Quick Poll

Novus Holdings Reports Decline in Profits Amid Supply Chain Challenges

Novus Holdings
  • Novus Holdings reports a decline in profits for the year ended March 2023.
  • Revenue increases by 6.0%, but earnings before interest, taxes, depreciation, and amortization (EBITDA) significantly decrease due to rising costs and supply chain disruptions.
  • Challenges in the Print segment and higher paper prices impact operating profit, while the Packaging segment sees growth.

Novus Holdings Limited announced its provisional audited results for the year ended March 31, 2023. The company experienced a challenging year marked by global economic uncertainties, supply chain disruptions, and volatile raw material prices, leading to a decline in profitability.

Despite facing numerous obstacles, Novus Holdings reported a 6.0% increase in revenue, reaching R3,196 million compared to R3,014 million in the previous year. However, the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) significantly decreased to R131.7 million from R281.1 million. The decline was attributed to rising paper costs, supply chain interruptions, and constrained energy supply.

Operating profit also took a hit, declining to R7 million from R193 million in the previous year. Novus Holdings experienced challenges in its Print segment due to the inability to pass on the increased paper prices to customers. In response to supply disruptions, the company increased buffer paper stock, which was procured at higher prices than the current spot rate. Consequently, the higher costs are expected to impact profits in the first half of the 2024 fiscal year.

One positive development for Novus Holdings was the award of the Department of Basic Education (DBE) school workbook contract, securing a stable revenue stream for the current and next two financial years. However, the delayed tender award and disruptions in the paper supply chain negatively impacted margins.

Furthermore, Novus Holdings diversified its operations within the educational content sector through the acquisition of Pearson South Africa, now known as Maskew Miller Learning. The acquisition contributed to the overall increase in revenue, adding R156 million to the company’s top line.

In the Print segment, revenue remained relatively flat at R2,377 million compared to R2,371 million in the previous year. However, operating profit declined from R155.8 million to an operating loss of R23.7 million. The Packaging segment, on the other hand, experienced a 3.8% revenue increase to R659.4 million and a significant operating profit growth of 62.9% to R61.6 million.

Novus Holdings maintained a healthy cash balance of R392.2 million but experienced a decrease compared to the previous year’s closing cash position of R567.9 million. The company funded part of the acquisition of Maskew Miller Learning from its cash reserves, introducing a level of gearing by obtaining additional funding.

Looking ahead, Novus Holdings expects the global and domestic environments to remain volatile, impacting both cost and revenue drivers. While paper prices are gradually decreasing, the company anticipates the short-term profitability of its Print segment to be affected. Novus Holdings remains confident in its Print business model and aims to mitigate the impact of load shedding through initiatives such as solar power installations and load curtailment programs.

Due to the significant debt incurred from the acquisition and the need for working capital investment, Novus Holdings has decided not to declare a final dividend at this stage. The company’s board will continuously review the situation and communicate any updates to shareholders.

Novus Holdings will host a results presentation on June 22, 2023, to discuss the audited financial results in detail. Shareholders and investors can access the webinar through the company’s website.

Related

Rateweb

South Africa’s primary source of financial tools and information

Contact Us

admin@rateweb.co.za

Disclaimer

Rateweb strives to keep its information accurate and up to date. This information may be different than what you see when you visit a financial institution, service provider or specific product’s site. All financial products, shopping products and services are presented without warranty. When evaluating offers, please review the financial institution’s Terms and Conditions.

Rateweb is not a financial service provider and should in no way be seen as one. In compiling the articles for our website due caution was exercised in an attempt to gather information from reliable and accurate sources. The articles are of a general nature and do not purport to offer specialised and or personalised financial or investment advice. Neither the author, nor the publisher, will accept any responsibility for losses, omissions, errors, fortunes or misfortunes that may be suffered by any person that acts or refrains from acting as a result of these articles.