THE BOTTOM LINE
Grim news ahead for printer Novus’s shareholders
Losing half of the gigantic Media24 account will clobber basic earnings per share by about 75%
Given all that’s happening the trading statement released by Novus Holdings earlier this week was remarkably upbeat. It seemed almost as though the loss of half of the single most valuable contract it ever had, namely printing for Naspers subsidiary Media24, was of no great significance.
While shareholders were told basic earnings per share for the year to the end of March will be around 75% lower than 2017, group headline earnings are not expected to be down by more than 20% on the previous year.
Shareholders didn’t seem to take comfort from the group’s sangfroid attitude. On Wednesday the share price dropped 6.17% to close at R3.80, just 20c off the all-time low reached a few weeks ago. And grimly far from the R15 at which the share traded back in 2015 when it first listed.Obviously shareholders are not persuaded by management’s optimism and may see it as evidence that perhaps they don’t really know what’s going on. Closing the Pietermaritzburg operation and decommissioning other unutilised equipment are useful enough measures but may be of little comfort to shareholders who are looking for alternative sources of income to make up for the loss of a large chunk of its very profitable Media24 business.
While the soon-to-be released annual results will be knocked by impairment expenses related to the Media24 contract, the big hit to earnings is still to come. The financial 2018 figures included 100% of the Media24 contract. So unless Novus management can pull a large rabbit out of its steadily shrinking hat, financial 2019 could turn out to be a real nightmare. The sort of nightmare that may not even be able to support a share price of R3.80. The loss of many key executives isn’t helping to settle shareholder nerves.