Record sales for Walstead at half-year amid 'maelstrom'

Walstead chairman Mark Scanlon believes insolvency “remains a real threat” for some competitors, but said his own group’s position was very different as the business announced its highest sales yet at the half-year.

Scanlon pointed to the dramatic events at continental rival Circle Media earlier this year, but said it was too early to say whether market conditions for Walstead would improve as a result. 

“One of the major events during the period was the rapid demise (following the rapid ascent) of Circle Media Group and the closure of most of its factories; hopefully, the latter will create a better balance between supply and demand in the various countries it operated in – we will see,” Scanlon stated.

“Our business model and financial structure are very different to the opaque ones Circle operated. We do not overpay for acquisitions – we synergise, improve and restructure them; we manage our cash very tightly; we maintain serviceable levels of debt; our working capital is positive; and we have the cash headroom to effect restructuring should it become necessary.”

Announcing interim results for the six months to 30 June, he said sales at the business – which acquired LSC Communications’ Polish web offset operation last year, with the business now being incorporated for its first full year – were up 35.1% to a record €328.21m (£304.4m). Net sales excluding paper recharges were up 23.5% to €184.8m.

Scanlon said that profits for the period “would have been significantly higher” had the group not had to absorb substantial increases in paper costs. EBITDA (earnings before interest, tax, depreciation, amortisation and exceptional charges) slipped slightly at €20m (H1 2018: €20.1m).

Net debt reduced by €9.6m to €88.2m (2018: €97.8m).

He added: "For some of our remaining competitors, insolvency is a real threat. Supply exceeds demand, contracts are hard fought-over, and prices are often dropped to win the work. 

"I am confident Walstead will continue to thrive in this maelstrom because of our low cost base, economies of scale, and sound financial footing."

Manufacturing output increased by nearly 19% to the equivalent of 201.6bn A4 pages, while capex of €6.1m included completion of the installation of a 96pp web that came out of Polestar Sheffield at Walstead Iberia, and the relocation of two other web presses on the continent.

Scanlon said that profits at the group in the second half were expected to be “substantially higher” due to “pre-emptive cost-saving initiatives” that have already been implemented, as well as a seasonal boost to volumes.

In the UK the group shut its Grange sheetfed site and trimmed shifts at Bicester during the period.

Group chief executive Paul Utting said internal cover printing and some sheetfed titles previously produced at Grange were now being printed using the sheetfed capability at Roche. 

"Our UK sites are all pretty efficient and performing well given the volumes in the UK market at the the current time," he said. 

"Structural decline [in the UK] has been added to by concern and uncertainty around Brexit generally."

PrintWeek understands a number of redundancies were also made at its Walstead Central Europe and Walstead Leykam businesses.

Full-year EBITDA is expected to be around €50m, up on last year’s figure of €47m.

Walstead UK is ramping up its paper wrapping offering with a number of clients moving subscriber titles to paper wrap.

The overall group now employs 3,551 staff and has 15 manufacturing sites. Its core operations span web offset and gravure printing, as well as pre-media services through its Rhapsody business. Walstead companies processes more than 900,000 tonnes of paper a year.  

Utting said the Walstead Group was still acquisitive, but any deal had to meet strict criteria. "Our next acquisitions will either have to fill in geographic gaps or bring something particular to the group," he added.