THE BOTTOM LINE
Novus: Not quite laughing all the way to the bank, but closer
Printing company has been under the cosh but the latest trading update is cause for at least a smile
Novus shareholders received some much needed good news in early January. In an updated trading forecast the board said it now targeted headline earnings per share for the 12 months to end March of between 60c and 65c. In September the board’s forecast range was between 50c and 60c.
It wasn’t anything dramatic, but for shareholders faced with almost unrelenting bad news (loss of much of the Media24 printing contract, executive changes, poorly performing acquisitions) for the past few years, it was welcome.
Remarkably, it didn’t have much of a sustained upward effect on the share price. After reaching a peak of 435c a few days after the announcement, the share price then began to ease back. On Tuesday it was back at 405c, which is about a quarter of the level at which the share was trading shortly after its listing in 2015.
The updated forecast means the board is expecting headline earnings per share in the six months to end-March 2019 of between 10.6c and 15.6c. The top end of the range is about half of what the group generated in the second half of financial 2018. At the halfway stage Novus reported a 32% decline in headline earnings to 49.4c a share from 71.7c.
The improved forecast allows for the assumption that general economic conditions will remain tough and continue to put downward pressure on demand and pricing. The Novus board is also assuming it will retain the existing printing contracts “in the normal course of business”.
Given the highly competitive market conditions, and the group’s recent experience, this is an assumption that cannot be taken for granted.
And despite an update just 10 weeks before the year end, shareholders shouldn’t rely fully on the forecast. The board cautions it makes no allowance for any costs or benefits that might result from any once-off strategic initiatives.