Ovato (formerly PMP, Gordon & Gotch, Griffin Press and 20 other associated businesses) will close its Moorebank print site and consolidate all its NSW print into the Warwick Farm facility, as the company responds to declines in the real estate, magazines and catalogues markets.
In the first half of the current financial year Ovato saw its revenue slide by $37m, down by 9.2 per cent to $363m, with its EBITDA down by 7.7 per cent to $18.6m. Net loss after significant items was $10.9m, compared with $19.5m in the same period last year. It is printing 11 per cent less paper at 142,200 tonnes.
Ovato's share price fell by 12 per cent on the half year results and outlook to 15c, equalling its lowest ever value of six years ago.
The company has a cautious outlook for the second half of the year which it says is “reflected in a reduction in H2 forward bookings for newspapers, magazines and non-food and beverage catalogue customers.” It says the outlook for Tier 1 food and beverage catalogues remains “in line with previous expectations.” Its EBITDA guidance for the full year is “at or around the lower end of the $37m-$40m previously announced guidance.”
Ovato Australia catalogue print and distribution volumes are forecast to continue to reduce by 2 per cent to 3 per cent a year, while the rate of decline in publishing volumes is set to stabilise with reductions of 5 per cent to 10 per cent annually.
However Ovato Print Australia saw its EBITDA soar by 38.7 per cent to $13.2m, on sales that were down by 12.9 per cent to $213m, the figures reflecting operational efficiencies achieved in tough trading conditions. By contrast New Zealand Print struggled on overcapacity impacting pricing, with its EBITDA down by 54 per cent to $3.5m, on sales that were 2.8 per cent down to $62.6m.
The company said its Australia Print revenues were lower mainly from $6m of catalogue work lost due to the sale of one of its customers, and $6m of lost magazine contracts. It saw a decline in catalogue revenue from customers who closed their businesses, this was $2m against pcp. There was $13m of lower magazine and newspaper volumes from existing customers, due to the weaker real estate market and reduced advertising pages. Its Tier 1 existing customer catalogue volumes and sell prices have remained stable compared to last year.
Heatset profit was up $3m pcp as operational savings around labour costs, ink and R&M, and lower headcount, more than offset the impact from lower sales volumes and higher paper prices.
Ovato Book Printing (previously Griffin Press) revenue was$0.6m or 3.8 per cent higher. EBITDA (before significant items) was up $0.7m pcp, as volumes held, and higher sell prices and lower costs more than offset higher paper prices.
In New Zealand revenues at $62.6m were down $1.8M or 2.8 per cent pcp due mainly to lower heatset sell prices and magazine distribution print revenues. Kiwi Sheetfed and Distribution sales were broadly in line year on year. The non-print and sheetfed print businesses were broadly flat pcp with the reduction in NZ profitability largely due to performance of the heatset print business.
While print volumes were flat year on year several major print contracts were re-signed with sell price reductions, due to aggressive competition. In addition higher paper prices were not fully recouped.
Ovato is now looking at market rationalisation and consolidaiton options for its New Zealand business.
Ovato CEO and managing director Kevin Slaven said,“It is encouraging to see that our margin improvement strategies, initially focused at Ovato Print Australia, are having a positive impact. . While we recognise there are still challenges ahead to improve returns across the group, we continue to make steady progressand our ongoing initiatives allow us to affirm our medium-term targets”.
It will cost Ovato $30m to close Moorebank and transfer “the best of our equipment and personnel” to Warwick Farm, which is also getting a new 80pp manroland Lithoman during the year. CEO Slaven has already flagged the decommissioning of “four or five” existing presses once the new Lithoman is up and running. Ovato says it will save $24m a year by closing Moorebank.