CATALOGUES DRAG ON OVATO QUARTER, OTHERS PERFORM STRONGLY

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Ovato’s books, packaging, retail distribution and marketing services sales "performed solidly" over the Jan-March quarter, but heatset catalogues continue to struggle, and may do so until the latter part of this year.

Catalogues dragging: Ovato CEO Kevin Slaven

The company says decreasing volumes as a result of Covid-19 continue to impact heatset catalogue printing and residential distribution, and, “it is expected that the normalising of volumes post Covid-19 may now not occur until the first half of FY22".

Ovato says this will lead to the resulting FY21 revenue being less than previously expected.

Its cashflow also took a hit, impacted by $7m from significant non-recurring outflows, and a further $6m from negative working capital movement, resulting from the timing of payments in the retail distribution business. Operating cash flows were also negatively impacted by the ongoing impact of Covid-19 on its core customer base, and delays in returning to previous trading terms with a number of suppliers.

Its total financing facility at the end of the quarter was $55.7m, which has all been used. It has estimated cash of $15.3m, enough for one quarter of future operating activities. It aims to boost this by selling assets, implementing improved trading terms with suppliers, and looking at short term funding options.

During the quarter Ovato completed the remaining steps of its restructure through the schemes of arrangement which were approved in December. The company says management will continue to execute “fit for market” strategic initiatives, and “invest in new technology platforms that will enhance the core commercial print operations”. The board continues to review the "appropriate capital structure" of the company with its advisers.

The Hannans have put the Queensland Ovato site, owned by their Rathdrum property business, up for sale. It houses the 14,000sqm Geebung premises, which sits on a 27,600sqm site. Ovato has three years remaining on its lease there, at an annual rent of $2.4m.

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