09 Jun - 8 min read

Preliminary Audited Results for the year ended 31 March 2021

Preliminary Audited Results for
the year ended 31 March 2021

Novus Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 2008/011165/06)
JSE share code: NVS    ISIN: ZAE000202149
(“Novus Holdings”, “the Company” or “the Group”)


PRELIMINARY AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2021


With extensive experience and a solid track record, Novus Holdings services the country and
customers across the African continent through its print production of all short to long run
requirements of magazines, retail inserts, catalogues, books, newspapers, commercial and digital
work and educational materials. Beyond traditional printing, the Group has a packaging division that
offers wet-glue and wrap-around labels, pressure-sensitive labels and flexible plastic packaging.

SALIENT FEATURES

    •    Revenue declined by 31,0% to R2 838 million (2020: R4 112 million)
    •    Operating profit* declined to an operating loss of R20 million (2020: operating profit of R126
         million)
    •    Headline earnings per share decreased from 23,4 cents per share to a headline loss of 5,4
         cents per share
    •    Loss per share improved to 8,3 cents (2020: 119,6 cents loss per share)
    •    Net asset value per share decreased by 3,2% to 767,5 cents (2020: 792,6 cents)
    •    Final cash dividend of 50 cents per ordinary share with a scrip dividend alternative (2020: NIL)
    •    Net working capital decreased by a further R128,2 million (2020: decreased by R210,2 million)
    •    Free cash flow** improved by R26,2 million to R362,2 million (2020: R336,0 million)
    •    Cash conversion^ increased to 351,9% (2020: 119,4%)
    •    Closing cash position up R268,3 million to R 442,8 million (2020: R174,5 million)

* Operating profit excluding “other gains/(losses).”
**Cash generated from operations less expenditure on property, plant and equipment (“PPE”) and intangibles plus proceeds
on disposal of assets, less taxation paid.
^Cash generated from operations less expenditure on PPE and intangible assets, divided by Earnings before interest, taxation,
depreciation and amortisation (“EBITDA”) excluding “other gains/(losses).”

PERFORMANCE OVERVIEW

The financial year under review was impacted by COVID-19, which resulted in economic contraction
and business interruption. This tested the Group’s ability to be agile and respond swiftly to the
uncertainty that presented itself. The Group’s primary focus was to ensure operations were stabilised,
the livelihoods and health of staff were protected in the workplace and the strategic objectives
amended to ensure sustainability of the Group.

The Group’s performance can be attributed mainly to the lockdown regulations causing disrupted
trade during the state of disaster and aggravated by the extended alcohol bans placing pressure on
the Labels Gravure division and the after-effects impacting all print product categories.

Whilst revenue and operating profit were down compared to the prior year, the resilience of the
Group was demonstrated through the implementation of extreme cost cutting measures with
operating expenses reduced by R81,1 million (12,6%). Gross profit margin improved moderately to
19,0% from 18,7% supported by the changed product mix in print and significant asset impairments
in FY2020 which absorbed the margin compression.

The Group continued to restructure and rationalise production facilities in order to obtain operational
efficiencies, to extract under-utilised capital assets, and reduce capacity in line with future expected
demand. Retrenchment costs of R29,3 million were accounted for in the year together with a net
impairment charge of R27,2 million on property, plant and equipment and assets held for sale.
Favourably impacting the results was a R30,7 million profit on the sale of certain redundant plant and
machinery in the Print segment whilst there was a R10,9 million loss recognised in the disposal of the
Tissue subsidiary.

Print

Revenue declined by 33,0% to R2 123 million and operating profit declined from R106 million to an
operating loss of R37 million in the current year.

Volumes declined on all product categories with an overall tonnage drop of 35,8%. Magazine and
newspaper volumes declined due to additional title closures, reduced volumes and general market
declines. Retail inserts and catalogue volumes were significantly lower, also contributing to thinner
margins based on overcapacity in the market. Books and directories volumes also decreased.

Packaging

Revenue decreased by 15,6% to R580 million and operating profit by 50,5% to R19,8 million.

ITB’s operating profit improved by 4,7% despite revenue declining by 10,2% compared to the prior
year. The division benefitted from more stable polymer pricing and cost savings across all expense
categories.

The alcohol and other lockdown restrictions resulted in Labels Gravure revenue declining by 31,6%
and contributing an operating loss to the segment. The division achieved lower margins from key
customers due to pricing pressure and lost margin due to alcohol restrictions and inefficiencies on
production and trade.

Tissue

Reported revenue decreased by 47,7% to R134 million with an operating loss of R2,6 million compared
to an operating loss of R19,1 million in FY2020. The Group only consolidated the results of the Tissue
division for the first half of the financial year as 51% of this business was disposed of with effect from
01 October 2020 and equity accounted for from this date onwards. On a like-for-like basis, Tissue
revenue was up 2,2%.

CASH GENERATION

The Group closed the financial year with a cash balance of R442,8 million compared to R174,5 million
in the prior year. Notable improvements in working capital contributing an inflow of R250,0 million,
proceeds on the sale of certain redundant plant and machinery of R59,1 million and the disposal of
Tissue equity of R20 million contributed to this strong closing position. Cash preservation strategies
and curbing expenditure also contributed positively to this result.

TRANSFORMATION

The Group is proud to retain its Level Two B-BBEE contributor status and remains committed to
transformation.

CHANGES TO THE BOARD

Mr André van der Veen has been appointed to the board of directors of the Company (“Board”) as a
non-executive director with effect from 17 May 2021, with Mr Adrian Zetler appointed as an alternate
non-executive director to Mr van der Veen, also effective 17 May 2021.

After serving on the Board for almost three years, Mr Dennis Mack will retire as an independent non-
executive director by rotation at the upcoming Annual General Meeting on 27 August 2021 and has
indicated that he will not be available for re-election and will formally resign from the Board. Mr Mack
currently serves as chairman of the Audit and Risk Committee and member of the Remuneration
Committee and the Nominations Committee.

The Board is in process of streamlining its composition to ensure that it is fit for purpose and will
consider the vacancy to be filled by the time Mr Mack’s retirement takes effect, being 27 August 2021.

DIVIDENDS

The Board has decided to declare a cash dividend of 50 cents per ordinary share. In order to balance
the cash flow requirements of the business and provide maximum flexibility to shareholders, a scrip
dividend alternative will be offered to shareholders, subject to the Company obtaining the requisite
regulatory and shareholder approvals. The number of shares issued under the scrip dividend
alternative will be limited to 31 million ordinary shares. To the extent that there is an excess election
of the scrip dividend alternative, shareholders will receive a pro-rata share of the scrip dividend with
the balance of the dividend to be settled in cash. A circular setting out the terms and salient dates of
the cash dividend and scrip dividend alternative will be published separately in due course.

OUTLOOK

The impact of the COVID-19 pandemic on the business during FY2021 was significant and a return to
a degree of normality is welcomed and expected in FY2022. However, permanent damage has been
inflicted on the global and local markets and especially the Print industry. Short-term recovery is
expected, but not to pre-COVID-19 levels as the traditional newspaper and magazine markets have
been severely disrupted. The broader South African economy has also been severely harmed and
recovery is not expected in the short to medium term.

During FY2021, four Print operations were closed or consolidated into other Print facilities and
together with impairments to PPE, resulting in the Print ‘footprint’ being significantly reduced making
the operating cost-structure leaner and more competitive but without compromising its traditional
product offering. This bodes well for the future and this ‘right-sizing’ philosophy has been entrenched
in the minds of management for future deployment. Whilst a recovery in post-COVID-19 volumes can
be expected, the recent shortage of pulp together with the ever-present ZAR volatility will have a
knock-on effect on paper-pricing and margins.

The Labels Gravure division is expected to see some form of recovery as trading normalises whilst
ITB’s performance is expected to remain stable. Both businesses will continue to explore alternate
product line offerings that complement their existing offerings and are within the parameters of
current equipment capabilities.

Management will maintain a close eye on market trends and continue to respond as and when
required. In the coming months additional capital resources will be freed up to support Group
initiatives along with a further anticipated cash release. Management is conscious of the generally
suboptimal return on gross assets and in line with the stated strategy all operations will be continually
assessed in terms of projected return on funds employed, and where appropriate, further action will
be taken to ensure that all assets are carried at realisable values. This focus may result in further
liquidation of underperforming assets.

With the inherent strength of the balance sheet and cash generating ability, current momentum will
ensure the sustainability of the Group. The Group expects demand to remain muted, before stabilising
again in the medium term.

RESULTS PRESENTATION

Shareholders are advised that Novus Holdings will be hosting their results presentation via a live audio
webinar at 11h00 (SA time) on Friday, 11 June 2021.

For access and details of this webinar, please visit the Group’s website at www.novus.holdings and
view the invitation at https://novus.holdings/wp-content/uploads/2021/06/Novus-Holdings-Annual-
Results-2021-Invite.pdf.

SHORT FORM ANNOUNCEMENT

This short-form announcement is only a summary of the information contained in the audited financial
results for the year ended 31 March 2021 of Novus Holdings Limited and its subsidiaries (the “full
announcement”) and, as such, it does not contain full or complete details pertaining to the Group's
results.

The results have been audited by the Company's external auditor, PricewaterhouseCoopers Inc.,
who expressed an unmodified opinion. Shareholders are advised that, in order to obtain a full
understanding of the nature of the auditor's engagement and more specifically, the nature of the
information that has been audited, they should obtain a copy of the auditor's report available
through the following link: https://novus.holdings/wp-content/uploads/2021/06/IAR21-Annual-
Financial-Statements-v_Final.pdf, which sets out key audit matters and the basis for the unmodified
opinion together with the accompanying audited Group consolidated annual financial statements,
both of which are available for inspection at the registered offices of the Company and Sponsor,
Merchantec Capital, during business hours, and copies may be obtained at no cost on request from
the Company Secretary, who is contactable on 021 550 6206.

Any investment decisions should be made based on the full announcement. The full announcement
has been released on SENS and is available through the following link:
https://senspdf.jse.co.za/documents/2021/jse/isse/nvse/FY2021.pdf and can also be found on the
Group's website (www.novus.holdings). This short-form announcement is the responsibility of the
board of directors of Novus Holdings (“Board”) and has been approved.




On behalf of the Board


Dr Phumla Mnganga                                             Neil Birch
Chairman                                                      Chief executive officer


Cape Town
09 June 2021


Sponsor
Merchantec Capital

Date: 09-06-2021 05:30:00
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