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Novus’ growth engine is Maskew Miller Learning (JSE: NVS)

The other divisions are focused on profitability rather than revenue growth

Novus has released results for the year ended March 2024. Aside form the acquisition of Maskew Miller Learning (MML), they tell a story of a group that is in a low-growth environment. In response, Novus has been putting a lot of work into improving profit margins. Thankfully, this has worked.

Revenue is up by 24% which might sound amazing at first blush, but you can thank the acquisition of MML for that. The MML results are now in the numbers for the full 12 months (vs. 4 months in the prior year), so this limits year-on-year comparability. Looking at overall group growth isn’t the right approach here.

Instead, we can dig into the divisional numbers.

The largest division from a revenue standpoint is print, where revenue ticked up slightly to R2.4 billion. This was thanks to pricing increases, as sales volumes fell 9.1%. Gross profit margin moved 120 basis points higher to 17.4%, also thanks to the pricing increases. This did wonders for operating profit, which swung from a loss of R31.1 million to a profit of R55.0 million. These kinds of swings around the break-even mark are typical in a low margin business model.

In the packaging division, revenue was flat at around R657 million. Despite this, operating profit moved 9.6% higher at R67.5 million. You can see that they are very focused on managing profits in a tough environment.

We now get to the education segment, which is where MML is. A full year of revenue is good for R966 million and operating profit was R264 million, so this is now by far the most important part of the group from a profit perspective.

This is why the year-on-year numbers at group level look rather silly, as MML wasn’t there in full in the prior year and is much larger than the other divisions on the line that counts: operating profit. Diluted headline earnings per share (HEPS) therefore increased from a headline loss of -7.4 cents to profit of 67.6 cents.

The other big news is that there’s now an ordinary dividend of 50 cents per share. The confidence to pay this dividend stems from a vast reduction in inventory and thus working capital, driving a substantial improvement in the net cash position from net debt of R119.7 million to net cash of R461.1 million. That’s a swing of R581 million!

Although there was a small acquisition in the packaging segment, the major focus going forward is on growing the MML business and bringing in the benefits of the Bytefuse acquisition, which will inject some AI-type thinking and technology into the textbooks business. Along with a need to revise material for grades 1 to 3, this will put some pressure on MML’s profits in the 2025 financial year.

Overall, Novus has taken major steps beyond its traditional business and this is for the better, as evidenced by the lack of top-line growth outside of the education segment.

Little Bites:

• Director dealings:
  • An associate of Johnny Copelyn bought shares in Hosken Consolidated Investments (JSE: HCI) in an off-market transaction to the value of R20 million.
  • An associate of a director of Astoria Investments (JSE: ARA) bought shares in the company worth R284k.
  • Associates of the CEO of Spear REIT (JSE: SEA) bought shares in the company worth R46k.

• AYO Technology (JSE: AYO) has appointed Adv Dr NA Ramatlhodi as chairman of the group. He has held many prior roles, including various political offices ranging from Premier of Limpopo to member of Parliament.