IVE Group’s resilience on show with strong FY21 result

IVE Group has posted a strong full year 2021 result with the diversified printing and marketing giant, which celebrates its centenary this year, recording a net profit after tax (excluding JobKeeper) of $19.9 million, up 7.5%, based on net revenue of $656.5 million, down 3.1%.

The company delivered on its earnings guidance reporting a EBITDA of $100.2m (including JobKeeper) or $85.3m without the federal government wage support. NPAT including JobKeeper was $30.2m.

Net revenue was $656.5m, down $20.9m on the pcp, with gross profit increasing 1% to $316m in 2021. EBITDA margin increased from $82.8m to $85.3m for 2021.

As a token of appreciation all of IVE’s 1600 employees have also been gifted 500 shares in the company.

Shareholders will receive a 7 cent dividend, full franked. Net debt has also been reduced by $59.8m to $77.3m with a cash balance as at June 30, 2021 of $107m.

Future growth

IVE also announced it has solid plans for future growth.

It has $30m to $40m set aside to beef up Lasoo, a digital catalogue business it strategically acquired last year, and expand further into fibre-based packaging, either organically or by acquisition, and third party logistics service provision.

The company already produces some fibre-based packaging in Melbourne, but is looking to grow in this area mirroring what it has already done in the sign, display and merchandising space.

IVE Group executive chairman Geoff Selig told Sprinter the previous 12 months, and current conditions with lockdowns, have been challenging but he said the fact the company has earmarked $30 to $40 million for expansion, while also paying down debt, proves its resilience.

“We have paid almost $60 million off our debt and foreshadowed that we have $30 to $40 million in the fuel tank to invest either in our existing businesses like Lasoo, or potentially put the focus on acquisitions,” Selig told Sprinter.

“So whilst we have been impacted because of COVID, we have got a very strong balance sheet and we are ready to invest and grow our earnings.”

IVE Group chief executive officer Matt Aitken told Sprinter fibre-based packaging would benefit the company, and further diversify its offer to customers.

IVE Group CEO Matt Aitken

“We do some fibre-based packaging work today but we certainly think that sector has growth opportunities in it for us and that could be organically by purchasing new equipment and developing our own offer or if an acquisition were to appear we would look at that,” Aitken said.

“We are not trying to compete with Visy or Orora but we are certainly signalling that is quite a natural adjacency for us to continue to expand our offer.”

Aitken said small to medium size packaging businesses would be the most attractive to IVE Group.

“It is probably more the small to medium business that we are looking at where it really enhances what we are doing in the business today and lifts it up to the next level to bring a level of expertise to customers,” Aitken said.

Selig said, “As we come out of COVID we see a number of opportunities in the competitive landscape for us to look for a number of bolt-on acquisitions over the next couple of years. Low risk, low multiples and a nice earnings kicker for the business.”

IVE’s sectors most hit by COVID-19 were retail catalogues, travel and events/exhibitions sectors resulting in 2021 full year revenue losses of $75.6m.

This was offset by a reported $54.7m revenue increase from the full year benefit of the Salmat (residential distribution business) acquisition and part year benefit of the Australian Community Media (ACM) acquisition from November 2020.

The company’s improvement in EBITDA and NPAT margin were attributed to improved gross margin, as well as its demonstrated capacity to flex the cost base in response to the pandemic.

Residential distribution

Aitken said the residential distribution side of the business, the former Salmat, benefited in June, July and August with new customers coming on board following Ovato’s decision to cease residential distribution services.

“We had good success in May, June and July in winning a number of new distribution customers so that has been very good for our distribution business,” Aitken said.

“Ovato chose to close their residential distribution business down and we have transitioned some of those Ovato customers over to IVE so we can continue to provide distribution services to that customer and that was done collaboratively with Ovato.”

Outlook

Selig said it is hard to predict a solid outlook for FY22 but with a number of new high-profile clients onboard and an expansion of utilisation of IVE’s products and services by existing clients the future is looking positive.

In FY21 IVE secured more than $100m (annualised) in contract renewals across a multitude of customers including Woolworths, Westpac, L’Oreal, IAG, Bupa, Toyota, GlaxoSmithKline, Luxottica and Energy Australia.

New business momentum also remains strong with new clients onboarded including Australian Community Media (ACM), Bunnings, Officeworks, Simplot, Colgate, Zip Money and a number of others.

“If we look at FY22 we are not able to provide guidance at this time, but we do point to the resilience of the IVE business over the last 18 months and we would expect that resilience to continue through this current period,” Selig said.

Selig added that with the vaccination roll-out accelerating, he expects to see a bounce in client spend to drive consumer sales post-lockdown.

“We would expect revenue growth across the business over the next 24 months driven by the post lockdown recovery. We’ve come out of COVID in a very strong position, we operate with multiple competitors across the landscape, so we would expect that our market position will improve in some of those key sectors,” he said.

Selig said IVE Group has been employing a diversification strategy for 20 years and it has served the business very well.

“This is not a five-minute roll up, this is a company that has been around for the long term and it is a very deliberate strategy, certainly over the last 20 years, to diversify the offering of the business,” Selig said.

“The result of our long-term strategy of diversification and growth has delivered today what is in our view a highly resilient business which has been demonstrated by our performance and our metrics over the last 18 months.

“From our perspective the strategy we articulated and the course we set 20 years has turned out very well. So, this is really a continuation of our strategy of continuing with the growth opportunities.”

Selig also offered his thanks and appreciation to IVE’s senior management team and employees for the results.

“Given the year of unprecedented volatility and uncertainty, I acknowledge the capacity of our people and business to respond to the pandemic by coming together as one and committing to go above and beyond to service our clients and care for each other,” Selig said.

“The solid financial performance of the business, and our significantly strengthened balance sheet, demonstrate the resilience of the business, and position the Company to deliver strong growth as we emerge from this period of disruption.

“My thanks to our Board, our CEO Matt Aitken for his leadership, and the entire IVE team for their skill and continued commitment over what has been a most challenging year.”

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