Novus expects earnings to fall

Printing group Novus Holdings is expecting headline earnings a share to drop at least 20% in a year in which tough trading conditions have been aggravated by particularly adverse developments.

Printing group Novus Holdings is expecting headline earnings a share to drop at least 20% in a year when tough trading conditions were aggravated by a number of particularly adverse developments.

Novus, which is controlled by Naspers through Media24’s 66% holding, advised shareholders on Wednesday it expected the results for the year to end-March to differ by 20% or more from the comparative reporting period. The continuation of tough trading conditions and losses at the group’s tissue operation contributed to the decline in earnings.

During the year, a number of senior executives resigned following the February 2016 exit of CEO Stephan van der Walt. In April, the company secretary resigned and in June, finance director Edward van Niekerk announced he was quitting.

In July, Lambert Retief, nonexecutive director and a major force behind the growth of the company, announced he was taking medical leave of absence for six months. In January, Retief died, prompting an announcement from Media24 that this had triggered the termination of the management contract between Novus, Media24 and Retief. Media24, a wholly owned subsidiary of Naspers and one of the largest publishers in the country, said this meant it could terminate its printing contract with Novus on six months’ written notice.

In its Wednesday trading update, Novus told shareholders it had reached an in-principle agreement with Media24 for a new print contract. Industry sources said given the tension between Naspers and Caxton, the country’s only other major printer, Media24 might have had little option but to enter into another agreement with Novus.

A new exclusive printing agreement between Novus and Media24 might be complicated by the Competition Commission’s recent recommendation that Media24 unbundle its controlling stake in Novus. The Competition Tribunal, which is due to hear the matter on Thursday, might fear that an exclusive agreement renders futile the effect of an unbundling.

The good news for Novus and its shareholders is that it has once again been awarded the Department of Basic Education workbook tender. The group, in partnership with Lebone Printers, a black empowerment company, has secured a contract from 2018 to 2020.

The Treasury suspended the tender awarded to the partnership in early 2016 due to irregularities and a tougher tender process was launched.