Ovato reports $4.4m FY2019 net loss

Ovato chief executive officer Kevin Slaven says the print and distribution giant’s full year results were in line with expectations as the final phase of its Sydney site consolidation is finalised which is expected to generate annual savings of $24m once completed.

A downturn in real estate sales put downward pressure on local newspaper volumes which in turn impacted Ovato with a 9.6 per cent revenue drop in Australia and a 4.8 per cent slide in New Zealand, amounting to an across the board revenue decline of 8.8 per cent to $669.2m.

Ovato NZ EBITDA was down 57 per cent to $4.6m which further impacted the bottom line with the company posting a net loss after significant items of $4.4m.

Slaven told Sprinter the results were very much as the company predicted in the last couple of months when the Hannan family, the original owners of IPMG which merged with PMP in 2017 before the new merged entity rebranded as Ovato earlier in 2019, increased its stake in the listed company to ensure the planned site consolidation in Sydney could be completed before Christmas.

“We continue the journey of getting our manufacturing footprint down to where we need it to be,” Slaven told Sprinter.

“We’ve had another challenging year with publisher volumes particularly newspapers falling but all in all there are a number of positives that have come out.

“We are in the last half year of the disruption of the site consolidation and will have clear air after Christmas once we’ve closed Moorebank and we’ve got the new press up and running so we are in the home stretch.”

While community newspapers have declined 30 per cent year on year, catalogues remain stable and this is the area Ovato is pouring its resources with significant investments made into data which compares consumer purchase behaviour with the geography of the letterbox drop. So far this year four new brands have onboarded with Ovato after seeing the sales data, according to Ovato’s chief innovation and marketing officer Ben Shipley who has been leading the Quantium project.

“The Tier One food and grocery clients have remained stable year on year which is great because that’s pretty much where our strategy is based with those retail clients and the relevant measurement tools that we are putting forward around the data and so on and how effective those catalogues are,” Slaven said.

“We’ve expanded some of that to FMCG clients and online brands like Ebay as well so I love the irony if you like of having online retailers use printed catalogues to drive traffic to their site, it’s fantastic.”

Planning is well in hand for Ovato’s print site at Moorebank to be closed down and merged to with its existing supersite at Warwick Farm which will handle web offset, cut sheet and packaging printing as well as distribution once completed.

Moving the two sites into one is expected to generate $24m a year in savings for the company which will have a big impact on its balance sheet going forward.

A new 80 page Manroland press is set to be in operation from October or November this year and other equipment from Queensland has also been moved into the site.

“Consolidating the sites in NSW gives us annualized savings of about $24 million so that certainly helps with the ongoing run rate of our manufacturing cost base,” Slaven said.

“We will go to the AGM at the end of November and be able to give an update at that time about the new press and the site consolidation and then we will have the half year results next February.”

All in all, catalogues and custom publishing continues to be strong for Ovato.

Slaven says its continued investment in data and the fact it has print and distribution combined onsite sets its apart from its competition and gives it a unique offering.

“We are the only printer that has got distribution as well and we get a lot of our own data through that distribution channel and we overlay that with the information we are getting from Quantium which gives us that unique opportunity to provide the measurement tools that clients want so they can really test the effectiveness of their campaigns at the cash register,” he said.

“It’s a slow burn but it is something that definitely is something that we are very much focused on.”

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