The receivership of Dick Smith is causing ripple effects in industries other than consumer electronics, with printing group PMP blaming the collapse of the retail chain for a 58.8% drop in its profit for the first half of the financial year.
Dick Smith collapsed into voluntary administration in early January, with receivers appointed on the same day. A sale campaign is continuing for the business, which reportedly has total debts of approximately $400 million.
Releasing its half-year results on Monday, PMP said it is owed a pre-tax total of $3.9 million by Dick Smith in Australia and New Zealand but it is unlikely to recover the full amount.
As a result, it has booked a post-tax one-off impairment of $2.7 million for the six-month period, which pushed its profit for the two quarters to $1.78 million.
A year earlier, PMP’s recorded a profit of $4.31 million.
As well as printing and distributing catalogues for retailers such as Dick Smith, PMP offers book printing and magazine distribution services.
Overall, the company said its Australian catalogue print volumes declined by 4% during the first half of the financial year, although distribution volumes increased by 6%.
PMP’s total revenue for the period came in at $393.3 million, with the company attributed most of the 8.7% decline to customers supplying their own paper.
In a statement to shareholders, PMP described the loss to Dick Smith as the company’s “largest bad debt in over 10 years and given the materiality and one-off nature of this impairment it has been treated as a significant item”.
However, while PMP confirmed it is on track to make its the full-year guidance outlined at its last annual general meeting, it said “trading conditions remain challenging” and it expects to lose volumes during the second half of the financial year from Dick Smith and home improvement chain Masters, which parent company Woolworths intends to sell or wind-up.