Novus Holdings sets new base for future performance

Novus Holdings has reported a base-setting performance for the full year ended 31 March 2019, with stable revenue at R4 331 800 m, while operating profit decreased by 41,4 per cent to R294 million predominantly due to lower print revenues and weaker returns on revenue from ITB Flexible Packing Solutions (ITB). ‘2019 was the first full year of operation with the renegotiated Media24 contracts, at reduced volumes and prices, marking a period of significant transition for the Group. All this change was successfully navigated against the backdrop of a tough economic environment, setting a new base for the future,’ sais Neil Birch, Novus Holdings CEO.

The Group maintained its current dividend policy of 2x Headline Earnings Per Share (HEPS), declaring a dividend of 30 cents per share. Print revenue decreased by 7,9 per cent during the year under review. ‘This was due to the reduced pricing and volumes with the renegotiated Media24 contracts coupled with a declining market and local economy. However, retail inserts and catalogues increased by 6,2 per cent year-on-year. This increase is mainly due to internal organic growth and existing customers increasing their print volumes and marketing spend to counter declining consumer spend,’ said Birch.

Due to ITB being fully consolidated for 12 months (six months in prior year), the division – part of Packaging – increased its revenue contribution the Group by 91 per cent, however, operating profit declined by 57,5 per cent, with the business being impacted by industrial strike action during the year. Labels, which also forms part of Packaging, reported a revenue increase by 16,2 per cent over the year, mostly driven by the gravure labels (wet-glue labels) operation, with improved margins of 25,6 per cent (up from 24,7 per cent in 2018), on the back of improved efficiency and capacity utilisation. The Tissue operations reported revenue growth of 33,3 per cent and it ended the year breaking even.

‘The Tissue operation has stabilised, however, we are planning to dispose of the business, which will be positive for cash generation and return on net assets in the year ahead. Until then, our commitment to ensuring the profitability of the business remains,’ said Birch. Positively, the Group moved from a Level Four Broad-Based Black Economic Empowerment (B-BBEE) rating to a Level Three during the year. Initiatives across the organisation resulted in an improved rating to Level One, which will stand the Group in good stead for the year ahead.

‘We have not been resting on our laurels and we are very pleased that our increased focus on transformation has come to fruition with our new improved Level One status. We believe that our transformation efforts not only help to right the structural injustices of South Africa’s past, but it distinguishes our business from peers and will give us an advantage when tendering for large contracts,’ said Birch.

Birch continued to say, ‘The management team is focused on driving further efficiencies and retaining market share while continually reviewing and adjusting the capacity requirements in the Print segment. This includes further cost cutting, business development, streamlining of operations, innovating where possible and ensuring that all operations meet individual return on net assets target hurdle rates.’ He concluded by adding that the Group’s packaging operations will be supported to deliver appropriate returns, and ITB is expected to contribute more strongly to the Group results in future.