Ovato in red on tough newspapers, NZ and retail

Ovato slipped back into the red in the 2019 financial year, as soft conditions in retail, the exit of real estate from suburban newspapers, and a damaging price war in New Zealand saw sales fall by 8.8 per cent.

The company achieved an EBITDA of $30.8m, down by a quarter on last year, on sales dropping to $669.2m, some $64.7m less than 2018.

Last year's razor thin net profit of $1.1m turned to $4.4m net loss. Significant items of $79.9m saw the net loss reach $84.3m, compared to last year's net loss with significant items of $43.8m.

Speaking to Print21 this morning Ovato CEO Kevin Slaven said, “The results are as we anticipated a few months ago. There are plenty of positive signs for Ovato going forward. Retail catalogues for grocery, food, beverage are travelling well, and that is where our strategy is focused.”

Slaven said the collapse in the newspaper real estate business had hit paginations and circulations. The company also said the print sharing between Nine and News Corp had hit its volumes.

On magazines he told Print21, “The weekly consumer magazines fell in line with expectations. However custom publishing is on the rise. Credit to the publishers who are reinventing themselves with branded products.” Year-on-year Australian newspaper and magazine print revenues were down 35 per cent and 16 per cent respectively for Ovato.

Ovato is now in the final stages of consolidating its NSW operations into its super-site at Warwick Farm, which will result in the closure of Moorebank. Slaven said, “Everything is on track for a complete transition by the end of the year, with the new press, new equipment, and one integrated site which will handle everything, all under one roof.”

The Australian arm of Ovato saw a 9.6 per cent loss in revenue, down by $59m compared to last year to to $554.9 from $613.9m. Ovato Australia EBITDA $26.3m was down $3.7m, with EBITDA/sales ratio from 4.9 per cent to 4.7 per cent.

The New Zealand business saw a 5.8 per cent slip in sales to $114.3m Ovato NZ EBITDA of $4.6m was down 57 per cent, the result of a ferocious price war going on there, with EBITDA/sales ratio from 8.8 per cent to 4 per cent.

The company said advancements in marketing services profitability and the impact of the reducing cost base was offset by reduced print and distribution revenues, and the inefficiencies associated with the disruption surrounding the NSW site consolidation project.

Looking to the current year Slaven said, “The first half of this year will see Warwick Farm become fully operational, with all the efficiencies that will bring. The second half is looking positive.

“We remain confident of improved profit margins and positive cash flows as we move towards FY21 through a lower manufacturing cost base, and higher margin revenues in our evolving marketing services products to offset the continued reduction in publishing print revenues.” The company expects a $24m a year saving through Warwick Farm.

Slaven also pointed to the success of the company's data insights programme for retailers, online retailers and FMCG clients. He said, “We are gaining traction. It enables retailers to see measure the performance of their catalogues.”