Ovato has announced further company changes with the Ovato Residential Distribution business to close on July 30, 2021 as print volumes for the letterbox market continue to decline.
The announcement comes as the company readies for two Extraordinary General Meetings later this month to decide on the sale of its retail distribution businesses in Australia and New Zealand to Are Media and its marketing services division to a Hannan family business.
In a statement to the Australian Securities Exchange, Ovato CEO James Hannan said costs from redundancy and leasing costs will be recovered well within the current financial year as the company avoids ongoing trading losses in a business where volumes have continued to steeply decline.
“The impact of the COVID-19 pandemic has seen volumes across our Australian residential distribution network fall sharply since early in 2020. While the business is committed to covering this impact, it is now clear that the volume the network requires is some way off and the business can no longer offer this support,” Hannan said.
The company said it continues to offer unparalleled national reach and speed to market via print sites in NSW, Queensland, Western Australia and South Australia.
In an earlier statement, Ovato has also announced it is splitting the sale of its retail distribution business in A/NZ due to timing issues with competition authority clearance in each country.
“Subject to receiving clearance by the ACCC, the parties currently expect to complete the sale of Retail Distribution Australia on 31 July, 2021 and subject to receiving clearance by New Zealand Commerce Commission, Retail Distribution New Zealand on by 30 August 2021 or as soon as possible thereafter,” the Ovato statement to the ASX read.
Under this arrangement the sale price will also be split.
The Australian retail distribution arm will be sold for $10 million with the New Zealand retail distribution business to be sold for $5 million.
The Real Media Collective, an industry association for the paper, print, publishing and distribution sectors, has offered its support to Ovato at this time.
“TRMC is aware Ovato has released an announcement yesterday, that as at the end of this month they will no longer offer Residential Distribution services across their business,” The Real Media Collective CEO Kellie Northwood said.
“This is part of a committed focus of Ovato which was communicated by their new CEO and Managing Director, James Hannan, last month. Ovato is right-sizing its business and maintaining a laser focus across all operations to build a strong and profitable print group.
“We provide all the support we can on this journey, our industry needs healthy and performing companies to offer stability. Whatever support the industry association can offer through this process we will provide.”
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