IVE Group Financial results for the Six Months to 31 December 2023

IVE Group Limited has announced its financial results for the six months to 31 December 2023.

The Group delivered a solid first-half performance with revenue, EBITDA and margins up on a strong (record) prior corresponding period (pcp).

“Given the more uncertain economic landscape, I am pleased with the first half result which was up relative to a record prior period that was partly buoyed by the post Covid-19 recovery.

Importantly, during the half we also completed the Ovato integration six months ahead of the original timetable and entered the Australian fibre-based packaging sector through the cornerstone acquisition of JacPak,” commented Chief Executive Officer, Matt Aitken.

EBIT included a non-recurring Ovato (Warwick Farm) loss of $5.6m, while NPAT was also impacted by higher net finance costs.

Normalised for the Warwick Farm loss, NPAT was $26.6m, up 9.4% on pcp, and EPS was 17.3¢ps, up 5.1% on pcp. EBITDA margin improved to 13.7% from 12.9% pcp on the same basis.

Key underlying financial performance indicators for the half include:

• Revenue $506.0m, up 0.6% from $502.8m pcp

• Material gross profit margin, 46.2% from 44.2% pcp

• EBITDA $65.8m, up 1.3% from $65.0m pcp

• NPAT $22.7m, down 6.5% from $24.3m pcp

• EPS 14.8¢, down 10.2% from 16.5¢ pcp

• Operating cash conversion to EBITDA 84.0%, up from 56.7% pcp

• Cash on hand: $41.7m

• Net debt $165.4m, up from $124.2m at 30 June 2023, reflecting the funding of the JacPak acquisition and peak working capital seasonality, partially offset by the rebound in operating cash conversion

• Fully franked interim dividend of 9.5¢ps, unchanged from 9.5¢ps pcp

Cornerstone acquisition of JacPak and planned organic expansion

On 31 October 2023, the Group entered the Australian fibre-based packaging sector with the cornerstone acquisition of leading Melbourne-based folding carton player JacPak, which currently generates annual revenues of around $45m.

The total purchase consideration for JacPak was $35m, including ~$28m paid on completion,

$4m payable as deferred consideration (subject to 12 month performance hurdles) and the assumption of ~$3m of equipmentfinance leases.

During the two months since acquisition, JacPak contributed revenue of around $7m which was broadly in line with expectations.

By the end of FY24, IVE expects to unlock annual cost synergies of around $2.4m across procurement, operational efficiencies, finance and administration, after which the business is expected to contribute annual EBITDA of around $8.4m and NPAT of around $3m.

JacPak currently has $15m of available capacity for potential organic revenue growth. Over the near term, we are confident of utilising that capacity through new or expanded customer relationships, which would increase JacPak’s annual revenue to around $60m, EBITDA of around

$11.9m and NPAT of around $5.5m.

In addition to organically growing JacPak’s standalone revenues, in FY25 IVE intends leveraging the operational footprint of the Group’s Silverwater commercial printing operation (via the addition of new finishing equipment) to support up to $30m of annualpackaging revenues.

Over the medium term, investment in additional equipment would add a further $60m to capacity resulting in the Group achieving itsstated ambition of building a packaging business with annual revenues of around $150m.

Lasoo – continued strong growth momentum

Following its successful launch in October 2022, Lasoo continues to show strong consecutive month-on-month growth with key financial metrics (monitored daily), including monthly active users (MAU), conversion rate, average basket size (ABS), gross transaction value (GTV) and commission rates continuing to track in-line with, or above, original business case expectations.

Lasoo is performing in line with FY24 expectations and remains on track with guidance.

Based on current momentum, proof of concept and better than expected marketplace performance, we are reviewing all possiblegrowth options (including further enhancing platform functionality and optimising marketing spend) and expect to update investors on our longer term plans for Lasoo later in FY24.