According to Novus Holdings CEO Neil Birch, the company anticipated a lower performance for the six months to September 2018, but is pleased that the first half of the year has witnessed the stabilisation of the business with new bases having been set.
The company announced a slight increase in revenue from R2 295 million to R2 297 million for this period, despite the direct impact of the Media24 tender renewal coming online and impacting print revenue.
‘We realise that there is still much to do, which is why we remain committed to improving profitability and maximising efficiency throughout our operations,’ said Birch. He explained that as a direct result of the focus on disciplined spending, the group’s free cash flow improved by R162 million to an outflow of R45 million (2017 recorded an outflow of R207 million).
‘Utilisation of cash resources has been a major focus this period. Capital expenditure has reduced by R30 million, net working capital improved by R181 million, share buy-backs have been introduced and a prudent level of balance sheet gearing has been allowed.’
However, print revenue declined during the period by 14,1% to R1 828m and operating profit declined by 38,3% to R212 million. In addition, the group experienced a decline in gross profit margin to 26,1% and headline earnings per share decreased by 31,2% to 49,4 cents per share.
Retail inserts and catalogue work, which makes up 26% of the group’s revenue, has increased by 5,5% year-on-year. ‘This is a positive trend given the current economic climate. Customers have increased their print volumes and print marketing spend to counter declining consumer spend,’ said Birch.
He added that other performance highlights include the packaging division’s revenue having significantly increased by 90,8% in this period following the acquisition of ITB Plastics on 1 October 2017. ‘We are also pleased with Paarl Labels’ performance as it increased its revenue by 23,2%, due to existing customers having increased work allocation.’
In addition, the tissue business has increased revenue by 50,3% and is close to break-even. ‘Measures were implemented to reduce losses and while our preferred outcome remains an exit strategy, we are committed to ensuring that this business’s profitability continues to improve. We are realistic about the measures needed in order to mitigate a further decline, and are committed to deliver value not only to our shareholders, but to all our stakeholders,’ concluded Birch.