YM Group: what went wrong?
Friday, April 22, 2022
There are lots of odd things about the current situation at YM Group, where more than 500 people are out of work after the sudden fall into administration of its three web offset sites.
Sad to say that YM was looking like it could be ‘the new Polestar’ back in 2019. What’s strange is why major backer Pricoa kept shovelling money into the group, deferring expected repayment dates on its loan notes, without seemingly demanding some sort of radical change in the management of the business in return.
Is it, like Polestar, an example of yet another investor convinced by a ‘jam tomorrow’ narrative despite the obvious evidence to the contrary writ large in the figures?
It’s also odd that a group that has two accountants on its main board (CEO Stephen Goodman and CFO Lee Richardson), can have let the numbers get out of hand to such an extent that workers who were promised they’d be paid their March wages – and were even encouraged to continue working overtime on that basis – were left holding payslips detailing their pay, but with no actual money in their bank accounts.
Pricoa had apparently stepped in with a cash injection to cover the group’s February wage bill, but has not responded to Printweek’s requests for comment about why it then decided to cease any further support, come March.
Hopefully when administrators at FRP Advisory report on the events leading up to this failure, the reasons will become clear.
One thing seems certain, the ego and hubris involved in buying Chantry and the 64pp short-grain press from Polestar Sheffield will have been instrumental in this disastrous downfall.
Chantry was, according to people who worked there at the time, loss-making under Polestar, and it remained that way under the ownership of YM, which inexplicably took on the plant without the necessary level of customer commitment for it to be viable from the outset.
Last year came what looked like a last desperate throw of the dice to keep the cash flowing: ‘winning’ the Daily Mail and Mail on Sunday weekly supplements contract, reportedly for £2m less than incumbent Prinovis had been charging, and with the certain knowledge that the Daily Mail planned to bring production of Weekend in-house in the not-too-distant future anyway.
What followed perfectly illustrates that old adage about the high cost of a cheap price. Every web offset and production expert Printweek spoke to at the time said YM would not be able to produce the Mail titles efficiently or on schedule.
And so it proved. In Q4 last year, the busiest period for all web printers, chaos ensued across all three web sites as YM let down long-standing customers as it attempted to absorb Weekend and You.
The additional costs must have been astronomical in transport, overtime and paper over-usage alone. Meanwhile, other profitable work was falling by the wayside, with some jobs handed back to commercial clients.
Come the new year it was clear that the cost of the Q4 chaos would be crystallising in YM’s finances. But then, Goodman and Richardson would surely have been aware of that as they are, as previously observed, accountants.
Fast-track sale plans for the web division came too late, and administration became the only option, leaving 512 workers out of a job as the stricken plants ceased trading immediately.
The YM Group is now a much smaller entity, comprising (at the time of writing) of Lettershop and Go Direct Marketing and with combined sales of around £25m based on the 2020 numbers.
What happens next? There’s still a chance that trade buyers may be interested in all or parts of York Mailing or Pindar Scarborough. Some print buyers will be having “interesting” conversations with their CEOs, and, whisper it, the balance of power between buyers and high-volume printers has shifted.
One way or another this sorry saga is to be continued. Watch this space.
FROM MBO TO MASS LAY-OFFS
2015 York Mailing CFO Stephen Goodman helms an MBO at the group, which has sales of £101.5m, operating profit £6.6m, and pre-tax profit £2.9m
2016 Goodman transitions to CEO. Sales are £104.4m, operating profit £7.1m
In June, the firm buys Polestar Chantry’s business and assets out of administration for £2m, followed in September by the huge 64pp short-grain Goss M5000 from Polestar Sheffield
2017 In April the ‘new’ YM Chantry is fully up and running according to group managing director Peter Greaves, who says YM has invested £5m in the site
Sales are £120.5m, operating profit is £7.87m (excluding £5m bargain purchase gain on Chantry deal)
2018 Sales are £118m, operating profit £5.9m, pre-tax loss is £1.5m
2019 Sales are £117m, operating profit £1.26m, pre-tax loss is £5.7m
Mike Newbould Junior proposes a turnaround plan for the sites. YM’s board rejects it
2020 Accounts for 2020 are filed late and have material uncertainty note. Sales are £114.8m, operating profit is £1.65m (prior to exceptionals, £64,000 after), bottom-line loss is £7.6m
2021 YM wins DMG Media supplements contract for Weekend and You magazines. Absorbing the work causes massive disruption to other customers across its web offset businesses. Financial performance unclear as accounts for year end 31 May 2021 not yet filed
2022 York Mailing, Pindar Scarborough and YM Chantry go into administration with FRP Advisory on 31 March and cease trading with some 500 employees immediately made redundant, and not paid their March wages