On Tuesday (Apr. 24) PMP, the parent company of magazine distributor Gordon & Gotch, announced their second profit downgrade this year. Three days later, yesterday morning, I heard reports of more retrenchments, the third or fourth round this year. Late yesterday came the announcement to the ASX of a highly conditional offer to purchase the business.
Tuesday’s announcement did not attribute divisional blame for the poor profit outlook so we cannot be sure whether the Gotch business is a factor. All we can go off is what we do know … service levels at Gotch have fallen over the last eighteen months. This decline in service has accelerated over the last six months. Their much touted distribution system has resulted in oversupply of some titles and undersupply of others. What was rare for the previous three or four years was, for some of us, common. It was costing us money and was probably costing publishers money.
The retrenchments in recent months have seen magazine experts flee or be pushed off the Gotch ship. This has left the company bereft of leadership with magazine experience and insufficient people to manage their labour-intensive operation. I think this has been a key factor in the poor performance I, and others, have experienced.
Rather than trying to work on what was causing more mistakes in the distribution process, the company denied any such problems existed. I am told they would try and discredit examples I wrote about here or outright deny the facts as I presented them. Two years ago, Gotch would engage and try and learn from reported in field challenges. That stopped around eighteen months ago. It was as if they had given up and invested in spin rather than in a professional distribution operation.
To this observer, I don’t see how Gotch can function as a professional magazine distributor in its present form. Too many magazine experts have been let go. Even allowing for trimming of fat, the cuts have been too deep. Valuable experience and even IP has left the building. Rebuilding that will be challenging.
While the logistics operation is reasonably straightforward, it is in the allocations and customer service areas where the most important decisions are made. This is where the staff cuts have been feels the most from what I have been told.
A magazine distribution business with increased losses for retailers and publishers is a dying business.
What has made the situation more challenging for Gotch has been operational improvements at Network Services through the same period.
So, what of the highly conditional offer? I have no information about the offer and can only speculate.
I don’t see how the offer could be from an ASX listed company given the continuous disclosure rules. This would rule out Fairfax and Seven – all reasonable suitors in my view. Maybe the offer is from ACP – I’d be somewhat surprised, but who knows in this marketplace.
What is certain is that magazine publishers with their titles being distributed by Gordon & Gotch would want the matter resolved quickly and the magazine distribution business sorted out and provided fresh leadership and appropriate resourcing as soon as possible. Right not Gotch cannot, in my view, serve these publishers well – publishers suffer and we newsagents suffer.
As I have noted previously when writing about the performance of Gotch, careful what you wish for. Maybe what we are seeing is another step in consolidation of businesses involved in print. Alternatively, we might be seeing moves which are part of what will be seen as a smart business takeover.
I like the rich colours on the cover of the latest issue of Better Homes and Gardens magazine. What I like about the cover is that it stands out among the sea of colour in the magian aisles.
