Embed Size (px)
Citation preview
Presentation Monday, 12 June 2017
For the year ended 31 March 2017
ANNUAL FINANCIAL
RESULTS
Presented by: Keith Vroon, Chief Executive Officer Edrich Fivaz, Chief Financial Officer
2017 IN CONTEXT
FINANCIAL REVIEW
OPERATIONAL REVIEW
OUTLOOK & STRATEGY
Contents
2
2017 IN CONTEXT
3
Core business
• Core print business came under pressure due to continued volume declines. • Costs were removed from the business by mothballing of equipment as a result of volume declines. • Consumer spending pattern in retail sector has impacted print retail advertising. • Margin squeeze due to ongoing competitor activity in market.
Exchange rate • Heatset print segment impacted by a volatile exchange rate.
Growth initiatives
• Tissue TM#2 successfully commissioned in latter part of year. The tissue project was reassessed:
TM#1 refurbishment and upgrade planned. Re-assessing in-house converting division.
• Labels The labels division achieved profitability, volume and efficiencies introduced.
• Novus Print Solutions Paarl Media Paarl closure, equipment relocation and establishment of Novus Print Solutions is
complete.
• Africa Africa division strategy broadened to include non-print related project capability. Projects have not repeated to the same extent as the prior year.
Acquisitions • ITB Plastics and two other packaging sector acquisitions are currently under negotiation.
Business Features - 2017
2017 IN CONTEXT 4
Operating profit excl. impairments and profit/(loss) on disposal of assets
R529m (FY16) R651m 18,7%
Headline earnings per share 110,8c (FY16) 139,9c 20,8%
Revenue R4 312m (FY16) R4 175m 3,3%
5 2017 IN CONTEXT
Results Summary
Dividend per share 56,0c (FY16) 70,0c 20,0%
FINANCIAL REVIEW
6
Group Overview
3 969 4 261
4 175 4 312
668 635 651 529
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
Revenue Operating Profit ex capital items
R’m
Gross Profit %
28,8%
FY14 FY15 FY16 FY17
27,4%
7
30,2%
25,6%
Revenue • Turnover increased by 3,3% to R 4,3bn. • Pricing increases outpaced by volume declines. • Label volumes grew steadily. • Tissue volumes slightly negative due to project
disruption. • Africa project revenues declined, Liberia project
completed in March 2017.
Gross margin • Gross margin lagging prior years, 2016 considered
a high water mark. • A negative forex recovery position prevailed for
the year. • Tissue had a significant negative impact on Group
gross margin. • The total ”other” segment gross margin has
moved into positive territory.
Operating profit • Operating expenses well-controlled and improved
to 13.4% of revenue (2016: 14.6%). • Impairment charge of R138,6m impacted results.
FINANCIAL REVIEW
3 898 4 043
3 918 3 987
657 625 685 575
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
Revenue Operating Profit exc. Capital Items
28,8%
Print Segment: Commentary
27,9%
8
32,3%
27,6%
Revenue • Revenue increased marginally by 1,8%. • Volume declines in all segments, excluding books
and directories. • NPS volume declines resulting from project
disruption. • Impact of grammage reductions and title closures
more prevalent in second half of 2017.
Gross margin • Negative impact of forex on imported paper and
the lag effect to fully recover this from clients. • In addition, the following added to the gross
margin decline: Outsourcing costs due to NPS amalgamation; Increased repairs and maintenance
expenditure; Increased staff costs to cater for peaks in
book work in second half of 2017.
Operating profit • Operating expenses as % of revenue improved by
1.6% in Print segment from 2016. • Impairment charge of R109m.
Gross Profit %
R’m FY14 FY15 FY16 FY17
FINANCIAL REVIEW
70
218
256
326
11 10
-34 -46
(100)
(50)
0
50
100
150
200
250
300
350
Revenue Operating Profit exc. Capital Items
Revenue • Other segments revenue increased by 27,3%. • Labels turnover increased by 44.1%. • Tissue revenue increased by 7.6% in spite of project
related downtime. • Non-print related voter registration work was
performed during the year for the UNDP.
Gross Profit • Improved material consumption at Labels as a result
of improved efficiencies and quality standards. • The Tissue project lead to increased costs as the site
readies itself for its expanded production capacity. • Costs have been incurred ahead of related
production and selling activities.
Operating Profit • During H1 Labels managed to break-even, and is
continuing to add to its profitability in H2 by adding volume and efficiencies.
• Unfortunately same not valid for tissue; significant amounts spent on putting infrastructure in place, yet volumes will only follow in 2018.
• Operating expenses as % of revenue increased by 4.6% in Other segments, compared to 2016.
31,2%
18,9%
-2,3%
Other Segment: Commentary
9
1,3%
Gross Profit %
R’m FY14 FY15 FY16 FY17
FINANCIAL REVIEW
Group Income Statement Summary
2017 2016 % Change (Rounded)
Revenue R4 312m R4 175m 3,3% ▲
Gross Profit R1 105m R1 260m -12,3% ▼
Gross Margin 25,6% 30,2% -4,6% ▼
Fixed Overheads R576m R609m 5,4% ▼
Operating Profit (Excluding impairments and profit/(loss) on disposal of assets)
R529m R651m -18,7% ▼
Operating Margin (Excluding impairments and profit/(loss) on disposal of assets)
12,3% 15,6% -3,3% ▼
Headline Earnings Per Share (Cents)
110,8c 139,9c -20,8% ▼
Dividend Per Share (Cents)
56,0c 70,0c -20,0% ▼
FINANCIAL REVIEW 10
Cash Position Analysis
11
2017 (R’m) 2016 (R’m)
Cash Generated from Operations 662 ▼ 720
Net Property, Plant, Equipment and Intangibles -236 ▼ -214
Taxation Paid -189 ▼ -178
Free Cash Flow 236 ▼ 328
Acquisitions of subsidiaries, non-controlling interest
11 ▲ -68
Other Loans and Receivables - ▼ 1
Net Loan & Finance cost payments -63 ▲ -70
Dividends Paid -224 ▼ -205
Net Cash Flow -40 ▼ -15
Opening Cash Balance 267 ▼ 282
Closing Cash Balance 227 ▼ 267
Continue to explore growth opportunities, supported by a firm cash position and capacity to raise debt. • Debt Equity Ratio:
FY17: 2,8% (FY16: 2,9%)
• Cash Conversion Ratio: FY17: 77,5% (FY16: 72,0%)
• Effective tax rate: FY17: 29,0% (FY16: 29.8%)
FINANCIAL REVIEW
Print Other
• Expansion capex in FY17 related to digital printing project and related infrastructure.
• Maintenance capex for FY17 related to current infrastructure at all printing sites, and is expected to remain at similar levels in FY18.
• Majority of the R 118m capex was incurred on the Tissue expansion project.
• Labels expansion items related to finishing equipment, enabling it to expand its offering to clients.
• Capital expenditure in this segment is expected to reduce significantly as a result of projects running to completion.
• New projects may be added if opportunities arise.
Capital Expenditure
4 17 6 0
4
52
137 118
0
50
100
150
200
250
Maintenance Expansion
R’m FY14 FY15 FY16 FY17
FINANCIAL REVIEW 12
78 80 48 64
175
36 60
70
0
50
100
150
200
250
Maintenance Expansion
R’m FY14 FY15 FY16 FY17
OPERATING REVIEW
13
Category Share of Group Revenue 2017
Share of Group Revenue 2016
Volume Growth/(Decline)
Magazines 19,4% 20,6% (11,2%) ▼
Newspapers 20,6% 21,9% (9,9%) ▼
Security Products - 1,7% -
Retail Inserts & Catalogues
29,0% 29,0% (6,7%) ▼
Books & Directories 22,6% 20,7% 1,3% ▲
Africa revenue FY17: R49m (FY16: R122m)
The print division remains at the core of Novus Holdings and contributed 92% to Group revenue and 109% to Group operating profit excluding capital items.
Revenue Contribution: Print Product Category
OPERATING REVIEW 14
The division currently contributes 8,0% of revenue, but is the area of biggest potential for the Group.
Category Share of Group Revenue 2017
Share of Group Revenue 2016
Volume Growth/(Decline)
Labels 3,1% 2,7% 65,9% ▲
Tissue 3,6% 3,4% (7,0%) ▼
Other Security Products
1,0% - -
Africa revenue FY17: R102m (FY16: R28m)
Revenue Contribution: Other Product Category
OPERATING REVIEW 15
Key focus areas identified
2016 2017 2018
Performance 2017 2016
Revenue – net of intersegment revenue (R’000) R3 986 504 R3 918 108
Operating profit – excluding impairments and profit/(loss) on disposal of assets (R’000) R575 300 R684 953
Total Assets – net of intersegment assets (R’000) R2 965 002 R3 176 514
• Focus on maximising sales opportunities and relationships both in South Africa and outside of its borders.
• Restoring and increasing market share in the book sector, and achieving improved profitability in NPS.
• Group restructure creating focused silos for print by merging heatset and coldset divisions.
• Achieving continued benefits from efficiency drives, while anticipating market movements and adjusting capacity accordingly.
Print: Performance and Focus Areas
OPERATING REVIEW 16
• Protect core activity cash flows and profitability.
• Achieving the above through enhanced production efficiencies, effective procurement practices and continuous focus to match capacity with demand.
• Review of operating efficiencies and market demand resulted in the closure of Paarl Media Commercial.
• Consolidate and deliver on the current digital project and identify new products and markets to advance profitability.
Progress made
Key focus areas
• DBE tender successfully re-awarded.
• Costs were removed from the business by the mothballing of equipment as a result of volume declines.
• NPS achieved operational success after a disruptive year that negatively impacted financial results.
• Ongoing operational and procurement efficiencies achieved.
Key focus areas
2018
Performance 2017 2016
Revenue – net of intersegment revenue (R’000) R325 960 R256 409
Operating (loss)/profit – excluding impairments and profit/(loss) on disposal of assets (R’000) (R46 474) (R34 178)
Total Assets – net of intersegment assets (R’000) R634 549 R520 727
Other: Performance and Focus Areas
OPERATING REVIEW 17
• Increasing labels volumes by landing additional product lines through existing customers.
• Expanding the labels product range to include self-adhesive food-related products (low migration ink solutions) and in-mould labelling products.
• The next tissue project to be embarked on is the refurbishment of TM1, which is expected to yield a superior product to the market, more efficiently.
• Concluding multiple acquisitions that offer both volume and scale benefits.
• Concluding successful projects in Sub-Saharan Africa for elections services and sales of tissue and packaging products.
• Group restructure creating focused silos for tissue and packaging (incl. labels).
Key focus areas identified
Progress made
• The Group acquired significant clients in the wraparound and wet glue labels markets.
• The tissue project has advanced significantly with the commissioning of TM2.
• Through reviewing the profitability of the converting facility, the proposed discontinuance of the in-house converting division was raised.
• Acquire FMCG clients and extend the labels offering to wraparound beverage labels and canned goods labels, while investigating other flexible packaging opportunities
• Over the next three years, improve the operating profit margin through increased volume, product mix optimisation and efficient production and procurement practices.
2016 2017
Consumer spending / low economic growth forecasts
Operating Challenges and Risks
Publishers traditional business models under duress
Key infrastructure failure (Eskom, water supply, etc.)
Health and safety incidents
Labour activism and skills shortage
Exchange rate fluctuations
OPERATING REVIEW 18
OUTLOOK
19
Outlook
STRATEGY 20
Future expansion of packaging. Business
model focused on growing through smaller
acquisitions that yield synergy and volume benefits.
Good cash flow and debt capacity
for further diversification
prospects.
Creation of focused operational business
units under experienced management teams.
Create a dedicated sales focus on SA
market share opportunities and growth markets in
parts of Africa, supported by
focused production units.
Match operational capacity to market demand through
continuous evaluation of operations, and
match equipment type to market trends.
Continued volume decline in most traditional print
market segments.
Challenging operating environment and
depressed economic outlook with currency
volatility remains.
1 2 3
4
5 6 7
21
Status Update on Current Matters
Merger notification process – Media24 / Novus Holdings • Competition Commission recommended to the Tribunal that
the ‘merger’ be approved subject to the sell down condition. • Caxton application to intervene. • Tribunal hearing date needs to be set. • There may be an appeal process. Management Agreement - Lambert Retief / Novus Holdings / Media24 • Lambert Retief’s passing was interpreted to signal
Management Agreement termination. • On further scrutiny the interpretation was changed to that
the Management Agreement continues. • Media24 had the right to terminate the Print Agreement. • Media24 subsequently waived this right. Print agreement • The Media24 Print Agreement is currently in force. • The Media24 Print Agreement may be cancelled on a six
month written notice, post Media24 sell down to less than 50% shareholding.
STRATEGY
QUESTIONS
22
APPENDIX
23
Cash flow History of strong cash flow generation and cash conversion with low financial leverage.
Market position Strong market position in an industry that benefits from operational leverage.
Facilities Well-located, world-class production facilities on company-owned properties located in close proximity to end markets and major economic hubs nationally.
Experience Management team with extensive experience in the printing and manufacturing industries.
Portfolio An attractive diversified investment portfolio of sustainable growth assets.
Growth Growth opportunities identified through accretive acquisitions and greenfield opportunities both within its traditional business and other related areas.
Investment Case
APPENDIX 24
Retail inserts and Catalogues • Brochures, leaflets and catalogues • Reports and calendars • Retail inserts for the majority of • South African retailers
Magazines • ABC-listed magazines • Trade magazines, • Club magazines • Free-to-market magazines
Newspapers • Daily newspapers • Weekly newspapers • Community newspaper
Books and Directories • Workbooks for the Department of Basic Education • Hard and soft cover books for leading publishers • Telephone directories
Security Products • Election ballots • Examination materials and assessments • Other security related printing
Labels • High-quality self-adhesive, wet-glue and wrap
around labels for the wine, beer, spirit, cosmetics, petrochemical, food and beverage markets
Tissue • One and two-ply toilet rolls • Jumbo wadding
Product Offering
Summarised financial
results for the year ended
31 March 2017
