Polestars sales for the six months to 31 March rose by over 11%, but its margins were hit by intense price competition, the continuing weakness of the euro and cost inflation.


The group also laid the blame for the failure to implement its efficiency improvements squarely at the feet of former chief executive Jim Brown. "If the change programmes had been implemented to plan, the group would have exceeded last years profitability in the six-month period," a statement said.


Turnover for the period rose by 11.2% to 274.8m, but excluding the impact of the Heliocolor acquisition and adverse translation from overseas operations, the increase was 6.8%.


Gross profit fell 12.2% to 48.2m, while operating profit, excluding Heliocolor and adverse translation, slid 19.7% and EBITDA fell by 8.8% to 44.4m.


The group said demand remained strong in its core business areas magazines, newspaper supplements, catalogues and direct mail.


But there were no signs of improvement in the packaging division, which remains up for sale.


Sales and marketing director John Ashfield said the euro was no longer an excuse and the group had upped service levels.


He also said the demise of Duncan Web Offset (see p4) would have an effect on pricing, "but I dont think it will be fundamental".


Around half of the 6.8% rise in sales was due to an increase in outsourcing and the proportion of paper supplied by Polestar.


A spokeswoman said the group had to outsource more work, especially binding, because it had added printing capacity.
To counter the finishing shortfall it has put in two new lines at Greaves and one at Watford and is considering other perfect binding options.


Ashfield said the specialist jobs the group had taken on, including the printing of National Census forms, meant it had to enlist the help of other suppliers.


Polestar has also negotiated improvements to its financing arrangements to execute the programmes that will improve cashflow and profitability. But it is unclear what effect this will have on interest payments.


The group said it expected progress in the second half of the year on its efficiency improvements, which should lead to improved profitability. It also thought sales would grow, but markets would remain competitive.


Polestar is still seeking a replacement for Brown, who resigned in February. Investcorps Nicholas Bryan has assumed the role of executive chairman in the interim.


Story by Gordon Carson