Highlights of annual financial results for the year to 31 March 2016

  • Operating profit excluding impairments and profit/(loss) on disposal of fixed assets increased 2,5% to R650,7 million (2015: R635 million)
  • Achieved increased operating margin, excluding impairments and profit/ (loss) on disposal of fixed assets, of 15,6% (2015: 14,9%)
  • Revenue of R4,17 billion (2015: R4,26 billion)
  • Headline earnings per share increased 9,6% to 139,9 cents per share (2015: 127,6 cents)
  • Dividend of 70 cents per share declared up by 9.4% (2015: 64 cents)

Cape Town, 08 June 2016 – Novus Holdings (NVS:SJ), the commercial printing and manufacturing Group, today reported a strong set of results for the 2016 financial year with headline earnings per share increasing by 9,6%.

As the Group’s largest division, print contributed remarkably with an operating margin excluding impairments and profit/(loss) on disposal of fixed assets of 17,5% (2015: 15,4%).

The Group demonstrated its resilience this year, performing well in a struggling economy. Despite low economic growth and suppressed consumer confidence affecting publication print volumes, the profitability of the Group’s core business remained solid.

“We achieved significant cost savings primarily through lower waste, higher productivity and proactive maintenance plans. Proactive management response to the fluctuating exchange rate enabled positive pricing points that matched the cost of raw materials and exchange rates which resulted in optimised margins,” said acting CEO, Keith Vroon.

The Group remains focused on extending its leadership position within the print industry by matching operational capacity to market demands. This includes careful consideration of its footprint, and a continuous evaluation of operations to align productive capacity to demand in order to retain margins.

Affecting the Group’s results were the losses incurred on the tissue and labels diversification projects. However, these offerings have been refocused and management remains confident that, once capacity is reached, both projects will add to overall Group profitability.

Revenue contributions and operations update

The Group’s print division contributed 94% of revenue. Despite a slow start for the tissue and labels divisions, both increased their contribution to revenue with 3,4% and 2,7% respectively.

While the print division’s revenue declined from R4,04 billion to R3,91 billion mainly due to volume pressure on newspapers and magazines, foreign paper pricing adjustments and continued efficiency and productivity programmes helped to maintain profitability as the gross profit margin rose from 32% to 35%.

Retail inserts and catalogues remained the highest contributor to revenue at 29,0%, followed by newspapers (21,9%), books and directories (20,7%), magazines (20,6%) and security print products (1,7%). Revenue derived from Africa sales increased from R91,7 million to R149,1 million.

A new market in digital print also opened for the Group through the acquisition of Digital Print Solutions. The consolidation of Digital Print Solutions and Paarl Media Paarl is expected to be completed mid-year 2016, and includes the installation of the first digital web press in South Africa.

While revenue from the labels and tissue divisions rose from R218 million to R256 million, operational challenges and learning curves contributed to the gross profit margin declining to 14% from 22% previously.

A delay in the tissue capital expansion programme led to the operation lagging anticipated revenue growth. While the labels expansion programme remained on track, the process of on-boarding new label clients took longer than expected.

Rather than pursuing short-term gains, Vroon noted that Novus Holdings remains committed to organic and acquisitive growth, with the latter being determined by seeking the right quality assets at the right price.

Outlook

“While volume decline in most traditional print market segments is anticipated to continue, growth markets in parts of Africa, such as the sub-Saharan African donor-funded educational and ballot markets, remain a focus for Novus Holdings,” says Vroon.

He adds, “We continue to focus on our expansion and diversification strategy, through the increase of tissue production capacity, ramping up turnover from labels and leveraging print as our core asset.”

With challenging market conditions and currency volatility expected to continue, Vroon noted that the consolidation of existing assets and enhanced production efficiencies coupled with extensive experience in the manufacturing environment which positions the Group well for future growth in its diversified segments.

He concludes; “With our broad customer base, continued investments in technology and infrastructure, depth in leadership teams, diversified and quality product offerings we will continue offer unique and innovative propositions to an evolving market.”