 2019 fixed rate bond is indicatively offered below par at $99.70 with a yield to maturity of 6.53%.