Ovato posts $67.1m net loss, print now the ‘singular focus’

Ovato has posted its full year results for 2021 with the company that has undergone significant transformation during the year posting a net loss of $67.1 million, up from last year’s $108.8m loss, in a year where sales revenue declined by $96.6m to $442.7m.

The company said Ovato’s Australian operations accounted for a $90.5m reduction in annual revenue, while revenue at Ovato NZ was down $6m with lower print and residential distribution volumes noted across the board.

It also reported that FY21 EBITDA (before significant items) was at $31.1m, 4.2% down year on year.

Ovato said while it benefited from government wage subsidies and very tight cost controls the company was unable to fully offset the adverse impact from lower revenues.

In Australia, the revenue hit was largely from a $67.1m reduction in print sales, made up by $49.5m reductions in print catalogues and $19.5m reductions in print magazines and newspapers.

Tier 1 food and beverage catalogue sales were down in HI but sales in H2 were broadly in line with last year, the company said.

Non-food and beverage catalogues were down 38% or $21.7m on lower existing customer volumes as a result of very slow COVID-19 retail conditions.

Ovato booked significant items in FY21 of $20.4m pre-tax down $52.1m on the pcp. Cash significant items at $17.4m included employee related costs, the Victorian heatset print site closure costs, legal, professional fees and finance costs.

Ovato CEO James Hannan said revenue was slower to recover than expected in the year and pointed to further restructuring.

“Throughout the course of the year we have undertaken significant work to align our fixed cost base to the lower revenues and further restructuring to both our manufacturing and support infrastructure is required into FY22, which is already underway,” Hannan said.

“Despite the negative variance in revenue year on year, it is encouraging to see the impacts from an extremely challenging year soften at the EBITDA level and to see significant improvements to Ovato’s EBIT and net loss figure.”

During the final quarter of FY21, Ovato proceeded with the sale of its retail distribution businesses in Australia and New Zealand for a combined headline price of $15m to Are Media.

It also sold its marketing services business to Ballygriffin Holdings, a company owned by the Hannan family for $9m.

“These asset sales have had a significantly positive impact on Ovato’s balance sheet of approximately $48m by the end of August 2021, with an improvement in working capital of $24m together with sales proceeds of $24m. As a consequence, Ovato is in a much stronger financial position to complete further restructuring and to respond to any ongoing impacts of the COVID-19 pandemic,” Hannan said.

The company has also now closed its residential letterbox distribution business marking further savings.

“FY21 was truly transformational. We have and continue to make the hard decisions necessary to ensure a sustainable future for the Ovato business. Our new management team understands the challenge we have ahead of us and are committed to the effort and excellence it will require.

“We are returning our business to a singular focus and to the thing we do best – print production. When we hold a shared and focussed vision, success will follow.”

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