Weeks after announcing the sale of its Retail Distribution & Marketing units, ASX-listed print company Ovato Limited is closing its Residential Distribution business after a sharp decline in volumes. “This step allows us to further focus on our core business of Print.”
Ovato’s Residential Distribution business in Australia will cease operating by 30 July 2021, the company told the ASX.
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| 'Sharp fall in volumes': Ovato CEO & MD James Hannan |
“The impact of the COVID-19 pandemic has seen volumes across our Australian residential distribution network fall sharply since early in 2020,” said James Hannan, Ovato’s CEO and managing director. “While the business 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.”
Ovato said: “The closure of the business will predominantly incur redundancy and leasing costs, all of which 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.
“Ovato continues to provide unparalleled national reach and speed to market via our Print sites in NSW, QLD, WA and SA. This step allows us to further focus on our core business of Print – something we are deeply committed to.”
Update on sale of Retail Distribition units
The company also announced that in order to avoid delays in competition clearance in New Zealand, it will now complete separate sales of its Retail Distribution Australia and Retail Distribution New Zealand businesses to Are Media, a deal announced last month.
“Receiving competition clearance in New Zealand is likely to take longer than that of receiving clearance in Australia,” Ovato said. “Rather than delay the completion of the Transaction, the parties are proposing that the sale and purchase of each of Retail Distribution Australia and Retail Distribution New Zealand be completed separately.
“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 headline purchase price of A$15 million will be split with A$10.0 million allocated to Retail Distribution Australia and A$5.0 million to Retail Distribution New Zealand. The acceptance of the A$27 million negative working capital position will be split with A$22.5 million allocated to Retail Distribution Australia and $4.5 million to Retail Distribution New Zealand.
“The amount borrowed by Ovato from Are Media Holdco, an associate of Are Media, under the loan agreement between Ovato, Ovato NZ Limited and Are Media Holdco dated 17 May 2021, will be repaid on completion of the sale of Retail Distribution Australia. As at the date of this announcement, the amount drawn down by Ovato under the Loan Agreement is $2.3 million.”
Ovato posted a Covid-related net loss of $108m for 2020 before announcing plans to cut 300 jobs and raise $40m in a restructure.
