The appointment of administrators from PWC to Polestar for the second time within a month has unleashed a scramble for new print arrangements among the publishers contracted to have work printed at one of the sites.
And there has been an equally quick response from other printers seeking to secure at least one of the plants and the jobs that go with it. Print management companies have been equally swift to promote their abilities to help commercial customers left without clear printing slots for web and gravure work. One of those potential buyers is Wyndeham Group, or its owner Walstead, where chairman Mark Scanlon warns that as much as £100 million of work from Polestar may now head abroad.
“We foresee significant disruption to the gravure and web offset printing market if the Polestar assets were to permanently cease operating and this capacity was lost for good from the UK. We believe that in this scenario up to £100 million of print would potentially have to be sourced from the Continent, with all the attendant exchange rate risks, higher transport costs, and longer lead times,” he says. Ironically, Polestar had only recently regained the contract to print for Express Newspapers returning that work from the Netherlands.
Walstead has declared its interest in some of the assets, though without specifying which. Likewise Prinovis, operator of a gravure plant in Liverpool, will be looking at the opportunity coextend its UK operations, perhaps into web offset.
Any deal, it says, would need full clearance by the Competition and Markets Authority. Walstead is not interested in the assets of Polestar Stones-Wheatons, also in administration, but which would not need official clearance. Any Walstead purchase would almost certainly depend also on securing contracts along with the capacity. Scanlon adds that without some kind of resuscitation of the operations “there would be a significant negative impact on UK jobs”. Across the group Polestar employs around 1,500, 1,00 of whom are linked to the high volume plants. But a deal is not certain. “We are exploring whether there are certain Polestar sites and jobs that can be saved, although it is by no means certain that a viable solution can be achieved,” he says.
The administration was triggered by the decision of Associated Newspapers not to continue the contract to print supplements for the publisher’s titles including the Mail on Sunday and Daily Mail. If this started as a negotiating ploy, it has backfired with devastating effect, destroying the prepacked business.
The first administration had been triggered by the need to restructure the business with a prepack chosen as the best way to do this. The arrangement was endorsed by the prepack panel with the verdict that the new Polestar would last at least a year. Neither Proventus nor Barclays Bank had been prepared to increase loans to the original business and they collected £65 million of the £131 million they had forwarded.
The prepack route was chosen because, according to PWC: “We believe that if the company had been put into liquidation this would have resulted in the break up of the group resulting in an uncoordinated fragmented and more costly insolvency process and ultimately a worse outcome for creditors.”
That is now the position the business is in although the administrators say they are continuing to operate the business while seeking to sell it in its entirety or in part. There are reports that a first wave of redundancy notices were issued at the end of last week. The end of the winding down process would come after 90 days, the notice period on magazine contracts, unless publications were able to find new slots elsewhere. Publishers will almost certainly need to pay more for print and with a permanent loss of capacity, smaller publishers may find themselves squeezed.
If the Polestar capacity is lost completely, some work would have to be placed outside the UK. But, with the uncertainty of the referendum vote looming, this carries additional risk, not least in achieving the same deadlines as before. Additional days will need to be factored into schedules to cover transportation which will increase the carbon footprint of print while the exchange uncertainty will make forecasting more difficult.
There are three volume print sites, Polestar Sheffield housing Cerutti gravure presses and Goss heatset web machines; Bicester, home to relatively new Lithomans and a recently decommissioned Sunday Press; Chantry, which has a modern perfect binder and whose newest press is a 72pp KBA previously installed at Quebecor in Corby. On paper this is the most vulnerable of the sites.
Prinovis may rekindle the interest it showed in Bicester before Polestar bought it, while Sheffield might provide Walstead with gravure capacity in the UK to match that it owns in Spain. It is less likely to want the line up of Goss presses at Sheffield unless it secures contracts suited to these machines.
These were the star attractions from the 2011 reinvestment under Sun, said to a £50million package involving the closure of the Petty’s site in Leeds. However, the project lies at the heart of Polestar’s recent problems. The company chose to manage the project using its own stretched resources, specifying ancillary web control technology that had not been recommended by the press manufacturer for example. The necessary finishing equipment was moved from other Polestar facilities.
In the report on the first administration, “operational issues had significant detrimental impact on timely performance of the business with financial implications at £15 million”. It thad been hoped that these had been overcome and that with renewed focus on eliminating waste and production efficiency, the business would be viable.
The list of creditors includes sums owing to publishers for overuse of paper necessary to cope with the huge levels of waste that were being generated. Publishers too have been concerned that deadlines were being missed or shortfalls noted. Some had already taken action: Immediate Media, for example, switched the contract for Radio Times and other titles to Wyndeham immediately after the first administration, breaking an association with the title that dates back to its earliest days.
Its production staff and publishers can sleep comfortably knowing that they at least have escaped the wreckage unscathed.
Goss 5000 web presses supply the web offset firepower at Polestar’s Sheffield plant, one of the key sites that rivals and investors will be looking closely at.
