“We’re very pleased with the results on the whole. If you look back to when we became involved, Paperlinx was posting a A$277m loss [2011/2012], and we’re looking to turn that around to A$5-8m loss for the full year, which is a pretty remarkable turnaround,” said Paperlinx chief executive Andrew Price.
Losses for the six months to 31 December 2013 stood at A$9.6m (£5.2m) at the EBIT level (earnings before interest and taxes) compared to A$15.1m in the same prior year period. Total sales in the period were up 2% to A$1.5bn.
While the group expects to be profitable in the second half of its financial year, it has issued a revised guidance predicting a EBIT loss of A$5m-A$8m for the 2013/2014 full year. Previously the firm had said it would be "marginally profitable" in its full year results.
“Of course we would have liked that to be a profit and we were previously predicting a A$5m profit internally, but we’ve had to change that predominantly because of the delays to some of the things we wanted to do. But the worst is definitely over,” said Price.
The group’s operations outside of Europe had performed well according to Price, but its European operations, in particular the UK, which generates around two-thirds of its sales, continued to struggle.
As well as structural decline in paper sales and slower than hoped for impact of the restructuring, Price the UK operation had been hamstrung more recently by the “erratic pricing” of some competitors.
“In the past few months we’ve seen some crazy pricing in the UK, it’s been all over the place. Some of the credit terms being offered are ridiculous too,” said Price.
“When we’re up against this we just have to walk away from some deals, they’re unsustainable. We’re in this for the long haul and we have a very simple philosophy, we don’t want to win business that we’re going to lose money on.
“We’re still the largest merchant in the UK and with that comes an element of responsibility. By propping up businesses with 120 or even 150 day credit terms its actually destroying the industry and we don’t want to be part of that.”
The merchanting group’s net debt increased from A$139m at 31 December 2012 to A$177m at the same point in 2013, with unfavourable exchange rates, restructuring costs and trading losses being the prime factors.
According to Price the company expects the UK market to continue to decline by around 6-9% a year.
“We have to make sure we have a cost base that mirrors that, while not forgetting that we’re here to add value for our customers, with things like Maillinx,” added Price.
The Maillinx service in essence helps users of direct mail users to “sell space in their envelopes” to non-competing organisations to reduce the cost and improve the effectiveness of direct mail.
The service is in the process of being rolled out now, and, according to Price there has already been a significant level of interest.
“The end users understand the opportunity, we’re now going to start talking to our customers, the printers, and help them understand how it could benefit their business. This is something that we want to benefit them [printers], that they can take to their customers, we don’t want to take it to end users ourselves,” said Price.
