Not many shareholders in Novus Holdings will shed tears when the printing and packaging group disposes of its thin-margined tissue business.
While the need to diversify away from the strains of the printing industry was understandable, the 2014 acquisition of a KwaZulu-Natal-based tissue plant was probably not the best way to mop up profits.
Novus's new management team — headed by Neil Birch (former CEO of Bidvest Paperplus) — has, to date, been stoic about this prickly legacy issue and not rushed into disposing of the tissue assets.
The patience appears to have been prudent, with the Novus interim results presentation on Tuesday at least presenting a dose of good news in that the tissue segment — which accounts for about 6% of total revenue — had reached break-even after 8% volume growth.
The tissue segment’s gross margin also turned positive, improving by an encouraging 3.4% in lean trading conditions.
In this regard, Novus management can take a bow for reducing operating expenses a whopping 42% year on year. Operating expenses as a percentage of revenue were ratcheted down to just 5.3% compared with more than 11% in 2018.
While efforts to reinforce the tissue segment are heartening, there seems little chance the operations will be retained by Novus.
Birch referred to the improved tissue business as “dressed for sale”. With the core printing and packaging segments having to grind out profits, the sooner this operational distraction is removed, the better.
Presumably the ongoing effort to squeeze profits from the tissue segment suggests Novus believes it can fetch an acceptable price for the business.
Positive thinking is well and good, but action is also required
When CEOs speak about the challenges facing SA, perhaps they should use their positions of influence to be honest and leave the positive thinking vibes to self-help gurus such as Oprah Winfrey and John Demartini.
Pick n Pay turnaround man Richard Brasher was keynote speaker at a recent retail summit, and given his sterling business acumen, attracted a serious crowd. The Briton started graciously by congratulating SA for its Rugby World Cup win. But it was all downhill — or uphill, as it was a talk on optimism — from there.
The topic he was asked to speak on was “Is SA at a tipping point?”
People want to hear what a global CEO, who runs a fantastic business with 18,000 employees, thinks about our future.
Instead he gave a lesson in having the right attitude and “optimism being more fun”, admitting there were real challenges, but telling us business opportunities exist in adversity. Brasher started: “I really want spend a bit of time on attitude. How people turn up really matters.”
Brasher pointed out — rightly — that complaining about the “political and business elite” was SA's “national sport”.
His message to his audience of retailers was, “Stop worrying what you can’t do ... you can’t affect corruption, you can’t affect political machinations ... [but] what you can do is a hell of a lot”.
It echoed Discovery founder Adrian Gore’s, who told the Discovery leadership summit that global research showed South Africans were too pessimistic and that “attitude drives fundamentals, not the other way around”.
To be fair to Brasher, a good attitude is essential in customer service — part of the retail sector's DNA. But we would feel a lot more optimistic if business leaders used their honesty and influence to push the government to address SA's challenges rather than giving us lessons in seeing the glass half full.
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