Ovato’s half year 2020 financial results show a A$59m ($60.3m) net loss.
The company puts the slide down to competitive pricing pressures, volume reductions in some retail catalogues, non-recurring costs associated with its NSW site consolidation and a non cash goodwill impairment of A$35.2m stemming from its IPMG merger.
In a statement on the ASX, the company recorded an EBITDA of $13.4m, down 27.9 per cent from the previous corresponding period, a 9.4 per cent dip in sales and a debt of A$90.9m.
Ovato New Zealand sales fell 8.5 per cent to $57.2m.
Kevin Slaven, chief executive officer at Ovato, says, “The competitive landscape has also been challenging, with pricing pressure in recent tender activity and the incurrence of greater than expected disruption costs associated with the NSW site consolidation, while we ensured all client demands were met.”
In December 2019, Ovato officially combined its print and distribution operations in NSW with a 35,000 square metre supersite at Warwick Farm, accommodating seven web presses, including an 80 page manroland Lithoman. It has closed its Moorebank facility. Slaven says, “All make-good costs and redundancies relating to this site closure will be completed before the end of the financial year, enabling the company to return to positive cash flows as we move into FY21.
“The closure of Moorebank will deliver a significant reduction in our underlying manufacturing cost base with annualised savings exceeding $20 million.”
Ovato says it will take a “cautious stance on the short-term macro outlook” which includes growing its retail marketing business; optimising publishing; increasing operational efficiency; and creating a robust distribution platform. It expects soft retail conditions and lower consumer confidence.
Slaven adds, “We will continue to execute our margin improvement strategies and control costs to mitigate the effect of the current market conditions.”
“We remain confident of improved profit margins and positive cash flows as we move towards FY21 through a lower manufacturing cost base and higher margin revenues in our evolving data capabilities.
Ovato has appointed financial advisers to assist in reducing debt levels with initiatives including non-core asset sales, raising equity and other “strategic initiatives”.
