In a statement to the ASX (Australian Securities Exchange), international merchant group PaperlinX announced that in line with its forecast in February, the second half of FY14 delivered a positive underlying EBIT of A$2.6 million.
The company also reported a reduction in net debt of 24% since June 2013 and a 2% increase in sales revenue. Working capital balances were significantly lower than last year, a positive change that has seen an inflow of operating cash flow of A$50.7 million.
Despite continued challenging trading conditions in the UK, Benelux and Germany, the Group’s performance in Europe significantly improved. Underlying EBIT loss was reduced by 44%, from €(28.6) million in FY13 to €(16.0) million. The company says that it expects to see the full benefits of the cost savings achieved through its restructuring activities, particularly in the UK, the Netherlands and Germany, flow through in FY15 and beyond.
As a result of the positive cash flow for the year, largely due to a significant improvement in working capital management and improved earnings, net debt at year end was at a historical low. The company has also completed the extension of lending arrangements in the key facility in the UK, and facilities in Czech Republic, Germany, the Netherlands and Poland.
Managing Director and Chief Executive Officer Andrew Price says, “Our turnaround strategy is bearing results, with a significant improvement in our underlying result, following strong performances in the Canadian and ANZA regions and improved positions in Europe.”
In response to the declining demand for commercial print, mainly due to the impact of technology on a global basis, generating growth through diversification remains a key objective going forward.
“Worldwide, trading conditions in our established paper markets remain challenging and changes in the competitive landscape further reinforce the need to redefine our merchant model and focus on growing our diversified businesses as part of our longer term strategy,” Price adds.
The Group’s diversified businesses – Packaging, which now represents 9.4% of total sales; VTS, 11.3% of total sales; and Graphic Supplies, 2.7% of total sales all show further potential for growth. PaperlinX says that its focus is on continuing to grow its diversified business and that it will seek appropriate bolt-on acquisitions to more effectively accelerate expansion in the future.
The company also announced that as part of a longer term strategy, it has started research and development into product innovations that embrace new technologies and align with its existing product mix and customer base. Further details will be advised as projects are taken to market.
“Our strategy of exiting low margin and unprofitable business in this segment is ongoing. To boost revenue, we will continue to improve our margin management and shift our focus to growing segments other than Commercial Print,” continues Price. “We have continued to lower our cost base through aggressive restructuring and achieved a drop in trading expenses by 11.9% in constant currency. With this cost benefit and by focusing on margin improvements and product innovation, we are progressing towards sustainable profitability.”
