As tipped in yesterday’s Crikey, printing group PMP did raid its company superannuation fund (its defined benefits fund actually) for a timely contribution to profit.
The company today reported earnings before interest and tax of $82.001 million compared to $76.738 million, so the $2.9 million picked up from the super fund didn’t have much of an impact.
But that EBIT figure is “significant items” which have assumed much greater importance since the new international accounting rules were applied in Australia.
After significant items of a loss of just over $21 million, the company reported an EBIT profit after significant items of $60.686 million compared to $58.975 million for 2005.
That was only an increase of $1.711 million: take away the super contribution and the company’s EBIT after significant items would have been $1.2 million down on 2005 (The super contribution is included in that $21 million, without it the significant items would have been around $24 million).
The company disclosed the super snatch in its report and in a briefing reported to the ASX.
Here’s the exchange from the briefing:
“Q: PMP’s profit before tax included an actuarial gain of $2.9 million relating to its defined benefit pension plan. This compares with a loss of $1.1 million in 2005. Can you comment on the likely P/L impact going forward and on your expectation that you’ll make $1.2 million of cash contributions to the defined benefit plan in 2007?
PMP CFO Richard Allely:
“There were two components to the 2006 actuarial gain. Firstly there was an actuarial gain in relation to the plan assets of $2.8 million. In 2005 that was a $1.7 million gain. There was also an actuarial gain in relation to the plan obligations of $0.1 million. In 2005 that was a $2.8 million loss, primarily due to the substantial number of redundancies of plan members in that year. We don’t expect any material movement in plan membership through redundancy in 2007, therefore it’s reasonable to assume that the plan obligation actuarial movement will be minimal.
“Going forward, actuarial gains or losses on plan assets will depend on the performance of plan investments such as equities, cash, property etc., so it would be inappropriate to try to project the P/L impact.
“We expect our cash contribution to the defined benefit plan in fiscal 2007 to be approximately $1.2 million and we note that the plan had a surplus of assets to cover obligations as at June 30 of $1.8 million.”
Accountant gobbledygook. The real explanation came in an answer from PMP CEO, Brian Evans (who was recruited from Fairfax in a CEO swap after PMP’s David Kirk went to Fairfax)
“PMP Managing Director, Brian Evans, said the 2005/06 result was pleasing as it was underpinned by significant work to streamline PMP’s cost base, and lay the operational foundation necessary for improved performance in years to come.
“He also noted that the results included an actuarial gain from the Company’s Defined Benefit Superannuation Plan of $2.9m, which offset both a shortfall in equity accounted profit from the Company’s 25% share in the listed sheetfed printer, Promentum Limited of $1m and approximately $2m timing delay in relation to the cost savings initiatives announced late last year. (Target $20m Vs Actual $18m).
“On a like with like basis with the previous financial year, it is gratifying to see that on most of the key performance measures we made considerable progress,” Mr Evans said.”
Well there it is: to make up for a two million shortfall on cost cuts promised to the market (10% of $20 million promised) and the $1 million drop from an associate, the company raided the defined benefits super fund after a boom year on the markets and snatched $2.9 million.
For that reason, the Super Snatch, the result can’t be looked at on a “like for like basis” as asserted by Mr Evans.
It is very definitely an “apples with oranges” comparison, to use the basic training jargon for accountants, finance analysts and business journalists.