Novus Holdings · Novus Holdings 2020 Annual financial results Group income statement key features....

Novus Holdings 2020 Annual financial results

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Novus Holdings 2020 Annual financial results 2

Contents.


OPERATING PROFIT

(Excluding “other gains/(losses)”)

R126m [2019: R294m]

(57,1%)

HEADLINE EARNINGS PER SHARE

23,4c [2019: 60,4c]

(61,2%)

REVENUE

R4 112m [2019: R4 332m]

(5,1%)

4EXECUTIVE OVERVIEW

FREE CASH FLOW

R336,0m [2019: R116,6m]

188,2%

Results summary.


Group income statement key features. [FOR YEAR ENDED 31 MARCH 2020]

2020 2019 % CHANGE

Revenue R4 112m R4 332m (5,1%) ▼

Gross profit R768m R944m (18,6%) ▼

Gross margin 18,7% 21,8% (3,1%) ▼

Overheads R641m R651m (1,5%) ▼

OPERATING PROFIT* R126m R294m (57,1%) ▼

OPERATING MARGIN* 3,1% 6,8% (3,7%) ▼

HEADLINE EARNINGS PER SHARE(Cents)

23,4c 60,4c (61,2%) ▼

(LOSS)/EARNING PER SHARE(Cents)

-119,6c 56,4c (311,9%)▼

6FINANCIAL REVIEW

*(Excluding “other gains/(losses)”)


Cash position analysis.

7FINANCIAL REVIEW

Cash inflows Significant reduction in

working capital of R293m resulting in net cash inflow.

Proceeds on sale of PMB building of R24m

Proceeds on disposal of UV Flexo Labels business of R34m

Cash outflows 2019 dividend of 2X HEPS was

paid amounting to R86m

Lease repayments classified within net loan & finance cost payments on adoption of IFRS 16: Leases of R12m.

Gearing Ratio 6,2% 3,7%

NET CASH/(DEBT) (including bank overdraft)

32 (153)

Year ended 31 Mar 2020

(R’m)

Year ended 31 Mar 2019

(R’m)CHANGE

(R’m)

Cash generated from operations(excluding working capital) 336,5 433,0 (96.5)

Working capital 91,1 (201,9) 293,0

Net property, plant, equipment and intangibles (53,6) (45,8) (7,8)

Taxation paid (38,0) (68,7) 30,7

Free cash flow 336,0 116,6 219,4

Acquisitions/disposals of subsidiaries, investment in associate 31,8 (47,2) 79,0

Net loan & finance cost payments (53,1) (28,9) (24,2)

Dividends paid (86,3) (160,8) 74,5

Share buy-backs and odd lot - (142,2) 142,2

Net cash flow 228,4 (262,5) 490,9

Opening cash balance (53,9) 208,6 (262,5)

CLOSING CASH BALANCE 174,5 (53,9) 228,4

Novus Holdings 2020 Annual financial results 8FINANCIAL REVIEW

Cash flow movements.

-54

175126

164

91

27

32

-38

-81-86

-6

-100

-50

0

50

100

150

200

250

300

350

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R’m

Financial year ended 31 March 2020


1 0

11

68

6 9

61

55

4

61

3

51

2

50

2

38

5

58

7 69

2

63

1

48

7

-

200

400

600

800

1 000

1 200

H12019

H2 H12020

H2

Debtors Creditors Inventory Net working capital

9FINANCIAL REVIEW

Working capital.


R’m

985

866

1 090

656

Novus Holdings 2020 Annual financial results 10FINANCIAL REVIEW

CAPEX

In line with the Group’s rationalisation of assets andreduction in Print capacity, maintenance spend is expected to remain modest and reduced in the Print segment.

Capex overview. [EXCL. INTANGIBLES]

64

62

55

51

18

0

76

52

29

-

50

100

150

200

250

300

FY17 FY18 FY19 FY20

R’m Expansion

Maintenance



Group overview.

11FINANCIAL REVIEW

4 312 4 308 4 3324 112

52

9

50

1

29

4

12

6

25,6% 26,2%

21,8%

18,7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

Revenue Operating Profit exc. other gains/(losses) Gross Profit %

RE

VE

NU

E Printing revenue comprised 77,0% (2019: 77,3%) of total revenue. Print experienced volume declines on all product categories, except books and directories, with an overall tonnage drop of 4,2% (2019:12,4%).

GR

OS

S M

AR

GIN Gross profit margin was significantly

impacted by lower margins in Print, with a GP margin decline of 4,0% in the segment.

Packaging revenue contributed at a typically lower margin with a GP margin increase of 1,6% on the prior year. ITB’s GP recovered to historical levels whilst pressure on Gravure labels and disposal of the UV Flexo business offset that gain.

OP

ER

AT

ING

PR

OF

IT Operating profit declined by 57,1% to R126m (2019: R294m) mainly resulting from Print’s under performance.

FY17 FY18 FY19 FY20


R’m


Print segment | Commentary.

12FINANCIAL REVIEW

3 987

3 634

3 3493 168

57

5

50

5

27

0

10

6

27,6%28,7%

24,7%

20,7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

Revenue Operating Profit exc. Capital Items Gross Profit

RE

VE

NU

E The decrease in revenue was driven byvolume declines of 4,2% overall across product categories, except for books and directories which saw an overall tonnage increase of 17,8%.

GR

OS

S M

AR

GIN The gross profit margin in Print declined as a

result of:• higher than inflation paper price increases

as well as unfavourable exchange rates not passed on to customers;

• lower margin product mix in the current financial year;

• increase in electricity costs due to load shedding.

OP

ER

AT

ING

PR

OF

IT The lower revenue levels negatively impacted operating profit.

Operating expenses measured as a % of revenue increased from 16,7% to 17,4%

Efforts were made to reduce costs during the year, these efforts were offset mainly by the following:• An increase in the expected credit loss

allowance due to increased COVID-19 related customer credit risk;

• Once-off increase in retrenchment costs of R23m due to the closure of the KZN print facility;

• Restructuring across the segment.

77,0% of revenue

FY17 FY18 FY19 FY20R’m



Packaging segment | Commentary.

13FINANCIAL REVIEW

130

475

750688

13 42 41 40

18,3% 18,7%

14,7%16,3%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-100

400

900

1 400

1 900

2 400

Revenue Operating Profit exc. Capital Items Gross Profit

16,7% of revenue

RE

VE

NU

E

The UV Flexo division of Labels was sold during the year and this led to a R69m reduction in turnover in comparison to the prior year.

On a like-for-like basis overall segment revenue was up 1,0%.

ITB saw an increase in revenue of 1,6% compared to the prior year despite volume declines of 7,6%.

GR

OS

S M

AR

GIN ITB achieved a gross profit margin of 14%

compared to 9,5% in the prior year. This was offset by the Labels division’s

decreased gross profit margin of 25,6% to 23%.

OP

ER

AT

ING

PR

OF

IT ITB’s operating profit increased from 1,2% to 5,0%.

This returned the division to historical profitability levels after the challenging prior year that saw abnormal increased material costs and downtime due to strike action.

The Labels division’s operating profitdecreased from 14,2% to 8,1% as a result of an increase in expected credit loss allowance as a result of COVID-19 and lower margin product mix.

FY17 FY18 FY19 FY20

*Includes ITB Flexible Packaging Solutions and Novus Labels.

R’m



6,3% of revenue

Tissue segment | Commentary.

14FINANCIAL REVIEW

155 175233 257

-62 -52

-17 -19

-15,7%

-10,9%

2,4%-0,6%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-100

400

900

1 400

1 900

2 400

Revenue Operating Profit exc. Capital Items Gross ProfitR

EV

EN

UE Revenue increased due to price increases on

products sold despite volume being down by 2,3% year on year.

GR

OS

S

MA

RG

IN Gross profit margin decreased as a result of unfavourable market conditions and rising raw material and energy costs.

OP

ER

AT

ING

PR

OF

IT The operating profit % remained consistent year on year.

Operating expenses measured as % ofrevenue, decreased from 9,8% to 6,9% during the year under review, mainly as a result of cost saving measures put in place.

FY17 FY18 FY19 FY20R’m



Revenue contribution.

15OPERATING REVIEW

The Print division remains at the core of Novus

Holdings and contributed 77,0% to Group revenue.

CATEGORYSHARE OF GROUP

REVENUE 2020SHARE OF GROUP

REVENUE 2019

VOLUMEGROWTH/(DECLINE)

PRINT PRODUCT CATEGORY

Magazines 9,4% 11,1% -19,0%

Newspapers 11,1% 10,5% -2,5%

Retail Inserts & Catalogues 29,0% 29,9% -10,8%

Books & Directories 27,0% 22,1% 17,8%

Security Products 0,0% 3,7% -100%

Publishing 0,5% 0,0% 0,0%

PACKAGING AND TISSUE PRODUCT CATEGORY

Labels 4,2% 5,6% -13,2%

Flexible Plastic Packaging 12,5% 11,7% -7,6%

Tissue 6,3% 5,4% -2,3%

NOVUS HOLDINGS | 2019 INTERIM RESULTS


Outlook and segmental focus.

17OUTLOOK

PRINT TISSUEPACKAGING

Ongoing review of future operational requirements has resulted in a lower cost-base in order to make future print more affordable and extend its longevity.

Will need to adjust to new capacity requirements post COVID-19.

From 01 June 2020 Novus Holdings will continue to own 49% of the existing Tissue operation (which will be equity accounted).

The Group looks forward to partnering with an empowered specialist in the tissue production and conversion industry.

The Lockdown regulations had little impact on the flexible packaging operations as essential food-packaging demand was mostly uninterrupted.

The Labels operation was impacted by the ban on sale of alcoholic beverages and is expected to normalise as the pandemic and lockdown regulations are eased.

ITB will focus on multi-use plastic and novel packaging solutions.

Novus Holdings 2020 Annual financial results 18OUTLOOK

STRATEGIC FOCUS AREA FY20 PROGRESS FY21 FOCUS

Ensure optimalgroup capitalstructure and that operations are optimal size for their respectivemarkets

Tracked target linked KPI’s per facility on a monthly basis and took corrective measures where required.

Optimised net working capital by reducing stockholding and debtors’ book, as well as stretching trade creditors.

Extracted lazy capital. Streamlined the group structure – ITB into Novus Packaging,

Novus Print structure, sold non-essential property, closed KZN facility.

Continue to track ROA’s per facility on monthly basis and take corrective measures on an ongoing basis.

Continue to focus on optimising net working capital by further reducing stock holding and debtors’ book in line with reduced volumes.

Ensure that all facilities are appropriately sized for purpose and continue to trim where deemed necessary (PPE and headcount at all levels).

Constantly scrutinize our product offering to maximize profitability and return and remove waste.

Review all contracts on renewal ensuring that pricing reflects capital employed in full process.

Maintain and grow our market sharesand positions of strength

Continued focus on customer service and retention, as well as implementing business development and marketing initiatives.

Retained key customers amidst highly competitive activity. Introduced new product offerings within our non-print

business (PSL labels). Targeted opportunities in the book market, which is showing

some resurgence, leveraging our improved B-BBEE score. Secured the extension of the printing contract for DBE

workbook for two years.

Focus on customer service, retention of existing clients, extend the life of products where possible.

Book market and education remain relevant. African market is even more relevant for specific products Labels to diversify into more Flexible paper packaging

solutions.

Group strategy and outlook.


STRATEGIC FOCUS AREA FY20 PROGRESS FY21 FOCUS

Drive operationalefficiencies

Leaner structures and more efficient management structures. Embedded a culture of innovation. Continued to leverage market leading skills to drive

operational efficiencies. Continuously assessed individual plant performance against

targets, and removed excess capacity. Further drive on cost-saving initiatives. Impaired excess PPE capacity and noncore assets.

Continue to embed culture of innovation. Continuously assess individual plant performance against

targets, and cut or close down excess capacity with an increased sense of urgency.

Rationalize and standardize product offerings to avoid inefficient run-length, stockholding.

Grow non-traditionalprintingbusinesses’ revenuecontribution

Focused on improving the margins and profitability of non-traditional printing operations.

Ensured facilities are correctly sized in terms of industry best practice.

Material acquisitions will not be pursued in the short term. Invested in new product offerings in the Labels business

(pressure sensitive labels). Invested further in value-adding laminated bags at ITB. Closed-loop recycling within plant at ITB reducing landfill

dumping. Exited non-profitable plastic shopping bag markets at ITB.

Focus on improving the margins and profitability of the non-traditional printing operations.

We will not pursue any material acquisitions in these uncertain times.

Diversify product offering with our Labels and packaging businesses to broaden customer base.

Continue totransform ourbusiness

Focused on retaining a B-BBEE Level Two status. Added all elements of the scorecard to managements KPI’s. Introduced full tracking system to monitor and maximize B-

BBEE spend and point accumulation.

Focus on maintaining B-BBEE Level 2 status under the revised codes.

Development and retention of key staff remains a priority.

19OUTLOOK

Group strategy and outlook.

NOVUS HOLDINGS | 2019 INTERIM RESULTS

+27 21 550 [email protected]

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