Peter George: Turnaround business

Peter George: Turnaround business
ProPrint sits down with PMP CEO to see how he brought the print giant back from the brink.

Fixing companies on the brink of collapse is not a glamorous job. You have to make hard choices under immense pressure while always one mistake from disaster. It is stressful, and punishing on your body, mind and soul. Long nights, longer weekends, every decision affecting people’s lives. After all that, the company might fail anyway and you will get the blame. This is the situation Peter George found himself in when he took over as chief executive of PMP three years ago. Years of hubris, lack of focus and poor decision making, a bloated cost base, and falling market share had brought Australia’s biggest printer to its knees, but George did not panic. He had been there before, and he never panics.

George has spent his career doing the tough, exhausting jobs no one else wants. In the 1990s he managed the Mayne Nickless $500m 25 per cent stake in Optus when the telco burned $1.5bn in 13 months building Optus Vision. In 2006-2008 he took on Nylex for one of the toughest ever Australian company rescue attempts. After cutting everything he could to keep creditors at bay, George thought the iconic manufacturer might make it, but a severe downturn in the auto industry dropped volumes in a key market by 30 per cent and it was game over.

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Casually sipping a Diet Coke in his simple, white-walled Sydney office, George’s relaxed demeanour today not only hides the extreme stresses of the life he leads, but is his greatest asset that makes him a renowned turnaround artist. “The only skill that I have that differentiates me from anyone else is that I keep my head in a crisis,” he says. George is a man built for the 24/7 war that was, and still is, saving PMP. In contrast to his predecessor Richard Allely, a gregarious lover of golf, George is a soft-spoken low profile person with an eye for detail and who likes to get his hands dirty. He admits to having little personal life and not much else going on outside of work; instead he wakes up early every morning ready for battle. “These jobs, you are never off even if you aren’t at your desk,” he says. “You are always thinking about it and I still have sleepless nights.”

George is not a printer. He only ended up at PMP because back in 2002 major shareholder Kerry Stokes was uneasy about how things were going, and appointed him to the board to be a voice of reason. George did not need a print background to see things were headed in the wrong direction. “I can slot in and do this job without growing up with ink in my veins because the symptoms are similar no matter what the industry. You get seduced by fat margins, you get lazy, you believe your own crap and the world changes around you and you don’t see it.” PMP ticked every box. When asked what the once-great printer had done wrong, George says simply ‘where do I start?’

PMP ‘forgot what it did well’, he says, and decided print and distribution had no future and would try something else, rebadging itself as a marketing services firm or a ‘maxi Kwik Kopy.’ “All of those things are not what this company is and every CEO who came in not only pushed it down these paths but packed it up with costs,” George says. “Meanwhile in the real world it was making no money out of the new businesses and Franklin Web was eating its lunch in print and Salmat eating its lunch in distribution. By the time it woke up it had gone from 60 per cent market share to 35 per cent.”

George says PMP used to be able to recover its high overheads by charging clients premium prices, but in the 2000s there was ‘a revolution in the retail industry’. “All these really smart procurement people came over from Britain and said ‘hang on, you’re paying three times what we pay back at Tesco’,” he says. At the same time, Australia’s biggest printers ordered too much capacity, causing a perfect storm of tumbling prices. “Everyone fell into the trap of participating in every tender and bid the pricing down to not much more than cost. You will all go broke if you do that,” he says. George says about $100m in profit has been handed back to customers in the form of cheaper retail prices over the past three or four years from savings on print budgets alone.

While he wasn’t busy with Nylex, George spent the better part of a decade jumping up and down against these decisions with no one listening. “Most boards tend to become one voice I got a reputation as the dissenter,” he says. “They thought if they kept their heads down eventually I would pass through and everything would go back to normal, but if I had done that there wouldn’t still be a PMP.” But he had a duty to his shareholders and so persisted.

After a messy breakup with Brian Evans, PMP installed Allely as chief executive with a mandate to turn the leaky ship around. Things went well at first and his strategy was prematurely hailed as a success in 2011 before a disastrous 2012. “Richard didn’t cut hard enough, deep enough or quick enough and the tidal wave was coming,” George says. “We had far bigger costs than our competitors and when the industry becomes about price the one with the fat cost structure is going to lose, so we had to at least get near their much leaner costs as quickly as we could.” The last straw was an expensive new manroland Lithoman press bought for the Perth factory where George says it was certain to be grossly underutilised. “Putting it into WA was a really silly decision as it would have done the entire week’s production by 9am Monday, so I said ‘you’re crazy don’t do it’.” It was about then the board started realising he was right, and in October 2012 Allely was handed a million-dollar golden parachute and thrown overboard.

By the time George took over, PMP was in a perilous position and late that year came ‘very close’ to collapse. Its 2011-12 figures showed a company with a $1.093bn turnover and a $24.5m loss, which was a $100m less turnover than the previous year and a loss that had more than doubled. George knew exactly what he had to do to fix the company, as he had restructured its New Zealand business over the previous three years as chief operations officer. It was essentially a testing ground for his full-company turnaround plan and taught him what would and would not work. “PMP’s major advantage is it is a one-stop-shop for catalogues and we were structured so as to give ourselves the least possible chance of selling that bundle. It had four print sites on the north island so we brought it all under one roof and put the management across all the product groups,” he says. “It was clear NZ had not fallen in a heap despite its manpower being cut in half, so I took that model and applied it here.”

Eight presses were switched off, the loss-making data business and Canberra operation were offloaded, hundreds of millions of dollars of unprofitable business like directory printing was dumped, and several plants were sold and leased back in a series of deals worth $74m. These cuts were painful, but George says the massive job cuts were the hardest part. When he took over PMP had about 2600 staff and five years before that it had about 4500: Now it has 1200. “It was a horrible thing to have to do and I wish to God I didn’t have to do it, but it is like having 100 people in a 50-man lifeboat: You can all drown or half of you can survive,” he says. George says while ‘continuous improvement’ is always necessary and small adjustments will be made for new clients and better efficiency, there will be no more ‘hatchet jobs.’

The results speak for themselves: PMP posted an $8m profit for the 2015 financial year and has slashed its net debt to $16.3m with plans to be debt-free next year. Margins are higher than they have ever been after unprofitable business was jettisoned, which has seen turnover drop by some 25 per cent during George’s tenure, but George says as PMP is ‘a business is in its twilight’ he is less concerned with margins and more with how much cash goes into the bank every year. “We have removed all noise, everyone is accountable and all operating statistics – utilisation, waste, scheduling – are better than they have ever been,” he says.

The company’s success is built around George’s emphasis on the bundled model of print and distribution and supplemented with extra services like graphic design, and geared specifically to save the big end of town buckets of money through economies of scale. “We think we have a model that works for big retail. We can now efficiently offer a ‘total retail solution’ under one roof that saves big clients $1m-$4m on freight alone,” he says. “We were recently in a tender for a big retailer that we do the printing for but not the distribution and we were able to show them there was a saving of about $3m just in transport costs between us and Salmat. Anyone who spends more than $10m a year on catalogues would be mad to do it any other way, it is massive savings in time and money.” George says more than half of PMP’s top customers are now using more than one service, and the rest of the market is starting to take notice. “It will take time for the market to come to grips with this, but the message is sinking in and word is spreading about the savings from this model.”

The culture of PMP has also been rebuilt during George’s reign. He says PMP was a ‘very political organisation with a lot of jobs for the boys’ and that promoting on merithas broken that down and replaced it with a strict, transparent meritocracy. “Everyone wants to win, everyone understands that the game is now about a bundled offering of print and distribution,” he says. “Staff have a better feel for their future, if you’re a 45-year-old printer you feel a lot more comfortable now than three years ago, you know you have another 20 years of work.”

George says this kind of company culture reshaping has to happen from the front. Executives have to be responsible and pay attention to the numbers and the details in their business, and be accountable for them. “You need to be very on top of the details – every contract you have, every cost you are incurring. You have to treat the money like it is your own and surround yourself with good people from the coalface up to senior management. I guess you could say I’m a dictator in that I like to surround myself with likeminded people, but this is not a startup internet company, it is a company that has to manage its cash carefully. It is not an easy job, you can’t do this on your own. My chief operating officer John Nichols: he is gold. I could never have done this without him.” George says previous senior management never really had their head around the numbers and would therefore ‘shoot their mouth off to the press and regret it later’ predicting huge earnings and being punished by the market when they failed to reach them. “People put their money into the company on the basis of what you tell them, so you have to set realistic goals and strive to meet them, only then do you regain your credibility,” he says. George seems to have accomplished this mission – in June he told the market profit before significant items would jump to $10m and $30m of debt would be repaid. The share price jumped 20 per cent in the days following and when the annual report showed a $12.1m profit and a $35.4m debt repayment it did not go back down again.

George has similar advice for small and medium printers trying to navigate the changes in the industry and survive in an increasingly cutthroat market – get back to basics. “A lot of people in this industry don’t know what the cost of doing business is because back in the day the margins were so good you didn’t have to,” he says. “You have to exist for your customers and I think our industry’s idea of customer service is very different from others that have already been through this painful transition. You have to believe and live that the customer is always right because they are the reason we all come to work in the morning.”

For the same reason, George says PMP almost collapsed because it lost focus, he is concerned about the trend of some bigger printers, like its biggest rival IPMG, rebranding themselves as marketing companies with a plethora of ancillary services, hoping a market will appear for them.

“We have been there and done that, it is not a path we want to go down,” he says. “You go on that journey when your customers ask you to, you don’t go out there and try to get ahead of it. That is the mistake we and Salmat made and look what happened. I wish them well, but my instincts tell me for every company that has successfully diversified out of its core business there are a million that tried and failed. You can’t lose focus on what you are good at.”

Analysts are bullish about PMP’s future, predicting the share price could jump another 20c to reach 75c, or even higher to 80c. George says the share price is arguably still undervalued, but that it has a natural ceiling as long as the print industry is structured the way it is, and eventually that has to change, which can only be achieved through consolidation. He says there were some acquisition talks with another company but they are now ‘suspended’. “I know what I want to do but the other party has to feel the same way,” he says.

Despite having no print experience before he joined PMP, George says he has developed an affinity for print in the time he has spent in it. “Print is a different kind of manufacturing. A lot of people outside the industry make the mistake of thinking it’s just like making cans of coke but every job you do is different,” he says. “It has evolved over the years from an art to a craft to a process and that’s been a difficult journey. I like this industry, I like the people in it – the blue collar workforce at PMP have really rallied to help the company make it and I haven’t seen that anywhere else.”

George says some parts of print are making a comeback, with heatset volume and prices stabilising, on-demand book printing bring work back from offshore, and magazines reinventing themselves into speciality titles. “I am a big believer in print, it has been disrupted by the internet – some products have been smashed, the obvious victims being telephone books and to an extent magazines,” he says. “The big run New Idea-type titles whose currency is gossip are always going to be affected by the internet where gossip is all over social media as soon as it happens. However, some have been very resilient. Print is an extremely powerful advertising medium that has been its own worst enemy and has not done a good job selling its case like others have. Obviously some products sell better on digital like cars and real estate, but how do you get out the message that rump steak is $12.99 at Woolies this week over digital media?”

George says catalogues, which make up 80 per cent of PMP’s profit, are remarkably resilient, with the number going into a letterbox today not much different than 10 years ago. “I am a huge believer in the efficacy and life of the catalogue,” he says. “How do you get 40 pages of product out on digital media? If retailers could sell products without a catalogue they would, but they can’t. People have been taking them out of their letterbox forever and it works for them and works for the retailer, so if it’s not broken don’t fix it.” George refers to Roy Morgan research finding 54 per cent of Australians read a catalogue every week and 60 per cent of those buy something. “Compare that with a primetime TV ad with maybe 900,000 viewers, most of whom make a cup of tea during the ad breaks.”

George acknowledges that some printed media will eventually go all digital but he thinks it is ‘a long way off’ because they are still the most effective way to sell many products. George’s experiences in telecommunications during the 1990s and the early 2000s taught him that early enthusiasm for new technology by its proponents is nothing new and always ‘way ahead of normal people’. “When broadband networks were first being developed in 1994 I remember having meetings with people who said TV is dead and everything will go over the internet,” he says. “Twenty one years later that is starting to happen but a hell of a lot of people have made a hell of a lot of money from TV in the meantime. There will always be a place for print, and we have some very good operators in this industry who will find a way to survive.”

Even at 62 years old, you have to wonder if George will be at PMP for most of those 20 years. He says he has no plans to step down any time soon and will stay as long as he and the board feel he is being useful. Print, and PMP, is his home now, and despite the toll it takes on his life, he is where he wants to be, and he feels the responsibility to win the peace not just the war. “It’s the other 49 people in the lifeboat that I do it for. I can’t see myself travelling around Australian in a Winnebago, but I have my farm in the country I go to every weekend. Eventually I’ll stay there.”


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