Monday 03 March 2014 by FIIG Research Company updates

PMP results confirm transformation on track

Key points:

  1. The company returned to profit.
  2. Phase 3 of the company transformation remains on track to complete in Q3.
  3. Net debt continues to come down, full year EBIT guidance affirmed.

PMPs fixed rate issue looks like good value, especially given a shorter maturity date compared to other non-rated FIIG issues. Confirmation of the continued transformation of this business over the next 12 months would see the spread tighten significantly. Last week listed printing company PMP Limited reported its half year results reporting a net profit of $0.8m, compared to a net loss of $24.3m in the prior comparable period. The company continued its transformation during the period by investing $4.0m in the Phase 3 of the transformation for the half, delivering $8.5m in annualised savings. The company reduced its headcount by a further 119 full time equivalents during the period. The company expects to complete Phase 3 of the transformation (the final phase) during Q314.

Operationally the business was relatively steady (with the exception of the decline of the directories business) with print catalogue and magazines volumes steady. Distribution levels increased 7.7% as the company enjoyed increased take up of its full service model. Competitive pressures remain in the sector keeping downward pressure on pricing, however this appears to have stabilised and with the company largely transformed, it looks set to benefit from any pricing upside should this occur.

The company continued to improve its balance sheet with net debt at 31 December 2013 of $81.3m, down from $89.1m at June and down from $135m in the prior year. The company improved its guidance on net debt for the full year, reducing the guidance to $60-65m (down from $70-75m). On the back of this lower net debt position, credit metrics improved with interest coverage up to 5.1x from 4.7x at 30 June.

Management confirmed its full year guidance of $60-64m (EBITDA before significant items) and $26-30m (EBIT before significant items).
 
first_half_results

Table 1

Sales volumes were down in large part due to the sale of the PMM business as part of the ongoing business transformation, though lower revenues from the directories/Gordon and Gotch business also flowed through. We note however that these businesses are very small contributors to EBITDA.

With the business transformation on track, PMPs fixed rate issue looks like good value currently, especially given a shorter maturity date compared to other non-rated FIIG issues. Confirmation of the continued transformation of this business over the next 12 months would see the spread tighten significantly.

 pmp_securities_list

Source: FIIG Securities
Figure 1