However, finance director Peter Johnston believes the current accelerated investment and restructuring plan at the group will transform its profitability, allowing owner Investcorp to exit its investment through a sale or flotation by 2007.

"We are undertaking a huge investment programme over a short timescale, that will enable us to increase profitability quickly. By the end of the next two years we will have restructured the business as far as it can be restructured," he said.

The adoption of a career average related earnings pension scheme has actually reduced Polestar's liability going forward. "The deficit will reduce through improvements in the stock and bond markets over time and because we are continuing to fund the scheme within the legal requirements," Johnston added.

Polestar's 2002 figures were flattered by a 95.8m technical surplus. In the year to 30 September 2003 sales were effectively flat at 488.7m (2002: 484.4m), while EBITDA (earnings before interest, taxes, depreciation and amortisation) increased by 6.5% to 78.4m. However, the group's interest charge increased by 12m to 67.9m, although the cash element of the interest payment is less than half of this sum, at 32.5m.

The group's "True North" project includes the construction of a greenfield gravure plant, further rationalisation of its UK web offset plants to four large sites, and the replacement of 27 old binding lines across the group with 13 new ones. "We will de-man by more than 300 people purely on the bindery investment, while enhancing capacity," Johnston added.