Ovato revenues down 28.2% in COVID hit half

One of Australia’s largest print, marketing and distribution companies, Ovato, has posted a $9.7 million net loss for the first half of 2021, compared to a $58.3m loss for the prior corresponding period.

Sales revenue was down 28.2 per cent, or $92.8m, to $236.2m while EBITDA before significant items was at $22.3m, compared to $25m in the period prior.

This EBITDA figure included $18.3m in JobKeeper payments in Australia and $1.6m in wage subsidies from New Zealand.

Ovato CEO Kevin Slaven said: “To put this in context, sales in the 8 months to February 2020 (pre COVID-19) were down 9.3 per cent pcp and at the peak of COVID-19 in the month of April 2020 sales were down 57.9 per cent pcp.”

The company reports the Retail Distribution and Book Printing divisions have improved with Marketing Services remaining steady.

But the company says the Print and Residential Distribution businesses were impacted heavily by the pandemic resulting in the need to undertake a restructure and recapitalisation strategy during the first half of 2021.

This process included gaining court and creditor approval to forgive $11m debts, liquidate certain companies and close down its Melbourne manufacturing site in Clayton, Victoria.

Slaven says with that process now in place, Ovato has been able to “reset its manufacturing and fixed cost base to better reflect expected future volumes and de-leverage its balance sheet”.

It also included raising $40 million in new equity which has been used to pay trade creditors, transaction fees, repay the $7m ANZ overdraft facility and improve liquidity.

“Following the schemes of arrangement, the company has made payments as required to the scheme administrator and is re-establishing trade terms with its key suppliers to the print business,” Slaven said.

Net debt as at 31 December 2020 was $34.7m, down from $72.9m at June 2020 and $90.4m at December 2019.

Cash and equivalents as at December 31 were $39m.

Fiscal outlook

Slaven says the restructure has reset the balance sheet and allowed the business to reduce its manufacturing footprint and fixed cost base to better match future demand.

He says books, packaging, retail distribution and marketing services are seeing increase opportunities whereas heatset catalogue printing and residential distribution volumes are not returning as quickly as expected due to the lingering impacts of COVID-19.

“It is expected that FY21 EBITDA before significant items will be at or about the lower end of the previous provided guidance range of $31m to $35m,” he said.

Ovato says guidance for fiscal 2022 will be provided at the AGM in November 2021.

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