IVE Group forecasts 14% FY revenue boost in latest update

Supply chain disruption, particularly paper supply, continues to be a key focus at IVE Group (ASX: IGL) which recently posted a trading update for the 11 months to May 31, 2022.

The company, Australia’s largest diversified marketing and printing company, has forecast full year revenue will be around $750 million, a 14 per cent increase on last year, with net profit after tax (NPAT) expected to be $33 million.

The underlying EBITDA is expected to be $98 million for the full year 2022, with capital expenditure to be $14.5 million (excluding Lasoo investment of $4 million).

Net debt at 30 June 2022 is expected to be circa $95-100 million. In terms of dividends, IVE says its dividend policy remains unchanged, targeting a fully year payout ratio of 65-75 per cent of NPAT.

In a statement to the ASX, IVE Group executive chairman Geoff Selig said supply chain disruption, primarily around paper supply remains a key focus.

“We continue to build inventory levels to ensure no disruption to customer service levels and to play the business in a strong position to take advantage of growth opportunities,” Selig said.

“Raw material inventory levels are currently 25% higher than June 2021. This level of holding, whilst high by historical standards, is considered appropriate given the scale of the business, current supply chain volatility, and the competitive advantage it potentially delivers.

“We envisage paper inventories will continue to grow over H1 FY23. We continue to work successfully with clients to manage flow through price increases as a result of upward pressure on input costs.”

Active Display Group (ADG) and AFI Branding Solutions (AFI) integration

Selig said the integration of the acquired Active Display Group and AFI Branding Solutions is also continuing to progress well, with full integration tipped for September 2022. This completion is three months later than previously advised “due to weather and COVID driven delays in completion of IVE’s new Braeside facilities”.

ADG and AFI operations across five sites, will end up being fully integrated into IVE’s new Retail Display facilities at Braeside.

Renewed finance facility

Selig said in May 2022, IVE renewed its syndicated senior debt facility for a further term of four years with the maturity date extended to May 2026.

“The renewal process achieved improvements in both the terms and pricing of the facility. These favourable outcomes are reflective of IVE’s ongoing balance sheet strength, earnings quality, and our strong relationship with syndicate members,” Selig said.

The statement says that at the end of May 2022, IVE’s senior syndicated loan facility of $160 million was drawn to $125 million (31 December 2021 – $110 million), with available headroom of $35 million.

“The increase in drawings over the period is primarily the result of the company’s previously communicated decision to increase inventory holdings in response to supply chain volatility to ensure there is no disruption to the business,” Selig said.

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