The IVE Group
(ASX:IGL) AGM held recently underscored the company's robust performance throughout the fiscal year ending June 2023.
And in response, UBS has issued a price target of $2.70 and a Buy rating. The multinational investment bank has made this rating due to the positive financial metrics and expectations of organic EPS growth over the next few years.
IVE Group reported substantial financial growth, despite facing challenges such as input price inflation and increased energy and finance costs during the fiscal year ending June 2022 (FY22). A comparison of FY22 with FY21 showed the following financial highlights:
- Revenue increased by 15.6%
- Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) grew by 13.3%
- Net Profit After Tax (NPAT) surged by 66.1%
- Earnings per share (EPS) showed a significant growth of 71.1%
This positive trend continued into FY23 compared to FY22:
- Revenue experienced a substantial increase of 27.5%
- EBITDA recorded growth of 23.1%
- NPAT demonstrated steady growth of 19.8%
- EPS exhibited notable growth of 14.5%
The acquisition of key assets from Ovato, a primary print competitor, following ACCC clearance in September 2022, has significantly contributed to this growth, with an anticipated additional $145 million in revenue, $25 million in EBITDA, and $13 million in NPAT once integration is complete.
IVE Group has expedited the integration of Ovato, aiming to complete it by December 2023, six months ahead of schedule. Full integration synergies will be realised by the end of FY24, primarily upon exit from significant Ovato Sydney site costs related to lease expiration and capturing final production efficiencies.
To strengthen its balance sheet and support future growth initiatives following the Ovato acquisition, IVE Group successfully completed a capital raising effort in October 2022, raising $19.3 million through the issuance of 8.58 million shares at $2.25 per share. This move increased liquidity in the market for IVE shares.
IVE Group's dividend policy targets a full-year payout ratio of 65%-75% of underlying NPAT. The company has paid $1.03 per share in fully franked dividends since its listing on the ASX in December 2015, with a 70% average payout ratio and a 7.9% yield since listing, excluding FY20 when dividends were paused due to the COVID-19 pandemic.
As of June 30, 2023, IVE Group maintains a strong balance sheet with net debt of $124 million, below the stated target of 1.5x pre AASB 16 EBITDA, despite an increase from $76.8 million a year earlier due to the Ovato transaction and associated integration costs.
To manage energy costs effectively and transition to renewable energy, IVE Group entered a 7-year partnership agreement in April 2023 with Iberdrola, a major renewable energy company. Starting in January 2024, IVE's electricity requirements will be sourced from renewable energy, primarily wind, as the company aims to achieve 100% renewable supply.
IVE Group has undertaken a comprehensive assessment with external specialists to define its ESG roadmap and develop a transparent sustainability framework. The finalised ESG action plan and reporting regime, along with 2025 targets, can be found in the Group's 2023 annual report.
IVE Group's strategic growth plan includes diversification and expansion into adjacent markets. Following an analysis of the Australian packaging sector, the company identified the $800 million+ folded cartons (fibre-based) segment as an attractive opportunity. On October 25, 2023, IVE Group acquired JacPak, a leading Melbourne-based packaging business, as a cornerstone acquisition to facilitate growth in the packaging sector.
IVE Group Limited remains committed to organic growth as the primary driver of its strategy. The company anticipates providing a comprehensive update on its packaging organic growth strategy at its interim results in February 2024.
The AGM highlighted IVE Group Limited's strong performance, adaptability, and growth prospects in a competitive landscape, setting the stage for continued expansion and success in the future. Shareholders and investors can look forward to further growth and diversification in the years ahead.
