GW: Three things. First, the importance of print to the economy and the resulting relative stability of revenues suited my business model. Second, the highly fragmented nature of the sector and the consequential availability of potential acquisition opportunities. Third, the high value of tangible assets in each business, which underpin the purchase price.
BM: Having driven a number of acquisitions of print businesses on both sides of the Tasman, how do you believe PPG can add substantial value to target companies, even though they may already be well managed and performing reasonably well?
GW: The scale of the combined group enables buying advantages. Given paper can comprise up to one third of the inputs into a print business, this can have a material impact on earnings. PPG also brings to the table a more disciplined approach to expenditure on capital equipment, the result of which is an improved return on capital employed. Last, but not least is the ability to attract and retain quality management to replace retiring owners due to the potential career path open to key employees.
BM: From comments attributed to you in the past, it would appear that you see the printing industry as an underperformer. Without giving away too many secrets, how do you think proprietors can get more out of printing businesses?
GW: I think the single biggest weakness in most of the print businesses I have seen is questionable decision-making around capital expenditure. Not that the actual item being acquired is unsatisfactory but rather whether the spend is justified in terms of a financial return on the capital. I have also observed that many printers are not as focussed on profitability as they might be.
BM: What would be some of the business areas in which you feel that print business owners and CEOs tend to make mistakes?
GW: Far be it from me as a newcomer to the industry to suggest I know more about running a print business than existing operators, but I think the two items mentioned above might be worth analysis.
BM: Do you believe that printing companies need to own bricks and mortar, or even the capital equipment they use to produce income?
GW: As a matter of policy PPG does not buy bricks and mortar. Properly structured, we can obtain a far better return on capital by deploying our funds into operating companies. However this is a decision based around our particular business model and there are sound reasons (such as establishing a source of passive income for retirement) why the same rationale may not apply to every print business.
BM: Are you enthusiastic about the often touted multimedia opportunities available to printers in repurposing information for distribution in media other than print (such as the internet, DVD-ROM, etc) or do you think these are often over-stated?
GW: They are grossly overstated at present.
BM: In your business model, the print companies acquired continue trading in their own right, with their original brand or business names. Do you foresee a time when it would be advantageous to have a common brand across all markets or would this defeat the purpose?
GW: It is most unlikely we would ever merge our businesses. The strength of our approach is the individual businesses who are able to provide a unique offering to their customers.
BM: In your model, the former owners of the businesses stay on to run and develop the businesses under new ownership. In this regard, what resources are at their disposal to improve the efficiency and bottom line of their businesses, and do most former owners stay on for the contracted period?
GW: All the previous owners have stayed for the contracted period and many have continued on past the initial agreed period having found PPG provides an enjoyable and rewarding environment.
BM: As a player on both sides of the Tasman, what have you found to be the major points of difference between the markets of Australia and New Zealand (a) on the supply side and (b) among print buyers
GW: I’m not close enough to the operating businesses to comment.
BM: Could you foresee acquisitions or partial ownership arrangements in countries beyond Australasia, such as in Asia or beyond?
GW: We’ll wait and see what unfolds.
BM: How has the continuing consolidation of printing businesses in your markets affected your business?
GW: It’s too soon to draw any firm conclusions.
BM: Do you think there is a need for or likelihood of further consolidation in print on both sides of the Tasman?
GW: Consolidation is a good thing for the industry as a whole and is likely to continue as long as there is an economic rationale for it to do so.
BM: Do you see potential for other groups to develop locally or enter the markets in which you operate with similar business models?
GW: We’ll wait and see.
BM: I know you spend quite a lot of time in the UK. Do you have any feel for the printing business there and how it compares or contrasts with the business in Australasia?
GW: I have not done a lot of research on the UK print industry but can offer this observation: UK printers are materially less productive than their Australasian counterparts.
BM: I understand you have a roving brief to seek out and acquire new businesses that fit the PPG business model. What sort of companies are you looking for? What does a potential acquisition target need to have/to not have, in order to be an interesting target for PPG?
GW: I look for three key things: 1. EBITDA to be greater than 17.5 per cent of revenues; 2. Modern plant; 3. A talented and committed management team willing to stay for at least three years after the purchase is completed. Size is also important. There is no hard cut-off point but the business needs to be sufficiently large to ensure that acquiring it will have a meaningful impact on PPG’s financial results.
BM: Given your knowledge of other economies, are Australia and New Zealand still good places to start and develop businesses? Is there anything which governments could do/not do in order to foster business development?
GW: Compared to many countries, Australia and New Zealand provide a good business environment. However I have concerns longer term about how competitive we can remain compared to Asian countries where bureaucratic regulation is considerably lower. In my view, the best thing governments can do to encourage business is simply to get out of the way.
BM: Do you still consider yourself more a banker than a printer, or are you warming to the industry and developing a sense of “ink coursing through your veins”?
GW: I am a financier but have certainly developed a great deal of affection for the industry and many of the people working within it. I have found the printers I have dealt with to be largely honest and decent individuals who care a great deal about their staff and their business’ reputation. This is not necessarily at all common nowadays.
BM: Last but not least, what do you do when you’re not working? And what else are you passionate about other than business?
GW: I shoot during the season, ride horses and travel.
No doubt we’ll be hearing much more from Geoff Wilding as Pacific Print Group continues along its acquisitive path. Australian Printer will keep readers informed of developments as they arise.
Company Snapshot: Pacific Print Group
Sandy (Samford) Maier, Chairman
Mark Brebner, CEO - New Zealand
Warwick G Whyte, CEO - Australia
Mark Godfrey, Group Financial Controller
116 East Tamaki Road, Auckland
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