A move by publicly-listed printing and distribution giant, Ovato, to direct 300 soon-to-be-redundant employees to seek their entitlements through the federal government has been greeted with fury from unions.

Ovato, which was formed in 2016 in a mega-merger between PMP and the Hannan family’s IPMG, has been hammered by the combined impacts of a drop in print demand and the COVID-19 pandemic.

Heatset sales for the three months to September 30 plummeted 41.1 per cent compared to the same period in the year before, while residential distribution sales nosedived 44.3 per cent. Book printing sales were pleasingly up 13.7 per cent.

Last week, with the ink barely dry on a one-week-old deal with the Australian Manufacturing Workers Union to reduce redundancy pay through the creation of a new Enterprise Bargaining Agreement, it set in train its survival plan.

The plan is outlined in a 600-plus page document that was submitted to the ASX, which Ovato CEO Kevin Slaven said is the only way to ensure the company’s survival and the continued employment of 900 staff.

Included in the plan is closing down the company’s Clayton print site with 300 staff from around the country to be made redundant before Christmas.

The company is now working to have this Scheme of Arrangement approved in the NSW Supreme Court. Approval will allow it to restructure the company and create an arrangement with creditors that they are paid $0.50 for each dollar owed.

The creditors involved in the scheme, believed to be made up of large overseas suppliers, are due to vote on the Scheme on November 30.

The company is also recapitalising with $35 million being invested into the business by the Hannan family and an entity associated with Mercury Capital – Are Media Pty Ltd.

The restructuring part includes transferring assets and liabilities, with some exceptions, from a host of subsidiary companies to Ovato Ltd.

For the Ovato Print business, its shares in subsidiary companies and liabilities will move across to Ovato Ltd, with the exception of certain redundant plant and equipment; certain redundant employees of Ovato Print, Hannanprint NSW Pty Ltd; Hannanprint Victoria Pty Ltd and Inprint Pty Ltd, as well as $2,030,000 in retained funds.

Included in this is a directive that redundant staff, not being transferred across to Ovato Ltd, will have to apply for their entitlements through the Fair Entitlements Guarantee (FEG).

Unexpected twist

Australian Manufacturers Workers Union assistant national secretary (print and packaging) Lorraine Cassin said she was shocked to learn taxpayers would be footing the redundancy bill, which she said went from $30 million to $18 million due to the reductions included in the new EBA.

The new EBA includes reductions in redundancy pay from an un-capped four weeks pay per year of service, to two weeks capped to 52 weeks, Cassin said.

“This has been planned out to the max,” Cassin told Sprinter.

“They were going to terminate the agreement because they couldn’t afford the redundancy provisions, but now we find out that the plan was for the taxpayer to pay the redundancy provisions.

“They have got the main Ovato company and they are going to the Supreme Court to ask to approve them to move the 300 employees into those four companies and then liquidate those companies.

“So basically, move it and construct it so they have to be paid out of FEGs and then continue on with the $40 million investment they have just got – all of that goes into Ovato and they keep moving on for the sustainability of the ongoing business.”

Sad day for employees

Cassin said the sad thing for the employees is that they voted to accept the new EBA as they believed this would mean they would receive their money before Christmas and then be able to move on.

But she said it could take four months for them to have access to their entitlements, especially given the Christmas break closures.

“We had no idea they were even considering FEGs. They just kept saying they could not afford one more cent. We had to fight to get the shift loadings on,” Cassin said.

“They weren’t even going to pay those so we had to fight to get that and then, they said that’s it – there is no more money. So why would they say that when they weren’t going to pay it? They lied, quite frankly.”

Cassin has also questioned why the money being invested into the business by the Hannans and Mercury Capital is not being used to foot the redundancy bill.

“They do have the money in the business to pay the redundancies, but they are just using the money towards the future,” she said.

“They say this is going to protect everyone in the future but I am not convinced of a word they tell us. They have a grand plan and I have no idea what it has. I have to say my members that are left behind don’t have much security left in this company anymore.”

But Ovato CEO Kevin Slaven said the alternative would have been much worse for staff.

“The alternative to this restructure  is all 1300 Ovato employees losing their jobs,” Slaven said.

“That is clear from the independent expert’s report which is available for everyone read. I am sure the alternative is not one that the union would prefer.

“The entitlements from FEGS  are exactly the same as those that in the Enterprise Agreement negotiated this year. The liquidator will help employees access FEGS as soon as possible.”

Slaven says once process done, the company can look to a viable and sustainable future

In announcing the plan last week, Slaven said the arrangement entered into with the AMWU had made the recapitalisation plan possible.

“I am pleased that with the support of the AMWU and our staff we have been able to enter into an amended Enterprise Bargaining Agreement with new terms which has made our recapitalisation plan possible. This could also only have been achieved with the support during the Pandemic of the Australian government through the JobKeeper scheme,” Slaven said.

“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.

“The proposed recapitalisation and restructure will also support the security of 900 jobs across the manufacturing sector in Australia and New Zealand.

“We look forward to progressing the Schemes and proposed rights issue over the next few weeks securing the continuation of our proud history of providing innovative solutions for our clients and turning their audiences into customers.”

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