new six months ended 30 september 2018 - novus holdings · 2018. 11. 20. · • the division...
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NOVUS HOLDINGS | 2019 INTERIM RESULTS
PRESENTATION TUESDAY, 20 NOVEMBER 2018
SIX MONTHS ENDED30 SEPTEMBER 2018
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NOVUS HOLDINGS | 2019 INTERIM RESULTS
CONTENTS
2
PRESENTED BY
Neil Birch – Chief Executive Officer
Harry Todd – Chief Financial Officer
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NOVUS HOLDINGS | 2019 INTERIM RESULTS
EXECUTIVEOVERVIEW
3
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NOVUS HOLDINGS | 2019 INTERIM RESULTS
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
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NOVUS HOLDINGS | 2019 INTERIM RESULTS
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.
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NOVUS HOLDINGS | 2019 INTERIM RESULTS 6
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NOVUS HOLDINGS | 2019 INTERIM RESULTS
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
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NOVUS HOLDINGS | 2019 INTERIM RESULTS
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.
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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
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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
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NOVUS HOLDINGS | 2019 INTERIM RESULTS
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
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NOVUS HOLDINGS | 2019 INTERIM RESULTS
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
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NOVUS HOLDINGS | 2019 INTERIM RESULTS
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
Revenue Operating Profit exc. Capital Items Gross Profit
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
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NOVUS HOLDINGS | 2019 INTERIM RESULTS
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
Revenue Operating Profit exc. Capital Items Gross Profit
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
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NOVUS HOLDINGS | 2019 INTERIM RESULTS
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
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NOVUS HOLDINGS | 2019 INTERIM RESULTS
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NOVUS HOLDINGS | 2019 INTERIM RESULTS
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.
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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.
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NOVUS HOLDINGS | 2019 INTERIM RESULTS