Novus Holdings, the printing, packaging, and educational resources company that last week announced a bid for listed IT distribution company Mustek, reported on Friday that interim diluted headline earnings per share more than doubled to 55.56 cents from 25.01 cents last year.
Revenue increased by 3.3% to R2.09 billion in the six months to September 30, while operating profit rose to R196.4 million from R168.6m, as shown in the results released on Friday. Headline earnings per share increased to 59.36 cents from 28.77 cents. No interim dividend was declared.
Novus directors said that the Mustek acquisition reflected a planned transition to a more diversified investment holding company, which has its benefits and disadvantages.
“The most significant disadvantage is the underlying investments often trade at a discount, but as active shareholders, we are confident in our ability to add value to our underlying investments, which will be positive for our shareholders,” the directors said.
Net asset value per share increased marginally to 728.27 cents per share at the end of the interim period from 719.92 cents per share at the end of the 2023 financial year. The interim closing cash position was at R310m, significantly down from R621.1m at the last year-end.
The improved results were largely due to an increase in the profitability of the print segment and profits from derivative instruments held in Mustek, within the packaging segment.
The education and packaging segments increased revenue by 10% and 10.1% respectively, while the print segment decreased by 0.9%. The revenue recognition of the Department of Basic Education (DBE) contract in the print segment was consistent with the prior year, with more than half recognised by September 30, 2024. The education segment benefited from orders received that were previously processed in the second half.
No retrenchment costs were recognised in the six months compared to R1m in the prior period. Load shedding costs decreased to R1.5m from R9.6m. Operating costs included a R25.8m increase (to R27.5m) in the credit loss provision.
Regarding the decline in cash, the directors explained that the first half typically saw the group invest substantially in working capital to fund seasonal demand and to deliver on the DBE contract. The DBE contract was invoiced one month later than in the prior year, having a negative impact of R600m on the cash balance as of September 30, and the payment was received in October 2024.
Revenue from the education division increased by 10% to R447.2m following the recording of revenue historically processed in the second half. Historically, orders from Limpopo province were placed during the second half; however, this year’s volumes were expected to be lower compared to the prior year.
“We are engaging with the DBE to understand their thinking on curriculum reform, but we expect that the full-year performance of the education segment will be lower than the previous year,” the directors said.
In the packaging segment, revenue increased by 10.1% to R368m, with both ITB and Novus Labels showing growth compared to the prior year. Operating profit fell by 7.4% to R35.7m.
The acquisition of three divisions of Media24 Proprietary has been finalised: On the Dot (media supply chain management division), Community Newspapers (local news portfolio), and Soccer Laduma and Kick Off (football publication division), for R40m in total.
Initial investment in working capital will be required for the acquisitions, which is expected to contribute to group profits and earnings per share.
Novus also now holds just over 35% of Mustek and has made a mandatory offer to the remaining shareholders of R13 per share cash, or R7 per share cash plus one Novus Holdings share, or two Novus Holdings shares for each Mustek share tendered.
The DBE contract has been secured for a further two years. The Print business, where an ongoing decline in print volumes places pressure on margins and the recovery of fixed costs, continues to be optimised.
Paper prices have returned to normal fluctuations following a period of energy surcharges and premiums on shipping rates.
The AI associate, Bytefuse, is also actively investing in the development of the AI tool Maski, with the investment expected to grow in the future.
“We expect that the curriculum update will negatively affect orders in the second half of the financial year, resulting in MML sales declining from the prior year,” Novus directors said.
The packaging segment successfully commissioned expanded production capacity, enabling market share growth and improving production efficiencies. However, import lead cycles remain a challenge.
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