Australia’s biggest printer Ovato, formerly PMP, went into a trading halt on Monday as it launched a $15.5 million equity raising to strengthen its balance sheet and accelerate work on the Warwick Farm ‘Super Site’ in Sydney. The company confirmed early on Wednesday that its shares were expected to be back on the market at the opening after institutional investors raised $11m of the offer and retail investors took up $4.5m.

 

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Ovato was offering one new share for every 2.3 already owned at 7¢ a share. The Hannan family, which owns 40% of the business, said it would buy any rights not taken up by other investors.

Ovato told the ASX on Wednesday: 

Take up by eligible institutional shareholders in the Institutional Entitlement Offer was approximately 59%. The Hannan Family continue to support the Company by taking up their pro-rata entitlements under the Institutional Entitlement Offer and will be subscribing for any Shares which were not taken up by existing shareholders in the Entitlement Offer or not subscribed for by existing and new investors in the institutional offer shortfall bookbuild.

Ovato issued an earnings update on Monday which said revenues for its Print Australia business had been “softer than expected,” with 2H FY19 expected to be down about 12% on FY18, due to:

A fall in newspaper volumes at a greater pace than expected, following masthead closures and move to cold-set printing by publishers;

- Increased competition for Ovato’s publishing and retail customers (following printing alignment between Fairfax and News Corp);

- Softer retail conditions and temporary reduction in activity associated with the recent NSW State and Federal elections which has led to lower than expected uncontracted new business;

- Ovato NZ revenues lower than expected due to industry overcapacity and continued price led pursuit of market share. 

Ovato said that after facing “challenging industry headwinds,” it expected $30 million to $33 million EBITDA in the 2019 financial year, a decrease of $7m on the previous guidance of $37 million to $40 million.

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  photo: Ovato

 The company is now looking to its new Warwick Farm ‘Super Site’ in Sydney – “Australia’s largest fully integrated heat set web, sheet fed and digital print & packaging facility with co-located distribution facilities” - to deliver significant savings over the next three years:

NSW SITE CONSOLIDATION

- Estimated site consolidation total cash spend of approximately $50M between FY19-FY21

- Cash spend includes purchase and installation of new 80pp cost effective Press at Warwick Farm, redundancies, site works, make good and press relocations (financing of press largely funded through ECA loan with Commerzbank)

- Total annualised savings of approximately $24M from FY21 ($4M in FY19, $14M in FY20 and $6M in FY21)

As revealed in November 2018, Australasia's largest commercial printing company PMP announced it would change its name to Ovato – from the word Ovation - after a turbulent year in which PMP’s results fell “very significantly short of original expectations."

 

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