Key points
- 1H15 EBIT was 4.8% lower YoY at $15.7m with higher profits at PMP New Zealand and Griffin Press offset by lower print and distribution revenues at PMP Australia
- Cash from operations was up $0.8m to $14.4m and Free Cash Flow (a key feature of PMP’s business model i.e. what they can use to paydown debt) was stable at $14.1m
- PMP expect to be net debt free by June 2016 and completely debt free by 2017. 1H15 Net Debt was $40m (down by 51% YoY)
- With an absence of any acquisition targets, the company is very likely to consider calling this issue at first opportunity in October 2015 (at $103): it has sufficient cash to do so, and the dividend restrictions the bond imposes (50% of NPAT from FY15 onwards) are contrary to the group’s core strategy of returning cash to shareholders
- Outlook: FY15 EBITDA (pre significant items) of $56m-$60m, EBIT of $24m-$28m and net debt of $17m-$22m
Details
Source: FIIG Securities, Company presentation
Sales of $427.3m were down 7.7% YoY with a reduction of $23M relating to lower magazine distribution volumes and a $14m reduction to sales in the core Heatset print and Distribution sectors. Positively, New Zealand performed well with a 17% growth in EBIT to $6.4m driven mainly by cost savings and book printing at Griffin Press increased revenues 26%
Overall EBIT was 4.8% lower at $15.7m with higher profits at PMP New Zealand and Griffin Press were offset by lower print and distribution revenues in PMP Australia.
Source: FIIG Securities, Company presentation
Cash Flow: Cash from operations was up $0.8m to $14.4m due to lower significant items and borrowing costs partially offset by working capital movements and lower EBITDA. Free Cash Flow (a key feature of the PMP business model ie what they can use to paydown debt) was stable at $14.1m with lower interest payments and reduced capex offset by lower EBITDA and working capital movements.
Significant Items: $4.5m of one off items were booked 1H15 which included $2.8m of restructuring costs and a final provision of $1.7m to finalise the exit from the previously vacated Chullora site.
Debt & Capital Management:
- Capital management initiatives announced at the AGM in November are “on track”: ie with the absence of acquisition opportunities PMP plans to return excess cash to shareholders & aims to pursue a debt free balance sheet by 2017
- Net Debt was down by 51% to $40.0m over the year
- Net Debt to EBITDA has reduced from 1.2x to 0.7x. (from a high of 1.9x YE12)
- Interest cover improved to 6.4x from 5.1x
- Expect to be net debt free by June 2016, and completely debt free by 2017
- Net proceeds of NZ$8.2m due June 2015 for the sale/leaseback of the Christchurch property which will be used to pay down debt
- Total available cash headroom 1H15 was $62m including cash of $34.7m and $27.3m in available financing
- With an absence of any acquisition targets, the company is very likely to consider calling this issue at first opportunity in October 2015 (at $103): it has sufficient cash to do so, and the dividend restrictions the bond imposes (50% of NPAT from FY15 onwards) are contrary to the group’s core strategy of returning cash to shareholders
Outlook: While conditions remain subdued, PMP reaffirmed its full year guidance:
- FY15 EBITDA (pre significant items) of $56m-$60m
- EBIT (pre significant items) of $24m-$28m
- Net debt of $17m-$22m