IVE Group (ASX:IGL) FY20 results and outlook


by Ortenzia Borre

IVE Group Limited (ASX:IGL) Executive Chairman Geoff Selig talks about FY20 results, the impact of COVID-19 on clients' marketing spend, group strategy and outlook.

Ortenzia Borre: Hello. I'm Ortenzia Borre for the Finance News Network. And joining me from IVE Group (ASX:IGL) is Executive Chairman Geoff Selig. Geoff, welcome back.

Geoff Selig: Thanks for having me.

Ortenzia Borre: Now, IVE Group describes itself as Australia's leading holistic marketing company. Talk us through an overview of different parts of your business.

Geoff Selig: Yes. Well, we're a $700 million-a-year revenue business. We operate across four areas. Creative services, production and distribution, which incorporates a number of areas: Print -- retail display, premiums and merchandise, logistics. Our third division is data-driven communication, which is essentially CX and personalised experiences, data-driven communications, one-on-one. And then the fourth area of our business is integrated marketing for clients that are looking to completely outsource the management of the marcomms category in their business. So when we describe ourselves as holistic, by nature it is that we're operating across multiple channels and we are dealing with a very diverse customer range across very broad sectors of the Australian economy.

Ortenzia Borre: Now to your recent financial year results, what were the highlights, starting with financials?

Geoff Selig: It's obviously been a very difficult period across the board. We had posted a $76.6 million underlying EBITDA result, which was slightly down on last year by about 5 per cent, but in the context of the COVID-19 crisis, a solid result. Strong free cash flow of 110 per cent for the year, and a significant reduction in net debt, certainly from our last market update in March of this year. So, just under $700 million of revenue with a solid EBITDA number, under the circumstances, we're very pleased with the financial performance of the business, and how the business has responded, and how quickly it responded to the COVID-19 crisis and the impacts on the business.

Ortenzia Borre: And what was behind the numbers?

Geoff Selig: Look, a lot of moving parts behind the numbers. Ultimately, revenue impacted the numbers because revenue was off. Certainly in Q4 was down in many parts of our businesses, particularly in the catalogue and production and distribution area. But we moved quickly to pull, because of the flexibility of our cost price, all the levers we needed to pull to mitigate the impacts of short-term revenue decline or revenue volatility. And they would be the main two drivers of the EBITDA outcome at the end of the day. And we certainly managed the liquidity position incredibly well in terms of our end-of-year cash position of just under $52 million and a strong balance sheet. So the main drivers, revenue and our response to revenue volatility.

Ortenzia Borre: Now, IVE have made a number of recent investments over the years, including acquisitions. How will these benefit shareholders post COVID-19?

Geoff Selig: If I look at our investment in two categories, one acquisitions and one investing in the operational footprint of the business, what it says to me is that our resulting or our expanded value proposition that we take to market, relative to where we might have been a few years ago, certainly in the retail sector, enhances our capacity to offer a more holistic and integrated offer, or retail vertical, than we were in three or four years ago. And the investment in our operational footprint, ultimately, for us, drives efficiency, which means we have the capacity through our scale and efficient operations and investing, given we operate in a speed-to-market time-sensitive space, to deliver a highly attractive commercial proposition to customers across a pretty broad range, an unparalleled range, of marketing communications.

Ortenzia Borre: And to our last question, is there anything else you'd like to add?

Geoff Selig: Look, I would say that in the context of maybe a more forward-looking perspective, we did issue guidance this morning for FY21, the year we've just started, which was about delivering a number consistent with FY20, a further paying down of debt, a resumption of an interim dividend in April of next year to the first half of this year. So, from our perspective, quite a positive outlook on the year that we've just commenced and the fundamentals of our business. And we had a strong business going into COVID, and as a result of the number of the initiatives and how we've responded, I believe we have a more match-fit business as we come out of COVID.

So, as we see and hopefully see revenues recover, that will support an expansion of our margin. And if there were to be a softness in the macroeconomic environment, the fundamental strength of our business combined with the fact that our tier one customer base, rock-solid customer base, has the capacity to spend, in a marketing sense, to drive their revenue, that goes well for our company, given the offer and the relationships we have.

Ortenzia Borre: Geoff Selig, thank you for the update and your insights.

Geoff Selig: No, I appreciate your time. Thank you very much.


Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.