Ovato takes a first half hit as figures slide
National print business Ovato (formerly PMP) struggled to make headway in the first half, with all figures on the slide on the back of the softer economic environment in Australia.
Headline results show the net sales figures down by $34.1m, 9.4 per cent, to $328.9m, its EBITDA down by 27.9 per cent to $13.4m, its net debt doubling to $90.9m, and its net loss blowing out to $59m from $10.9m in the same period last year.
The results didn't go down well with the market, it share price fell by a quarter in early trade.
Ovato has now has appointed financial advisers to assist in reducing debt levels. Initiatives being considered include non-core asset sales, raising equity and other strategic initiatives.
However Kevin Slaven, CEO of the business said its recent manufacturing consolidation which saw the supersite in Warwick farm become fully operational will reap rewards in the coming period, he said, “We remain confident of improved profit margins and positive cash flows as we move towards FY21 through a lower manufacturing cost base and higher margin revenues in our evolving data capabilities.” Ovato expects annualised savings of $20m to its cost base as a result.
Slaven told Print21 that, "The debt was expected, and was from a write-down and redundancies, both of which were one-offs. Profit was softer than we would have liked, but everyone has been impacted by the soft first half.
"We now have a lean manufacturing operation, and will be investing more in the data side of the business. Some of the lost print volumnes are not coming back, but data is a big area of growth for us."
The company says while sales to tier 1 food and beverage catalogue clients held firm lower than expected newspaper and magazine volumes, combined with tier 2 and 3 catalogue volumes slipping, and pricing pressures in recent tenders caused the decline in revenue.
Australian print and residential distribution EBITDA was down by $2.7m to $12.4m on lower volumes, while its New Zealand EBITDA just stayed in the black, it was down by $2.5m to $1m, with a fierce price war still ongoing over there. Retail distribution and marketing services were broadly in line with the prior corresponding period.
Its $59m net loss came through a $35.2m non-cash impairment of IPM G merger goodwill, combined with $20.6m in redundancy and relocation costs associated with the closure of Moorebank.
Ovato Australia sales fell by 28.8 per cent to $271.7m from $300.4m, while the New Zealand operation saw its sales fall by 5.3 per cent to $57.2m from $62.6m.