PMP's rivals are taking their strategies to the streets and mailboxes

ACHAIRMAN dumping his stock just weeks out from the company's annual meeting is not a good look, particularly during a share buyback. But that didn't deter PMP's Graham Reaney from selling 350,000 shares last month in the printing and distribution company he chairs.

Reaney also sits on the boards of AGL and St George and, now that Westpac is to swallow St George, is one of three St George directors to have been invited onto the Westpac board.

Meanwhile, PMP is in all sorts of strife. The privateers from CVC who own Kerry Packer's old magazine arm Australian Consolidated Press - which is also PMP's biggest customer - are threatening to build their own printing plant.

PMP's next biggest customer, Kerry Stokes' Pacific Magazines, has a couple of years to run on a 10-year contract and is ruminating a legal action. Then there is PMP's menacing rival, IPMG/Hannan, which is proposing to build a flash new printing plant in western Sydney in a bid to relieve PMP of market share.

As if that weren't enough, PMP's junk-mail business is in a spot of bother too. Word is a couple of PMP Distribution's blue-chip customers are threatening termination, perhaps even pondering a demand for compensation.

If you find that pesky junk-mail filling your mailbox you can probably point the finger at PMP and its flier-dumping rival Salmat. In theory, this should be a good business with little capital invested. And PMP gets to print the junk mail catalogues to boot.

The trouble for PMP is that if the delivery is not made to minimum service levels, the customers waste the delivery fee as well as the printing cost and want that money returned.

We are talking tens of millions of dollars in annual print and distribution costs for some of the larger junk mail customers including the likes of Harvey Norman, Coles, Kmart and Bunnings.

In practice, the assorted casuals who saunter about stuffing leaflets in mailboxes have a penchant for lugging the junk mail straight to the recyclers for a good pulping - to increment their pay with a modest recycling stipend.

So PMP devised "Project Catwalk" whereby it strapped GPS trackers to its "walkers" to keep them honest and ensure they made their deliveries. It sank $30 million into Project Catwalk but it turned out to be first-rate in theory but a failure in the field. Customers reckon the deliveries are well below minimum service levels, costing them dollars in wasted delivery and printing costs.

Against this backdrop, Reaney has dumped the bulk of his holding, his most recent announcement lobbing at the ASX last Friday, just a week out from the annual meeting and just in time to remind shareholders to harangue him over his reasons for selling, not to mention question him as to how the junk-mail business is faring.

None of this has prevented him from presiding over a pay rise for chief executive Brian Evans and an extension of his contract, despite the share price woes suffered by shareholders.

You really have to wonder what's going on at PMP. Virtually the entire executive team has left since Evans replaced present Fairfax Media chief David Kirk three years ago.

If ACP goes ahead and builds its own printing plant, as it recently announced it would, PMP will lose its largest magazine print customer - the biggest in Australia by far. PMP reckons this wouldn't affect its printing operation as it would fill the void with more catalogue printing but from where?

Luckily for PMP, CVC is in strife itself, running up against its banking covenants after loading up with too much debt to buy Nine Network and ACP

at the peak of the cycle. PMP had better hope the private equity mob is foxing in a tactic to lock in some keen pricing on a new contract. Either way, it is bound to feel the heat.

Should ACP go it alone there would be potentially serious cash-flow consequences for PMP's magazine distributor Gordon & Gotch too that is, if ACP ran its own distribution off the back of its new print plant.

A haircut on price would be preferable to conceding its prime contract, mind you. Printing is a big volume game, where a handful of cornerstone contracts carry the big fixed cost-base and any smaller deals make up the icing. Without the volume to keep the presses going, you're not looking good.

IPMG/Hannan's huge new printing plant in western Sydney could take more volume from PMP - potentially delivering a lower overhead structure up against PMP's old unionised workforce - and further reduce printing prices for magazine and junk-mail catalogues.

It would seem inescapable that PMP will get hit with volume reductions and price pressure once ACP and IPMG get their proposed new plants up and running.

Graham Reaney will no doubt seize on the opportunity to avail the market of all these issues at tomorrow's shareholder meeting - particularly the potential liabilities in PMP Distribution arising from the failure of Project Catwalk.

An interesting twist to the chairman selling most of his stock is that the last sale of 300,000 shares was disclosed to the ASX on October 8, inside the traditional black-out period of one month before an AGM when insiders generally do not trade regardless.

Of more interest, the buyer of the stock may even have been PMP itself. In August 2008 PMP announced its intention to buy back up to 5% of its issued shares between September and October.

mwest@fairfax.com.au