YEAR ENDED 31 MARCH 2019 - Novus Holdings€¦ · Novus Holdings 2019 Annual financial results...

Novus Holdings 2019 Annual financial results

YEAR ENDED31 MARCH 2019


CONTENTS

2

Novus Holdings 2019 Annual financial results 3


OPERATING PROFIT (Excluding profit/(loss) on disposal of assets and investments, impairments and re-classification of foreign currency translation reserve)

R294m [2018: R501m](41,4%)

HEADLINE EARNINGS PER SHARE

60,4c [2018: 102,9c] (41,3%)

REVENUE

R4 332m [2018: R4 308m](0,6%)

RESULTS SUMMARY

4EXECUTIVE OVERVIEW

DIVIDEND

30 cps [2018: 52 cps] (42,3%)


GROUP INCOME STATEMENT KEY FEATURES [FOR YEAR ENDED 31 MARCH 2019]

2019 2018 % CHANGE (Rounded)

Revenue R4 332m R4 308m 0,6% ▲

Gross profit R944m R1 126m (16,2%) ▼

Gross margin 21,8% 26,2% (4,4%) ▼

Overheads R651m R626m 3,9% ▲

OPERATING PROFIT* R294m R501 (41,4%) ▼

OPERATING MARGIN* 6,8% 11,6% (4,8%) ▼

HEADLINE EARNINGS PER SHARE(Cents)

60,4c 102,9c (41,2%) ▼

6FINANCIAL REVIEW

*(Excluding profit/(loss) on disposal of assets and investments, impairments and re-classification of foreign currency translation reserve)


CASH POSITION ANALYSIS

7FINANCIAL REVIEW

CASH INFLOWS

• Media24 impact on EBITDA.

• Proceeds on sale of Paarl building of R60m.

CASH OUTFLOWS

• Working capital:

- Inventory increase: Pre-price increase buying and

- Debtors increase of R56m due to weekend close.

• Modest capex spend.

• Final acquisition amount of R42m for ITB.

• 2018 dividend of 2X HEPS cover was distributed.

• Share buy-backs 31,2m shares (9%), and odd-lot of 676k.

Year ended 31 Mar 2019 (R’m)

Year ended 31 Mar 2018 (R’m)

Cash generated from operations(excluding working capital)

433 718

Working capital -202 -34

Net property, plant, equipment and intangibles -46 -116

Taxation paid -69 -169

Acquisitions of subsidiaries, non-controlling interest

-48 -202

Net loan & finance cost payments -29 -35

Dividends paid -161 -179

Share buy-backs and odd lot -142 -

Net cash flow -263 -18

Opening cash balance 209 227

CLOSING CASH BALANCE -54 209

Gearing Ratio 3,7% 4,1%

NET DEBT (including bank overdraft) -153 -93

Novus Holdings 2019 Annual financial results 8FINANCIAL REVIEW

CASH FLOW MOVEMENTS

FINANCIAL YEAR ENDED 31 MARCH 2019

209

-54

277

161

62

202

69

107

48

141

161

35

-100

0

100

200

300

400

500

600

700

Cashbalance at

01 April2018

Operatingprofit

Depreciation Workingcapital

Taxationpaid

Acquisitionof PPE

Proceedson

disposal ofassets

Acquisitionof

subsidiary

Paymentfor shares

boughtback

Dividendspaid

Other Balance at31 March

2019

R’m


1 2

44

70

2 1

01

1

68

6 5

01

52

9 6

13

51

2

34

5 47

5 58

7 69

2

-

200

400

600

800

1 000

1 200

1 400

H1 H2 H1 H2

2018 2019

Debtors Creditors Inventory Net working capital

1 089

648

985

866

9FINANCIAL REVIEW


WORKING CAPITAL

R’m

Novus Holdings 2019 Annual financial results 10FINANCIAL REVIEW

CAPEX

• Maintenance capex incurred reduced from the prior year.

• Capex in the printing operations is limited largely to maintenance spend, with proactive maintenance programmes aiming to extend the useful lives of assets.

• Expansion capex incurred related mainly to the Packaging segment, with the introduction of new product offerings.

CAPEX OVERVIEW [EXCL. INTANGIBLES]


56

64

62

55

18

0 1

80

76

52

-

50

100

150

200

250

300

FY16 FY17 FY18 FY19

Rm Expansion

Maintenance


GROUP OVERVIEW

11FINANCIAL REVIEW


4 1754 312 4 308 4 332

65

1

52

9

50

1

29

4

30,2%

25,6% 26,2%

21,8%

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. Capital Items Gross Profit %

RE

VE

NU

E • Print revenues remained under pressure with volume declines in all product categories except for retail and catalogues.

• Renegotiated Media24 contracts led to a circa R500 million decrease on revenue.

• The 12 month (2018: six months) inclusion of ITB numbers resulted in an additional R241 million revenue contribution by the Packaging segment.

• Revenue includes R164 million printing revenue from African election relatedwork.

GR

OS

S M

AR

GIN • Impacted significantly by lower margins in

Print compared to prior years. • Increased Packaging revenue also

contributed at lower margin.• Capacity reductions and impairments in

2018, with resultant savings in employee costs and depreciation offset margin decline.

OP

ER

AT

ING

PR

OF

IT • Declined by 41,4% to R294 million (2018: R501 million).

• Operating expenses increased by 3,9% mainly due to the full year inclusion of ITB.

• Softer last quarter due to weaker demand, load shedding and currency weakness.

FY16 FY17 FY18 FY19R’m


PRINT SEGMENT | Commentary

12FINANCIAL REVIEW

3 918 3 987

3 634

3 349

68

5

57

5

50

5

27

0

32,3%

27,6%28,7%

24,7%

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 • Print revenue decreased by only 7,9% despite the reduced pricing and volumes with the renegotiated Media24 contracts coupled with a declining market and local economy.

• Retail inserts and catalogues increased by 6,2% year-on-year.

• Business development initiatives yielded results with printing contracts from a large South African publishing house and election related work in Africa.

GR

OS

S

MA

RG

IN • Print margin was eroded by the increase in input costs and is a function of a very competitive environment.

OP

ER

AT

ING

PR

OF

IT • Foreign currency strength and raw material pricing, together with load shedding impacted the segment significantly, largelyimpacting the last quarter.

77,3% of revenue


FY16 FY17 FY18 FY19R’m


PACKAGING SEGMENT | Commentary

13FINANCIAL REVIEW

113 130

475

750

-16

13 42 41-7,3%

18,3% 18,7%

14,7%

-15%

-5%

5%

15%

25%

35%

45%

-100

400

900

1 400

1 900

2 400


17,3% of revenue

RE

VE

NU

E • Overall revenue contribution of segment increased from 11,0% to 17,3% of total revenue.

• Includes full year’s result for ITB, contributing additional revenue of R241 million (91% increase in ITB revenue).

• Labels revenue up by 16,2% - growth in sales predominantly driven by the Gravure labels (wet-glue labels) operation.

GR

OS

S M

AR

GIN • Increased lower average margins due to

unfavourable trading conditions and increased raw material costs at ITB.

• ITB margins under pressure with gross and operating margins down 4,5% and 4,2% respectively year-on-year. Industrial action and material input escalation were major reasons for this underperformance.

• Impact of Rand weakness further exacerbated by the volatile price of crude oil and related polymers impacted input costs.

• Labels gross margin improved to 25,6% up from 24,7%, on the back of improved efficiency and capacity utilisation.

OP

ER

AT

ING

PR

OF

IT • ITB’s operating profit declined by 57,5% year-on-year.

• Operating expenses were well controlled.

FY16 FY17 FY18 FY19


*Includes ITB Flexible Packaging Solutions and Labels.

R’m


PACKAGING SEGMENT | Commentary

14FINANCIAL REVIEW


0

2

4

6

8

10

12

14

16

Mar

-18

Ap

r-1

8

May

-18

Jun

-18

Jul-

18

Au

g-1

8

Sep

-18

Oct

-18

No

v-1

8

De

c-1

8

Jan

-19

Feb

-19

Mar

-19

Rand vs US Dollar (Average)

Rand/US$

Oil Price (R)

0

200

400

600

800

1000

1200

Mar

-18

Ap

r-1

8

May

-18

Jun

-18

Jul-

18

Au

g-1

8

Sep

-18

Oct

-18

No

v-1

8

De

c-1

8

Jan

-19

Feb

-19

Mar

-19

ZAR


5,4% of revenue

TISSUE SEGMENT | Commentary

15FINANCIAL REVIEW

144 155 175 233

-19 -62

-52-17

1,6%

-15,7%

-10,9%

2,4%

-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 • Increased by 33,3% year-on-year with additional mill capacity coming online.

• Stabilised operationally, breaking-even monthly.

GR

OS

S

MA

RG

IN • Improved to 2,4% up from -10,9%, on the back of increased efficiency and market price normalisation.

OP

ER

AT

ING

PR

OF

IT • Typical cyclical industry struggling in current low growth economic environment.

• General pricing challenges on the back of a weakening and volatile Rand.

FY16 FY17 FY18 FY19


R’m


REVENUE CONTRIBUTION

16OPERATING REVIEW

The Print division remains at the core of Novus Holdings and contributed 77,3% to

Group revenue.

ITB increased its revenue contribution to the Group

by 91%.

CATEGORYSHARE OF GROUP

REVENUE 2019SHARE OF GROUP

REVENUE 2018

VOLUMEGROWTH/(DECLINE)

PRINT PRODUCT CATEGORY

Magazines 11,1% 15,6 % -15,9%

Newspapers 10,5% 18,6% -47,4%

Retail Inserts & Catalogues 29,9% 28,3% 3,2%

Books & Directories 22,1% 21,9% -2,3%

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

PACKAGING AND TISSUE PRODUCT CATEGORY

Labels 5,6% 4,9% 12,1%

Flexible Plastic Packaging 11,7% 6,1% 49,4%

Tissue 5,4% 4,1% 31,8%

NOVUS HOLDINGS | 2019 INTERIM RESULTS


OUTLOOK AND SEGMENTAL FOCUS

18OUTLOOK

PR

INT

TISS

UE

PAC

KA

GIN

G

• Expect the declines in all product categories to continue as an industry trend, however the book and education markets are showing a positive resurgence.

• Continue right-sizing our capacity and driving efficiencies.

• Competing aggressively for share in existing markets, while seeking alternative markets (locally and abroad) for our varied product offerings.

• Industry struggling in the current low growth economic environment.

• Business has been earmarked for disposal under the right circumstances. Will be positive for cash generation position and return on net assets in the year ahead.

• Continue engaging with suitors, which is at an advanced stage.

• Increased consumer awareness of plastic pollution, fortunately our focus is not on lightweight plastic products.

• Continue exploring opportunities for innovative use of plastics for the market.

• Expect to see a recovery of margin lost due to the strike and raw material price increases experienced at ITB.

• ITB expected to contribute more strongly to Group results in future.

• Introduction of expanded label offering matching market trends.

Novus Holdings 2019 Annual financial results 19OUTLOOK

STRATEGIC FOCUS AREA FY19 PROGRESS FY20 FOCUS

Ensure optimalgroup capitalstructure and thatoperations aresuitably sized fortheir respectivemarkets

• Reviewed group capital structure.• Bought back 9% (R139 million) of issued share capital.• Reviewed working capital requirements and

structures of all business units.• Redefined operating return on net assets (RONA)

calculation methodology for each facility allowing for effective comparisons to be made on rates across various operations.

• Educated operational management on the value of capital management and set clear targets for all operations.

• Track target linked KPI’s per facility on a monthly basis and take corrective measures where required.

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

• Extract lazy capital.

Maintain and growour market sharesand positions ofstrength

• Responded to competitive pressures by adopting a customer centric approach, which is yielding benefits.

• Identified relevant business development and marketing initiatives.

• Mitigated pricing pressure through innovative collaboration with our customers and suppliers.

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

• Target opportunities in the book market, which is showing some resurgence, leveraging our improved B-BBEE score.

Drive operationalefficiencies

• Performed in-depth process evaluations of all operations, identifying small- to large-scale solutions to increase operational efficiencies.

• Promoted a culture throughout the Group that facilitates innovation.

• Leaner structure and more efficient management structures.• Embed culture of innovation.• Continue to leverage market leading skills to drive

operational efficiencies.• Continuously assess individual plant performance against

targets, and remove excess capacity.• Further drive on cost-saving initiatives.

GROUP STRATEGY AND OUTLOOK

Novus Holdings 2019 Annual financial results 20OUTLOOK

STRATEGIC FOCUS AREA FY19 PROGRESS FY20 FOCUS

Grow non-traditionalprintingbusinesses’ revenuecontribution

• Diversification of revenue streams was not a priority during the year.

• Focused on stabilising and consolidating non-traditional print operations and obtaining a better understanding of the quality of our revenue streams, as well as the cash generation abilities of all operations.

• Acquisition of three small publishers concluded around year end.

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

• Ensure facilities are correctly sized in terms of industry best practice.

• Material acquisitions will not be pursued until such time that all operations are running optimally, specifically the newer acquisitions such as ITB.

Continue totransform ourbusiness

• Obtained a B-BBEE Level Three status in December 2018 by focusing on all the pillars of empowerment, in particular management transformation and procurement.

• Recent initiatives resulted in an improved B-BBEE rating to Level One.

• Focus on retaining a B-BBEE Level One status. • Add all elements of the scorecard to managements KPI’s.

GROUP STRATEGY AND OUTLOOK

NOVUS HOLDINGS | 2019 INTERIM RESULTS

+27 21 550 [email protected]

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YEAR ENDED 31 MARCH 2019 - Novus Holdings€¦ · Novus Holdings 2019 Annual financial results...

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