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Print giant Ovato is closing its main Victoria print plant at Clayton, with the loss of 300 jobs. It is also seeking to raise an additional $40m in cash through a rights issue, and it is asking suppliers to take a 50 per cent haircut on their outstanding invoices.

Scheme: Michael Hannan and Kevin Slaven

The company has filed an application for creditor and members Scheme of Arrangement with the NSW Supreme Court, without which it says the “outlook for the group is unpalatable”.

Ovato is in court today, and looking to have a Scheme booklet out on Monday with a creditors meeting on 30 November to vote on it.

For its Melbourne operation, Ovato CEO Kevin Slaven told Print21 that the lease was up on the existing Clayton site, with developers wanting to move in, giving Ovato a choice of opening a new greenfield site in Victoria, or moving the printing to its Warwick Farm supersite in NSW. Slaven told Print21, “The choice was clear. As far as customers are concerned there will be no difference.”

Clayton will close by Christmas, although no definitive date has yet been set. The major printing equipment will not be redeployed within the group, the existing assets at Warwick Farm will print all the work for Melbourne.

Some $35m of the $40m rights issue will be underwritten by major shareholder the Hannan family, and major customer, publishing house Are Media (formerly Bauer Media). The cash will be used for liquidity, to pay down debts, and for operational initiatives.

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.”

Speaking to Print21 Slaven said, “It is important to align supply with demand. There is a bright future for print in this country, and there needs to be two major players."

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.”

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