Ovato, formerly PMP, recorded a 9.2% ($37 million) slump in revenue to $363 million in the first half year, “mostly due to a $31.7 million fall in revenues at Ovato Print Group Australia from lost customers and lower volumes with existing newspaper and magazine customers.” Net loss for the period was $10.9 million.

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Ovato CEO and MD Kevin Slaven told the ASX the newly rebranded company will now close its Moorebank printing plant and consolidate its NSW operation at Warwick Farm.

“We have further analysed our future capacity requirements and have determined that we are able to house all required equipment at one plant in NSW,” he said.

 

“Today, we announce the next stage of our business transformation with the consolidation of our NSW capabilities under one roof at Australia’s largest heat-set printing plant at Warwick Farm. While we recognise there are still challenges ahead to improve returns across the group, we continue to make steady progress and our ongoing initiatives allow us to affirm our medium-term targets.

“Over the balance of the 2019 calendar year, we will relocate the best of our equipment and personnel from Moorebank to consolidate our NSW print operations at Warwick Farm, Ovato’s largest and most modern print facility."

The consolidation of the NSW operations under one roof combined with the installation of the new 80-page press will result in substantially lower manufacturing costs and will further contribute to reducing excess capacity in the market, Slaven said. “Warwick Farm will further enhance its reputation as being the “Super Site” for heat-set printing in Australia and being co-located with letterbox distribution services further enhances the efficiencies for our customers who combine their print and distribution with us.”

According to Ovato, the consolidation of NSW print sites at a cost of a further $30 million over the next 18 months (primarily on redundancies, site works, press relocations & make good) will allow additional annualised savings of $19 million by FY21.

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  Kevin Slaven, CEO Ovato

Slaven warned of further potential disruptions ahead. “We take a cautious stance on the next six month’s macro outlook with potential disruptions from upcoming Federal and NSW State elections and expected continued weakness in real estate markets and consumer confidence. 

“This outlook is reflected in a reduction in H2 forward bookings for newspapers, magazines and non-food & beverage catalogue customers. We will continue to execute our margin improvement strategies and control costs to mitigate the effect of the weaker market conditions.”

There were some hopeful signs in the company’s results. Ovato Print Australia improved its EBITDA by 38.7% to $13.2m “It is encouraging to see that our margin improvement strategies, initially focussed at Ovato Print Australia, are having a positive impact,” Slaven said.

 “Ovato Retail Distribution (formerly Gordon & Gotch Australia) also delivered a pleasing improvement in profitability. Lower magazine volumes distributed were offset by an increase in the average sell price, additional cost savings and revenue from new product streams utilising the existing delivery platform to Newsagents.

 “Challenges in maintaining a sustainable delivery network within Ovato Residential Australia (formerly Letterbox Distribution) are being addressed by management in consultation with relevant industry associations and major retailers. 

“Overcapacity in the New Zealand print market has led to intense pricing pressure as contracts have come up for renewal. While we were pleased to see print volumes year on year remain fairly stable, this was outweighed by significantly lower sell prices on contract tenders and higher input prices not fully recouped in a very competitive market. As a result of these factors, profitability fell at Ovato New Zealand by 54% pcp. As market leader we are taking a proactive approach to addressing the overcapacity issue.” Ovato New Zealand EBITDA of $3.5M, was down $4.1M or 53.6% pcp.

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  Ovato's FY19 half year results

No dividend was declared or paid during the half-year ended 31 December 2018.

 

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