Wrap Text
Reviewed interim results for the six months ended 30 September 2015
Novus Holdings Limited
(Incorporated in the Republic of South Africa)
JSE share code: NVS
ISIN code: ZAE000202149
Registration number: 2008/011165/06
("Novus Holdings" or "the company" or "the Group")
Reviewed interim results for the six months ended 30 September 2015
Salient features
- Revenue remains unchanged at R2,08 billion (2014: R2,07 billion)
- Improved gross profit margin of 31,4% (2014: 27,5%)
- Operating profit increased by 12,3% to R352,2 million (2014: R313,6 million)
- Headline earnings per share increased by 16,2% to 75,7 cents per share (2014: 65,1 cents per share)
Performance overview
Novus Holdings has delivered a solid set of interim results since listing on the JSE in March 2015. At the beginning of the financial year, the business landscape was still characterised by a
relatively stable exchange rate and macroeconomic factors, allowing for appropriate pricing positions and the accumulation of efficiency benefits which positively impacted the gross margin.
However, since then trading conditions have entered a vastly different cycle of lower economic growth forecasts with exchange and interest rate fluctuations.
Revenue remained flat for the period at R2,08 billion compared to the first half of the previous year. Revenue is generated through a diversified offering to a loyal and long-standing customer
base that relies on Novus's reliable and high-quality printing, manufacturing and distribution capabilities. These customer relationships include contractual commitments for the provision of
printing services to major book, magazine and newspaper publishers, retailers and Government.
Gross profit margin improved due to concerted, worldwide raw material procurement programmes, a beneficial productivity and efficiency programme and a structured forward exchange programme.
Operating profit increased to R352,2 million in line with the improvement in gross profit margin. Operating expenses increased beyond inflationary amounts due to the inclusion of the tissue
business for a full six-month period, as well as the equity-settled share-based compensation charge from the new share incentive scheme.
Headline earnings per share increased by 16,2% compared to the previous period.
The working capital investment for the interim period was R112,1 million (2014: R143,6 million).
Novus Holdings generated free cash flow of R184,5 million (2014: R111,3 million). The Group remains in a strong cash position.
Operational progress
As the most comprehensive commercial printing and manufacturing-related operation in South Africa, Novus Holdings runs a capital investment programme to ensure that it continues to offer advanced
technology and highly efficient, fully automated production processes. The approved capital investment is on track. The anticipated completion dates of these capital projects are expected to
be achieved in the latter part of the financial year.
Net capital expenditure of R27,2 million (2014: R45,5 million) was incurred by the Print segment and R63,6 million (2014: R14,2 million) by the Other segment. Capital expenditure was largely
expansionary in nature, with these projects totaling R82,9 million (2014: R30,2 million) of the R90,8 million (2014: R59,7 million) invested.
The new packaging gravure equipment for the production of wet glue labels has been installed successfully. The focus is now on bedding down new clients and achieving the capacity benefits of the
new equipment in the next financial year.
The delivery and installation of the additional tissue mill and equipment is currently underway. The increased productive capacity is expected to yield full economic benefits from early in
the next financial year.
The investment in digital printing capacity successfully supported diversification initiatives. The acquisition of Cape Town-based specialist digital printing house, Digital Print Solutions
in May 2015, was the first step and will be followed by the acquisition of additional equipment. The installation of the latter has been delayed due to rezoning challenges in the building
process. When completed, this offering will position the Group to take advantage of the global digital printing trend and strengthen the print services offering.
Efforts to increase the Group's earnings from other African territories continue. Recent new senior sales appointments will further entrench Novus Holdings in the traditional print, label and
tissue sectors - where it continues to gain market share - and will assist in expanding the diversified footprint of the business. The diversified products have gained market share through
retail client uptake as they start engaging with Novus Holdings as an attractive alternative supplier, especially in label and tissue products.
Segment performance
Printing Other
R'000 R'000
Revenue 1 955 671 127 086
- Gross revenue 1 966 647 127 086
- Inter-segmental eliminations (10 976) -
Gross profit 626 081 28 319
Operating profit 350 788 1 390
The Print segment - encompassing heatset, coldset and digital printing - experienced a marginal decline in revenue to R1,97 billion (2014: R2,0 billion), while the Other segment -
encompassing Paarl Labels and Correll Tissue - showed strong growth: revenue increased by 63,9% to R127,1 million (2014: R77,5 million). This can be ascribed to the inclusion of the
Correll Tissue revenue (revenue was included for six months to September 2015, but only four months to September 2014) and the effect of successfully attracting and landing new label
clients.
Performance for retail products has remained consistent, while magazine volumes are lower due to pressure on circulation and pagination. Daily, paid for newspaper volumes remain
under pressure.
Acquisitions
On 1 May 2015, the Group acquired 100% of the share capital of Victory Ticket 376 Proprietary Limited trading as Digital Print Solutions for a consideration of R7,5 million. On
30 September 2015, Paarl Media Holdings Proprietary Limited acquired the remaining 16% interest of the issued share capital of Paarl Media Paarl Proprietary Limited for a purchase
consideration of R19 million.
Outlook
Due to the seasonal nature of the Printing and Other Segments revenue, operating profits in the second half of the year will not necessarily be in line with the first six months. It is
anticipated that the second half of the year will be subject to significantly more challenging market conditions and it is likely that the gains achieved in the first six months may be
partially relinquished in the latter part of the year.
Ongoing priorities include the attraction of higher skill levels in the core and diversified business units to ensure the value-oriented implementation of the strategy. The completion
of the investment projects will continue receiving dedicated attention, with demand activation for labels as a priority. The business will continue exploring acquisitive or joint venture
opportunities in diversified and related businesses.
Condensed consolidated statement of financial position
30 September 30 September 31 March
2015 2014 2015
Reviewed Reviewed Audited
Note R'000 R'000 R'000
ASSETS
Non-current assets 2 335 927 2 357 842 2 298 867
Property, plant and equipment 2 160 711 2 205 810 2 134 523
Goodwill 6 138 711 132 052 132 052
Other intangible assets 29 036 17 508 27 254
Loans and receivables 1 587 2 179 1 920
Derivative financial instruments 53 293 75
Deferred taxation assets 5 829 - 3 043
Current assets 1 393 535 1 178 141 1 222 840
Inventory 452 069 483 575 325 714
Trade and other receivables 635 935 569 715 503 736
Derivative financial instruments 46 569 2 941 1 486
Current income tax receivable - - 2 860
Cash and cash equivalents 258 962 121 910 389 044
TOTAL ASSETS 3 729 462 3 535 983 3 521 707
EQUITY AND LIABILITIES
Capital and reserves attributable to the Group's equity holders 2 640 787 2 283 249 2 536 235
Share capital 606 040 1 606 040
Treasury shares (368 172) - (368 172)
Other reserves (805 242) (748 577) (872 575)
Retained earnings 3 208 161 3 031 825 3 170 942
Non-controlling interest 7 - 137 274 30 480
TOTAL EQUITY 2 640 787 2 420 523 2 566 715
LIABILITIES
Non-current liabilities 394 596 465 451 408 975
Post-employment benefit obligations and provisions 17 589 15 287 17 523
Long-term liabilities 55 466 116 716 80 636
Cash-settled share-based payment liability 13 120 12 724 12 061
Deferred taxation liabilities 276 600 291 742 267 015
Deferred income 31 821 28 982 31 740
Current liabilities 694 079 650 009 546 017
Current portion of long-term liabilities 60 753 117 267 71 149
Trade and other payables 523 800 467 951 346 949
Current income tax payable 18 623 612 -
Derivative financial instruments 43 10 476 18 877
Bank overdrafts 88 992 52 228 107 203
Deferred income 1 868 1 475 1 839
TOTAL EQUITY AND LIABILITIES 3 729 462 3 535 983 3 521 707
Condensed consolidated statement of comprehensive income
Six months ended Year ended
30 September 31 March
2015 2014 2015
Reviewed Reviewed Audited
Note R'000 R'000 R'000
Revenue 2 082 757 2 075 282 4 261 484
Cost of sales (1 428 357) (1 505 465) (3 092 247)
Gross profit 654 400 569 817 1 169 237
Operating expenses (302 085) (256 885) (534 255)
Other (expenses)/income (137) 714 (73 484)
Operating profit 352 178 313 646 561 498
Finance income 11 748 5 396 12 572
Finance costs (25 085) (25 672) (67 735)
Profit before taxation 338 841 293 370 506 335
Taxation (94 609) (81 806) (141 531)
Net profit for the period 244 232 211 564 364 804
Other comprehensive income, net of taxation 35 858 1 812 (5 847)
Items that may be subsequently reclassified to profit or loss
- Effect of cash flow hedges 49 803 2 027 (6 176)
- Tax effect (13 945) (215) 1 788
Items that will not be reclassified to profit or loss
- Actuarial losses on post-employment benefit obligations
and provisions - - (2 026)
- Tax effect - - 567
Total comprehensive income 280 090 213 376 358 957
Net profit for the period attributable to:
Equity holders of the Group 241 728 195 787 334 904
Non-controlling interest 2 504 15 777 29 900
244 232 211 564 364 804
Total comprehensive income attributable to:
Equity holders of the Group 277 429 197 671 329 655
Non-controlling interest 2 661 15 705 29 302
280 090 213 376 358 957
Earnings per share (cents)
Basic 8 75,65 65,26 110,92
Diluted 8 75,65 65,26 110,92
Condensed consolidated statement of changes in equity
Six months ended Year ended
30 September 31 March
2015 2014 2015
Reviewed Reviewed Audited
Note R'000 R'000 R'000
Balance at beginning of the period 2 566 715 2 206 605 2 206 605
Changes in share capital, premium and treasury shares
- Share capital issued net of share issue expenses - - 1 413 067
- Cancellation of repurchased shares - - (1 044 895)
- Transactions with non-controlling interests - - 237 867
- Shares issued to entities controlled by the Group - - (368 172)
Changes in reserves
- Total comprehensive income for the period 277 429 197 671 329 677
- Share-based compensation movement 18 228 509 1 131
- Transactions with non-controlling interests 13 404 - (117 509)
- Dividends paid 13 (204 509) - -
Changes in non-controlling interest
- Total comprehensive income for the period 2 661 15 705 29 280
- Share-based compensation movement 111 33 22
- Transactions with non-controlling interests (32 404) - (120 358)
- Dividends paid 13 (848) - -
Balance at end of the period 2 640 787 2 420 523 2 566 715
Comprising:
Share capital and premium 606 040 1 606 040
Treasury shares (368 172) - (368 172)
Existing control business combination reserve (857 897) (753 792) (871 301)
Share-based compensation reserve 23 528 4 678 5 300
Hedging reserve 30 586 537 (5 115)
Actuarial reserve (1 459) - (1 459)
Retained earnings 3 208 161 3 031 825 3 170 942
Non-controlling interest - 137 274 30 480
2 640 787 2 420 523 2 566 715
Condensed consolidated statement of cash flows
Six months ended Year ended
30 September 31 March
2015 2014 2015
Reviewed Reviewed Audited
Note R'000 R'000 R'000
Cash flows from operating activities
Cash generated from operations 358 372 261 259 802 486
Finance income 11 748 5 396 12 572
Finance costs (10 618) (13 396) (26 223)
Taxation paid (79 467) (85 128) (173 239)
Net cash generated from operating activities 280 035 168 131 615 596
Cash flows from investing activities
Acquisition and disposal of property, plant and equipment (90 831) (59 734) (165 313)
Proceeds from Government grants - - 4 286
Other loans and receivables 1 165 (433) 31
Purchase of intangible assets (3 588) (5 139) (17 340)
Acquisition of subsidiaries 9 (38 314) (63 932) (103 844)
Net cash utilised in investing activities (131 568) (129 238) (282 180)
Cash flows from financing activities
Proceeds from share issue - - 1 044 895
Repayment of long-term loans (33 333) (105 904) (190 377)
Proceeds from long-term loans - 100 000 100 000
Repurchase of shares - - (1 044 895)
Repayment of capitalised finance leases (2 648) (2 109) -
Acquisition of non-controlling interest 7 (19 000) - -
Dividends paid 13 (205 357) -
Cash utilised in financing activities (260 338) (8 013) (90 377)
Net (decrease)/increase in cash and cash equivalents (111 871) 30 880 243 039
Cash and cash equivalents at the beginning of the period 281 841 38 802 38 802
Cash and cash equivalents at the end of the period 169 970 69 682 281 841
Notes to the condensed consolidated interim financial statements
for the six months ended 30 September 2015
1 BASIS OF PREPARATION
The condensed consolidated interim financial statements for the six months ended 30 September 2015 have been prepared in accordance with International Financial Reporting Standard (IFRS),
(IAS) 34 Interim Financial Reporting and the IFRS Interpretations Committee (IFRIC), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, Financial
Pronouncements as issued by the Financial Reporting Standards Council, the Companies Act of South Africa and the JSE Limited (JSE) Listings Requirements.
The accounting policies used in preparing the condensed consolidated interim financial statements are in terms of IFRS and are consistent with those applied in the previous annual
financial statements.
The Group has adopted all new and amended accounting pronouncements issued by the International Accounting Standards Board (IASB) that are effective for financial years commencing
1 April 2015. None of the new or amended accounting pronouncements that are effective for the financial year commencing 1 April 2015 are expected to have a material impact on the Group.
2 ESTIMATES
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 March 2015.
3 SEASONALITY OF OPERATIONS
Due to the seasonal nature of the Printing and Other segments revenues and operating profits in the second half of the year will not necessarily be in line with the first six months.
4 PREPARATION OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
The preparation of the condensed consolidated interim financial statements was supervised by the Group chief financial officer, Edward van Niekerk CA(SA).
5 REVIEW BY THE INDEPENDENT AUDITOR
The condensed consolidated interim financial statements have been reviewed by the Group's auditor, PricewaterhouseCoopers Inc., whose unqualified review opinion appears at the end of this
interim report. The review opinion does not necessarily cover all the information contained in this interim report.
6 GOODWILL
Goodwill arises on the acquisition of interests in subsidiaries and is subject to an annual impairment assessment. Movements in the Group's goodwill for the period are detailed below:
30 September 30 September 31 March
2015 2014 2015
Reviewed Reviewed Audited
Note R'000 R'000 R'000
Goodwill
Cost 132 052 86 701 86 701
Accumulated impairment - - -
Opening balance 132 052 86 701 86 701
Acquisitions 9 6 659 45 351 45 351
Closing balance 138 711 132 052 132 052
7 TRANSACTIONS WITH NON-CONTROLLING INTERESTS
On 30 September 2015 the Group acquired an additional 16% of its subsidiary Paarl Media Paarl Proprietary Limited from Kurisani Investments Proprietary Limited for a consideration of
R19 million. Paarl Media Paarl Proprietary Limited is now wholly owned by the Group.
The effect of the above transaction can be summarised as follows:
2015
Reviewed
R'000
Carrying amount of non-controlling interest at 30 September 2015 32 404
Purchase consideration paid (19 000)
Amount credited to equity 13 404
8 EARNINGS PER SHARE
Basic earnings per share
Earnings per share is calculated using the weighted average number of ordinary shares in issue during the period and is based on the net profit attributable to ordinary shareholders. For
the purpose of calculating earnings per share, treasury shares are deducted from the number of ordinary shares in issue. Earnings per share for 2014 has been restated to take into account
the 299 999 900 capitalisation shares issued. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all
dilutive potential ordinary shares and is based on the net profit attributable to ordinary shareholders, adjusted for the after-tax dilutive effect. Currently, the share options granted
to employees and directors are anti-dilutive.
Headline earnings per share
Headline earnings per share is calculated using the weighted average number of ordinary shares in issue during the period and is based on the earnings attributable to ordinary
shareholders, after excluding those items as required by Circular 2/2013 issued by the South African Institute of Chartered Accountants (SAICA).
Six months ended Year ended
30 September 31 March
2015 2014 2015
Reviewed Reviewed Audited
R'000 R'000 R'000
Calculation of headline earnings
Net profit attributable to shareholders 241 728 195 787 334 904
Adjusted for:
- Loss/(profit) on sale of property, plant and equipment 930 (714) (338)
- Insurance proceeds (793) - -
- Impairment in value of property, plant and equipment - - 73 537
241 865 195 073 408 103
Total tax effect of adjustments (38) 200 (20 495)
Total adjustment for non-controlling interest (17) 42 (2 427)
Headline earnings 241 810 195 315 385 181
Number of ordinary shares in issue 347 332 454 300 000 000 347 332 454
Weighted average number of shares 319 545 857 300 000 000 301 927 811
Earnings per ordinary share (cents)
Basic 75,65 65,26 110,92
Diluted 75,65 65,26 110,92
Headline earnings per ordinary share (cents)
Basic 75,67 65,11 127,57
Diluted 75,67 65,11 127,57
9 BUSINESS COMBINATIONS
With effect from 1 May 2015, the Group acquired 100% of the share capital of Victory Ticket 376 Proprietary Limited trading as Digital Print Solutions for a consideration of R7,5 million.
The acquisition will enable the Group to offer clients more comprehensive range of printing services.
Goodwill of R6,7 million relates to expected synergies resulting from the Group's ability to offer a more complete printing offering to existing clients.
The amount paid to Correll Tissue relates to the transaction concluded during 2015 and was payable in terms of the sale of business agreement.
2015
Reviewed
Note R'000
Property, plant and equipment 115
Inventory 51
Trade and other receivables 2 144
Tax receivable 2
Cash and cash equivalents 1 204
Finance lease liabilities (803)
Shareholders' loans (521)
Trade and other payables (1 395)
Identifiable assets and liabilities at acquisition date 797
Goodwill 6 6 659
Total purchase consideration 7 456
Consideration as at acquisition date
Cash 4 833
Cash consideration payable 2 623
7 456
Cash flow
Cash consideration paid in respect of Digital Print Solutions (4 833)
Cash in entity acquired - Digital Print Solutions 1 204
Payment in respect of the prior year acquisition of Correll Tissue (34 685)
Cash flow on acquisitions (38 314)
10 SEGMENTAL ANALYSIS
The Group has identified its operating segments based on business by service or product and aggregated it into the reportable segments based on the nature of the operating segment and it
meeting the aggregation criteria in terms of IFRS 8 para 12. These reportable segments are "Printing", which comprises printing of books, magazines, newspapers and related products, and
"Other", which comprises manufacturing of tissue paper and printing on packaging.
Six months ended Year ended
30 September 31 March
2015 2014 2015
Reviewed Reviewed Audited
R'000 R'000 R'000
Revenue 2 082 757 2 075 282 4 261 484
Printing 1 966 647 1 998 257 4 059 230
Other 127 086 77 520 218 019
Inter-segmental eliminations (10 976) (495) (15 765)
EBITDA 442 598 414 229 767 489
Printing 436 392 408 405 751 037
Other 6 206 5 824 16 452
Operating profit 352 178 313 646 561 498
Printing 350 788 310 767 552 499
Other 1 390 2 879 8 999
Total assets 3 729 462 3 535 983 3 521 707
Printing 3 658 191 3 452 986 3 445 753
Other 365 972 188 154 299 883
Inter-segmental eliminations (294 701) (105 157) (223 929)
Total liabilities 1 088 675 1 115 460 954 992
Printing 1 018 013 1 043 542 884 969
Other 365 363 177 075 293 952
Inter-segmental eliminations (294 701) (105 157) (223 929)
11 COMMITMENTS
Commitments relate to amounts for which the Group has contracted, but that have not yet been recognised as obligations in the statement of financial position.
30 September 30 September 31 March
2015 2014 2015
Reviewed Reviewed Audited
R'000 R'000 R'000
Commitments
Capital expenditure 101 850 22 900 57 479
Operating lease commitments 18 787 6 801 475
120 637 29 701 57 954
12 RELATED-PARTY TRANSACTIONS
During the six months to September 2015, sales to Novus Holdings Limited's holding company, Media24 Proprietary Limited, amounted to R534 million (six months to September 2014:
R603 million, 12 months to March 2015: R1,156 million).
13 DIVIDENDS
A dividend of R205 million (2014: nil) that relates to the period to 31 March 2015 was paid in September 2015.
14 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
14.1 Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit
risk and liquidity risk.
The condensed consolidated interim Group financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they
should be read in conjunction with the Group's annual financial statements as at 31 March 2015. There have been no material changes in the Group's credit, liquidity and market risk or
key inputs in measuring fair value since 31 March 2015. There has however been a significant increase in the foreign exchange contracts asset resulting from the weakening of the rand
against the euro and USD denominated contracts.
14.2 Fair value estimation
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined.
Level 1 Level 2 Level 3 Total
Quoted prices in Significant Significant
active markets other observable unobservable
for identical inputs inputs
assets or
liabilities
R'000 R'000 R'000 R'000
30 September 2015
Assets
Interest rate swap - 110 - 110
Foreign exchange contracts - 46 512 - 46 512
- 46 622 - 46 622
Liabilities
Foreign exchange contracts - 43 - 43
- 43 - 43
30 September 2014
Assets
Interest rate swap - 401 - 401
Foreign exchange contracts - 2 833 - 2 833
- 3 234 - 3 234
Liabilities
Foreign exchange contracts - 10 476 - 10 476
- 10 476 - 10 476
31 March 2015
Assets
Interest rate swap - 116 - 116
Foreign exchange contracts - 1 445 - 1 445
- 1 561 - 1 561
Liabilities
Foreign exchange contracts - 18 877 - 18 877
- 18 877 - 18 877
14.3 Valuation techniques used to derive Level 2 fair values
Interest rate swaps
The fair value of the Group's interest rate swaps is determined through the use of discounted cash flow techniques using only market observable information. Key inputs used in measuring
the fair value of interest rate swaps include spot market interest rates, contractually fixed interest rates, counterparty credit spreads, notional amounts on which interest rate swaps
are based, payment intervals, risk-free interest rates, as well as the duration of the relevant interest rate swap arrangement.
Foreign exchange contracts
In measuring the fair value of foreign exchange contracts, the Group makes use of market observable quotes of forward foreign exchange rates on instruments that have a maturity similar
to the maturity profile of the Group's foreign exchange contracts. Key inputs used in measuring the fair value of foreign exchange contracts include current spot exchange rates, market
forward exchange rates, and the term of the Group's foreign exchange contracts.
The carrying amounts of the other financial assets and liabilities is a reasonable approximation of their fair values.
Directorate
Independent non-executive directors
Uys Meyer (Lead independent director)
Sandile Zungu
Bernard Olivier
Fred Robertson
Jan Potgieter
Gugulethu Dingaan
Non-executive directors
Lambert Retief (Chairman of the board)
Esmare Weideman
Manie Mayman
Executive directors
Stephen van der Walt (CEO)
Edward van Niekerk (CFO)
Keith Vroon (COO)*
* Alternate executive director
Company secretary
Bradley Meyers
Company information
Novus Holdings registered office:
10 Freedom Way, Milnerton, Cape Town, 7441
Listing:
Johannesburg Stock Exchange (JSE)
Transfer secretary:
Link Market Services South Africa Proprietary Limited, 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001
Sponsor:
Investec Bank Limited
Auditor:
PricewaterhouseCoopers Inc. Paarl
Administrative information
Novus Holdings Limited
(Incorporated in the Republic of South Africa)
("Novus Holdings" or "the company" or "the Group")
Registration number: 2008/011165/06
JSE share code: NVS
ISIN code: ZAE000202149
www.novus.holdings
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