Ovato recorded a net loss of $9.7 million for the six months to 31 December 2020, with sales falling by 28.2% to $236.2M compared to the corresponding six month period, which was prior to the impact of the COVID-19 pandemic. "Heatset catalogue printing and residential distribution volumes are not returning as quickly as expected due to the lingering impacts of COVID-19."
Ovato’s statutory half year FY21 EBITDA before significant items was $22.3 million, down $2.7m or 10.7% pcp. It included $18.3m of Australian JobKeeper income and $1.6M of New Zealand Wage Subsidy income.
“While the operating performance of Retail Distribution and Book Printing improved and Marketing Services was steady during this period, the Print and Residential Distribution businesses were severally impacted by the pandemic resulting in the need to undertake the restructure and recapitalisation of the Ovato Group during the course of the first half of FY21,” said Ovato CEO Kevin Slaven.
Ovato last year announced a restructure that led to 300 redundancies, the closure of its Clayton site in Victoria, and a $40m rights issue.
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| "Ovato has been able to reset": Kevin Slaven, CEO Ovato |
Slaven told the ASX that the restructure and recapitalisation involved:
"Renegotiation of the Print Australia Enterprise Agreement with reduced redundancy scales and more flexible work practices.
Reduction of the $40M corporate bond to $15M with note holders consenting to the conversion of the $15M into equity by a further issue of shares in Ovato (subject to existing shareholder approval).
A Court approved Creditors’ and Members’ Scheme of Arrangement resulting in certain debt being forgiven and the liquidation of certain companies within the Group allowing the closure of the Clayton plant.
Negotiation with landlords allowing the termination and re-establishment of terms for certain onerous property leases and deferral of equipment financing loans. Establishment of a new $17M secured debt facility to cash back the existing bank guarantee facility.
Raising of $40M in new equity.
“As a result of the restructure and recapitalisation, Ovato has been able to reset its manufacturing and fixed cost base to better reflect expected future volumes and de-leverage its balance sheet with net debt at 31 December 2020 being $34.7M4 (down from $72.9M4 at June 2020 and $90.9M4 at December 2019),” he said. “Cash and equivalents as at 31st December were $39.0M.”
Outlook
In a company statement, Ovato said: “The restructure has reset our balance sheet and allowed us to reduce our manufacturing footprint and fixed cost base to better match future demand. Our new Ovato Print Australia Enterprise Agreement allows us to be more flexible in managing our workforce and to affordably adapt to future changing demand.
We are evolving other parts of the business to take advantage of growth areas that sit well within our existing infrastructure and which do not require material capital investment.
Books, packaging, retail distribution and marketing services are seeing increased 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-$35M.
Guidance for fiscal 2022 will be provided at the AGM in November 2021.”
