OVATO IN ADMINISTRATION
In a tough day for the print industry, heatset giant Ovato is in voluntary administration, with the directors asking FTI Consulting to take over the troubled business from today.
The company says ongoing volatile market conditions, the increased cost of raw materials and legacy cost issues have continued to impact it, “leading to the difficult decision” to appoint administrators.
The administrators intend to run the company on a business-as-usual basis, as they seek the best outcome for creditors. The first creditors' meeting will be in early August, following which the administrators will focus on efforts to recapitalise or sell off the business.
Ovato has been struggling for years; its share price has collapsed, down by 70 per cent this year alone, its revenue has been rapidly diminishing, down by almost a third in the first half of the year, and for the past two years it has been selling off everything it can, including the former Gordon & Gotch distribution business, which went to Are Media, the Griffin Press book business which went to Opus, its Brisbane premises although that was owned by the Hannan family and not Ovato, and all its marketing businesses.
In addition, it closed its Clayton plant last year, and closed its entire New Zealand heatset operation earlier this year. Its new supersite in Warwick Farm with seven heatset webs opened three years ago.
It originally restructured the business 18 months ago, after asking suppliers to take a 50 per cent haircut and getting a $40m cash injection, with $35m underwritten the Hannans and $5m by its major customer and shareholder Are Media (formerly Bauer, formerly ACP).
Ovato actually returned to profit in the first half of this year, on sales that were down to $161m, and a net profit after tax was up by 282 per cent to $17.5m. Revenue fell by $75m or 32 per cent, but the majority of this was due to its sold off businesses, with sales revenue down by 11.6 per cent or $19.9m on the same period last year.
Ovato was a billion dollar printer when it was PMP, but since the merger with the Hannan family’s IPMG it has been hit with a series of body blows. Its share price has plummeted by 99 per cent from $3 five years ago to $0.089 today.
In the last three months, Hong Kong-based Left Field print group has pumped $20m into Ovato, in the form of a $5m loan, taking over a $4.8m mortgage, and buying Griffin for $8.5m. Left Field now owns 14.7 per cent of the company.
Ovato is the conglomeration of three huge print businesses; Hannanprint formed in 1968, which then became part of the Independent Print Media Group (IPMG), still owned by the Hannan family, and PMP, the print business spun out of Rupert Murdoch's empire 30 years ago as he sought cash to fight off creditors. PMP and IPMG merged five years ago, and rebranded as Ovato two years later. James Hannan, son of chairman Michael, took over as CEO last year.