IVE Group (ASX:IGL) positioned for growth


by Tim McGowen

IVE Group (ASX:IGL) Executive Chairman Geoff Selig discusses full-year results, the recent acquisition of Ovato and the launch of the Lasoo e-commerce platform.

Tim McGowen: We're talking with IVE Group (ASX:IGL), which is an ASX-listed company, IGL, market cap around $320 million. The company, believe it or not, has been around since 1921. It specialises in creative services, data-driven communications, integrated marketing, production and distribution. We have with us the Executive Chairman, Geoff Selig. Geoff, thanks for your time. Nice to meet you in person.

Geoff Selig: No, good to be here.

Tim McGowen: Now, you've recently put out your full-year results. Can you give us the highlights of those?

Geoff Selig: Yeah. Sure. No, it was a strong bounce-back from FY21. There was some uncertainty going into FY22, prevailing uncertainty, and certainly from our perspective a strong uplifting revenue, roughly 16 per cent, and roughly 66 per cent increase in net profit after tax. So, a very solid set of financials for full year FY22, which we're very pleased with. In the client base, you know, there's a range of corporates and leading retailers there, from Chemist Warehouse, Westpac, Woolworths, Aldi, L'Oréal, quite a broad diversity of customers and sectors in which they operate, and across our customer base, roughly 2,800 customers in total across that 760 million of revenue.

Tim McGowen: And, Geoff, the company listed in December 2015. Can you talk us through the milestones in terms of your growth?

Geoff Selig: Look, if you took a snapshot since we listed, the company's essentially doubled in size, revenue, doubled in earnings through that period. We have a very high-cash-generation business, so our dividend yield is very healthy. We've paid $115 million of fully franked dividends since we listed. The dividend we just paid in FY22 was 16 per cent up on the full-year dividend the previous year. And through all that, notwithstanding the doubling the size of the business and the strong dividend yield, our net debt is below $80 million. That's our net debt to EBITDA is less than one times or about one times. So, strong growth, strong cash flow, healthy dividend, and our balance sheet, as a result, leaves us with capacity of about $40-odd million to pursue further growth opportunities in addition to our $55 million of undrawn facilities. So, I think the journey, albeit COVID interrupted for a couple of years there, since we listed has been a very strong story.

Tim McGowen: And, of course, you've attracted some institutional investors along the way as well.

Geoff Selig: Absolutely. You know, we've got a nice split in terms of retail and institutional investors and some family offices mixed in there as well, and certainly a lot of renewed interest in our stock the last six months, given the strong dividend yield and cash flow and the fundamentals of the business.

Tim McGowen: And, of course, it's been a busy period, Geoff. You've announced the acquisition of the printing business of Ovato. Can you talk us through the significance of this?

Geoff Selig: Sure. Yeah. Look, the first point I'd make is across our $760 million of revenue, we don't have one headline competitor. We have competitors in the various parts of the marketing communications space we operate in. And it's fair to say that, structurally, we have far less competitors today than what we did 10 years ago. So, we compete and have competed with this company called Ovato, listed company Ovato, in one part of our business for a number of years. They went into VA about five or six weeks ago. And, just last week, we had the ACCC's approval to proceed with the acquisition of the majority of their assets. So, they are the number two player. We are the number one player by size in that market. So, at the end of the integration process, we will hold close to 100 per cent of that part of the market. So, it's $160 million worth of revenue that they are producing here in Australia. And, essentially, over an 18-month period, we will integrate that $160 million along with some of their equipment into IVE's existing three sites in that part of our business across New South Wales and Victoria. So, for us, a really neat opportunity and quite significant in terms of revenue in the context of our $760 million of turnover to start with FY22.

Tim McGowen: And, Geoff, post the Ovato acquisition, which you're bedding down at the moment, what sort of pipeline in terms of future acquisitions or of the sort is there looking forward?

Geoff Selig: Yeah. We would look at three areas when we talk about growth opportunities. The first would be organic initiatives, secondly, bolt-on acquisitions, and third would be more strategic acquisitions. If I look at the first of those organic, our Lasoo investment and Lasoo strategy that we've been working on over the last 18 months that we announced at the full year results is an important initiative for us. It's historically been an aggregated digital catalogue site that we've owned for a couple of years, but it's been around for 15. We've invested just under $5 million rebuilding that platform over the last 12 months. And in mid-September it goes live as an e-commerce marketplace. We have already 200,000 active users a month coming to the Lasoo site and have done for many years. And we've signed up 80 of Australia's leading retailers to the new Lasoo platform when we go live in mid-September, which also coincides with a $4 million go-to-market campaign across TV, radio, print media, social, right across every conceivable marketing communications platform. So, we're very excited about the replatformed and relaunch of Lasoo that's about to take place very shortly. That's a very important strategic, organic initiative for us.

We've done a number of bolt-on acquisitions over the years. We did two bolt-on acquisitions in FY22, the year just complete, out of Victoria, essentially, in the area of retail display and third-party logistics, 3PL, for our business. So, we continue to see opportunities in the bolt-on acquisition space, if they're attractive, low multiples, and we can easily integrate them into our existing footprint.

And then we have the more strategic acquisitions. And in the full year results and certainly at the AGM, we'll talk in far more detail around our strategy to move more aggressively into the packaging space, and that may include a beachhead acquisition in that sector as well to spearhead or to build out our existing packaging revenues, which are only about $15 million of our $750 million. So, yes, outside of Ovato, we've still got a lot of initiatives on the go and some big plans for the year ahead, and look forward to updating shareholders at the AGM come November.

Tim McGowen: And you've had a cracker year. I mean, the share price is up 28 per cent in what's been a weak and volatile market. Shareholders are always looking forward. What are some of the milestones and achievements they could potentially look toward?

Geoff Selig: Yeah. Look, we decided to put our FY23 guidance in our full year results. So, we've guided a number of $36 million for our NPAT for FY23. That would be 9 per cent up on FY22 NPAT. And, as I said, FY22 NPAT was 66 per cent up on FY21, so 9 per cent guidance in terms of NPAT. Lasoo, we'll monitor closely and say more to the market around the performance metrics for that business, because it is a business that, certainly with 200,000 users today before we launch the new e-commerce marketplace, has the potential to grow quite significantly. And then certainly through those other opportunities of packaging and some bolt-on opportunities, if they come along, will be earnings-accretive as well, outside of the earnings accretion that will be generated from the Ovato acquisition. Yeah, we've already put out quite a healthy uplift in terms of guidance for FY23, but yeah, more to come.

Tim McGowen: Geoff Selig, thanks for your time.

Geoff Selig: No, thank you very much for having me back again.


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