OPINION: Ovato takes the pub test

I didn’t think they would do it; I certainly didn’t think they should. Heck, I didn’t think they even could do it… but they did.

 

Just before Christmas, Ovato, our largest printing company, threw 300 of its workers in Victoria onto the public purse to sue for their due entitlements of long service pay, holiday and redundancy. The company convinced Justice Black of the Supreme Court of NSW that if it had to pay the entitlements of its redundant Victorian employees the entire group would go broke. It involves a matter of some $15 million, of which the company is contributing $2 million, while the Federal Government, aka the taxpayer, picks up the rest under the Fair Entitlements Guarantee scheme.

After raising $40 million in new equity, mostly from the Hannan family and Are Media, the largest magazine publisher in the region, the Ovato Group itself continues. It’s the heavily unionised Victorian companies that are being liquidated: Ovato Print, Hannanprint NSW, Hannanprint VIC and Inprint. Its Victorian printing will be transferred to the Warwick Farm Super Site in NSW.

No one can argue that printing is being hit hard, especially printing at the high-end of the heatset web market where Ovato operates in a practical duopoly with IVE Group. Coles cancelled the massive print job of its magazine, other catalogues have been decimated by the shutdowns, and the long-term drift towards digital media gets a boost by working at home and reduced economic activity.

Michael Hannan and Kevin Slaven, chairman and CEO respectively of Ovato Group, are tough-minded businessmen. I’ve interviewed both of them over the years and it’s no surprise to me that after all the downsizing and consolidation that’s marked the industry, their pragmatic decision-making and hard-nosed business determination ensures they are still in control of the region's largest printing company.

But it does come as a surprise that they have engineered the restructuring of the Group around a taxpayer ‘contribution’ they claim is essential to pay their employees’ benefits. FEG is a Federal scheme of last resort designed to protect workers when an insolvent company goes belly up. It’s taking a battering with so many businesses going to the wall and will likely take even more punishment as pandemic credit protections unwind this year.

Yes, it’s a tough time in the trade and yes, I’m sure Michael Hannan is tired of not making any money from printing. But it’s not like he and the other owners of the business are short of a quid.

We’re accustomed to hearing management assure us that a company’s most important assets are its employees. Only months ago the Victorian workers undertook to reduce their redundancy entitlements and alter their Enterprise Bargain conditions to help keep the business going. Are we to assume their representative sat across a negotiating table with company representatives who already knew the plan was to wind up the business and turn them out onto FEG?

Then there’s the precedent this sets. Will we see companies structure with two different entities; one to maintain the business, the other to employ the workers?

There is no suggestion that anyone at Ovato Group did anything illegal. They are far too well informed and too well equipped with the best legal advice for anything like that. Even the Federal Government, which has to pick up the FEG tab, didn’t make an appearance in court to oppose the move. It’s all quite legal and above board.

But there’s another court at play, the court of public opinion, the so-called ‘pub test’. What does the industry at large think of it? Everyone I’ve spoken to is appalled. I think it’s a general opinion.

Ovato is likely to go on to a bright future, well capitalised, developing its ‘market services', leading the industry in technology and innovation. However, its reputation as a modern-minded, well-governed exemplar of the printing industry will never be the same.

And that’s a shame.