Print industry holding company Novus Holdings’ (NVS’s) operating profit declined 39% year-on-year to R393-million in the year ended March 31, owing to a volume decline in the group’s print segment. This was exacerbated by tough trading conditions, a volatile foreign exchange rate, and an impairment charge of R138.6-million.
Subsequently, headline earnings a share fell 20.8% to 110.8c apiece.
“The year proved challenging for the group. However, we were able to focus on establishing a stable platform for the next growth phase as we continued to focus on leveraging our investments in tissues and labels, seeking new opportunities in the form of acquisitions,” said NVS CEO Keith Vroon.
In the group’s core print business, a continued decline in magazine and newspaper sales, compounded by pricing pressure within the print publication market, impacted on revenue. The retail inserts and catalogue category also saw volume declines, while book and directory volumes increased marginally.
Overall, NVS’s gross margin for print was negatively impacted on by foreign exchange fluctuations, declining from 32.3% to 27.6%.
The group, however, diversified its print offering and rationalised its geographic footprint through the establishment of Novus Print Solutions. While the project phase proved unexpectedly disruptive to business, the operation is now fully functional and is expected to contribute to volume growth for books, which is the operation’s intended business model.
NVS was also successfully re-awarded the workbook printing contract from the Department of Basic Education (DBE) for a three-year period.
As for the group’s diversification projects, the labels operation settled down well, achieving profitability on the back of volume and efficiency increases, while the implementation phase of the tissue project, which ran over into the 2017 financial year, significantly impacted on the group’s financial results.
A second tissue mill was successfully commissioned during the year, bolstering the tissue operation’s overall capacity and quality of production, as well as firmly positioning the business as a growing supplier of jumbo tissue reels, which is showing greater prospects for the group than the converting facility.
NVS expects continued pricing and volume pressures in the print segment, and will actively manage costs through optimised capacity and consolidation. During the year under review, operating expenses were well-controlled and improved to 13.4% of its R4.31-billion revenue.
“In the coming financial year, we expect improved returns resulting from the investments of the past few years,” said Vroon. These investments include Novus Print Solutions, operational profitability in the ‘other’ segment – which includes labels, flexible packaging and tissue manufacturing – as well as further acquisitions.
Vroon added that, while the group remained realistic about the challenges it faced, NVS was confident in its long-term growth strategy.