Novus up on upbeat statement

Novus Holdings’ share price enjoyed a lift last week following a reasonably upbeat presentation of the printing group’s financial 2017 results.

Novus Holdings’s share price enjoyed a lift last week following a reasonably upbeat presentation of the printing group’s financial 2017 results.

The share price gained almost 7% during the course of the week to R7.50. Not that there was much cause for cheer in the results — earnings and dividends were down 20% and the group suffered some hefty knocks on a variety of fronts. The trading environment was exceptionally tough as weak economic conditions compounded the negative effect of fundamental changes in the print industry.

CEO Keith Vroon told analysts that newspapers and magazines were struggling and no one had been able to adequately monetise the digital offerings.

On top of a number of executive changes and the death of chairman Lambert Retief, there was the fumbled implementation of attempts to change the group’s control structure to accommodate Retief’s previously expressed desire to cash out his 20% stake in the company. And, as if that were not enough, Caxton dogged its every move in a bid to thwart its restructure plans.

The competition authorities are expected to rule before the end of June on Caxton’s latest application for intervention status. Caxton wants the Competition Tribunal to interrogate Naspers’ control structure, which seems a bit of a stretch, given the restructuring deal will result in Naspers’ stake reduced to less than 19% from 66%.

The tribunal may consider granting a restricted level of intervention focused on marketrelated issues. Novus’s clumsy handling of its restructuring looked masterful compared with the appalling way it handled changes to the Media24 printing agreement resulting from Retief’s death. The JSE had to intervene to persuade Novus it could not rely on an agreement that had not been disclosed to shareholders to justify terminating a valuable contract.

But after an exceptionally tough year, things are looking considerably better for financial 2018. Significant impairments mean the asset base is better prepared for tough times and management has grabbed the lion’s share of South African Breweries’s label business from Caxton. This pushed turnover in the label division up 44%.

The good news for shareholders is that if the unbundling goes according to plan, management will be able to focus on business in 2018.