Australian Catalogue Delivery Industry

Salmat & PMP

At Uni a couple of years ago we reviewed the performance of both these companies during the 2007/8 year. I was reading this again a few days ago and still think that it is relevant. Enjoy!


Salmat has evolved since it’s inception in 1979 from a catalogue delivery business into a one to one communication leaders. Salmat is unique in the world as it offers customers solutions from print through to distribution through to web through to fulfilment and sales, all integrated through one to one marketing.

Throughout the world there are a myriad of companies that offer similar elements of the Salmat offering, but not the whole offering. An example is Edita from Finland. This company offers a printing and distribution solution to customers but no fulfilment, sales or web. They have an additional business of a non-fiction publishing house.

In Australia a company similar to Salmat is PMP, especially in the printing and distribution segments. This is where the similarities end. Whilst Salmat has branched out into sales (call centres, outbound, IVRs), technology (segmentation tools, digital fulfilment, biometrics) and web (lasoo.com.au) PMP have taken a different approach. PMP specialise in research and segmentation tools via Pacific Micromarketing, Gordon & Gotch magazine distribution and enhancement tools such as GPS tracking on letterbox delivery contractors.

However, while both companies have their differences it is worth reviewing the key statistics to determine whether investors should have initially invested the $200k in PMP instead of Salmat.

At the end of 2007/8 PMP is in a better shape than Salmat. In all the key statistics PMP is clearly leading Salmat. However Salmat has been planning for the future with a diversified online application and an acquisition of competitor player HPA. This has increased revenue but eroded margin as these businesses are merged with the traditional Salmat offering. This better performance from PMP has not been the longer term trend as demonstrated by the earnings per share and current ratio.

Salmat has clearly out performed PMP over the past five years with an earning per share much higher than PMP. In 2006/7 Salmat had an extraordinary result due to the sale of the Philippines operation. This money was invested by Salmat during 2007/8 to purchase HPA & invest in lasoo.com.au. Of more concern for PMP investors is the current ratio. Whereas Salmat has consistently been in the 1.5 range (a key area for a company to aim for) PMP has been at or just below the 1.0 range. Salmat has fallen to 1.10 this year due to the above investments whereas PMP has improved. PMP may experience cash flow problems from time to time that Salmat does not experience.

Salmat in recent years has given an excellent return on owners’ equity, well above that of PMPs, with the exception of 2007/8 due to reasons outlined above. However the operating expense margin for PMP has generally been better for PMP than that of Salmat. In 2007/8 Salmat invested $213m in purchasing businesses whereas PMP spent just $19m. PMP did however spend $91m in property, plant and equipment compared to Salmat’s $1.7m in proceeds from sales. Overall Salmat spent $233m in cash flow from investing activities compared to PMPs total of $85m. In total cash at the end of the year Salmat has grown from $5m in 2006/7 to $36m this year as compared to PMP which grew from $4m to $7m. So compared to others in the industry, Salmats’ cash flow is healthy.

However, a key outcome for this investors group is to see a return to previous years ROE and a reduction in costs to reduce expenses.

Cheers, Michael.


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