Walstead plays waiting game on M&A, expects more rivals will fail
Tuesday, October 20, 2020
Walstead group chief executive Paul Utting believes it is “inevitable” that some competitors will fail when government coronavirus support packages come to an end, with the web and gravure markets down by between 20%-25% and magazine printing capacity needing to adjust accordingly.
The pan-European print group has just published its results for 2019, which marked the first full year of inclusion of its biggest buy yet, the Polish web offset business acquired from LSC Communications in 2018, now Walstead Central Europe.
Sales increased from €519.5m (£474.4m) to €669.6m, while adjusted EBITDA was €49m (2018: €47m).
Operating profit prior to exceptionals was €22.2m compared with €17.5m the prior year.
The group spent €16m on restructuring and reshaping its operations, which included the closure of its Grange and Southernprint operations in the UK, with the loss of 197 jobs. It also cut 355 jobs on the continent.
Its Rhapsody pre-media business was also consolidated under a single management team.
The group employed just over 3,600 staff at the year-end.
Chairman Mark Scanlon described 2019 as “an excellent year for Walstead”, including the repayment of €71.5m of external net debt while retaining its focus on “cash and liquidity”.
The group’s output capacity increased by 15% to 418bn A4 pages per annum.
Utting told Printweek that the group was dealing with the effects of the Covid-19 pandemic from a position of strength, and said 2020 would be “a good year under the circumstances”.
“The first quarter of 2020 was pretty good, and then demand fell off a cliff,” he explained.
“Since ‘wave one’ retail volumes have picked up pretty quickly, but publisher volume has remained very subdued.
“We acted quickly in all territories to preserve profitability and cash. We are still in good financial health and all our employees have really done us proud. They have adopted new safe systems of working and just got on with it.”
He said that when government support schemes came to an end both here in the UK and on the continent, more competitor failures would be inevitable.
Continental rival Circle Media collapsed last year.
“Two things are going on. We have the effects of the pandemic and the reduction in print generally. It is inconceivable that the market can drop by 20%-25% and there not be a restructuring,” Utting stated.
“You can never call it, but in the end you can’t escape market forces. Dozens of titles have closed and won’t come back.”
Walstead also shelved plans to relocate one of the Southernprint presses to Roche.
Utting said that after the initial drop in business in Q2 2020, Q3 had seen an improvement with Q4 volumes about 20% down on original budgets.
He expected 2021 volumes to be similar to Q4 2020.
The group’s latest forecast included “healthy cash availability” of €66m at the year-end.
Scanlon said the group remained on the lookout for further buys that would expand Walstead’s geographic reach or extend its offering.