Polestar has grown its sales in the third quarter but at the expense of profits, and now plans to restructure its 500m-plus debt to give the group more headroom.


It will also retain its formerly up-for-sale packaging arm. "Rather than sell it at a fire sale price, we will take it back and give it increased care and attention," said chairman Nick Bryan.


Sales for the three months to 30 June rose 11.9% to 133.1m, but operating profits halved to 6.4m, and Polestars EBITDA margin (earnings before interest, tax and depreciation) dropped from 17.3% to 11.9%. The net loss for the period increased from 2.4m to 12.7m.


"That operating profits have halved is clearly not a satisfactory performance even in a market everyone recognises is difficult," said Bryan. He cited price pressure and overcapacity in the commercial market, along with a poor work mix resulting in excessive outwork. "Our sales team was overzealous in filling capacity, and did not pay enough attention to the impact of the work mix. Its something Barry [Hibbert] is on to."


More positively, the effects of the groups manufacturing efficiency programme were beginning to filter through.


Polestar has brought in specialist financial advisers to restructure its debt. "We need an appropriate capital structure that will reduce the cash burden of servicing the debt," stated Bryan.


Reports in the national press that disaffected bond holders were calling for a change of board were described as "not well-informed".


Bryan said the firm was "not a commodity printer" and would sharpen its focus on contractual work. However, there is a huge question mark over Polestars contract for 5.25m-run monthly customer magazine, Sky, which is up for review and tipped to be won by Gruner + Jahr. Publisher Redwood said an announcement would be made in the next two weeks.


Story by Jo Francis and John Davies