Key points
1. Net profit after tax of $3.4m (FY13 loss $70.2m), building on the 1H14 profit of $0.8m and the first full year profit since FY10
2. Phase 3 transformation completed which concludes the three year transformation or “turnaround” phase
3. The PMP 8.75% fixed rate bond was issued with a four year maturity (23 October 2017) but is callable at the company’s discretion at $103.00 on 23 October 2015 or $101.50 on 23 October 2016. The bond is currently offered at an indicative credit spread of circa +350bp, down significantly from +525bps at issue as it continues to de-risk. That equates to a current indicative offer price of $106.65 and yield to maturity of 6.37%. However, should the company decide to call prior to maturity that would reduce the expected return
PMP Limited (PMP) has released its FY14 results to 30 June 2014 with a return to profitability and excellent progress on its debt reduction program.
All key measures were at the upper end or exceeded management’s previous guidance.
Importantly, cashflow from ordinary operations saw significant improvement ($35.5m versus $7.6m for the previous year) as the benefit from past redundancies and cost saving measures (i.e. the “transformation” program) started to kick in.
The detailed results presentation is available at the following link.
Key figures from the FY14 results included:
- Net profit after tax of $3.4m (FY13 loss $70.2m), building on the 1H14 profit of $0.8m and the first full year profit since FY10
- Revenue down 7.8% to $899.2m (FY13 $975.8m)*
- EDITDA(excluding significant items) down 11.4% to $63.4m (FY13 $71.6m)*
- EBIT (excluding significant items) down 14.7% to $28.8m (FY13 $33.8m)*
- *Revenue, EBITDA and EBIT were all expected to fall as PMP rationalises operations, with these amounts now covering significantly reduced asset, interest and cost bases. The sale and leaseback of all major properties previously owned (which is now complete and has funded much of the debt reduction) has also resulted increased rental expenses. The revenue figure was in line with expectations and the EBITDA and EBIT numbers at the upper end guidance.
- Net cashflow from operating activities up strongly to $35.5m (FY13 $7.6m) as the benefit of past redundancies and cost saving measures flow through.
- Phase 3 transformation completed which concludes the three year transformation or “turnaround” phase.
- No dividend paid for the year (FY13 $nil)
- Total assets $502.7m (FY13 $549.2m)
- Total liabilities $237.9m (FY13 $290.6m)
- Total equity $264.8m (FY13 $258.6m)
- Gross debt down $29.6m to $83.7m (FY13 $113.3m)
- Net debt down a very large $37.4m over the year to $51.7m (FY13 $89.1m). This is the key figure for debtholders and a significant improvement on previous guidance of $60m - $65m by June 2014
- Interest expense down 36% or $6.5m to $11.5m (FY13 $18.0m)
- The significant improvement in the two items above resulted in strong gearing and interest cover ratios with Net Debt to EBITDA 0.8x (FY13 1.2x), Net Debt to Equity 19.5% (FY13 34.4%) and EBITDA to Interest Expense coverage of 5.1x (FY13 4.7x). These are very strong credit metrics and provide significant compensation for the relatively high industry risk that PMP faces.
- In the core catalogues business, volumes were up but pricing/margins were down as competition and excess capacity continue in the industry.
From the bondholder’s perspective, the FY14 results were excellent as both the operational performance and balance sheet continued to improve. Not only has management achieved what they clearly set out to do in their “transitional” plan, they have exceeded expectations, particularly in the reduction of net debt and turnaround of cashflow from operations. These two developments, together with the strong gearing and interest cover metrics and tight covenant package, more than compensate for the industry risk the printing industry currently presents.
The PMP 8.75% fixed rate bond was issued with a four year maturity (23 October 2017) but is callable at the company’s discretion at $103.00 on 23 October 2015 or $101.50 on 23 October 2016. The bond is currently offered at an indicative credit spread of circa +350bp, down significantly from +525bps at issue as it continues to de-risk. That equates to a current indicative offer price of $106.65 and yield to maturity of 6.37%. However, should the company decide to call prior to maturity that would reduce the expected return.
All prices and yields are a guide only and subject to market availability. FIIG does not make a market in these securities. The PMP bonds mentioned in this article are available to wholesale investors only.