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The reality of the Covid crisis on print hit home this afternoon as industry giant Ovato decided to close its Clayton print plant, with the loss of 300 jobs, a quarter of its workforce, in order it said, to safeguard the future of the company.

Closing Clayton: Michael Hannan (left) and Kevin Slaven

The company also announced a $40m rights issue, $35m of which will be underwritten by major shareholder the Hannan family, and major customer publishing house Are Media (formerly Bauer Media).

CEO Kevin Slaven cited ongoing media disruption and Covid as the reasons for the closure, and poured cold water on any potential merger with rival IVE. Are Media currently uses Ovato for all the former Bauer Media work, and IVE for what was Pacific Magazines.

Ovato lost $109m last financial year on a revenue that shrank by a fifth or $130m, to $593m. Revenue July to February was already 9 per cent down, then the March to June Covid period saw sales tumble by 41 per cent. While printing was smashed, the company says books, packaging, retail distribution and marketing services "held up well".

Nonetheless Ovato CEO Kevin Slaven issued a stark warning at the time that the company needed further restructuring to align revenues with its fixed cost base, to create a "smaller but more agile and profitable company".

Today Slaven said, “Print-based industries have been significantly affected in recent years and the Covid-19 pandemic has increased the pain this year for many parts of our group.

“Our industry has gone about as far as it can with mergers and consolidations in the last five years. Ovato has suffered losses for several years because of the costs of measures to meet the reduced demand for printed communications. This restructure allows for the company to get back to profitability and a sustainable future.

“Unfortunately, it means that over 300 employees will lose their jobs. However, the restructure will save 900 other jobs because the company would be facing an uncertain future without the restructure we are proposing.

“The proposed new equity, underwritten by two significant players in the printing and media sectors, together with the indicative support of our major suppliers and financiers to restructure our balance sheet, provides the foundation for a viable, sustainable and exciting future for our Group.

“Critical to the implementation of the Scheme, there will be no impact on our customers or all other suppliers outside of the Scheme, other than the positive impact of providing the Company with a stronger balance sheet and a viable, sustainable future. Our view, and the view of the independent expert, is that without this Scheme, the outlook for the whole group is unpalatable. We have searched for alternative solutions to the massive disruption in our industry, but they were unworkable.

“The Scheme will reduce our cost base, make us more sustainable and provide customers, suppliers and the 900 remaining staff certainty around a viable and profitable future.”

Commercial print has been battered by Covid, and nowhere more so than in Melbourne, where the government's hapless handling of the pandemic resulted ín a months-long lockdown and wholsesale closures of large sectors of the economy, including, crucially for Ovato, the retail sector.

Ovato had already been in discussion with AMWU about redundancies prior to today's decision, seeking to renegotiate the terms for its staff, it said it could no longer afford the legacy enterprise agreements. The successful outcome of those discussions was a prerequisite to attracting new investment for the $40m rights issue.

No decision has yet been made on the redeployment or not of the print and bindery equiment at Clayton, including the two giant manroland Lithoman presses. The reality is that all work currently being printed at Ovato in Melbourne could be accommodated by presses at other Ovato facilities, given no sites are operating at anywhere near full capacity.


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