IGL - IVE Group

[Dona Ferentes]

Goodness, no thread for this one ! Unloved by many

IVE Group Limited (IGL) is into Conceptual and creative design across print, mobile and interactive media; Printing of catalogues, magazines, marketing and corporate communications materials and stationery; Manufacturing of point of sale display material and large format banners for retail applications; Personalised communications including marketing automation, marketing mail, publication mail, eCommunications, multi-channel solutions and call centre services; Data analytics, customer experience strategy, CRM; Manufacturing of point of sale display material and large format banners for retail applications; and Outsourced communications solutions for large organisations including development of customised multi-channel management models covering creative and digital services, supply chain optimisation, inventory management, warehousing and logistics.

Listed for more than six years. Market cap $330 million. Just raised capital. $18 million +SPP, at $2.25 a share, to make a purchase.

> Ovato has been a large print producer of catalogues and publications in Australia for many years and was the largest competitor to IVE in this important sector
> As part of a strategy to focus on its core capability, over the last two years Ovato has divested of, or closed, many businesses including magazine distribution (Gordon and Gotch), book printing (Griffin), letterbox distribution, marketing services, Victorian HSWO plant, and its NZ businesses
> This rationalisation strategy resulted in Ovato returning to its core capability of long-run catalogue and publication production, with the business operating from three sites: Warwick Farm (Sydney) as major production hub; Geebung (Brisbane); and Bibra Lake (Perth).

 

[Dona Ferentes]

Just a normal biz ... but is the sector is choppy (some may say; in terminal decline). So it's all a bit problematic.

Modest metrics, PE under 10, dividends usually. Shareholders are spread, early money trimming ( Selig Family) and now SOL on board at 5%.

 

[Dona Ferentes]

Goodness, no thread for this one ! Unloved by many.

an interview. (DNH)
.
IVE Group Limited (ASX:IGL) Managing Director Matt Aitken discusses the company's activities over the past year, touching on key metrics and projects, costs, integration of Ovato, sustainability initiatives, acquisitions of JacPak and Elastic Group, and Lasoo's performance.

Paul Sanger: I'm Paul Sanger for the Finance News Network, and today I'm talking with IVE Group (ASX:IGL). IVE Group, with a market cap of $350m, is Australia's largest diversified marketing communications business. IVE brings together the capabilities, specialists and technology to make customer connections seamless — or, as IVE puts it, it manages communications and marketing from idea to execution. We have with us today Matt Aitken, the Managing Director. Matt, welcome to the network.

Matt Aitken: Thanks, Paul. Thank you.

Paul Sanger: Good to have you here. Now, Matt, congratulations on a really strong FY24 performance. All key profit metrics are up, with solid margin expansion. What were the primary drivers behind this uplift, and how do you see these trends continuing into FY25?

Matt Aitken: Yeah, thanks, Paul. We're really pleased with the FY24 results. It's a very solid result for the group. You know, revenue was pretty stable at almost a billion dollars, but we saw good margin expansion, as you've said, across our EBITDA line at $128m and our NPAT line at $43m. And a lot of what ultimately was driving that too was the increase in our material gross margins. So, in our profit margins, as we climb back towards pre-COVID levels in that space, as we start to see stability in our cost of goods sold and our raw materials and in our supply chains and we create some of that margin expansion. We also concluded a number of key projects through the year, which we'll talk about soon, no doubt, but the Ovato integration concluding just prior to Christmas was a big part of addressing some of that margin uplift.

Paul Sanger: Yeah. And you mentioned that while NPAT and margins were higher, they were impacted by increased net finance costs. Can you elaborate on the factors contributing to these higher costs and how the company plans to manage them going forward?

Matt Aitken: Yeah, I think that's really just calling out that, relative to PCP, our net finance costs were higher as a result of increased interest rates from a senior debt perspective. But, conversely, the company's done a fantastic job at strengthening the balance sheet through the year. Our operating cash flow was 114 per cent and our net debt now is 1.3 times pre-AASB 16 or one times post-AASB 16. So, the balance sheet is in an extremely strong position, but that call out in increased finance costs was more so relative to PCP....

Paul Sanger: Yeah, you've navigated those high interest environment very, very well and hopefully, maybe, as early as December maybe…
Matt Aitken: There's right.
Paul Sanger: ..interest rates will come down and it'll be plain sailing from there on.

Matt Aitken: That would be great.

Paul Sanger: You mentioned Ovato. Ovato's integration is expected to realise full-year run-rate synergies by FY25. Could you share more details on how this integration is progressing and what challenges, if any, you anticipate reaching these targets?

Matt Aitken: Yeah, Paul, we concluded the integration six months ahead of schedule. So, just prior to Christmas in FY24, that integration was complete relative to the original plans that we set. Very comfortable with the last set of numbers that we called out on that acquisition. So, revenue of $145m, EBITDA of $25m and NPAT of $13m. And we've got that full run rate of those synergies and of those revenues as we head into FY25. We've got a clear line of sight in terms of what builds out our FY25 guidance number.

Paul Sanger: Fantastic. And sustainability is a growing concern for businesses and consumers alike. Can you provide some insights into IVE Group's ongoing sustainability initiatives and how they align with the company's long-term strategy?

Matt Aitken: Yeah, we're on the third year now of our ESG journey and our sustainability plan. And, through that time, Paul, we've measured our Scope 1, 2, and 3 emissions. Importantly, through FY24, we've taken some important steps towards actioning a number of the strategic items in our plan.

One of those was to move all of our electricity into a renewable source, which is actually into a wind-farm source in western New South Wales, big infrastructure project developed by Iberdrola. That really deals with the majority of our Scope 1 and Scope 2 emissions moving forward. And we've made that commitment on a seven-year basis as we look to step out to being 100 per cent renewable.

We've got a number of other initiatives that don't deal necessarily with carbon that sort of look more at the social side and our people side, and innovation and so forth as well as we look to round that strategy. We've signed up to the Australian Packaging Covenant during the year, which is really important for our FMCG clients and particularly in the packaging space. And no doubt we'll talk about packaging soon. And we're just starting our reconciliation action plan now as well.

So, we've got a number of really key work streams underway there. I think what's most important to us in relation to that ESG sustainability piece is how tightly integrated we are with our clients and our clients' expectations. And what we're finding is that we are really leading the way in our industry and our market in terms of what we've done and how we feed back into our clients on that, and in some instances are slightly ahead of where our clients are. So we're actually becoming an advisor for some of our clients on some of the initiatives that could undertake and happen within our space. It's been really well received.

Paul Sanger: Yeah. And clearly a lot of work, thought and time put into that strategy. That's very impressive.

Matt Aitken: Thank you.

Paul Sanger: And IVE Group has made several strategic acquisitions, including JacPak in packaging and Elastic Group in creative and content. How do these acquisitions fit into your broader growth strategy and what synergies are you expecting from these additions?

Matt Aitken: We spent 18 months looking at the packaging sector before we made a move through the acquisition of JacPak in November last year, which was our beachhead acquisition into that sector. And we explored a number of different markets within the broader Australian packaging sector. The reason we chose the folding carton sector was because, operationally and from a production perspective, it's very similar to what we do in a number of our production business units today. So, we saw good synergies and good know-how already within our existing labour force and our existing business, but this was also a nice adjacency for us to move out into. It's an $800m sector in Australia growing at 5 per cent year-on-year. So, it's nice to be stepping into a growth sector there as well. And we have big aspirations to go from probably five or six at the moment into that top three position as we look out over the next five years.

JacPak's a business that turned over $45m. We could unlock $2.4m of synergies, and we've unlocked those as we go into FY25. They also have a further $15m of capacity available for us to fill off the existing footprint and off the existing structure. So, really good synergies and uplift both from a revenue and a cost-base perspective when we look at that particular acquisition. And we're now charting a course towards $150m of revenue in packaging in five years' time. And the first part of that is going to be the expansion up into Sydney, which we're going to do in FY25. And we're going to build into one of our existing sites in Sydney a folding carton capability up here so we can service national brands from Sydney and Melbourne complemented by our third-party logistics network right around the country.

Paul Sanger: And with the fragmentation of the media landscape and the proliferation of the marketing channels, how is IVE positioning itself to capture a larger share of the market and what role does the recent acquisition of Elastic Group play in this strategy?

Matt Aitken: Yeah, I think one of the things that's really obvious for us — we have 2,800 clients — is that when you're working with their clients around their content and you're managing their content and you're managing their data, you're very sticky with those clients. And IVE as a company can execute through any channel a client wants us to execute through. But it was also clear to us in the last 12 to 24 months that we needed to be doing more in creative and content to reflect that fragmentation in the media landscape that we see today
channel a client wants us to execute through. But it was also clear to us in the last 12 to 24 months that we needed to be doing more in creative and content to reflect that fragmentation in the media landscape that we see today.

We've always had a service and a capability in and around creative services and content management, but that needed to be really enhanced. We've done that through two ways during FY24. We've employed a lot of talent to deal with strategy and creative and different thinking in that space. And then the second part of that was the acquisition of Elastic, which completed at the end of May 2024.

And strategically a really important acquisition. Not a big business. 40 staff, Sydney and Melbourne, fully integrated into our sites already. But strategically really important when I think about the capability set they bring to the table, which is around television, motion, social, content and docuseries. They were all capabilities that we didn't have today to be able to take to our client base. And we're only three months into that acquisition, but it's been extremely well received by IVE clients and extremely well received by Elastic's clients as well.

Paul Sanger: Clearly a very strategic acquisition.
Matt Aitken: Yeah, that's right.
Paul Sanger: I get the answer now. And Lasoo has exceeded expectations with its performance in FY24, I think generating an annualised GTV of $16m. What factors contributed to this success and what are the next steps in scaling Lasoo to reach its new targets?

Matt Aitken: Yeah, 20 months ago, we replatformed a site called Lasoo. We had acquired it in January 2020 through the acquisition of Salmat. It was a completely different website, if you like, at that point in time, but we've really taken it, launched it into the market as a consumer e-commerce marketplace. Completely replatformed, rebranded, relaunched.

So, it's only 20 months old. We've been really impressed with the growth that we've seen through that period of time. And, as we've exited FY24 we're on a gross transaction value of $16m per annum, as you've just alluded to. We've got 335,000 monthly active users coming to the site. The average basket value is over $200 every time someone is buying on the site. We've got over 200 retailers and brands on that site, and over 200,000 SKUs. So, I think, for a relatively new marketplace, there's some fantastic metrics inside 20 months to get to that level, and it's well ahead of the original business plan that we put down with the board.

So, as we reflect on the future of Lasoo and where we're going with that, given it's a marketplace that has been losing $4m after tax NPAT for the FY24 year, we've been really encouraged about what that looks like. We've said to the market before break-even was in FY26, but we are going to commit more into the consumer marketing side of this business over the next three years, which will push that break-even out to FY28. But it will change the GTV from $50m in FY26 to $150m as we approach FY30 with a break-even in FY28.

And we think that that additional investment in the deferral, the decision to defer that break-even period by a couple of years, is really important to get the scale in that marketplace. And it's all going towards the consumer marketing dollar. So, there's no more investment required in the platform. There's no more people necessarily required for it. We've got the ability to scale it, and it'll be about the numbers, Paul.

Paul Sanger: And looking ahead to FY25, you provided guidance range for NPAT. Could you walk us through the key factors underpinning this guidance, including the expected contributions from Ovato synergies and JacPac?

Matt Aitken: Yeah, so the guidance is $45m to $50m of NPAT excluding the Lasoo loss for the year, which we've said will be broadly consistent with FY24, and excluding significant items which we're calling out as been $2.5m in FY25 in coming back to more normal levels. The $45m to $50m reflects the full-year or the full integration benefits of the Ovato acquisition, bearing in mind that we've been unlocking those integration benefits right through FY23, and FY24, as we've continued on that integration, and it reflects a full year of JacPak. So, JacPac had revenues of $28m in FY24, but, on a full-year run rate, those revenues will go north of $45m in FY25, and that includes the unlocking of those synergies. So, that's how we've really built out along with organic growth from those business units. We're still driving good base organic growth. That's how we've built out that range of $45m to $50m of NPAT for the market.

Paul Sanger: Understood. And then you mentioned ongoing investment in Lasoo, given it's better-than-expected performance. Can you share more about your investment strategy and how you plan to enhance customer experience and scale the business further?

Matt Aitken: Yeah, I think in the Lasoo space, Paul, if that's where your question is, it is literally about the consumer marketing spend. It's about the level of investment that we're putting into the marketing space to attract more customers to the site, to ensure we've got more retailers on board, to ensure that our conversion rate is optimised, that the average basket value remains at a high number. And I think above $200 is a really good high number for that site currently.

Paul Sanger: Which is up significantly from the year before.

Matt Aitken: That's exactly right. That number was south of $200 the year before. And, you know, also that we are continuing to execute good technological advancements in that platform from the in-house dev team that we've got, and we've got a range of features that we're continuing to release as we go through H1 FY25.

Paul Sanger: Matt, it's been an absolute pleasure. Thank you you for sharing your insights on those results. Great to have you here today.

Matt Aitken: Thanks, Paul. Really appreciate it.

Ends

 

[houtman]

I've had a nibble at these lately.

Div yield about 8.8% FF and fairly stable.

They have had some acquisitions lately that are currently being digested, Jacpak and Lasoo.
I like Jacpak, ambivalent on Lasoo.

Nothing else currently on the radar according to the 2024 presentation.

Their chairman, who was involved for 40 years, passed away in May.

Small holding.