Novus: Can new shareholders inject growth into underperforming printing company?

JSE-listed printing, publishing and packaging group Novus looks set for a shake up after boutique asset manager A2 Investment Partners snapped up the entire stake of almost a fifth of the company that was owned by Media24 investments. The Novus share price has taken a hammering over five years, with the business falling into the red as Covid-19 containment measures hit the media industry hard. Novus CEO Neil Birch speaks to BizNews about latest developments at the company – and what it’s like being at the helm of a public company in a sector that appears to be in terminal decline. – Jackie Cameron

Novus CEO Neil Birch on the new shareholder, Media24:

To be honest I don’t have a lot of the back story at this stage. What I can say – and I don’t want to speculate – is that Media24 went into very much a disconnect relationship with us, because really, they were very respectful of what they were instructed to do from the Competition Commission. From the time that they were required to sell down their stake, although they still held a substantial stake in the company, they weren’t particularly active and they weren’t allowed to be active. So, we had a very decent relationship – as shareholders are concerned – but obviously as customers, there remained a very important part of our lives. We don’t have great insight into that, other than we know they came along for the ride for a long time and they’ve now moved on.

On future plans for the company:

It’s early days. I’m due to engage with them, to try and understand what ideas they may have. I like to have as much insight into shareholder expectations anyway. I would expect that after I’ve engaged with them, I’ll get a sense of what ideas they might have. They would obviously be looking for some sort of value unlock, which is a strategy we’ve been embarking on for some time. If they’ve got extra perspective, we’ll have open ears to hear that.

On speculation that the company is set for a shake-up and whether he may step down:

I haven’t really thought that. It’s not something that has crossed my mind. In terms of the public spotlight, people are not too sure of what we’ve been up to. That’s obviously been the Covid situation and the fact that we’re not really just able to speak freely to either the press or individuals. Everything comes through a SENS-type discussion or presentation. What happens between press releases and results announcements, a lot of it goes unknown. I would think that we’ve actually done quite a lot of good things within the business recently. I think if one understands that, it would be surprising if someone expected some sort of step down.

On changes that have been made within the company:

We’ve embarked on something, to really rationalise our facilities – which we’ve done quite aggressively. That was accelerated during Covid. Demand was dramatically down and we needed to respond to that. That has created some structural changes in our market. The demand has shifted and it’s changed, in terms of the profile of what products are required. We’re not yet sure exactly how long-term that is – but we certainly reacted to the short-term and what the medium to long-term might be.

We’ve had some plant closures and reductions. We reduced our capacity and taken a lot of expense out of our structure. I don’t think we’re the ‘fat cats’ we might have been accused of being some time ago. I think we’ve learned to manage with less cash employed. The strategic drive (which was well-publicised) is that we would consolidate up our efficiencies, reduce excess capacity and start to squeeze cash out of the business.

That’s what we’ve been doing, and trying to get away from investments which shareholders felt were inappropriate. The tissue investment that my predecessors embarked on – I don’t think it was misguided – but we’ve done our best to extract ourselves in that business and we are in that process. We’ve secured a sale of half the shares in that business and we will continue to extract ourselves completely. That is part of our consolidation process. By and large, the culture of the company has become much more capital understanding – if I might use that as a term. I think we’re managing to do a lot more with less.

On the bigger picture of the industry Novus operates in:

We’re in an industry that is not an easy place to be. There’s an element of uncertainty. The publicity around print media doesn’t help because it creates an air of uncertainty. The future outlook for print, I think, is seen as negative just because of the segment it is. But there’s still quite a lot of life in the old dog. It’s really up to us to continue extracting it and making use of our capabilities to get the most out of it.

But it’s certainly not an exciting growth industry. I mean, to say that would be silly. That’s why one has to have some element of diversification, which we’ve achieved a degree by moving into some of the packaging activities. But really, it’s about making the most and that’s where the consolidation comes from. The efficiency drive is to make the most of what we can still do. We are still a significant player – and it’s not something which falls off a cliff. We just have to manage downsize on capacity downwards as the demand might decrease, because it’s certainly not an increase in demand sector.

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