New SIX MONTHS ENDED 30 SEPTEMBER 2018 - Novus Holdings · 2018. 11. 20. · • The division...

NOVUS HOLDINGS | 2019 INTERIM RESULTS

PRESENTATION TUESDAY, 20 NOVEMBER 2018

SIX MONTHS ENDED30 SEPTEMBER 2018


CONTENTS

2

PRESENTED BY

Neil Birch – Chief Executive Officer

Harry Todd – Chief Financial Officer


EXECUTIVEOVERVIEW

3


OPERATING PROFIT (Excl. impairments, profit / (loss) on disposal of assets and loss on de-recognition of foreign subsidiary)

R228 m [Sep ’17: R332 m](31,4%)

HEADLINE EARNINGS PER SHARE

49,4 c [Sep ‘17: 71,7 c] (31,2%)

REVENUE

R2 297 m [Sep ‘17: R2 295 m](0%)

RESULTS SUMMARY

4EXECUTIVE OVERVIEW


BUSINESS FEATURES [FOR SIX MONTH ENDED 30 SEPTEMBER 2018]

5EXECUTIVE OVERVIEW

OP

ER

AT

ION

AL

FIN

AN

CIA

L

• Intense scrutiny of cash utilisation.• Department of Basic Education (DBE) Workbook Project continues

to contribute strongly to results. • Forex had a negligible impact in first half, mostly negated by

Group’s Forex cover policy. • Share buy-backs.

• New base for Print division established post Media24 agreement. • ITB Plastics has been successfully integrated into the Group. • Labels performing well. • Tissue turnaround slow but steady improvement. • Management structure settling in and focused.

ST

RA

TE

GIC

• Drive to improve B-BBEEE scorecard. • No new acquisition targets, in line with strategy, but organic

growth related Capex still contemplated.

NOVUS HOLDINGS | 2019 INTERIM RESULTS 6


GROUP INCOME STATEMENT KEY FEATURES [SIX MONTHS ENDED 30 SEP 2018]

2018 2017 % CHANGE (Rounded)

Revenue R 2 297 m R 2 295 m 0%

Gross profit R 599 m R 659 m (9,1%) ▼

Gross margin 26,1% 28,7% (2,6%) ▼

Overheads R 371 m R 327 m (13,5%) ▲

OPERATING PROFIT(Excl. impairments, profit / (loss) on disposal of assets and loss on de-recognition of foreign subsidiary)

R 228 m R 332 m (31,4%) ▼

OPERATING MARGIN(Excl. impairments, profit / (loss) on disposal of assets and loss on de-recognition of foreign subsidiary)

9,9% 14,5% (4,6%) ▼

HEADLINE EARNINGS PER SHARE(Cents)

49,4 c 71,7 c (31,2%) ▼

7FINANCIAL REVIEW


CASH POSITION ANALYSIS

8FINANCIAL REVIEW

Six months ended 30 Sep 2018 (R’m)

Six months ended 30 Sep 2017 (R’m)

Cash generated from operations -9 ▲ -37

Net property, plant, equipment and intangibles 6 ▲ -76

Taxation paid -42 ▲ -94

Free cash flow -45 ▲ -207

Acquisitions of subsidiaries, non-controlling interest -42 ▼ -

Other loans and receivables -1 ▲ -4

Net loan & finance cost payments -12 ▲ -19

Dividends paid -161 ▲ -179

Share buy-back -63 ▼ -

Net interest paid -4 ▼ -

Net cash flow -328 ▲ -409

Opening cash balance 209 ▼ 227

CLOSING CASH BALANCE -119 ▲ -182

FREE CASH FLOW

• While EBITDA was lower, cash outflow decreased due to timing of debtor collections notwithstanding higher raw material inventory.

• Significantly reduced capital expenditure by R30 m.

• Positive cash proceeds on sale of Paarl building of R61 m.

NET CASH FLOW

• 2018 dividend of 2 times HEPS cover was distributed during the period.

• Share buy-backs and odd-lot repurchase during the period amounting to R63 m.

• Contingent consideration settled for ITB Plastics acquisition of R42 m on 01 June 2018.

NOVUS HOLDINGS | 2019 INTERIM RESULTS 9FINANCIAL REVIEW

209

-119

+222

+81+61

-299 -42 -55 -42 -62 -160 -32

-350

-250

-150

-50

50

150

250

Cash balance01 Apr 2018

Operatingprofit

Depreciation WorkingCapital

Taxationpaid

Acquisitionof PPE

Proceedson

disposal ofPPE

Acquisition ofsubsidiary

Payment for shares

bought back

Dividendspaid

Other Cash balance30 Sep 2018

R'm

Inventory: (112)

Trade and other payables: 122

Trade and other receivables: (309)

CASH FLOW MOVEMENTS

SIX MONTHS ENDED 30 SEPTEMBER 2018

NOVUS HOLDINGS | 2019 INTERIM RESULTS 10FINANCIAL REVIEW

CAPEX

• Capex spend decreased by R30 m.

• R28 m spent on expansion for capacity enhancing projects within the Packaging division.

9

31

12 18

83

104

72

37

0

20

40

60

80

100

120

140

160

Maintenance Expansion

R’ m 2015 2016 2017 2018

CAPEX OVERVIEW (EXCL. INTANGIBLES]

SIX MONTHS ENDED 30 SEPTEMBER 2018


GROUP OVERVIEW

11FINANCIAL REVIEW

SIX MONTHS ENDED 30 SEPTEMBER

2 082 7572 176 516

2 294 583 2 297 452

35

21

78

30

41

33

33

21

07

22

79

58

31.4%

26.5%

28.7%

26.1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

Revenue Operating Profit exc. Capital Items Gross Profit %

RE

VE

NU

E • Diversified operations (non-Print) increased revenue contribution from 7% to 20% year-on-year.

• Reduced Print revenue, largely replaced by Packaging division revenue, at lower margins.

• H1 sees seasonality of DBE contract as majority of work was printed in this period.

• Packaging revenue is typically stronger in H2.

GR

OS

S M

AR

GIN • Gross profit significantly impacted by

retained print work and new Packaging revenue at lower margins.

• FY18 Print capacity reductions positively impacted the current year employee costs and depreciation charge.

OP

ER

AT

ING

PR

OF

IT • Operating overheads declined by 4% on a like-for-like basis.

• The first half of the year sees the benefit of the seasonal nature of the business, with the second half typically not continuing this trend.

FY16 FY17 FY18 FY19R’000


PRINT SEGMENT | Commentary

12FINANCIAL REVIEW

1 955 6712 039 501

2 127 939

1 828 534

35

07

88

31

92

50

34

29

14

21

45

11

32.0%

28.2%

30.5%29.5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

Revenue Operating Profit exc. Capital Items Gross Profit

SIX MONTHS ENDED 30 SEPTEMBER

FY16 FY17 FY18 FY19R’000

RE

VE

NU

E • Revenue contribution to the Group reduced to 80% during the year (93% in prior year).

• Revenue in the Print division declined by 14,1% compared to prior year.

• Retail inserts and catalogue category increased by 5,5%.

• Overall print tonnage declining by 15,3%.

• Volume declines on magazines and newspaper publications.

GR

OS

S M

AR

GIN • Print gross profit margin decreased by

1,0% to 29,5%.• Benefit of costs reduction exercise

conducted in FY18 which included depreciation savings on impaired assets in Coldset as well as savings due to reduced staff costs.

• Negligible impact of Forex volatility.• Consumption well controlled.

OP

ER

AT

ING

PR

OF

IT • Lower revenue levels negatively impacted operating profit.

• This segment has also seen operating expenses measured as % of revenue increase from 14,3% to 17,7%.

• This increase of 3,4% is mainly as a result of renegotiated terms on key contracts.

80% of revenue


PACKAGING SEGMENT |Commentary

13FINANCIAL REVIEW

56 076 57 017 93 575

359 113

43

45

98

31

13

03

4

28

22

0

31.0%

18.7%

26.1%

17,1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000


SIX MONTHS ENDED 30 SEPTEMBER 15,6% of revenue

RE

VE

NU

E • Revenue contribution to the Group increased to 15,6% during the year (4,1% in prior year).

• Packaging revenue up on prior year by 283,8% mainly due to inclusion of ITB Plastics.

• Labels showed improved performance contributing positively to this division, with volume growth of 24,9%.

GR

OS

S M

AR

GIN • Disappointing period for ITB Plastics,

below expected margin contribution.• Delay in passing on material costs

increases, due to challenges faced in this period.

• Labels continued to extract efficiencies through improved production processes with gross profit up 3,7%.

OP

ER

AT

ING

PR

OF

IT • Labels operating expenses as a % of revenue decreased from 14,6% to 13,3% during the year.

• Despite positive efforts, ITB Plastics expenses are still unacceptably high.

FY16 FY17 FY18 FY19R’000


TISSUE SEGMENT | Commentary

14FINANCIAL REVIEW

71 010 79 99873 069

109 805

-29

55

-24

94

9

-23

84

1

-14

77

3

15.4%

-11.6%

-20.1%

-2.0%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-500 000

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000


RE

VE

NU

E • Revenue increased by 50,3%,contributing 4,8% to Group revenue during the period. (FY18: 3,2%).

• Operating in a very competitive market with rising input costs and over capacity.

GR

OS

S M

AR

GIN • Gross profit margin improved

significantly by 18,1% but remained negative, this has turned positive, during the period.

• Division still operating at suboptimal levels due to decreased market demand, market competitiveness and rising input costs.

• Continuous drive from management to achieve operating efficiencies through cost extraction and sales price increases.

OP

ER

AT

ING

PR

OF

IT • The operating loss in Tissue reduced by 38%.

• The division managed to reduce operating expenses year-on-year.

• Operating expenses measured as % of revenue decreased from 12,5% to 11,5% during the year.

SIX MONTHS ENDED 30 SEPTEMBER 4,8% of revenue

FY16 FY17 FY18 FY19R’000


CATEGORYShare of

Group Revenue Sep 2018 YTD

Share of Group Revenue Sep 2017 YTD

Volume growth/(decline)

PRINT PRODUCT CATEGORY

Magazines 10,8% 15,6% 19,9% ▼

Newspapers 10,1% 18,3% 49,0% ▼

Retail Inserts & Catalogues 26,2% 24,8% 0,1% ▼

Books & Directories 32,5% 33,5% 6,1% ▼

PACKAGING AND TISSUE PRODUCT CATEGORY

Labels 5,0% 4,1% 24,9% ▲

Flexible Plastic Packaging 10,6% 0,0% 100,0% ▲

Tissue 4,8% 3,2% 63,2 % ▲

NON-SA SALES [ALL CATEGORIES OF REVENUE]

For the six months ended 30 Sep 2018: R87,1 m (2017: R56,3 m)

REVENUE CONTRIBUTION

15OPERATING REVIEW


SEGMENTAL FOCUS

17OUTLOOK

PR

INT

TISS

UE

PAC

KA

GIN

G

• Print is set to remain cash generative, despite ongoing decline in newspaper and magazine circulation.

• Input costs are increasing in hard currency terms.

• Ongoing assessment of structure and flexibility to changing environment.

• Relentless pursuit of cash extraction.

• Minimal expansion for Capex required.

• Identifying innovative ways to drive growth in declining categories.

• Improved market and operational understanding to drive sustainable improvements.

• Sustainable break-even beckons in the short term.

• Competitive market expected to continue.

• Cost extraction and efficiency improvement remain key focus areas.

• Ultimate exit strategy likely.

• Short term focus on efficient throughput with current capacity to drive meaningful profit contribution.

• Remains a key growth area into the future.

• Plastic remains an essential packaging medium, despite public perception.

• Ability to pass on raw material price increases key to improve profitability.

• Innovation of new packaging products a definite differentiator.

• Capex for growth spent in Labels to enter new markets and remain relevant in the current industries.

• Capacity exists for continued growth in long-run Label offering.

NOVUS HOLDINGS | 2019 INTERIM RESULTS 18OUTLOOK

GROUP OUTLOOK

STRATEGIC FOCUS AREA STATUS NEXT 6 – 12 MONTHS

Group Profitability • The Group anticipated a lower performing period and is realistic about the challenges the business faces.

• Raw material pricing (paper and polymer) has shown a steady increase during the year.

• Further decline mitigated through improved contribution from other products revenues.

• Should the volatile exchange rate continue, it is expected to create further margin pressure.

Consolidation & Stabilisation of Print

• The first half of the year has witnessed the stabilisation of the print segment with new bases having been set.

• The Group continues to monitor and assess the Print division.

• Group structure and capacity will be continually optimised to suit current loads and market opportunities.

Turnaround Tissue • The Tissue plant continues to receive disproportionate management focus and the preferred outcome remains an exit strategy on the most beneficial terms.

• While Management continues to pursue an exit we remain committed to ensuring that profitability continues to improve.

Capital Structure & Allocation

• Cash generation has remained strong.• Limited gearing in place.• Share buy-backs commenced.• Capital expenditure strictly scrutinised.

• Share buy-backs to continue.• Prudent gearing will be continually assessed.• Working capital to be optimised per operational unit.

B-BBEE • Current Level 4 B-BBEE status maintained. • Specific initiatives in place to maintain and improve various aspects of B-BBEE transformation to ultimately deliver an improved rating.


+27 21 550 [email protected]

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