Novus earnings slide on loss of Media24 printing business
Six-months results to end-September are the first to reveal the impact of the loss of the attractively priced printing work, which was transferred to Caxton and smaller printers
The loss of more than half of Media24’s newspaper and magazine printing business was behind the largest decline in interim headline earnings reported by printing and manufacturing group Novus Holdings.
The results for the six months to September are the first to reveal the impact of the loss of the attractively priced printing work, which was transferred to Caxton and a few smaller printers at the end of March.
On Friday, Novus reported a 31% decline in headline earnings per share as the group battled to compensate for the loss of the Media24 work.
Novus said this negative impact was aggravated by weaker consumer spending on magazines. The 32% decline followed a 72.6% slump in headline earnings in financial 2018 as the management took hefty impairments on plant closures following the loss of the Media24 business.
The second-half results are expected to be significantly weaker as the group will have limited benefit from its book printing contract with the department of basic education.
The just-released interim results mark the latest milestone in what has been a traumatic five years for Novus, which was a subsidiary of Media24 until 2014 when former CEO Lambert Retief decided to sell his stake in the company. This prompted a Competition Commission intervention by Caxton, which claimed Retief’s sale would result in a change of control. In a bid to side-step this intervention Novus opted for a JSE listing in early 2015.
The share traded as high as R16.80 in the first half of 2015 but thereafter slumped steadily to a low of R3.14 in July 2018 in the wake of a slew of senior executive departures, the loss of the Media24 business, disappointing results from its recently acquired tissue businesses and poor prospects for its label business.
The group took more strain in late 2016 when the Treasury suspended the valuable three-year contract for printing the department of basic education’s workbooks, which had been awarded earlier in the year. The suspension was lifted in 2017 and the business has provided a significant boost to Novus’s revenue and margin.
Additional capacity acquired by the group’s relatively new and struggling tissue business helped to boost revenue by 50% in the first half of 2018.
“While this business has improved and is close to break-even, it is still not performing to satisfaction,” said the Novus board.
It said the group remains on track to meet the earlier forecast for headline earnings of 50c- 60c a share for the full year to end March 2019. This means Novus is on course to produce headline earnings of 0.5c- 10c a share in the second half of the year.