IVE Group (ASX:IGL) FY22 H1 results


by Melissa Darmawan

IVE Group Limited (ASX:IGL) Executive Chairman Geoff Selig discusses the highlights of the company's recently released results, key drivers and outlook.

Melissa Darmawan: Thanks for tuning in. I'm Melissa Darmawan for Finance News. Joining me today to talk about the recent half-year results for the IVE Group (ASX:IGL) is Executive Chairman Geoff Selig. Geoff, welcome back to the network.

Geoff Selig: Thanks for having me, Mel.

Melissa Darmawan: It's great to see you. And first up, IVE Group released its first-half year results with a big revenue and earnings beat. What were the key highlights?

Geoff Selig: The takeouts for us in terms of the key metrics would be revenue up 12.2 per cent, NPAT up 99 per cent, EPS up 104 per cent, and net debt remains very low at 78 mill, and we had $52 million of cash in the bank at December 30. And that has resulted in us declaring an interim dividend of 8.5 cents per share, which is 20 per cent up on PCP as well. So, a very strong first half and a strong set of metrics.

Melissa Darmawan: Can you give us a little more colour around the different drivers?

Geoff Selig: Look, put simply, a significant uplift in earnings over PCP was really the result of solid revenue growth, stable margins and the leverage of the recalibrated cost base, which we've done a lot of work on over the last 24 months. But if you look at revenue, our rebound of revenue or uplift in revenue has occurred right across the board and across most sectors in which we operate, which is, I think, a real positive for us. So, if you took over PCP, the combination of existing client revenue uplift, new business phasing in, and a small amount of revenue from the recent acquisitions that we completed of ADG and AFI in November, all of this coming together has resulted in a $47.1 million uplift in revenue over the prior corresponding period. And if you combine that with the recalibrated cost base, that really is where we see it drop to the bottom line and push up that EPS.

Melissa Darmawan: One of the things that's come from the current reporting season is the supply chain disruptions and costs. How is IVE Group travelling on that front?

Geoff Selig: We remain well-placed to manage the prevailing dynamic which we find ourselves in, and we expect that to continue for the foreseeable future. We have been the beneficiary of clients' bringing work on shore, particularly in the retail display part of our business because of supply chain issues. But, equally, supply chain challenges, primarily paper, require our ongoing focus and attention, which will be important for us.

Melissa Darmawan: Thanks, Geoff. You made an outlook statement for the full year around $101 million in EBITDA and around $35 million in net profit after tax. It sounds like the pre-pandemic days. Do you feel that the company's back to that sort of performance?

Geoff Selig: Yeah, look, definitely, and probably looking better in many ways. Yes, we've had a strong uplift in revenue and earnings. If you took that full-year forecast NPAT number of, say, 35 million at the top end, that would be a 77 per cent increase year on year, F21 to F22. So, certainly a strong uplift in revenue in earnings. With margins remaining stable, we feel we've strengthened our market position through the last couple of years and through COVID. Our balance sheet is in a far, far stronger position than what it was in just 12 months or two years ago at circa one times pre-AASB 16 EBITDA, well below our target of 1.5 times. And, with the cash position we've got, we have the capacity and the balance sheet to pursue a range of earnings-accretive opportunities, whether they be organic or potentially further acquisition activity. So, I think we've come out of COVID in a better shape at a whole lot of levels, but it's very nice to see the coming back of the revenue dropping to the bottom line like it has been.

Melissa Darmawan: Last question from me. It's been six years since the company IPO'd. What's the takeout for you at this point in time?

Geoff Selig: Yes. Well, I think from our perspective, we've had a clearly defined strategy from the beginning. We've executed very well on that strategy, and it's cemented IVE as the largest integrated marketing communications business in the country. We hold, six years after we've listed, dominant market positions in all the subsectors of the broader marcom sector in which we operate. We've delivered on every strategic initiative and every financial performance guidance that we put out, and notwithstanding the impacts of COVID, the business has continued to perform strongly all the way through. It's a very high cash-generative business. So that, since we listed, has been very important for investors. We've paid $104 million of fully franked dividends since we listed. And that is with the year on the sidelines where, to be prudent, we didn't pay a dividend as a result of COVID. So, a 7.6 per cent yield before franking credits. That puts us clearly in the top quartile of dividend-yielding stocks on the ASX, which has been incredibly important.

I think, to finish off with, the business fundamentals that we have today really put the business in great shape. We're ideally positioned, with our balance sheet and the fundamentals of the business and the value proposition we take to market, to actively explore a range of organic and inorganic earnings-accretive opportunities over the next 12 or 24 months.

Melissa Darmawan: Geoff Selig, congratulations on the results. I look forward to your next update.

Geoff Selig: Thanks, Mel. Thanks again for having me along.


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