AMID THE TURMOIL OF COMPANIES CLOSING or announcing redundancies, Polestar’s chief operating officer appears unflustered. Catherine Hearn is confident that the action the UK’s largest magazine printer took at the end of last year will stand it in good stead as nervousness increases and the market tightens. Add in the deal to swap a further slice of debt for equity and Polestar, if not sitting back comfortably, is not perched precariously on the edge of its seat. To a greater extent than for many years, Polestar is in charge of its own destiny.

The plunge in the value of sterling is helping return work that had been printed overseas, and is bringing in new work from Europe. This has prompted concerns in the French printing industry, which is losing out to aggressive German printers on the one hand and to attractive pricing from the UK on the other. If the French are complaining, Polestar has to be doing something right.

For the British giant the pressures of recession are almost business as usual, as the company has become accustomed to being laden with debt and has been familiar with navigating sources of finance. That many financiers have retreated possibly helped Polestar in negotiating the most recent equity swap, but so too did its recent track record as a cash-generative business.

“Because we have gone through the debt-for-equity process, we are better placed than ever,” she says.

Hearn can point to steady investment with wide web presses in place at Polestar Petty in Leeds, new bindery equipment rolled out across the group, and the latest press – the ‘good as new’ 80pp KBA Compacta originally at Quebecor Corby – being commissioned at Chantry Web in Bradford. Outside the publications area, a high-speed Océ inkjet press is going to the direct mail business in Nottingham.

“We are keeping our renewal programme alive,” she says. The benefits come from having more modern presses turning out the work of two older machines, and the consequent reduction in manpower required; the faster running times; and the better quality. “And customers are getting the benefit of us having superior kit to produce their work and the security of knowing that the press is going to work without mechanical problems.”

And then there is Sheffield, the greenfield gravure site which is now getting into its stride as a production centre. It has recently started to print 500,000 copies a week of What’s on TV for IPC, a switch from web offset production. “It’s something that we had discussed with IPC as part of the contract renewal last summer,” Hearn says. “Gravure has some benefits and there are other titles like What’s on TV which could be printed web offset or gravure. The difficult thing is achieving the balance.

“With the exchange rate as it is we are winning more European retail work, which is helping fill gaps in the gravure loading. And while we have other magazine titles that would suit gravure, it would be at the expense of web offset,” she explains.

“It’s not quite as black and white as it might have been at one point. Today’s bigger web offset machines can achieve some of the efficiency benefits associated with gravure, especially as we move more and more of the volume work to the web offset presses. We have to think in terms of total capacity across both gravure and web offset.”

That capacity was trimmed, as Hearn puts it, before Christmas when some of the older presses (and some date back 20 years) at Petty and Chromoworks were stood down with job losses as a result. It was a pre-emptive move and one that has been followed by redundancies at Wyndeham Heron, a number across the St Ives group and the closure of Cooper Clegg. “We’ve done what we need to do for the moment,” she says.

Towards the end of the year, magazine and supplement volumes were down 5% over the previous year. It’s too soon to put a figure on the first weeks of this year, but needless to say there won’t have been any improvement. At the time of writing there have been no announcements of major magazine closures, though this is a certainty at some point in the year. The normal churn of the publishing business will generally include the loss of at least one woman’s magazine in the course of a year, to be replaced by a launch or relaunch of a publication. While the closure is sure to happen, the chances of a high-profile launch are slim. “We know of no projects underway at the moment,” Hearn says.

Nor, it seems, will the reduction in press capacity have any great effect. “The loss of Cooper Clegg and changes at Heron are not enough in themselves. We are waiting to see what everybody else does.

“We know that magazines have been down 3-4% and that before Christmas the supplements were lower, despite the busy pre-Christmas period. So if we are experiencing an overall fall of 5%, others must be doing the same. Consequently we need spot retail work.

“During contract renewal discussions that we have had, we are largely holding what we have and even adding to what we print, even achieving some RPI price increases. It is commercial work that remains more volatile, but for now we feel we have the right production mix.”

By working across the various sites that it has, as well as choosing between web offset and gravure, Polestar is better placed than most to be flexible. It has the further option of adding shifts to manage any increase, she says.

If the market is nervous about the state of any supplier, Polestar is confident it is getting it right. “We think we are doing well because our quality and delivery-to-time record has always been good. If a publication schedule wobbles, we are able to recover. And because we have invested in people and equipment over the years, we can show a really good track record.”

That stability has come from the top. Barry Hibbert has been in place as ceo for eight years, something of a record for Polestar, where at one time the life expectancy of the top man was around 18 months. Hearn likewise has several years on the main board, though with different titles. Reporting in is a team of factory managers that has quietly been refined to create an organisation with a strong culture. “We have had to slim down over the years: some people have left because they simply did not get it in terms of what we were trying to do. It has taken us some time to get the mix right, but now we have very able people in position.”

Among these is Gary Marshall, who is spearheading Polestar’s environmental drive. As with the earlier Print Dynamics training product, Polestar wants to spin its experience out across the industry to the greater benefit of all. Hearn explains: “As a company we are big enough to be able to work through these things. We’ve found that consultants want to come in and apply the formula they have developed, but they do not disclose this as they own the formula and want to protect their revenues.

“Consequently we decided to work with The Carbon Trust as a properly recognised body and are aiming to see how the three parts of ourselves, our customers and suppliers can work together. At the end of this the customer can come up with a carbon footprint for his titles and know that there is integrity behind the calculations.”

The company launched its carbon footprint calculator at a series of well attended seminars last year. Since then its internal work has been in identifying the problem areas that need the most immediate attention and where the biggest improvements can be made. Meanwhile Gary Marshall has been following up on the interest sparked at the seminars and has been talking to customers who know they too need to address the environmental issue. “There is an awful lot of focus and attention across the industry on this area. What lies behind it are some aspirational factors and equally some impending legislation. Everybody is still trying to grasp the idea rather than having clear-cut action plans. And everybody knows it is an issue which will not go away.”

If the discussions about the broader environment are just beginning, talks about how best to economise in the current recession are also beginning to take place. So far any conversations about changes to formats, to paper grades and to schedules are in their formative stages. Nothing has been announced.

However, these are difficult times and difficult times can convince people to think differently. “New ideas that wouldn’t have been considered a couple of years ago must come out,” she says. Indeed Hearn calls for a “new business model” in terms of the relationship between printer and publisher. “For example the issue about logistics has been around for a while but doesn’t seem to have made any progress. It’s about how a publisher can radically change how they run the operation. There must be things that can be done to share truck movements to benefit both printer and publisher.

“Print schedules can be looked at, moving these around can help improve the logistics of publishing, and this could provide other efficiencies lost by forcing all the burden of production on to the middle two weeks of every month. And this might help employment as well, though I don’t think we are going to make progress on this any time soon.”

The business logic of this approach, as well as altering trim sizes, was proposed more than a decade ago by former IPC manufacturing director Peter Barber, but crashed against the rocks of the publishers and management of the individual titles that should have benefited. Yet Hearn is more optimistic about another idea to change the way that printers and publishers operate. “We need to look at the back office functions across the whole supply chain and work out if there is a better business model for carrying out these functions.

“There is a lot of duplication between the operational people at the publisher and the printer. There has to be a smarter way to do things. We could do more on content management and page make-up so that we are doing what we should be doing when we should be doing it. At Leeds Direct, just along the road from Petty, we house some people operating a call centre for the NHS who manage their own print requirements.
There are all sorts of opportunities of working more closely with publishers. We could take any shared service and look at the overlaps that exist, and with the support of an IT infrastructure, come up with a better business model.

“Within the group we have Httprint and a division which works with large partners and their account managers on reducing the cost base. We need to develop these sorts of new business models, either through down-line logistics or the upstream duplication between us and our customers.”

It’s the picture of a future where print – even the production-driven volume print that Polestar produces – increasingly becomes a service. What of Polestar itself? Major attempts at driving through much needed consolidation failed to deliver a merger between the Dutch and Quebecor Europe after shareholders threw out the deal. Polestar turned down the chance to buy Quebecor Corby for the minimum £1 sum.

“There were some prospects for consolidation which might have worked for us or for some of the European competitors. But then the economy hit, which has stopped the intervention of a lot of the investors who might otherwise have been interested in being part of that consolidation. Instead they are sitting on their money, and it would take a very brave investment company to do something at the moment and pull off a deal that would combine some of us.

“Such consolidation makes sense for us and these things are bound to happen. It’s highly likely that we would play a part, but we are all still stuck in this vacuum and until the banking frees up, nothing is going to move. Any type of consolidation is going to require some kind of financial injection, even if it were possible to construct a cashflow deal by swapping equity. So we are all waiting for the economy to free up and are hoping that it won’t take a couple of years to do so.

“The downside from the current situation is that more companies are going to go into administration that could have been part of the consolidation. This way it is going to be a much more negative shake-up.”