Blue Star boss optimistic
"A great business in a difficult industry position."
That's Phillip Bower's assessment of Blue Star Group after eight months as managing director and chief executive officer of the trans-Tasman printing conglomerate.
The printing market on both sides of the Tasman has declined between 7 per cent and 10 per cent due to economic conditions, he said, producing excess capacity that has, in turn, put pressure on margins.
However, debt-laden Blue Star has made significant progress at the same time. Underlying all of the uncertainty and change, Blue Star's four divisions are trading profitably, Bower said.
Last month Merchant banker Goldman Sachs was appointed by Blue Star's major shareholder, Champ Private Equity, to manage the sale of the business after financial performance remained below forecast.
It's a sale that is expected to result in a total loss for holders of $67.5 million in Blue Star's NZDX-listed bonds - unless the business is sold for what most would consider an unrealistic multiple.
And that gets to the nub of the issue. Debt is the real burden for the business, which in addition to its listed bonds owes $245m to bankers and Champ.
But Bower says there is a lot of "scuttlebutt" and nonsense in the market since the sale process was announced.
Customers have been supportive and so have the banks, he said. Similarly, employees are extremely committed and focused on meeting customer needs.
Bower said the biggest underperformance was in the Print Australia business, but new leadership has been put in place and a plan is being executed to revamp the business.
Delays in commercialising a new printing plant in Blue Star's New Zealand Webstar division also didn't help. But that Auckland plant, in Henderson, is now performing well, he said.
Webstar Australia and Print New Zealand are also doing well. In fact, Bower said, that performance will set a benchmark in the marketplace.
Print New Zealand has put in a strong financial performance despite the challenging market and has increased customer numbers and market share in commercial printing to somewhere in the mid-30 per cent range, he estimated.
Bower said the company will be sold as a continuing business, in whole or in parts, but he thinks it will be highly unlikely the business will be broken up much beyond the four operating divisions.
He is hopeful the sale process will be similar to Blue Star's sale of its Rapid Labels division in June, which saw all employees transferred with the business and customer service maintained throughout.