ASX-listed IVE Group reported 2023 revenue of $967.4 million and said it was proceeding ahead of schedule with integration of assets acquired from former competitor Ovato. IVE also flagged plans for a “modest beachhead acquisition” in the packaging market.
"Strong financial performance": IVE CEO Matt Aitken.“In addition to delivering a strong financial performance, the Group acquired selected assets of major competitor Ovato, successfully launched our new e-Commerce marketplace Lasoo, and executed a 7-year agreement with leading global renewable energy company, Iberdrola,” said IVE Group CEO Matt Aitken.
“The Ovato integration has proceeded smoothly with all Ovato equipment now expected to be installed and operational in IVE sites by March 2024, three months ahead of the previously advised timetable. Our focus in the coming 12 months will be on driving further organic growth and operational efficiency, and successfully executing the final phase of the Ovato integration.”
Executive chairman Geoff Selig added: “The Board is pleased the Group remains in a solid financial position with our net debt at 30 June 2023 sitting below our target level. Combined with positive cash flows, the successful capital raising in October of last year, a $30m increase in our working capital facility, and establishment of a new $40m acquisition facility, the Group is well placed to execute on a range of strategic initiatives over the period ahead.”
IVE Group said: “The result was underpinned by strong organic growth coupled with a maiden contribution from Ovato, partially offset by materially higher input and finance costs. Organic revenue growth was broad-based and reflects the Group’s leading industry vertical positioning, tier-1 clientele and diversified revenue base.”
Financial results for the Year Ending 30 June 2023
- Revenue $967.4m, up 27.5% from $759.0m pcp
- EBITDA $119.0m, up 23.1% from $96.6m pcp
- NPAT $39.7m, up 19.8% from $33.1m pcp
- EPS 26.4¢ps, up 14.5% from 23.1¢ps pcp
- ROFE improved further to 24.7% from 21.3% pcp
- Operating cash conversion to EBITDA 65.7%
- Cash on hand $44.9m
- Net debt $124.2m, up from $76.8m at 30 June 2022, primarily reflecting the Ovato acquisition
- Fully franked final dividend of 8.5 ¢ps, up 6.3% from 8.0¢ps pcp
Ovato - integration ahead of schedule:
The acquisition is now expected to deliver slightly reduced financial metrics including revenue of around $145m, EBITDA of around $25m and NPAT of around $13m (compared with the original transaction estimates of $160m, $28m and $15m respectively).
The expedited integration timetable will result in reduced operational risk and accelerated synergy emergence, however, the incremental financial impact in FY24 will be modest with the full integration synergies unable to be realised until the end of FY24 when significant Warwick Farm site costs (primarily related to the $4m lease expiry) are exited and final production efficiencies captured.
Lasoo – performing strongly after successful launch
Following its successful launch in October 2022, the new Lasoo platform continues to show strong consecutive month-on-month growth across all relevant metrics.
Key financial metrics (monitored daily) including unique monthly users, conversion rate, average basket size, gross transaction value (GTV) and commission rates are tracking broadly in accordance with expectations.
Activity levels remain strong with more than 126 fully integrated retailers operating on the platform (compared with only 28 live prior to launch) underpinning a broad and deep product/category offering.
Packaging update
During 2022, the Group worked closely with an expert advisory firm to complete an in-depth analysis of the Australian packaging market with a view to further developing and refining plans for a more aggressive move into the packaging sector.
The analysis identified the higher margin, shorter run, folding cartons segment and the primary (food) packaging focused flexibles segment as the areas of most interest.
Due to similarities with many of the Group’s existing businesses and its aligned ESG credentials, the ~$700m fibre-based folding carton segment is IVE’s initial and primary area of focus.
While optimistic of advancing IVE’s packaging strategy in FY24 via the completion of a modest beachhead acquisition, we remain prudent and disciplined with respect to asset selection and purchase price.
FY24 outlook and guidance
Following two consecutive years of growth on all key financial metrics (EBITDA, NPAT and EPS), the Group is well placed to deliver healthy returns to shareholders over the year ahead. Notwithstanding prevailing economic uncertainty, we expect the core fundamentals of IVE will once again underpin our financial performance and further strengthen our market position(s).
Revenues expected to increase in FY24 with growth forecast across all parts of the business, except for web offset printing (catalogues and publications) and household distribution, where a decline of 3-5% is expected over the year ahead as a result of the following factors:
- Decision to cease production in WA;
- Closure/failure of customer businesses;
- Closure of customer publications; and
- Impact of commercial repricing of Ovato and IVE customers as a result of meaningful increases in paper prices.
