Business News

Walstead 2012 results: profit up, debt down

Monday 06. May 2013 - Walstead Investments Limited, the leading UK magazine and commercial printing group, announces its audited financial results for the twelve months ended 31 December 2012.

EBITDA rose 126.5% to £11.1 million (2011: £4.9 million) on turnover down by 2.5% to £124.8 million (2011: £128.0 million).
The Group produced an inaugural operating profit of £4.6 million (2011: loss £11.5 million) and a profit before tax of £3.7 million (2011: loss £20.9 million) after incurring £3.8 million of exceptional charges (2011: £9.6 million). Exceptionals included the loss of 118 employees at a cost of £1.5 million and £2.3 million on other restructuring charges. Overall headcount at the Group fell from a peak of 1,501 in April 2011 to 1,132 at 31 December 2012.
Despite higher raw material and energy prices, the Group reduced its direct and overhead costs in response to forecast lower volumes of work. Cost controls and optimal use of press capacity produced an improved gross profit margin of 28.4% (2011: 18.9%). Works expenses and overhead costs were reduced by £6.9 million to £58.7 million following the closure of the Group’s smaller printing sites at Basingstoke, Plymouth and Warrington.
Capital expenditure before asset sales in the period was £1.7 million, substantially below the depreciation charge of £4.5 million: this should remain the case for the foreseeable future owing to the extensive investment in plant and machinery made by Walstead companies in previous years.
Repayment of debt has significantly improved Walstead’s balance sheet. In November 2012 we entered into a £30.4 million asset-based lending facility with The Royal Bank of Scotland that will provide us with ample working capital facilities for the next three years. The debt owed to RBS at the end of 2012 was £26.4 million (2011: £28.6 million). Walstead thanks RBS for the confidence it has placed in the Group.
Current trading is broadly in line with expectations: Unaudited turnover in the first three months of 2013 was £28.3 million (2011: £30.1 million) and EBITDA was slightly ahead of the comparable period in 2012. Net debt continued to fall – it was £29.0 million on 31 March 2013 (31 March 2012: £34.9 million). The final instalment of the £5.0 million deferred consideration for the St Ives Web acquisition was paid in April 2013.
Looking ahead, Walstead anticipates the UK web offset printing market will continue to contract by between 5% and 10% per annum. Group turnover is reducing at a slower rate than the market generally and we believe this is likely to remain the case as the sector continues to consolidate and ageing capacity is eliminated. We aim to maintain our operating margins on lower turnover by applying relentless cost controls, efficiency improvements and, when appropriate, investing in capital equipment.
Mark Scanlon, Walstead’s chairman, said: “The Group made excellent progress in 2012. We greatly improved our profits, reduced our debt, and made gains in productivity against a backdrop of declining volumes and static prices. The merger and heavy restructuring of the Wyndeham and St Ives Web businesses during 2011 and 2012, which involved the closure of three web offset printing sites, has been successful and means we are now producing more work with fewer people and at a lower cost.
“The sector saw further consolidation after Goodhead, one of our principal competitors, collapsed into administration in November 2012. There are lessons for us all in the demise of Goodhead: for investors, printers, customers and workforce. You cannot survive in any industry unless you charge a sensible price for the work produced. We had been warning for some time that making huge investments and then taking on unprofitable volume to fill surplus capacity would only end in disaster. And so it did – despite over £80 million of funding from its owner.
“Extravagant capital expenditure is no substitute for hard work and sound management. Goodhead’s insolvency demonstrates that in the end the economics of profit and loss will prevail. This dénouement marks an important stage in the rebalancing of supply and demand in a web offset sector that has to address a shrinking market caused by poor macro-economic conditions and the steady transfer of advertising and editorial content from the printed page to digital media platforms. Whilst we cannot influence these adverse market dynamics, we can and will adapt and reshape our business to ensure we remain resilient and profitable while the markets in which we operate continue to contract.”
Kevin Haupert, Head of Asset Based Lending and Syndications at RBS Invoice Finance, said: “We are extremely happy with our relationship with Walstead. The new £30.4 million facility we put in place last November underlines the Bank’s commitment to British industry and to the printing sector in particular. Since then Walstead has continued to meet its targets with us and has improved its market position. We look forward to seeing further progress in the current year.”