What a miserable thing Novus’s life as a listed company has been. Of course it was never supposed to list. Listing was the only option available to it after Caxton persuaded the Competition Commission in 2014 that there had been a change of control at Novus.
The change of control, according to Caxton, occurred when former CEO Lambert Retief decided he wanted to retire and cash out his shares. At the time Naspers’s Media24 owned 80% of Novus, which was then called Paarl Media. The obvious purchaser was Naspers. It seemed an unremarkable transaction until Caxton persuaded the commission that, given Retief’s previous ability to direct the company, the transaction amounted to a change of control.
At the time it seemed likely Caxton would use the opportunity of a Competition Commission investigation into the change of control to ensure considerable scrutiny of Naspers’s opaque control structure. Ironically, that opacity is now the focus of much international analyst scrutiny as Naspers heads for a listing in Amsterdam.
Whatever the precise motivation, Naspers decided in 2014 that a listing was the easier option and so in early 2015 the renamed Novus appeared on the JSE, trading at about R16. Things have pretty much gone downhill from there. The share is currently trading at R3.80 and cash is burning up.
The first major blow was the renegotiation in early 2017 of the 17-year old printing contract with Media24, which represented more than 25% of Novus’s profit. From April 1 2018 a new, smaller and much less profitable contract took effect.
Worse was to come, with a series of top management departures and a seeming inability to generate returns from acquisitions aimed at mitigating the structural decline of its traditional business. More recently Novus lost a court battle over the legality of its book printing contract with the department of basic education. This will make 2020’s renewal of that R3bn contract extremely difficult.
Perplexing statement from Trustco
Trustco’s financial statements published on Thursday last week are perplexing, to say the least.
The Namibian investment company, which operates in the financial services and mining sectors, boasted that its diversified business model “again proved its worth”. The group said consolidated revenue grew 85% to N$1.5bn (R1.5bn), with profit after tax surging 165% to N$725m.
A closer look at the numbers, however, shows that they were less about diversification and more about once-off items. Revenue, for instance, was boosted by a N$984.4m gain on the “transfer of inventory to investment property”.
This was linked to a decision not to develop properties that were previously bought for that purpose, due to a weak property market. The gain, which accounted for nearly two-thirds of total revenue, simply arose from the reclassification of those properties from “inventory” to “investment property”.
Other, more usual revenue streams all showed declines, including revenue from premiums, property sales, tuition and related fees, interest earned on student advances and diamond sales.
The company also recorded a gain of N$545.6m after a company linked to CEO Quinton van Rooyen waived a loan to Trustco, meaning financial liability was “derecognised”.
Trustco is tightly held, so it escapes heavy scrutiny. But its reliance on once-offs to boost numbers had some analysts scratching their heads. Cash flows, for instance, were poor. And despite healthy profits, there was seemingly no cash for dividends, independent retail analyst Syd Vianello noted on Twitter.
At the very least, Trustco’s financial statements make for an interesting read.
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