INTERIM FINANCIAL RESULTS

Transcription

1 Presentation Tuesday, 14 November 2017 INTERIM FINANCIAL RESULTS For the six months ended 30 September 2017

2 Contents EXECUTIVE OVERVIEW FINANCIAL REVIEW OPERATIONAL REVIEW OUTLOOK & STRATEGY Presented by: Keith Vroon, Chief Executive Officer Edrich Fivaz, Chief Financial Officer CONTENTS 2

3 EXECUTIVE OVERVIEW 3

4 Business Features for six months ended 30 September 2017 Core business Exchange rate High volume throughput due to DBE printing being expedited. Balance of print volume under continued pressure. Merge of Heatset and Coldset divisions brought forward. H2 not expected to yield similar volumes or results. More favourable exchange rate scenario, client pricing points have improved. Growth initiatives Tissue TM2 operational for the full six months. TM1 taken out of production in June 2017 refurbished, upgraded and placed back in production in October Increased volumes will be achieved in the latter part of the year. The converting business assets were sold in August Africa No large / significant project to date. Labels / Packaging Pleasing growth across all sectors of clients including wet-glue, self-adhesive and wraparound labels. Novus Print Solutions Full production capabilities have been in place for period of review. Division delivered positive contribution to operating profit during first six months. Acquisitions ITB acquisitions concluded, effective 01 October Continue to search for further diversification initiatives and extending the ITB business model. EXECUTIVE OVERVIEW 4

5 Results Summary Revenue R2 295m (Sep 16: R2 177m) 5,4 % Operating profit excl. impairments and profit/(loss) on disposal of assets R332m 9,2 % (Sep 16: R304m) Headline earnings per share 71,7c (Sep 16: 63,3c) 13,3 % EXECUTIVE OVERVIEW 5

6 FINANCIAL REVIEW 6

7 Group Overview R 000 FY15 FY16 FY17 FY % 27.5% 28.7% 26.5% Revenue Operating Profit exc. Capital Items Gross Profit % Six months ended 30 September Revenue Turnover increased by 5,4% to R2,29bn. Timing of DBE volume 2 impacted results positively. Gross margin Gross profit margin increased by 2,2%. Mostly driven by Print segment, however assisted by stronger performance in Labels. Improved pricing position mostly on the back of beneficial forward cover rates for the period compared to H The gross profit margin further benefitted from production efficiencies that were realised though the additional DBE volumes. The stabilisation of NPS and an associated increase in volumes also made a positive impact. Tissue and Labels both showed an improving gross profit contribution. Operating profit Operating expenses increased by 20,2%, however as a % of revenue, at 14,2% it remained fairly constant to H which was at 14,3%. This was predominantly due to the reversal of doubtful debt in the previous period not recurring and project costs related to the DBE project. Group saw a 2,1% year-on-year inflationary increase in other expenses, excluding the above. Acquisition related expenses and costs associated with increased business activity in other are also included in the net 2,1% above. FINANCIAL REVIEW 7

8 Print Segment: Commentary R 000 FY15 FY16 FY17 FY % 30.5% % 28.2% Revenue Operating Profit exc. Capital Items Gross Profit Six months ended 30 September Revenue Print revenue increased by 4,3% to R2,13bn, shaped by good throughput in print volumes. Increase was due to the full workbook tender being printed in the first six months of the year no further DBE work expected to accrue in second six months. Books and directories (excl. DBE) remained stable. Pressure on retail sector volumes for the period. Magazines and newspapers continue to decline. No Africa project print work during the period. Gross margin Print gross profit increased by 12,9% to R648,8m. Exchange rate position during the six months supported gross margin recovery. Production efficiencies extracted through completion of workbook project in first half of the year. NPS project completion in H meant back to productive levels during H Operating profit Increase of 19,7% in operating expenses resulting from nonrepeat of reversal in doubtful debt provision and full project costs related to the DBE Workbook tender. Additional costs incurred on acquisitions and consulting fees related to the unbundling process. Below inflationary increases in like-for-like expenses. FINANCIAL REVIEW 8

9 Other Segment: Commentary R 000 FY15 FY16 FY17 FY % 22.3% % 1.1% Revenue Growth in Label volumes pleasing on the back of gravure label revenues doubling compared to the previous period. Tissue volumes increased by 5,1% compared to the previous period, assisted by TM2 being operational for the six month period. Further growth expected to be achieved through the refurbishment of TM1 (brought back online during Oct 17) and seasonality of current gravure label requirements. Gross margin Improved gross margin in Label division, assisted by additional throughput and thus better utilisation. Tissue gross margin still not at expected levels as a result of full capacity not being online. Operating profit Increase of 23,9% in operating expenses resulting from prior year reversal of doubtful debt provision in Labels; ignoring this, the expenses in this division decreased compared to H Tissue operating expenses reduced during the period resulting from the sale of tissue converting operation. Revenue Operating Profit exc. Capital Items Gross Profit % Six months ended 30 September FINANCIAL REVIEW 9

10 Group Income Statement Summary (Six months ended 30 Sep 2017) % Change (Rounded) Revenue R m R m 5,4 % Gross profit R 659 m R 576 m 14,4% Gross margin 28,7 % 26,5 % 2,2 % Fixed overheads R 327 m R 272 m 20,2 % Operating profit (Excluding impairments and profit/(loss) on disposal of assets) R 332 m R 304m 9,2 % Operating margin (Excluding impairments and profit/(loss) on disposal of assets) 14,5 % 14,0 % 0,5 % Headline earnings per share (Cents) 71,7 c 63,3 c 13,3 % FINANCIAL REVIEW 10

11 Cash Position Analysis Six months ended 30 Sep 2017 (R m) Six months ended 30 Sep 2016 (R m) Cash generated from operations Net property, plant, equipment and intangibles Taxation paid Free cash flow Acquisitions of subsidiaries, non-controlling interest - 11 Other loans and receivables -4 - Net loan & finance cost payments Dividends paid Free cash flow Timing of the workbook project cash receipts reduced cash generated from operations. Working capital position restored shortly after reporting period. Net cash flow External loans repaid during the period; non-current liabilities relate to finance leases. Net cash flow Opening cash balance Closing cash balance FINANCIAL REVIEW 11

12 Capital Expenditure Print segment Other segment Printing segment Expenditure of R14m incurred in the Print segment during the six month period. Maintenance spend accounting for R12m across all Heatset and Coldset plants (nine plants), with the balance related to project finalisation at NPS. R137m Tissue Expansion capex of R60m incurred to date related to TM2 project completion and refurbishment of TM1. Proceeds of R8,3m was realised on the sale of converting equipment (impaired during March 2017). Labels Expansion capex of R10m incurred to date. Cylinder and engraving capacity expanded at the gravure label division. Expansion of finishing equipment capacity currently in progress. FINANCIAL REVIEW 12

13 OPERATING REVIEW 13

14 Revenue Contribution: Print Product Category Category Share of Group Revenue Sep 2017 YTD Share of Group Revenue Sep 2016 YTD Volume Growth/(Decline) Magazines 15,6 % 19,7% (18,3%) Newspapers 18,3% 21,9% (15,5%) Security Products - % - % - The Print division remains at the core of Novus Holdings and contributed 92% to Group revenue and 109% to Group operating profit excluding capital items. Retail Inserts & Catalogues 24,8 % 27,9% (9,8%) Books & Directories 33,5% 24,1% 46,2% OPERATING REVIEW 14

15 Revenue Contribution: Other Product Category Category Share of Group Revenue Sep 2017 YTD Share of Group Revenue Sep 2016 YTD Volume Growth/(Decline) Labels 4,1% 2,6% 97,0% Tissue 3,2% 3,7% 5,1% This segment currently contributes 8,0% of revenue, but is the area of biggest potential for the Group. Security Products 0,5% -% - AFRICA SALES (BEYOND SA, ALL CATEGORIES OF REVENUE): Six months ended 30 Sep 2017: R56,3 m (Six months ended 30 Sep 2016: R49,3m) OPERATING REVIEW 15

16 CURRENT MATTERS & OUTLOOK 16

17 Status Update on Current Matters Implementation of Media24 unbundling The unbundling was implemented on 26 September Novus Holdings shares were placed at R6,15, a 1,3 % premium to the closing price on that day. Good spread of shareholders. Existing shareholders retaining or taking-up additional shares to shareholders. Top 10 shareholders holding ± 80%. Media24 remains largest shareholder at 19%. Management and printing agreement - Lambert Retief / Novus Holdings / Media24 With the implementation of the unbundling of Media24 shares, the restated management agreement between Media24 and Novus Holdings was terminated on 26 September Media24 exercised their right to provide Novus Holdings with six months written notice of the termination of the printing agreements in place, effective 31 March RFP process included Caxton as a participant. Negotiations are currently underway. Operational ability well proven, pricing to retain work most important factor. OUTLOOK 17

18 Acquisitions ITB Acquisition Novus Holdings acquired ITB, effective 1 October Initial amount of R180m paid. Earn out capped at R300m. Management Earn out process to 28 February Current management remain beyond earn out. Operational and advisory capacity. Operational update Sector performance subdued. Additional capacity has been in Factory move almost complete. ITB business model to be extended: New product lines. Novus Holdings cross-selling opportunities. Other acquisitions Previously under cautionary SENS. Re-visited acquisition opportunities. Declined based on risk/return assessment. Pricing recapitalisation costs exceeding synergy benefit. Other opportunities are being investigated. OUTLOOK 18

19 Segment Focus Areas Print Tissue Labels / Packaging Continued publication volume decline. Retail season imminent. Forex situation volatile, but Novus Holdings is well positioned. Merge of Heatset and Coldset and rationalisation. Media24 contract negotiations are key. Margin pressure expected. Projects successfully completed: Expansion; Upgrade / refurbishment; Converting closure. Tissue market supply vs. demand: Milling capacity increase; Imports; Branded products vs. nonbranded. Break-even point. Significant tenders adding good volume. Seasonality upside. Acquisition opportunities in fragmented market. Ongoing capital investment. ITB overlap of capabilities and cross-selling opportunities. OUTLOOK 19

20 Group Outlook Challenging operating environment and depressed economic outlook with currency volatility remains. Continued volume decline in most traditional print market segments. (Media24 pricing pressure) Match operational capacity to market demand through continuous evaluation of operations, and match equipment type to market trends. 6 Future expansion of packaging. Business model focused on growing through smaller acquisitions that yield synergy and volume benefits. 5 Good cash flow and debt capacity for further diversification prospects. 4 Leverage existing relationships to grow market share in the labels / flexibles and tissue markets and build stable platforms for these divisions to perform optimally. OUTLOOK 20

21 QUESTIONS 21

22 APPENDIX 22

23 Investor Relations Contacts