Hi everyone, and welcome to the IVE Group First Half FY25 Financial Results Webinar. My name is Abby Phillips, and I'm your host for today. On the call, we have CEO Matt Aitken and CFO Darren Dunkley. The format is a 20- to 30-minute presentation followed by 15 minutes of Q&A. If you'd like to ask a question, please click the Q&A button at the bottom of your screen and type your question into the Q&A panel. For analysts, please click the raise hand button, and I'll invite you to unmute and ask the question verbally. Without further ado, I'd like to hand over to CEO Matt Aitken to start the presentation. Matt, are you there?
I am. Thanks, Abby. Good morning, everyone, and welcome to the presentation of IVE Group's H1 FY25 results. As Abby said, I'm joined this morning by our CFO, Darren Dunkley, and together we will step you through what is a very solid result for the first six months of FY25. So we turn to page three of the presentation. I just want to touch on some of the key highlights for the half. All key profit metrics are up significantly. We've had strong margin expansion and further uplift in operating cash flow with working capital levels normalizing. And the balance sheet, as you can see, has been further strengthened with gearing continuing to sit below our internal target. At an operational level, we have delivered all of the Ovato cost synergies, so they've been fully realized. We've delivered all of the JacPak cost synergies, and they've been fully realized.
We have integrated Elastic completely into the group post-acquisition of that business in May this year, May last year, sorry. At the AGM, I also gave you an update on a substantial consumer research project we had undertaken in relation to catalogs. This research has continued to drive stronger retailer engagement with retailers such as Bunnings and Harvey Norman coming back into the catalog channel during H1. But most importantly, Coles returning to the letterbox channel for catalogs late in H1, and we continue to have great conversations with retailers about the power of that channel. On the growth front, at a packaging level, we've committed now all of the JacPak revenue that was available to us when we acquired that business just over 12 months ago.
And we've purchased a range of equipment to assist with the build-out of our organic expansion plans here in New South Wales for the packaging side of our business. As I said, Elastic's been fully integrated into the creative and content service offering, and I'll touch on that more as we go through the presentation. We're relocating our 3PL business, a third-party logistics business, to a new 32,000 sq m facility in Dandenong South in early FY26. We're developing a city super site, consolidating four business units into 42,000 sq m in Kemps Creek. Again, a move that will happen in FY26. And Lasoo continued its strong momentum with annualized GTV of AUD 27 million in November, up 93% on PCP and ahead of what I guided at the AGM, which was AUD 24 million. And I'll cover these initiatives in more detail later in this presentation.
As we turn the page to the financial performance dashboard, illustrating a strong interim performance underpinned by the margin expansion I referred to earlier. Revenue of AUD 507 million was stable on PCP. Pleasingly, material gross profit margin of 48.5% was well up on PCP of 46.2%, and EBITDA of AUD 74.1 million was up 12.6%. NPAT of AUD 29.3 million was up 29.1%, and EPS of AUD 0.19 per share, up 28.1% from AUD 0.148 per share PCP. Again, the operating cash flow I touched on earlier, up to 92%, up from 84% on PCP, and net debt lower at AUD 121 million, down from AUD 131 million at 30 June. The company has announced a fully franked interim dividend of AUD 0.95 per share, unchanged from AUD 0.95 per share PCP, and consistent with the guidance that we've provided.
And I'd also like to point out a substantial improvement in our IFRS NPAT at $27.1 million, up 108% on PCP. I'll now hand over to Darren to walk through the financial section of today's presentation, and I'll come back and talk about the growth initiatives later on.
Thank you, Matt, and good morning, everyone. I will now take you through the financial section of the presentation, starting with profit and loss pages six and seven. Strong profit growth underpinned by material gross margin, MGM expansion, and delivery of promised cost synergies. Revenue up 0.4% to AUD 507.8 million. Revenue includes AUD 15.8 million of incremental revenue from JacPak, which was acquired on 31 October 2023. Base revenue down 3% relative to PCP, impacted by softer economy and non-recurrence of large one-off prior period projects, including the Voice referendum and FIFA Women's World Cup. Brand activations, 3PL and packaging experienced strong growth with new clients, business wins including household brands in the FMCG and pharmaceutical sectors. Material gross profit margin, MGM, which is revenue less material cost of goods sold, MGM improved to 48.5%, up from 46.2% in PCP. This margin improvement reflects input cost relief and business mix changes.
Underlying earnings, as Matt's touched on, was very strong. EBITDA increased 12.6% to AUD 74.1 million, up from AUD 65.8 million in PCP. EBITDA margin up strongly to 14.6% from 13% PCP. EBIT up 23.4% to AUD 51.4 million, up from AUD 41.7 million PCP, partly driven by reduced depreciation expense relating to Warwick Farm Ovato site. NPAT margin up strongly to 5.8% and from 4.5% of PCP. The strong increase in profitability reflects improved MGM and operating efficiencies coupled with earned cost synergies from Ovato and JacPac. Non-operating items of AUD 3.9 million pre-tax significantly reduced on PCP, refer appendix A. Excluded from underlying earnings were made up of AUD 3.2 million Lasoo operating loss consistent with guidance, $0.6 million restructure costs. FY25 full year restructure and other costs are expected to be around AUD 3.5 million.
It is important to note that excluding Lasoo restructuring and other costs are AUD 0.7 million for the period compared to AUD 10.9 million in PCP. Turning to page eight, the balance sheet. Gearing trending further below internal benchmark, cash at bank AUD 49.5 million, net debt decreased to AUD 121.4 million during the half, reflecting continued strong cash flow and greatly reduced restructuring costs, partially offset by peak working capital seasonality and CapEx associated with the packaging capacity build-out. Net debt is down significantly from the AUD 165.4 million at 31 December 2023. The prior period included AUD 28 million of JacPak acquisition funding since repaid. Gearing is trending further below the group's internal benchmark of 1.5 times pre-AASB 16 EBITDA or less than one times post-AASB 16 EBITDA. Undrawn debt capacity of AUD 65 million, including acquisition facilities. Page nine, capital expenditure, packaging capacity build-out underway.
Capital expenditure was AUD 13.8 million for the period, including AUD 8.5 million related to the packaging capacity build-out, largely for the purchase of replacement sheet-fed presses, also capable of printing on Board for packaging, as well as packaging finishing equipment, which includes die cutters and folders. FY25 CapEx is now expected to be around AUD 32 million, including AUD 18 million related to the packaging capacity build-out. This is net of disposal proceeds. The increase in expected FY25 CapEx reflects the bringing forward of additional packaging equipment purchases for the phase I expansion. Cash flow and dividends, further uplift in cash conversion. Operating cash conversion to EBITDA up to 92% from 84% in PCP reflects return to more stabilized levels of inventory, paper holdings, and working capital following improved supply chain certainty and the Ovato transaction. Working capital is expected to remain relatively stable hereafter, broadly in line with revenue seasonality.
The board declared a fully franked interim dividend of AUD 0.95 per share, which is stable on PCP and consistent with guidance. I will now hand you back over to Matt to take you through the balance of the presentation. Thank you.
Thanks, Darren Dunkley. We turn to page 12, and it's touched on packaging a bit further. As mentioned earlier, AUD 2.4 million of JacPak cost synergies were fully realized by 30 June 2024 and have contributed to the earnings during the half we've just spoken about. JacPak contributed revenue of AUD 24 million during the half. AUD 15.8 million of that was incremental, which was in line with expectations. And recent new business successes include household brands in the FMCG sector like Sanitarium, Sara Lee, and Peters Ice Cream. And we've got a strong and active pipeline for new business currently in play. Notwithstanding the lengthy revenue lead times on some contracts and opportunities, JacPak's AUD 15 million of available capacity that we had at time of acquisition is now committed as we look out to FY26.
As we've previously indicated, turning to page 13, we intend on servicing national brands through packaging operations in both Victoria and New South Wales, supported by our national 3PL network. In Victoria, JacPak or IVE Packaging will continue to operate as a standalone business down there with annual revenue capacity of AUD 60 million. In New South Wales, we'll build out a greenfield state-of-the-art packaging facility as part of the consolidation of businesses into the Kemps Creek super site, which I'll talk about in the coming slides' time. Combined, these sites will result in total packaging revenue capacity of around AUD 90 million per annum.
As you can see from the chart on the right-hand side of this page, for phase two, additional investment would be required to add a further AUD 60 million to the capacity, resulting in ultimately a total annual packaging revenue capability of AUD 150 million in five years over a five-year period. We turn to page 14 and on to creative and content. The integration, as I said earlier, of Elastic into Sydney and Melbourne has gone really well, and it's been received extremely well both by Elastic customers and IVE customers. It's rapidly advanced our creative and content offering in line with our strategy to grow revenue and capability in this space. Elastic's creative and strategic expertise in TV, video, digital, and social media has been the perfect complement to our strengths in CX, design, data, and content production capabilities.
We're helping brands efficiently target and connect with customers across every media touchpoint, and if you click on the squares on the right side of this page and take some of Elastic's work, particularly recent campaigns we've done for Kia, launching the EV5 and capturing activations at the Australian Open last month, so we turn to page 15, which touches on 3PL, so our third-party logistics part of our business, so with strong growth in our 3PL operations and the upcoming expiry of our warehouse lease in Braeside, we're relocating to a brand new purpose-built facility near Dandenong South. The 33,000 sq m facility will become our largest 3PL site in the country and provide an additional 60% of storage in Victoria, in turn increasing our national capacity by 30% to 80,000 sq m.
Groundworks on the site started at the end of 2024, and practical completion is expected by September 2025. In terms of benefits, clearly it provides additional space for us to expand the business in Victoria, and it'll be initially racked for 35,000 pallet spaces. We provide a dedicated in-house logistics services for JacPak, which are currently outsourced, and operating efficiencies through the consolidation of two existing Braeside warehouses, including common operating functions and reduced duplication of resource and equipment. It clearly is also a great facility for our staff, so as I said earlier, once relocated and that is completed in late 2025, the 3PL business will now have 80,000 sq m of modern, highly efficient logistics facilities right around the country servicing our clients.
Moving on to page 17, consistent with our strategy in Braeside Victoria three years ago, where we built a super site down there, we've recently committed to the development of a 42,000 sq m super site in Kemps Creek in Western Sydney. The super site facilitates our strategy of expanding into horizontal adjacencies such as packaging to drive revenue and also continue focus on operational efficiencies. Through this process, we're relocating four business units to the Kemps Creek super site, that being, or those being, our commercial print business in Silverwater, our brand activations business in Granville, our CX and data business in Homebush, and our paper storage site at Warwick Farm, and at the same time, we'll build, as I said, a state-of-the-art Greenfields packaging capability within the site to continue the expansion of our packaging strategy.
The site is close to our Erskine Park and Huntingwood sites, thereby bringing the majority of our Western Sydney teams much closer together. It is also very close to key transport hubs. Groundworks have commenced recently with practical completion expected at the end of this calendar year, and I would expect the site to be fully operational by early 2026. Again, a range of benefits coming from this initiative and this move, one of those being the mitigation of an additional AUD 3.1 million in annual rent had we stayed in the existing sites that we're leaving. Operating efficiencies, including consolidation of leases, equipment, and common operational functions. A centralized approach to labor, optimizing our labor mix and enabling flexibility across business units and reducing external labour hire and space to accommodate further expansion, particularly facilitating the phase one and phase two of the packaging strategy.
Again, similar to the 3PL site in Victoria, a more fit for purpose and modern workplace for our staff. We will, at the FY25 result, communicate what the expected capital expenditure and relocation costs will be associated with that project. Touching on Lasoo, we continue to execute on our Lasoo strategy by rapidly scaling our deals marketplace, and you can see this as illustrated by the charts on page 20 of the presentation. At 31 December, we had 255 retailers on the platform with a very healthy pipeline, including a number of retailers contracting onto the platform in recent weeks as a result of the announced closure of Catch.
With over 80% of the total investment being CapEx and cumulative after-tax losses and Lasoo already incurred by the end of FY25, we wanted to provide further detail in relation to the pathway to break even and profitability for the marketplace, and as you can see from the chart on the right side of page 19, we remain on track to break even during FY28 with plans to grow GTV, so gross transaction value to AUD 150 million by FY30. This is consistent with what we've guided previously at both the AGM and the FY24 results, at which point it would equate to revenue of around AUD 23 million, EBITDA of around AUD 4.5 million, and NPAT of around AUD 3.1 million. We move on to our outlook and guidance.
Reflecting a strong start to the year and sound new business prospects for H2, the group has revised its FY25 underlying EBITDA guidance range to AUD 47 million-AUD 50 million, noting that our EBITDA guidance excludes the Lasoo operating loss, which is going to be consistent with FY24, and restructuring and other costs of around AUD 3.5 million. CapEx, as Darren has alluded to, is now expected to be AUD 32 million, including AUD 18 million related to executing on the packaging strategy, and consistent with messaging again at the FY24 results and AGM, our annual dividend is expected to be held steady at AUD 0.18 per share for the foreseeable future, reflecting the already substantial dividend yield and to preserve cash to pay down senior debt, fund future growth initiatives, and/or capital management options. Our net debt at 30 June 2025 will continue to remain below our internal benchmarks that Darren's communicated already.
Considering this and the group's consistently strong financial performance, the board and management view IVE's share price as offering significant value at current levels, and accordingly, today has initiated on-market share buyback of up to AUD 10 million. Further to drive alignment between executives, employees, and shareholders, IVE has put in place an employee salary sacrifice share plan for employees, as well as director and executive minimum shareholding guidelines. We intend on hosting an Investor Day strategy session in late Q4, and I look forward to seeing many of our shareholders on that day. I'd like to thank all of our staff, customers, and partners for their contribution towards the strong H1 result. We're now happy to open the call for any questions. Thank you.
Thank you, Matt. So just a reminder that if you'd like to ask a question, click the Q&A button at the bottom of your screen and type your question into the panel. But first, we'll take questions from the analysts. So first up, I can see we have a question from Chris. Chris, if you could just unmute yourself and ask away.
Hey, can you hear me okay?
Can hear you.
Yes, we can hear you, Chris.
Good day, Matt. Good day, Darren.
Good day, Chris.
Just looking at the guidance, like it basically implies a second half underlying impact of around AUD 20 million to get you to the top end, which is consistent with the second half last year. When first half was up so strongly on PCP, why are you only expecting a flat second half result?
So a couple of things for us, Chris. One is we've got a federal election coming, so we're concerned about what if any impact they might have on the economy and on trading. We also don't have any of the Ovato synergy benefits flowing through in H2 that we had flowing through in H1. So you might remember the prior H2 period, we were fully integrated at that stage with Ovato, so you won't see any significant uplifts off the back of those acquisitions like we saw in H1. And traditionally, we're a seasonally quieter business in H2, as you've alluded to, and generally sort of a 55-45 business H1 to H2. So they're the main reasons that we've been prepared to up the guidance into the upper range, Chris, but not bridge it outside of the original range we've given.
Noting though that we do have a planned strategy day for shareholders coming later in the financial year, and would expect at that point we may be in a position to provide a further trading update.
Okay, and one of the highlights for me was the uplift in gross margin in the first half to 48.5%. Do you think that's sustainable going into H2, or would you expect some sort of pullback?
I think at the moment it's sustainable, Chris. I mean, it's, you know, there's supply chains are pretty stable at the moment, which is good. There's various reasons why, you know, it may be impacted. One of those could be, for instance, currency related. But look, I think from where we're seeing it right now, notwithstanding some of the broader macroeconomic things at play, both overseas, maybe, you know, through the US and then what might happen here locally, I think we're comfortable with how that margin's going to hold up through the half.
Okay. And last question, if there was anything disappointing in the result for me, it was probably just the lack of revenue growth. Are there any initiatives or, you know, things that could potentially uplift that growth rate in the second half, like the federal election or the additional JacPak capacity, which you've now basically filled?
Yeah, I think it's fair to call that out. That would be the one thing we were disappointed about too, Chris, was the revenue number. There's no doubt from mine that we've got a very healthy pipeline right across various parts of the business. It is a bit hard to see through the federal election at the moment, the crystal ball. We do do work in that space when an election takes place, but it is also budgeted for us, so we've got a rough handle on what that should look like. So no, I think we're doing a lot internally within the business to continue to drive new business forward.
Yeah, I would like to think by the time we're back around the table, be it later this financial year or the full year results, we've got some really good new business things to announce at the same time.
McDonald's?
Still in play, Chris. Absolutely. So that's still, you know, decision from McDonald's due in about May.
Oh, that's the longest tender I've ever seen.
It is true.
It is. Thanks, guys. Well done.
No problem. Thank you.
Thank you, Chris. So now we have some questions from Jonathan Higgins. Jonathan, if you could please unmute yourself, that would be great. I'm not sure if Jonathan's there, but there are two questions here. I might just ask for him. So can you remind us on the margins out of JacPak, effectively, what does AUD 160 million of revenues look like longer term?
Yeah. Yeah, I mean, our JacPak revenue, MGM would be similar, margin would be similar to that of the consolidated business. So, you know, the 48.5% for our MGM would be what we would expect for JacPak moving forward. However, we may work it, move into some work that is more commoditized to hit that AUD 160 million. So that may have some downward pressure in that sector on our MGM. But overall, our EBITDA margin from JacPak would be along similar lines of 12%-14% in line with the balance of our business.
Thank you. And then through normalized WC and cash flows expected in H2, further to this is a reducing interest rate environment positive for the group, noting you are doing really well, but economic conditions have been tough.
Yeah, I definitely, I mean, we've reduced our net debt to PCP quite significantly, as I'd certainly pointed out, but a reducing interest rate environment, I definitely think that will be positive to the group on an interest expense perspective and an overall economic activity perspective.
Thank you. Then next we have some questions from Shane. Shane, if you could unmute yourself, that would be great.
Oh, hi, Matt.
Good day, Shane.
Just one question. I mean, I picked up what you said, Matt, when you ran through the catalog business, particularly you said you'd been through some sort of review. You'd mentioned that Harvey Norman and Bunnings had returned, but did you also say that Coles have returned to the service as well?
I did, Shane. Yeah. So late in the half, Coles returned to the letterbox channel with catalogs, and they continue to be in that channel now, and I believe it's working well for them.
Is that to the same level that they were before they took the business away?
No, not to the same level yet, Shane, but they're sort of continuing to build up, I guess, as they go through what was initially a test phase for them, and they've moved down to that test phase into sort of a wider expanded reach. But no, not out to the full extent of what it was leading into 2021.
Right. And so more broadly, you said that Bunnings have come back into the business, Harvey Norman's come back into the business. So the business is looking revitalized.
Yeah, but I think it just shows to me the quality of the consumer research that we did to prove up the value of the catalog as part of a retailer's marketing mix and some of the additional work we're continuing to do in that space to prove up the results that catalogs actually deliver in stores. So we did a lot of quality one research. We had a lot of data available to us as part of that to prove the value of the catalogs. It's been really well received by retailers, and we have seen retailers specifically like Harvey Norman and Coles and Bunnings entering back into that channel after having been out of it for some time, really since the COVID times. So in a, you know, face value, that would appear to be working well for them at this stage.
Right. Thanks, Matt.
We don't have any other questions from any of the other analysts. We might just go to the Q&A box. So Matt, I'll hand it back to you to answer some of those written questions. If you're having trouble finding the Q&A box, you should just be able to hover your mouse at the top of the screen, and it should show up.
Abby, we've lost our connection here to the Q&A box. So can you just read maybe the questions that are there, and I'm happy to just take them on notice and answer them as we go through it?
Yep, of course. No worries. So firstly, congrats on the strong results, and thanks for all your hard work. Concerning Lasoo, you are targeting NPAT of about AUD 3 million by FY30. How much capital do you think it will have consumed by then, especially in OpEx over AUD 30 million? And how confident are you that it will justify itself?
Yeah, so I think maybe Darren and I might both tag-team a little bit on this. As I alluded to when I went through the Lasoo slide and it's in the deck, you know, by the end of FY25, we will have incurred 80% of all of the CapEx and after-tax losses associated with this platform. And by putting the chart into slide 19 today, hopefully that gives shareholders a clear line of sight as to how those losses continue to become less, if you like, as we head through to about FY28, where we hit that break-even point. And then obviously we build out to the FY30 numbers that we've talked about here. From our perspective, we think it's still a well worthwhile part of our strategy and should represent good value at that point in time by the time we get to that point.
We're very happy with the progress of the platform, so everything at the moment is continuing to go to plan, so there's nothing there concerning us that we won't hit those numbers that we've outlined in this, and we've got a lot of levers to be able to play with if at any such point in time we were concerned about it and we wanted to dial that back and we can do it quite quickly. So, yeah, our overall investment in Lasoo by the end of FY25, including the NPAT losses and CapEx, would be circa AUD 20 million, so overall, up until we achieve a break-even in FY28, it'll be closer to AUD 30 million in overall investment in Lasoo.
But then you can see that the, you know, returns will build relatively quickly and good margins as a percentage of true sales rather than gross transactional value in line with the rest of our business as well. So I definitely think it's been a worthwhile investment.
Great. So we do have another question here. So another set of very current clean numbers. Congratulations, Matt and Darren. Given the headroom in your debt facility and growth ops in production/creative, are you seeking further acquisitions to scale this offering alongside Elastic, or is focus for next FY on the new super sites?
Yeah, for us, it's a combination of both. It's clearly really important that we execute on both the 3PL move in Victoria and the super site move in Sydney to drive out those efficiencies that we're looking for and deliver that next level of customer experience that we know we were able to deliver when we did the Braeside super site three years ago. So that's been a real focus for us. There's no doubt, certainly from a balance sheet perspective, that if the right acquisition was to come along, we would definitely consider it.
And it's, you know, one of the reasons we've kept the balance sheet strong so that we've got that ability to look at any growth opportunities that might present themselves to the group, not just in the content and creative space, but there may be across other parts of our business and our value proposition too that we'd consider acquisitions accordingly. But there's nothing in play at the moment. So we remain focused on the relative capital management initiatives that we called out today, share buyback, and also just continuing to pay down senior debt.
Thank you. So that does bring us to the end of the Q&A section. Thank you, Matt and Darren, and thank you everyone for making the time to listen to the call today. If you have further questions, please reach out to the team and they will happily help. So copies of this webinar will be available on the IVE Group and ShareCafe websites. But again, thank you everyone for your time.
Thank you. Thanks.