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NOVUS HOLDINGS LIMITED - Reviewed interim results for the six months ended 30 September 2018

Release Date: 16/11/2018 15:58
Code(s): NVS     PDF:  
 
Wrap Text
Reviewed interim results for the six months ended 30 September 2018

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 2018

Novus Holdings' core operations comprises of an extensive network of specialised printing and manufacturing plants servicing customers across the continent. The Group's activities include print production of all medium to long run requirements of magazines, retail inserts, catalogues, books, newspapers, commercial and digital work, labels, educational materials, flexible packaging and manufacturing of tissue products.

SALIENT FEATURES
- Revenue remained stable at R2 297 m (2017: R2 295 m)
- Decline in gross profit margin to 26,1% (2017: 28,7%) 
- Operating profit (excl. impairments, profit / (loss) on disposal of assets and loss on de-recognition of foreign subsidiary) decreased by 31,4% to R228 m (2017: R332 m)
- Headline earnings per share decreased by 31,2% to 49,4 cents per share (2017: 71,7 cents per share)
- Free cash flow* improved by R162 m to an outflow of R45 m (2017: an outflow of R207 m)
 
* Cash (utilised)/generated from operations less capital expenditure spent on property, plant and equipment and intangibles (excluding proceeds on disposal of assets), less taxation paid.

PERFORMANCE OVERVIEW

PRINT DIVISION
As anticipated, external print revenue declined by 14,1% to R1 828 m and operating profit declined by 38,3% to R212 m. This is a direct impact of the Media24 tender renewal which had a negative impact on the newspaper and magazine categories, coupled with diminishing consumer spend specifically impacting magazine volumes.

The majority of the Department of Basic Education (DBE) workbook tender was printed during this period with a small portion of volume to be produced in H2 of this financial year. The full DBE volumes were printed in H1 of the previous year. Consequently, the revenue contribution of the books and directories category declined by 3,6%.

Retail inserts and catalogue work, which makes up 26% of the Group's revenue, has increased by 5,5% year-on-year. This increase is mainly due to internal organic growth and existing customers increasing their print volumes and print marketing spend to counter declining consumer spend.

PACKAGING DIVISION
The Packaging division revenue significantly increased in this period following the acquisition of ITB Plastics on 01 October 2017. This revenue contribution has compensated for the majority of the loss of turnover in the Print division albeit at weaker margins. Operating profit in the Packaging division increased by 90,8%.

ITB Plastics production and sales was hindered by a 27-day strike in this period. This business has also faced unfavourable economic trading conditions and rising costs of raw materials creating further margin pressure due to the difficulty of passing price increases on to the end user.

As this is a growth and focus area, the Group is pleased with Paarl Labels performance as it increased revenue by 23,2%. This is largely due to increased allocation of work from existing larger customers.

TISSUE DIVISION
The Tissue division increased sales revenue by 50,3% with the additional mill capacity coming online. Measures were implemented to reduce losses, and while this business has improved and is close to break-even, it is still not performing to satisfaction.

OVERHEADS AND CASH UTILISATION
The Group has seen the benefit of the implementation of its right-sizing measures following the changes to the Media24 contracts with operating expenses reduced by 4% on a like-for-like basis.

The impact of the fluctuating foreign exchange rate in this period was negligible and mostly negated by the Group's forex cover policy.

Utilisation of cash resources has been a major focus during the period. Capital expenditure has reduced by R30 m, net working capital improved by R181 m, share buy-backs have been introduced and a prudent level of balance sheet gearing has been allowed.

The closure of a key local paper mill has necessitated the importation of certain paper grades which impacted the amount of stock held, increasing cash outlay by more than R80 m compared to the prior year.

Despite the R57 m expended on share buy-backs (ex. dividend) and reduced EBITDA, the Group has managed to reduce cash outflow during this period by R81 m.

GROUP GOVERNANCE

CHANGES TO THE BOARD
After serving on the Board for three and a half years, Mr. Bernard Olivier has retired as non-executive director effective 17 August 2018. Mr Olivier served as chairman of the Audit Committee and Remuneration Committee, and was a member of the Nominations Committee. The Board wishes to thank Mr. Olivier for his long-standing and valuable contribution to the Group.

Mr. Christoff Botha has been appointed as chairman of the Audit and Risk Committee as well as the chairman of the Remuneration Committee.

Effective 20 August 2018, Mr. Dennis Mack was appointed as independent non-executive director. Mr. Mack has been appointed to the Audit and Risk Committee, the Remuneration Committee and the Nominations Committee.

After being appointed as acting chief financial officer (CFO) effective 02 July 2018, Mr. Harry Todd was subsequently appointed as CFO and executive director, effective 01 October 2018. Group financial manager, Ms. Keshree Alwar was identified as CFO designate and appointed as an alternate director, effective 01 October 2018.

The Nominations subcommittee has made good progress in identifying potential candidates to assume the chairman role and the Board looks forward to finalising the appointment in the near future.

The composition of the Board and balance of power remains aligned with the requirements of the King IV Report on Corporate Governance™ for South Africa. 

CHANGES TO THE COMPANY SECRETARY
In compliance with paragraph 3.59(a) of the JSE Listing Requirements, Kilgetty Statutory Services (Pty) Ltd has been replaced by Ms. Melonie Brink as Group Company Secretary, effective 01 October 2018.

OUTLOOK
The first half of the year has witnessed the stabilisation of the print segment with new bases having been set.

The ITB Plastics acquisition has been bedded down satisfactorily, however the current results have been below expectation. In order to ensure acceptable profit contribution and growth, it will be supported by further Group management involvement.

While the preferred outcome for the Tissue operation remains an exit strategy on the most beneficial terms, we remain committed to ensuring that this business' profitability continues to improve.

Raw material pricing (paper and polymer) has shown a steady increase during the year which will result in a negative impact on the second half should this continue. Further weakness in the exchange rate could create further margin pressure going forward.

Further to the Business Update issued via SENS dated 28 September 2018, the Group will continue to focus on maximising efficiency throughout its operations, along with disciplined cash allocation with priority given to existing assets. 

The drive to enhance the Group's B-BBEE credentials will continue. 

The forecast information for the full financial year as provided in the Business Update remains within range, shareholders will be advised should there be any known changes to this forecast information. 

16 November 2018
Cape Town
Sponsor: Investec Bank Limited


RESULTS PRESENTATION
Shareholders are advised that Novus Holdings will host a live audio webcast at 10h00 (SA time) on 20 November 2018. The webcast can be accessed at http://www.corpcam.com/Novus20112018. Once concluded, a recording of the webcast will be available on the Group's website at www.novus.holdings.



CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                
                                                                               30 September   30 September       31 March 
                                                                                       2018           2017           2018
                                                                                   Reviewed       Reviewed        Audited
                                                                        Note          R'000          R'000          R'000
                                                
                                                
ASSETS                                                
Non-current assets                                                                2 210 728      2 360 473      2 253 283 
Property, plant and equipment                                             10      1 894 411      2 092 353      1 919 115 
Goodwill                                                                   6        173 054        155 419        173 054 
Other intangible assets                                                              28 030         40 370         30 790 
Available-for-sale financial assets                                                       -          3 000          3 090 
Financial assets at fair value through other comprehensive income                     3 126              -              - 
Loans and receivables                                                                     -          6 580          6 517
Financial assets at amortised cost                                                    5 434              -              - 
Deferred taxation assets                                                            106 673         62 751        120 717 
                                                
Current assets                                                                    1 739 325      1 849 098      1 520 199 
Inventory                                                                           587 455        345 214        474 675 
Trade and other receivables                                                       1 011 452      1 244 300        702 154 
Derivative financial instruments                                          15         14 322         22 670            731 
Current income tax receivable                                                        19 179              -          8 000 
Cash and cash equivalents                                                            79 630        173 510        243 948 
Non-current assets held for sale                                          11         27 287         63 404         90 691 
                                                
TOTAL ASSETS                                                                      3 950 053      4 209 571      3 773 482 
                                                
EQUITY AND LIABILITIES                                                
Capital and reserves attributable to the 
Group's equity holders                                                            2 727 820      2 961 455      2 787 087 
Share capital                                                                       602 656        606 040        606 040 
Treasury shares                                                                    (427 824)      (368 172)      (368 172)
Other reserves                                                                      (74 516)      (780 669)       (80 596)
Retained earnings                                                                 2 627 504      3 504 256      2 629 815 
                                                
Non-controlling interest                                                              4 150           (371)         3 672 
TOTAL EQUITY                                                                      2 731 970      2 961 084      2 790 759 
                                                
LIABILITIES                                                
Non-current liabilities                                                             377 972        374 143        374 163 
Post-employment benefit obligations and provisions                                   19 950         19 183         20 191 
Long-term liabilities                                                                91 510         58 886         99 252 
Cash-settled share-based payment liability                                                -          1 469          1 845 
Deferred taxation liabilities                                                       237 320        251 268        221 357 
Deferred income                                                                      29 192         43 337         31 518 
                                                
Current liabilities                                                                 840 111        874 344        608 560 
Provisions                                                                            4 167            186          4 538 
Current portion of long-term liabilities                                             15 274          2 098         16 254 
Trade and other payables                                                            613 535        500 828        528 611 
Current income tax payable                                                                -         13 843              - 
Dividends payable                                                                       110              -              - 
Derivative financial instruments                                            15        5 144             54         21 055 
Bank overdrafts                                                                     199 111        355 458         35 332 
Deferred income                                                                       2 770          1 877          2 770 
                                                
TOTAL EQUITY AND LIABILITIES                                                      3 950 053      4 209 571      3 773 482 
                                                

CONDENSED CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME

                                                                                     Six months ended          Year ended
                                                                                       30 September              31 March
                                                
                                                                                       2018           2017           2018
                                                                                   Reviewed       Reviewed        Audited
                                                                        Note          R'000          R'000          R'000
                                                
                                                
CONSOLIDATED INCOME STATEMENT                                                
                                                
Revenue                                                                           2 297 452      2 294 583      4 308 102 
Cost of sales                                                                    (1 698 461)    (1 635 939)    (3 181 105)
Gross profit                                                                        598 991        658 644      1 126 997 
Operating expenses                                                                 (371 033)      (326 537)      (626 278)
Other gains /(losses)                                                                (5 627)         6 415       (358 772)
Operating profit                                                                    222 331        338 522        141 947 
Finance income                                                                        4 111          6 499         12 948 
Finance costs                                                                       (15 106)       (13 429)       (52 894)
Profit before taxation                                                              211 336        331 592        102 001 
Taxation                                                                            (58 501)       (97 839)       (30 898)
Net profit for the period                                                           152 835        233 753         71 103 
                                                
Net profit for the period attributable to:                                                
Equity holders of the Group                                                         152 702        233 751         70 418 
Non-controlling interest                                                                133              2            685 
                                                                                    152 835        233 753         71 103 
                                                
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                                                
                                                
Other comprehensive income, net of taxation                                           1 894         17 495         (2 735)
Items that may be subsequently  reclassified to profit or loss                                                
- Effect of cash flow hedges                                                          2 595         24 371         (2 080)
- Tax effect                                                                           (727)        (6 823)           582 
- Translation of foreign operations                                                       -            (74)        (2 697)
- Tax effect                                                                              -             21            755 
- Fair value reserve                                                                     36              -             90 
- Tax effect                                                                            (10)             -            (25)
Items that will not be reclassified to profit or loss                                                
- Remeasurement of post-employment benefit obligations and provisions                     -              -            730 
- Tax effect                                                                              -              -            (90)
                                                
Total comprehensive income                                                          154 729        251 248         68 368 
                                                
Total comprehensive income attributable to:                                                
Equity holders of the Group                                                         154 596        251 246         67 683 
Non-controlling interest                                                                133              2            685 
                                                                                    154 729        251 248         68 368 
                                                
Earnings per share (cents)                                                
Basic                                                                      7          48.09          73.15          22.04 
Diluted                                                                    7          48.09          73.15          22.04 
                                                

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                                                     Six months ended          Year ended
                                                                                       30 September              31 March
                                                
                                                                                       2018           2017           2018
                                                                                   Reviewed       Reviewed        Audited
                                                                        Note          R'000          R'000          R'000
                                                
                                                
Balance at beginning of the period                                                2 790 759      2 882 465      2 882 465 
Changes in accounting policies                                            16          5 828              -              - 
Balance at the beginning of the period (restated)                                 2 796 587      2 882 465      2 882 465 
                                                
Transactions with owners and non-controlling interests                                                
Changes in share capital, premium and treasury shares                                                
- Share buy-backs                                                         17        (59 652)             -              - 
- Cancellation of repurchased shares                                                 (3 384)             -              - 
Changes in reserves                                                
- Total comprehensive income for the period                                         154 596        251 246         67 683 
- Share-based compensation movement                                                     388          6 317         15 007 
- Other movements                                                                         -              -            504 
- Reclassification of foreign currency translation reserve 
on sale of subsidiary                                                     18          3 798              -              - 
- Dividends paid                                                          14       (160 840)      (178 946)      (178 946)
Changes in non-controlling interest                                                
- Total comprehensive income for the period                                             133              2            685 
- Transactions with non-controlling interests                                           345              -          3 361 
Balance at the end of the period                                                  2 731 970      2 961 084      2 790 759 
Comprising:                                                 
Share capital and premium                                                           602 656        606 040        606 040 
Treasury shares                                                                    (427 824)      (368 172)      (368 172)
Existing control business combination reserve                                      (128 460)      (857 897)      (128 460)
Share based compensation reserve                                                     54 430         63 686         54 042 
Hedging reserve                                                                      (1 399)        15 269         (3 268)
Actuarial reserve                                                                       822            182            822 
Foreign currency translation reserve                                                      -         (1 909)        (3 797)
Fair value reserve                                                                       91              -             65 
Retained earnings                                                                 2 627 504      3 504 256      2 629 815 
Non-controlling interest                                                              4 150           (371)         3 672 
                                                                                  2 731 970      2 961 084      2 790 759 
                                                


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                                     Six months ended          Year ended
                                                                                       30 September              31 March
                                                
                                                                                       2018           2017           2018
                                                                                   Reviewed       Reviewed        Audited
                                                                        Note          R'000          R'000          R'000
                                                
                                                
Cash flows from operating activities                                                
Cash (utilised)/generated from operations                                            (8 942)       (36 522)       683 632 
Finance income                                                                        4 111          6 415         12 948 
Finance costs                                                                        (8 228)        (6 319)       (18 254)
Taxation paid                                                                       (42 378)       (94 227)      (169 226)
Net cash (utilised in)/generated from operating activities                          (55 437)      (130 653)       509 100 
                                                
Cash flows from investing activities                                                
Acquisition of property, plant and equipment                                        (54 574)       (84 082)      (138 065)
Proceeds on disposal of property, plant and equipment                                61 129          9 579         21 424 
Loans and receivables advanced                                                       (1 083)        (4 450)        (3 448)
Proceeds from other loans and receivables                                                 -              -            227 
Purchase of intangible assets                                                          (616)        (1 433)        (1 887)
Insurance proceeds                                                                        -              -          2 086 
Acquisition of subsidiaries/businesses                                              (42 041)             -       (202 149)
Net cash utilised in investing activities                                           (37 185)       (80 386)      (321 812)
                                                
Cash flows from financing activities                                                
Repayment of long-term loans                                                         (6 475)             -        (26 950)
Repayment of short-term loans                                                        (1 478)       (16 667)             - 
Repayment of capitalised finance leases                                              (3 704)        (2 520)             - 
Payment for shares bought back                                                      (62 374)             -              - 
Share buy-back transaction costs                                                       (604)             -              - 
Dividends paid                                                            14       (160 840)      (178 946)      (178 946)
Net cash utilised in financing activities                                          (235 475)      (198 133)      (205 896)
                                                
Net decrease in cash and cash equivalents                                          (328 097)      (409 172)       (18 608)
Cash and cash equivalents at the beginning of the period                            208 616        227 224        227 224
Cash and cash equivalents at the end of the period                                 (119 481)      (181 948)       208 616
                                                

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
for the six months ended 30 September 2018

1. Basis of preparation
The condensed consolidated interim financial statements for the six months ended 30 September 2018 have been prepared in accordance with International Financial Reporting Standards (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 International Financial Reporting Standards and are consistent with those applied in the previous annual financial statements, except for the adoption of IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments 
(see note 16).

Other than the above, none of the new or amended accounting pronouncements that are effective for the financial year commencing 01 April 2018 are expected to have a material impact on the Group. Management is in process of assessing the impact of IFRS 16 Leases on the Group which is not expected to have a material impact on total assets. Current operating leases relate to leased property.

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 2018.

3. Seasonality of operations
Due to the seasonal nature of the operating segments within the Group, revenue and operating profit 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, Harry Todd 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 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. There has been no impairment charge recognised during the period. Movements in the Group's goodwill for the period are detailed below:


                                                                                     Six months ended          Year ended
                                                                                       30 September              31 March
                                        
                                                                                       2018           2017           2018
                                                                                   Reviewed       Reviewed        Audited
                                                                                      R'000          R'000          R'000
                                        
                                        
Goodwill                                        
Cost                                                                                235 632        155 419        235 632  
Accumulated impairment                                                              (62 578)             -        (62 578) 
Closing balance                                                                     173 054        155 419        173 054 
                                        


7. 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. 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 and vested under equity settled schemes to participating 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 net profit attributable to ordinary shareholders, after excluding those items as required by Circular 4/2018 issued by the South African Institute of Chartered Accountants (SAICA).


                                                                                     Six months ended          Year ended 
                                                                                       30 September              31 March
                                        
                                                                                       2018           2017           2018
                                                                                   Reviewed       Reviewed        Audited
                                                                                      R'000          R'000          R'000
                                        
                                        
Calculation of headline earnings                                        
Net profit attibutable to shareholders                                              152 702        233 751         70 418 
Adjusted for:                                        
- Loss / (profit) on sale of property, plant and equipment                            2 275         (6 256)       (11 293)
- Reclassification of foreign currency translation reserve on 
sale of subsidiary                                                                    3 798              -              - 
- Profit on sale of foreign subsidiary                                                 (446)             -              - 
- Insurance proceeds                                                                      -           (159)        (2 086)
- Impairment in value of property, plant and equipment                                    -              -        297 126 
- Impairment in value of intangible assets                                                -              -         12 448 
- Impairment in value of goodwill                                                         -              -         62 577 
                                                                                    158 329        227 336        429 190 
Total tax effect of adjustments                                                      (1 576)         1 796       (100 456)
Headline earnings                                                                   156 753        229 132        328 734 
                                        
Number of ordinary shares in issue                                              346 656 348    347 332 454    347 332 454 
Weighted average number of shares                                               317 552 998    319 545 857    319 545 857 
                                        
Earnings per ordinary share (cents)                                        
Basic                                                                                 48.09          73.15          22.04
Diluted                                                                               48.09          73.15          22.04
                                        
Headline earnings per ordinary share (cents)                                        
Basic                                                                                 49.36          71.71         102.88
Diluted                                                                               49.36          71.71         102.88
                                        

8. 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 paragraph 12 as they have similar profit margins, production processes, customers and suppliers. These reportable segments are Print which comprises printing of books, magazines, retail inserts and newspapers; Packaging which produces flexible packaging products and prints flexible labels and Tissue which manufactures tissue paper. Other includes all non-print or packaging related transactions. In the prior year the Other segment included Tissue, Packaging and all non-print related transactions. The prior year segment disclosure has been amended to reflect the change in reportable segments.


                                                                                     Six months ended          Year ended 
                                                                                       30 September              31 March
                                        
                                                                                       2018           2017           2018
                                                                                   Reviewed       Reviewed        Audited
                                                                                      R'000          R'000          R'000
                                        
                                        
Revenue                                                                           2 297 452      2 294 583      4 308 102 
Print                                                                             1 835 080      2 135 469      3 648 197 
Packaging                                                                           380 438        110 921        492 770 
Tissue                                                                              109 805         73 069        174 576 
Other                                                                                     -              -         24 180 
Intersegmental eliminations                                                         (27 871)       (24 876)       (31 622)
                                        
EBITDA                                                                              302 976        441 914        340 590 
Print                                                                               276 383        431 910        475 194 
Packaging                                                                            36 936         19 420         60 499 
Tissue                                                                              (10 343)        (9 416)      (200 637)
Other                                                                                     -              -          5 534 
                                        
Operating profit                                                                    222 331        338 522        141 947 
Print                                                                               212 236        344 241        311 299 
Packaging                                                                            24 868         13 031         42 362 
Tissue                                                                              (14 773)       (18 750)      (217 250)
Other                                                                                     -              -          5 536 
                                        
Total assets                                                                      3 950 053      4 209 571      3 773 482 
Print                                                                             3 896 027      4 321 874      3 692 691 
Packaging                                                                           637 807        250 035        610 295 
Tissue                                                                              398 770        496 577        395 249 
Other                                                                                     -              -              - 
Intersegmental eliminations                                                        (982 551)      (858 915)      (924 753)
                                        
Total liabilities                                                                 1 218 083      1 248 487        982 723 
Print                                                                               964 784      1 172 187        713 111 
Packaging                                                                           519 556        285 179        491 908 
Tissue                                                                              716 294        650 036        702 457 
Other                                                                                     -              -              - 
Intersegmental eliminations                                                        (982 551)      (858 915)      (924 753)
                                        


9. 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. Operating lease commitments relate mainly to leased property.


                                                                                     Six months ended          Year ended 
                                                                                       30 September              31 March
                                        
                                                                                       2018           2017           2018
                                                                                   Reviewed       Reviewed        Audited
                                                                                      R'000          R'000          R'000
                                        
                                        
Commitments                                        
Capital expenditure                                                                   6 562         12 882         19 834
Operating lease commitments                                                          89 536         24 780         99 961 
                                                                                     96 098         37 662        119 795 

10. Property, plant and equipment
The movement in property, plant and equipment 
is mainly due to the following:

Cash acquisitions the period                                                         54 574         84 082        138 065 
Depreciation                                                                         77 265        100 588        190 920 
Impairments                                                                               -              -        297 126

11. Non-current assets held for sale
At March 2018, the balance included the Paarl Media Paarl building which was subsequently sold in July 2018. The remaining balance relates to the Paarl Coldset Pietermaritzburg building which was classified as held for sale at March 2018.

12. Changes in working capital
Trade receivables
The increase in trade receivables compared to 31 March 2018 relates mainly to the seasonality of the business and the accounting for the contract asset in terms of IFRS 15. The contract asset amounted to R286 million.

Inventory and Trade payables
The requirement to import newsprint paper has led to higher stockholding and was the main contributor to the increased trade payables.

13. Related party transactions
During the prior financial year, in September 2017, Media24 Proprietary Limited reduced its shareholding in Novus as a result of the unbundling process which was a condition ordered by the Competition Tribunal. This changed the group relationship with Media24 as it was no longer Novus' holding company. Related-party transactions similar to those disclosed in the Group's annual financial statements for the year ended 31 March 2018 took place during the current period and there are no material related party transactions to disclose outside of the Novus Holdings Limited Group.

14. Dividends
A dividend of R161 million (2018: R 179 million) that relates to the period to 31 March 2018 was paid in September 2018.

15. Financial risk management and financial instruments
15.1 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 2018. 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 2018. 

IFRS 9 eliminates the previous categories of loans and receivables and available-for-sale financial assets. Under IFRS 9, on initial recognition, a financial asset is classified at: amortised cost; fair value through other comprehensive income; or fair value through profit or loss. Loans and receivables are held to collect payments of principle and interest and will continue to be shown at amortised cost. The available-for-sale investment is measured at fair value through other comprehensive income.

15.2 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 active        Significant                
                                                             markets for              other    Significant 
                                                        identical assets         observable   unobservable        
                                                          or liabilities             inputs         inputs        
                                                                   R'000              R'000          R'000          R'000
                                
                                
30 September 2018                                
Assets                                 
Financial assets at fair value through other 
comprehensive income                                                   -              3 126              -          3 126 
Foreign exchange contracts                                             -             14 322              -         14 322 
                                                                       -             17 448              -         17 448 
Liabilities                                
Contingent consideration                                               -                  -          1 627          1 627
Foreign exchange contracts                                             -              5 144              -          5 144 
                                                                       -              5 144          1 627          6 771
                                
30 September 2017                                
Assets                                 
Available -for- sale financial assets                                  -              3 000              -          3 000 
Foreign exchange contracts                                             -             22 670              -         22 670 
                                                                       -             25 670              -         25 670 
                                
Liabilities                                
Foreign exchange contracts                                             -                 54              -             54 
                                                                       -                 54              -             54 
                                
31 March 2018                                
Assets                                 
Available -for- sale financial assets                                  -              3 090              -          3 090 
Foreign exchange contracts                                             -                731              -            731 
                                                                       -              3 821              -          3 821 
Liabilities                                
Contingent consideration                                               -                  -         43 668         43 668 
Foreign exchange contracts                                             -             21 055              -         21 055 
                                                                       -             21 055         43 668         64 723 
                                


15.3 Valuation techniques used to derive Level 2 fair values
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.

Financial assets at fair value through other comprehensive income - the use of quoted market prices for similar instruments.

The carrying amounts of the other financial assets and liabilities is a reasonable approximation of their fair values.

16. Changes in accounting policies
The Group has applied both IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers using the modified retrospective approach, by recognising the cumulative effect of initially applying IFRS 9 and IFRS 15 as an adjustment to the opening balance of equity at 01 April 2018. Therefore the comparative information has not been restated and continues to be reported under IAS 18 Revenue and IAS 39 Financial Instruments. IFRS 9 was assessed by management at the reporting date and concluded that there is no material impact for the Group.

IFRS 9 Financial instruments
IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected credit loss' (ECL) model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at FVOCI, but not investments in equity instruments. Under IFRS 9, credit losses are recognised earlier than under IAS 39. 

Under IFRS 9, loss allowances are measured on either of the following bases:
- 12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and
- life time ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument.
The Group will measure loss allowances at an amount equal to lifetime ECLs. 

IFRS 15 Revenue from Contracts with Customers
The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. A contract asset is raised for products printed but not yet invoiced/delivered as per the below policy. Management has assessed the effects of applying the new standard on the Group's financial statements and has identified the following:

                                
Type of product/service  Revenue recognition and timing                             Nature of change in accounting policy
                                
                                
Printing revenue         Revenue is recognised at a point in time when control      Revenue will be recognised once the
                         passes to the customer which is when the products are      product is completed to specification
                         completed to the customer's specifications and accepted    and accepted by the customer rather
                         by the customer as this is when ownership passes.          than upon delivery under IAS 18.           
                                
Tissue revenue           Revenue is recognised at a point in time upon delivery     No change under IFRS 15.
                         of the related product and customer acceptance.

Packaging revenue        Revenue is recognised based on contractual arrangements    Revenue will be recognised once the
                         with customers, either when control passes to the          product is completed to specification
                         customer which is when the products are completed to       and accepted by the customer or upon
                         customer's specifications and accepted by the customer     delivery dependent on contract terms.
                         as this is when ownership has passed (point in time), 
                         or upon delivery of the related product (point in time).                          
                                
Waste revenue            Revenue is recognised at a point in time upon delivery     No change under IFRS 15.
                         of the related product and customer acceptance.                        
                                
Other revenue            Revenue is recognised at a point in time upon delivery     No change under IFRS 15.
                         of the related product and customer acceptance.
                                

The following table summarises the impact of transition to IFRS 15 on retained earnings at 01 April 2018:

                                
                                                                        Previously reported        IFRS 15       Restated 
                                                                              31 March 2018                 31 March 2018
                                                                                      R'000          R'000          R'000
                                
                                
Income statement                                
Revenue                                                                           4 308 102         33 741      4 341 843 
Cost of sales                                                                    (3 181 105)       (25 644)    (3 206 749)
Deferred tax                                                                        (30 898)        (2 269)       (33 167) 
Net profit after tax                                                                 71 103          5 828         76 931 
                                
Statement of financial position                                
Trade and other receivables                                                         702 154         33 741        735 895 
Inventory                                                                           474 674        (25 644)       449 030 
Retained earnings                                                                 2 629 815          5 828      2 635 643 
Deferred taxation liability                                                         221 357          2 269        223 626 
                                

The IFRS 15 impact on net profit after tax for the period ended 30 September 2018 amounted to R60 million.

17 Share buy-backs
In terms of a general authority granted by Novus Holdings shareholders at the Company's annual general meeting held on 17 August 2018, a special resolution was passed to approve the repurchase of its ordinary shares. The Group purchased a total of 12 758 403 ordinary shares in the Company during August/September 2018. The shares were acquired at an average price of R4,65 per share including share transaction costs, ranging from R4,10 to R4,80 per share. The total cost of R59 651 193,35, including transaction costs of R353 503,39 was accounted for as a debit to equity as these shares are held as treasury shares in the Group.

18 Disposal of International Printing Group Limitada
During the period, the Group disposed of its 97,74% interest in its only foreign subsidiary, International Printing Group Limitada. The exchange differences previously recognised in equity were reclassified to profit or loss with a profit of disposal of foreign subsidiary being recognised.

19 Events after reporting date
The directors are not aware of any matter or circumstance, other than the below, arising since the end of the reporting date that would significantly affect the operations of the Group or the results of its operations. During October/November 2018, the Group has repurchased an additional 9 952 509 ordinary shares at a total cost of R42 415 575,85. These shares are held as treasury shares.


INDEPENDENT AUDITOR’S REVIEW REPORT ON INTERIM FINANCIAL STATEMENTS TO THE SHAREHOLDERS OF NOVUS HOLDINGS LIMITED

We have reviewed the condensed consolidated interim financial statements of Novus Holdings Limited, which comprise the condensed consolidated statement of financial position as at 30 September 2018 and the related condensed consolidated income statement, statement of comprehensive income, changes in equity and cash flows for the six-months then ended, and selected explanatory notes.

DIRECTOR'S RESPONSIBILITY FOR THE INTERIM FINANCIAL STATEMENTS
The directors are responsible for the preparation and presentation of these interim financial statements in accordance with the International Financial Reporting Standard, (IAS) 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of interim financial statements that are free from material misstatement, whether due to fraud or error. 

AUDITOR'S RESPONSIBILITY        
Our responsibility is to express a conclusion on these interim financial statements. We conducted our review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. ISRE 2410 requires us to conclude whether anything has come to our attention that causes us to believe that the interim financial statements are not prepared in all material respects in accordance with the applicable financial reporting framework. This standard also requires us to comply with relevant ethical requirements.

A review of interim financial statements in accordance with ISRE 2410 is a limited assurance engagement. We perform procedures, primarily consisting of making inquiries of management and others within the entity, as appropriate, and applying analytical procedures, and evaluate the evidence obtained.

The procedures in a review are substantially less than and differ in nature from those performed in an audit conducted in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on these interim financial statements. 

CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements of Novus Holdings Limited for the six months ended 30 September 2018 are not prepared, in all material respects, in accordance with the International Financial Reporting Standard, (IAS) 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act of South Africa.


PricewaterhouseCoopers Inc.
Director: V. Harri
Registered Auditor
Cape Town
15 November 2018


DIRECTORATE

INDEPENDENT NON-EXECUTIVE DIRECTORS
Jan Potgieter (Acting Chairman)
Christoffel Botha
Dennis Mack
Lulama Mtanga
Sandile Zungu
Non-independent non-executive director
Noluvuyo Mkhondo

EXECUTIVE DIRECTORS
Neil Birch
Harry Todd
Keshree Alwar (Alternate)

COMPANY SECRETARY
Melonie Brink


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 
Sponsor: Investec Bank Limited 
Auditor: PricewaterhouseCoopers Inc. Cape Town


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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