Novus Holdings

Annual Financial Results Presentation for year ended 31 March 2021

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Annual Financial Results Presentation for year ended 31 March 2021 2

Contents

Annual Financial Results Presentation for year ended 31 March 2021 4EXECUTIVE OVERVIEW

Results summary

OPERATING (LOSS)/PROFIT(Excluding “other gains/(losses)”)

-R20m [2020: R126m]

HEADLINE LOSS PER SHARE

-5,4c [2020: 23,4c]

DIVIDENDS

50c [2020: 0c]

FREE CASH FLOW

R362m [2020: R336m]

7,8%

REVENUE

R2 838m [2020: R4 112m]

(31,0%)


2021 2020

Revenue R2 838m R4 112m (31,0%) ▼

Gross profit R540m R768m (29,6%) ▼

Gross margin 19,0% 18,7% 0,3% ▲

Overheads R560m R641m 12,6% ▼

OPERATING (LOSS)/PROFIT* -R20m R126m ▼

OPERATING MARGIN* -0,7% 3,1% ▼

HEADLINE (LOSS)/EARNINGS PER SHARE(Cents)

-5,4c 23,4c ▼

LOSS PER SHARE(Cents)

-8,3c -119,6c▲

6FINANCIAL REVIEW

*(Excluding “other gains/(losses)”)

Group income statement key features For the year ended 31 March 2021


Cash position analysis

7FINANCIAL REVIEW

Cash inflows• Further reduction in net

working capital of R250m.

• Proceeds on the sale of plant and machinery at Novus Print amounting to R59m.

Cash outflows• Related party loan advanced

at time of partial disposal of the Tissue business.

Gearing ratio 5,3% 6,2%

NET CASH/(DEBT) (including bank overdraft) 325 32

Year ended 31 Mar 2021

(R’m)

Year ended 31 Mar 2020

(R’m)

Cash generated from operations (excluding working capital)

89 337

Working capital 250 91

Net property, plant, equipment and intangibles 25 (54)

Taxation paid (2) (38)

Free cash flow 362 336

Acquisitions/disposals of subsidiaries, investment in associate

(56) 32

Net loan repayments & finance cost (38) (53)

Dividends paid - (86)

Net cash flow 268 228

Opening cash balance 175 (54)

CLOSING CASH BALANCE 443 175

Annual Financial Results Presentation for year ended 31 March 2021 8FINANCIAL REVIEW

175

443

106

25059

2

-20

-2 -34-55

-38

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0

100

200

300

400

500

600

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Net

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fin

ance

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sts

Oth

er

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ance

at

31

Mar

ch 2

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R’m

Financial year ended 31 March 2021

Cash flow movements


961

554

701 554

502

385

537

336

631

487 485

310

-

200

400

600

800

1 000

1 200

Sept 2019 March 2020 Sept 2020 March 2021

Debtors Creditors Inventory Net working capital

9FINANCIAL REVIEW

R’m

Working capitalFinancial year ended 31 March 2021

1 090

656 649

527


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.

62 55 51

24

76

52

29

9

-

20

40

60

80

100

120

140

160

FY18 FY19 FY20 FY21

R’m Expansion

Maintenance

Capex overview [EXCL. INTANGIBLES]

Financial year ended 31 March 2021


4 308 4 3324 112

2 838

501294

126-2

0

26,2%

21,8%

18,7% 19,0%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-500

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 contributed 74,8% (2020: 77,0%) to total revenue.

• Print experienced volume declines on all product categories with an overall tonnage drop of 35,8% (2020: 4,2%).

GR

OS

S M

AR

GIN • Gross profit margin improved marginally

due to significant asset impairments in FY20 which was impacted by margin compression and unfavourable product-mix in Print.

• Packaging revenue contributed at a lower margin with a 3,9% decrease on the prior year.

• Whilst ITB’s gross profit remained fairly stable, Gravure Labels gross profit margin showed a decline of 14,3%.

OP

ER

AT

ING

PR

OF

IT • Operating loss declined to -R20m (2020: R126m) mainly resulting from lower revenue levels.

• Operating expenses reduced by R81,1m compared to FY20 with a further reduction expected in FY22 due to the Group’s cost-reduction initiatives.

Group overviewFinancial year ended 31 March 2021

FY18 FY19 FY20 FY21R’m


3 634

3 3493 168

2 123

505

270106

-37

28,7%

24,7%

20,7% 21,5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-500

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

Revenue Operating Profit exc. Capital Items Gross Profit

RE

VE

NU

E • The decrease in revenue was driven by volume declines of 35,8% overall across product categories.

GR

OS

S M

AR

GIN • The gross profit margin in Print improved

largely as a result of a reduction in depreciation.

• Savings on maintenance as only essential maintenance was undertaken.

• Whilst the effects of the above favourably impacted GP margin, this was partially negated by the changes in product mix and raw material pricing.

OP

ER

AT

ING

PR

OF

IT • The lower revenue levels negatively impacted operating profit.

• Whilst operating profit was down, cost extraction exercises yielded a positive benefit.

• Operating expenses declined by 10,5% from the prior year with savings in marketing and promotions, reduced travel and entertainment costs and staff costs.

• Provisions for doubtful debts in this year are lower compared to prior year.

• Both years include retrenchment costs with the current year higher by R6,8m.


Print segment | CommentaryFinancial year ended 31 March 2021


475 750 688 580

42 41 40 20

18,7%

14,7%16,3%

12,4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-100

400

900

1 400

1 900

2 400


RE

VE

NU

E • Labels revenue declined by 31,6%. This is a direct result of COVID-19 and the effect of the alcohol ban..

• Although ITB continued to sell during the National Lockdown, their revenue declined by 10,2% compared to the prior year due to COVID-related economic downturn with a volume decline of 7,8%.

GR

OS

S M

AR

GIN • ITB achieved a gross profit margin of 13,4%

compared to 14,0% in the prior year.• The Label’s division’s gross profit margin

decreased from 23,0% to 8,7% compared to the prior year.

• The division achieved lower margins from key customers due to pricing pressure and lost margin due to restrictions on production and trade.

OP

ER

AT

ING

P

RO

FIT • ITB’s operating profit % increased from 5,0%

to 5,9%. The division benefitted from stable polymer pricing and cost savings across all expense categories.

• The Labels division’s operating profit %decreased from 8,1% to -6,1%.

*Includes ITB Flexible Packaging Solutions and Novus Labels.

Packaging segment | CommentaryFinancial year ended 31 March 2021



175233 257

134-52 -17

-19 -3

-10,9%

2,4%-0,6%

8,6%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-100

400

900

1 400

1 900

2 400


RE

VE

NU

E • The Tissue division contribution to Group revenue is 4,7% with this being reflective for six months after which was equity accounted.

GR

OS

S

MA

RG

IN • Gross profit margin was up by 9,2% year on year.

OP

ER

AT

ING

PR

OF

IT • The division contributed an operating loss of R2,6 million compared to a loss of R19,1 million in FY20.


Tissue segment | CommentaryFinancial year ended 31 March 2021

Annual Financial Results Presentation for year ended 31 March 2021 16OPERATING REVIEW

CATEGORYSHARE OF GROUP

REVENUE 2021SHARE OF GROUP

REVENUE 2020

VOLUMEGROWTH/(DECLINE)

PRINT PRODUCT CATEGORY

Magazines 7,7% 9,4% -42,3%

Newspapers 9,1% 11,1% -40,0%

Retail Inserts & Catalogues 26,5% 29,0% -38,6%

Books & Directories 31,1% 27,0% -26,6%

Publishing 0,4% 0,5% 0,0%

PACKAGING AND TISSUE PRODUCT CATEGORY

Labels 4,2% 4,2% -24,3%

Flexible Plastic Packaging 16,3% 12,5% -7,8%

Tissue (for six months trading) 4,7% 6,3% -49,1%

Revenue contribution

Print 75%

Packaging 21%

Tissue 5%

NOVUS HOLDINGS | 2019 INTERIM RESULTS


Outlook and segmental focus

18OUTLOOK

PRINT TISSUEPACKAGING

The right-sizing of our Print operations bodes well for the future and this line of ‘right-sizing’ philosophy has been entrenched in the minds of management and teams for future response.

Recovery of post-COVID-19 volumes can be expected, the shortage of pulp will have a knock-on effect on paper-pricing and margins, compounded by the volatile Rand.

Transaction closed out after year-end.

Equity accounted for in future.

Tissue business anticipated to improve under focused management.

Labels Gravure is expected to see some recovery as trading normalises.

ITB’s performance is expected to remain stable.

Both businesses will continue to explore alternative products that complement their existing offerings and align with current equipment capabilities.

Annual Financial Results Presentation for year ended 31 March 2021 19OUTLOOK

STRATEGIC FOCUS AREA FY21 PROGRESS FY22 FOCUS

Ensure optimal group capitalstructure and operations tomatch market demand

• Group structure has been further trimmed to suitcircumstances, lazy assets to be identified and liquidated,continued emphasis on maximising return on funds employed.

• Optimised net working capital by further reducing stockholding and debtors’ book in line with reduced volumesmaximised creditor funding.

• Appropriately sized all facilities and streamlined the Group’s structure.

• Continue to track ROAs per facility on monthly basis andtake corrective measures on an ongoing basis.

• Identify ways to further optimise/reduce net working capital requirements.

• Scrutinize our product offering to maximise profitability and return.

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

Sustain our market shares and positions ofstrength, and grow revenuecontribution through leveraging our technology

• Heightened focus on existing customer relationships, andnurtured customers through challenging circumstances to support retention drive.

• Research and development in diversifying product offering through repurposing equipment, to broaden customer base, and grow existing customers.

• Enhanced focus on customer service, and deepeningexisting customer relationships.

• Enhanced focus on offering of high level of service by being agile, responsive and innovative.

• Target growth opportunities in the African market,especially in the education and governmental sectors where the Group already offers expertise.

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

• Explore extended product offering through repurposing equipment, and extend customer base, by targeting opportunities in related customer markets and peripheral channels.

• Pursue more transactional export opportunities.

Group strategy and focus


STRATEGIC FOCUS AREA FY21 PROGRESS FY22 FOCUS

Drive operationalefficiencies

• Effectively managed through continuous assessment ofindividual plant performance against targets, and reduceexcess capacity with an increased sense of urgency.

• Rationalized and standardized product offerings to avoidinefficient run-length and stockholding.

• Improving press utilisation, waste minimisation and the analysis of optimum productive capacity.

• Continue to assess individual plant performance againsttargets, and respond with corrective measures whenrequired.

• Further rationalising and standardising of product offeringsto avoid inefficient run-length, stockholding.

Nurturing a formidable andmulti-disciplinary workforce, while continuing to transform our business

• Effectively managed empowerment initiatives, resulting in retaining a B-BBEE Level Two status.

• Continued usage of scorecard tracking system to monitor and maximize B-BBEE spend and point accumulation.

• Less training initiatives took place than planned due to the disruption of COVID-19 on business activities.

• Focus on maintaining B-BBEE Level Two status and drivefurther improvement in our transformation.

• Focus on development of talent, and nurturing and growing staff to ensure retention.

• Further focus on upskilling and multi-skilling of employees.

20OUTLOOK

Group strategy and focus

NOVUS HOLDINGS | 2019 INTERIM RESULTS

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