Novus impacted by new Media24 contract. The print and packaging group has had to adjust after Media-24 renegotiated a

printing agreement on less favourable terms.

Novus Holdings has taken a big hit after Media24 renegotiated a printing

agreement on less favourable terms than before, resulting in less printing

work and reduced prices. The print and packaging group says this has led to a

14.1% decline in print revenue to 1.83 rand billion for the six months to end-

September, with operating profit down 38% to 212 rand million.

The group says its newspaper and magazine categories were affected by the

changed contract, exacerbated by consumers buying fewer magazines. Revenue

from its books and directories category was also lower after it held over a

portion of a workbook tender for the Department of Basic Education (DBE) for

the second half of the year. Last year, it printed the full DBE volumes in the

first half of the year. On the plus side, retail inserts and catalogue work,

which contributes just over a quarter of group revenue, increased by 5.5%

year-on-year. It credits internal organic growth, with existing customers

increasing their print volumes and marketing spend to counter declining

consumer spending.

Revenue generated by the group's packaging division increased significantly

following its acquisition of ITB Plastics a year ago, compensating for the

decline in the Print division but at lower margins. Tissue sales were also up

strongly, with the division close to break-even after measures were

implemented to reduce losses. While the group's preferred option for the

Tissue operation would be an exit on beneficial terms, it said it remained

committed to ensuring that its profitability continued to improve.

Group revenue rose marginally to 2.3 rand billion in the six months to end-

September. Operating profit dropped 31.4% to 228 rand million and headline

earnings per share fell 31.2% to 49.4c. Free cash flow improved by 162 rand

million to an outflow of 45 rand million from an outflow of 207 rand million in the

year-earlier period.

The first half of the year has witnessed the stabilisation of the print

segment with new bases having been set," Novus said. "The ITB Plastics

acquisition has been bedded down satisfactorily, however, the current results

have been below expectation."

Its shares closed unchanged at 4.36 rand on Friday.