The recent comments by Kevin Slaven paints an atrocious picture...

The recent comments by Kevin Slaven paints an atrocious picture of the company.

Slaven has said that "The debt was expected, and was from a write-down and redundancies, both of which were one-offs". This means that Ovato needed to raise capital to pay employee redundancy entitlements, which is never a good sign for any business.

Slaven has said “Some of the lost print volumes are not coming back, but data is a big area of growth for us". This is an acknowledgement that the decline in print volumes won't improve so the company is looking to grow the business from data. Data is ambiguous and leaves open to interpretation how the company will acquire this unique and competitive data so it can be used strategically to grow the business.

Slaven has said “The competitive landscape has also been challenging, with pricing pressure in recent tender activity and the incurrence of greater than expected disruption costs”. Strong competition in the market and low margin opportunities is never a good combination.

Slaven has said “We will continue to execute our margin improvement strategies and control costs to mitigate the effect of the current market conditions”. Declining revenue and profit margins and increased market competition means that Ovato needs to look internally to reduce operating costs and improve profits.

It was also stated that, Ovato has also appointed financial advisers to assist in reducing debt levels with initiatives including non-core asset sales, raising equity and other “strategic initiatives” being considered.This would indicate that the company is looking to make further sacrifices and possibly close other sites including Geebung, Hendra or Cairns.

A risk analysis highlights four major concerns,

1. Earnings have declined by -57.77% per year over past 5 years.
2. Currently unprofitable and not forecast to become profitable over the next 3 years.
3. Highly volatile share price over past 3 months.
4. Shareholders have been diluted in the past year.