OVATO IN ADMIN – PRINT21 EXCLUSIVE ANALYSIS

While still a shock for the local print industry, Ovato going into administration can’t be too much of a surprise, given its travails over recent years. Since the PMP IPMG merger the company has lost $430m, to which will be added potential losses in the year just ended.

At the end of December Ovato reported cash levels of $9.3m, compared to debt of $49.4m. And anyone who has been looking at the quarterly reports it has been issuing since its restructure 18 months ago will have noted its precarious cash-flow figures, giving the impression it was likely only a matter of time before the directors pulled the plug. 

Then just last month as the ACCC whisked through the sale of Griffin Press to Opus in eyebrow-raising double-quick time it noted the reason was “the likely imminent insolvency of Ovato if the proposed transaction did not proceed”.

The past two years have seen the directors do all they can to sustain the business, taking some fairly drastic actions in their attempts to turn the tide. They closed Clayton, they closed New Zealand, they sold off everything they could, off-loading what was Gordon & Gotch, and Griffin Press, and all their marketing and associated businesses. They attracted investors, with the biggest customer Are Media (formerly Bauer & ACP) taking a major stake, and Hong Kong based Left Field Print Group, which owns Opus, also becoming a major shareholder with 14.7 per cent of the company.

Its restructure 18 months ago saw it receive a $40m cash injection, and receive support from suppliers who took a 50 per cent haircut on their outstanding invoices. However since then much supply has been COD, which hasn't helped the Ovato cashflow. Senior execs also departed the company, Craig Dunsford and CEO Kevin Slaven among them.

In the end though none of it was enough, and what just five years ago was the billion dollar behemoth of ANZ print is now on the floor, and at the mercy of the administrators. Its figures are stark. Its current market capitalisation of $10.8m is less than the value of one of its Warwick Farm presses.

Its share price has been mostly trending downwards ever since its launch in 1992, and has been on the floor for too long. The GFC saw its price tumble by 80 per cent. It clawed its way back to double its GFC floor five years ago, just before CEO Peter George left, but virtually on the day he departed it dropped by half again. In the last 12 months alone it has lost 70 per cent of what little remained.

Revenue in the year to June 2017 was $1bn, but a year later in 2018 was $734m, and by last year it was $443m, the year just ended will likely see it struggle to reach more than $300m. Losses have been large and growing, in 2017 they were a staggering $126m, in 2018 they were in the red to the tune of $44m, then $84m a year later, followed by $109m to June 2020, and $67m last year. The last five years have seen losses adding up to a whopping $430m.

That is an awful lot of red ink, proving unsustainable. The Hannans are clearly not prepared to countenance any more.