Page 74 - Print 21 Sep-Oct 2019

Business
Wayne Robinson, editor, Print21
Picton survival strategy sinks
Print21 editor Wayne Robinson analyses the dynamics, motives, and implications surrounding the demise of Perth printer Picton Press.
inconsiderable sum of $612,000 for its time with the company, whose turnover had dropped from $13.5m in 2012 to $7m
in 2017, and $3.1m in the six months of administration from May to November last year.
Also working against Picton was the print community itself. For so long a fragmented industry with no power, in recent times cohesion and resulting muscle has been evident, particularly in the face of perceived financial shenanigans. This unity was first made manifest when Stephen Anstice, at the time CEO of IPMG, famously told the paper merchants that if they supplied the US hedge fund KKR’s iteration of Geon, he would never buy from them again. Virtually every other major printer in the country immediately fell in lockstep with him, and just days later the Geon empire was dust. Since then merchants have been ultra-wary of dealing with failed companies, as
local printers have made their feelings clear.
In Picton’s case, paper came from an unknown source: rumours suggest either a friendly out-of-town printer ordering for Picton as well
as itself, or an east coast merchant with nothing to lose from Perth printers.
In regard to paper,
the collapse of Picton is problematic not just for
the owners and staff of the company but for the industry as a whole. Ball & Doggett was insured, but paper insurers
are becoming harder to find for the merchants as insurers look at the stats – which don’t look good, Picton being the latest in long line of failed printers with huge paper bills that insurers have been paying out on. Printers are going to struggle to get anything more
than 30-day terms – and not even that in many cases – from their merchants, who many say fund the industry, and certainly assist in the cash flow of many printers.
There are no winners from the Picton affair, which is a story of lofty ambitions, bad timing, and a desperate attempt to survive. The roots of the collapse go
back to 2012 when the directors of the growing business made the decision to invest in a new ten-colour B1 perfector. This was seen as ambitious even at the time for the Perth market, which isn’t huge, and has half a dozen decent sized printers including Scott, Advance, Daniels, and Quality Print serving it.
Unfortunately for Picton, the timing was terrible: virtually the day the new press was commissioned in 2013 the
WA economy, which had been booming for a decade, tanked,
as growth in the soaraway mining sector suddenly stopped. Business is like that – you can enjoy riding an unexpected wave, or be dumped from one that ends suddenly without warning. Unfortunately for Picton it was the latter.
Directors Dennis Hague
and Gary Kennedy are by all accounts regular decent guys
– hard-working, typical print business owners. Let’s hope their family homes are in their wives’ names, because with $6.8m of secured creditors and $3.5m unsecured, the debts are topping $10m, and with company assets a fraction of that, the future could be bleak. For printers around the country, Picton is a salutary lesson in over-extending – and in the dangers of
taking a survival
course that pits
the rest of the
industry, and
the ATO, against
you. 21
It was always going to end in tears. Offering the mighty ATO 1c-2c in the dollar, while giving smaller creditors 100c
in the dollar – and so gaining their votes for the DOCA to go through – was a risky strategy to say the least.
While the controversial Deed of Company Arrangement which facilitated the 1c in the dollar deal for Picton Press was perfectly legal, it was a long way from passing the pub test.
It clearly enraged the Australian Tax Office, which set its face like flint in its battle to get the deal rescinded, spending countless hours, and dollars,
in court appearance after court appearance in its bid to overturn the Picton DOCA under which
it would have been left with at most $26,000 on the $1.3m it was owed.
It also infuriated the local Perth print community – Picton’s rivals – who felt aggrieved that while they were paying 100c in the dollar to the ATO, and to their paper merchants, they were now competing against a printer that was effectively receiving a 98-99 per cent discount from both.
It was always an outrageous piece of financial engineering
– nifty or brazen, depending
on which side of the fence you sat. Clearly with the company’s options narrowing – in administration, no-one willing to buy it, workload diminishing, big debts – it seemed like a workable option to Picton directors Dennis Hague and Gary Kennedy.
Much to the wide-eyed surprise of many of those present, Administrator Jeremy Nipps from Cor Cordis managed
to get it through the creditors’ meeting, thanks to the backing of the less-than-$10,000 creditors and the employees, who understood they would get 100c in the dollar if they voted for it.
From that point it could have been a relatively straightforward run for Picton to get back on its feet, albeit without friends; however, the unwavering opposition of the ATO proved a huge obstacle, preventing the DOCA from enacting the Creditor’s Trust while it was being challenged in the courts, so keeping the company shackled.
The ATO piled on the pressure, including naming the two administrators themselves, Jeremy Nipps and Cliff Brooke, as defendants in its court action – an unusual move which would have been more than uncomfortable for the duo, and for their bosses at Cor Cordis.
The intensifying pressure cooker atmosphere eventually saw the relationship between the administrators and the directors break down, with both sides making various accusations against the other: the administrators claiming “unauthorised” payments had been made and demanding the directors inject a third
of a million dollars back into the company; the directors rejecting the demand and accusing the administrators of “shortcomings”.
In the end Cor Cordis decided enough was enough. We will never know all the reasons it decided to invite
the creditors to pull the pin. It did say that the company was trading at a loss and could not continue. Its fees ran to the not
74 Print21 SEPTEMBER/OCTOBER 2019