Will PMP Limited Yield The Same Earnings In Fiscal 2019?

Australian publisher PMP Limited (ASX:PMP) announced the trading update for its first three months of financial year 2019. Along with that the group has also announced the full-year guidance for FY19 and the expected financial performance for medium term.

Ahead of Christmas season, PMP Limited expects to achieve EBITDA within the range of $37 million - $40 million. But this upper limit of $40 million is almost the same what the company has achieved last year, $40.6 million EBITDA in FY18. In the long run, the company targets its EBITDA margin to increase from current 5.5% to above 7.5% by the end of FY21.

Why has its growth expectations dwindled?

It seems to be impacted by New Zealand’s earnings. PMP Limited told that it expects New Zealand FY19 EBITDA to be lower than last year, $10.6 million, due to the headwinds from customers loss and weaker than expected Sales Price Per Tonne (SPPT) based on competitive market pressures. Further, catalogue print and distribution volumes are expected to decline in medium term by 2% to 3% p.a. while publishing volume is estimated to drop sharply by 5% - 10% p.a.Â

The guidance provided has been drawn on company’s assumption to achieve retail and publishing print and distribution volumes in line with expectation. SPPT is also expected to remain stable.

At the end of the first quarter FY19, company stated that Australian print & distribution volumes were slightly better than the expectations. Sales Revenue and sales price per tonne in Print Australia segment were also reported to be higher than the expectations due to recent contract renewals undertaken by the company.

PMP Limited told that a major retailer has recently re-signed for a further 3-year print contract. In 2018 Annual Report, company’s top 20 retail customers were forecasted to be 121,882 in FY19, higher than 120,921 in FY18.

The management advised that total capital expenditure for the year FY19 is estimated to be $15 million, out of which $12 million is planned to be spent on the new press and finishing equipment that are to be installed in FY20 and $3 million as maintenance capex. Whereas, June 2019 net debt is expected to be in the range $40 million - $45 million driven by new press payments and subsequent rationalization costs.

Recently in October the company pitched the appointment of Mr. Andrew McMaster as a non-executive director to the PMP Board. With extensive financial and accounting experience Mr. McMaster has joined in place of retired Mr. Stephen Anstice to represent the partner print and digital services company owned by Hannan family, IPMG.

PMP Limited has merged with IPMG in October 2016 and under the terms of the Share Sale Deed entered into as part of the merger, Hannan family shareholders have the right to nominate two directors to the PMP Board. The Annual General Meeting of PMP Limited is slated to be held on 22 November 2018 in Sydney. PMP Limited last traded at $0.190 on 30 October 2018.

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