The fall-out from the strategy behind Ovato’s making over 300 people redundant and forcing them onto FEG is escalating. The ire is not against the redundancies themselves, but the way in which Ovato went about luring staff into accepting reduced pay and entitlements and then switching to liquidating the four subsidiary companies, leaving them with virtually no assets.
|One of Ovato's mighty manroland heatset web presses|
The four companies, Ovato Print Pty Ltd, Hannanprint NSW Pty Ltd, Hannanprint Victoria Pty Ltd and Inprint Pty Ltd., are currently being liquidated by Marcus Ayres and Stephen Parbery of Duff & Phelps and, in order for redundant employees to access FEG, they are required to provide a letter and information of the final pay and entitlements of the 300+ people applying for FEG.
However, at least one former employee says this is not working:
One says: “I haven't been issued with my final pay for FEGS and probably won't get it until April. A handful of us are disputing the payout figures. I can't even get information from my employee file regarding training received, dates etc. so I am not expecting a detailed breakdown, without a fight, to get that information.”
A 'please explain'
What ex-Ovato employees can’t understand is what happened to the money that was supposed to be there to pay redundancies, pay, leave and long service leave accruals and superannuation. “It’s like an asset strip,” said one. Another has sent a notice(see right>) pinned to Ovato’s Clayton notice board, reproduced here, with partial redaction. Another compared the actions to phoenixing, but where the ‘mother’ company carries on the business, with the same directors, rather than starting up again with a different name – a newco. Yet another said that, had the four companies been acquired and then stripped of assets, it would be regarded as ‘corporate raiding’ – but that the raiding has been done by the company itself.
JobKeeper $24 million wasted?
The amount of Government money received as Jobkeeper has also been questioned, since it did not actually keep jobs. In Ovato’s 2020 Annual Report, Kevin Slaven, CEO, says:
“The support of government has been essential in delivering an effective balance between the immediate priority of public health outcomes and the requirement to maintain the economy. JobKeeper has allowed us to keep a relationship with workers who have been stood down and provided a stabilising effect for the broader business in its role as a wage subsidy.”
In this same report, Ovato received $12.17 million in ‘Government Grants’ (Jobkeeper) to end of June 2020. Assuming pro-rata for July-December, the total could be around $24 million to December 24th.
This tends to downplay Ovato Chairman Michael Hannan’s claim that the printing industry does not get government support, since, with the approx. $17 million of eventual FEG funds, Ovato will have received $41 million in government support over about twelve months.
ACTU President Michele O’Neil goes further, calling for Attorney General and Industrial Relations Minister Christian Porter to intervene, saying:
“Workers have carried this country through the pandemic. Ovato has obligations to its employees and those should be honoured. “This is a clear case of a business trying to use accounting tricks to avoid paying what is owed to its workers, and the fact that this came over Christmas after an incredibly trying year is incredibly cruel. We stand with these workers and the AMWU and call on Minister Porter to do the right thing and protect the rights of these workers.”
In most liquidations, the main issue comes down to lack of money. While the four liquidated companies have virtually zero assets (the $2 million left in them will no doubt be swallowed up in compliance fees and Duff & Phelps fees); the mothership, ASX-listed Ovato, and its connections, are not without funds. About $40 million has been found, courtesy of the Hannan family and Mercury Capital’s ARE Media, as an injection to implement the restructure plan. Would another $17 million have made any difference?
Corporate restructures happen and they are rarely painless. For Ovato to ‘right-size’ itself to meet current market conditions and the softening demand for its kind of printing, is understandable. What remains hard to fathom – or digest – is the methodology, as our previous report examined.
In the Sign and Display print sector, there are at least three examples of companies restructuring with far more satisfactory outcomes: Fairview Group, Sydney Signs and Signex spring to mind. Even when Salmat self-liquidated in August 2020, all debts were paid.
As the old song goes: “It ain’t what you do, it’s the way that you do it.”
Footnote: Ovato's Chief Financial Officer quits
In an announcement to the ASX, Kevin Slaven, CEO states:
"As advised at the AGM in November, our long-time CFO Geoff Stephenson has decided to seek new opportunities. Spending more than a decade with the business, he has been instrumental in helping navigate the company through many challenges and has been a key support to a number of CEO’s. On behalf of the Ovato Board and management team and all our colleagues, I thank Geoff for his many years of service in the role and wish him well in his future endeavours. I am pleased to advise that Andrew Stedwell has been appointed to the role of Chief Financial Officer commencing 1 February. Andrew has been working in the business for the last couple of months to ensure a seamless handover into the role."
Mr Stephenson's total FY 2020 remuneration was $858,757 (source: Ovato 2020 Annual Report) including bonuses. His contract of employment calls for a minimum 3 months notice. It remains uncertain what entitlements he will receive other than Ovato's statement in its Annual Report that "Ovato does not (subject to limited exceptions) include termination or severance payments for Ovato executives in their employment contracts other than agreed notice provisions and the application of the Ovato redundancy policy (where applicable)."
If indeed Ovato's redundancy policy was applicable, we send commiserations to Mr Stephenson.