Printing and manufacturing group Novus says print advertising still serves the SA retail sector best and is the most cost-effective way to reach consumers.
The share price is up 34% over the past three months and the company said in its annual report published on Friday that it continued to optimise and restructure the print business, where an ongoing decline in print volumes placed pressure on margins and the recovery of fixed costs.
“The significant fixed costs to maintain and operate our print infrastructure is challenging and requires constant attention to mitigate the reduction in print volumes. Our key retail clients, who represent the largest portion of our print business, are constantly assessing their marketing plans and often pivot between digital and paper-based marketing strategies,” CEO André van der Veen said in a letter to shareholders.
“Our analysis still indicates that print advertising, for the majority of the retail market, remains the most cost-effective way to broadly reach SA customers. At times digital marketing appears to be the preferred strategy for some retail clients, but we have seen some spend return to paper.
“In addition, the retail segment is under pressure due to economic conditions which has impacted our pricing and we constantly evaluate potential volume loss against our required price increases. We are diversifying our print offering to better leverage our physical infrastructure, operational capabilities and sales network. This will take time, and the extent and success thereof remains to be seen.”
The Cape Town-based group — formerly known as Paarl Media — was spun off from Media24 in 2015. Novus Print has two production facilities in Cape Town, one in Gqeberha and one in Gauteng. Novus Packaging has its labels printing facility in Cape Town and its flexible plastic packaging facilities in KwaZulu-Natal and Gauteng.
Novus Print constitutes nearly 60% of group revenue, employing 776 people. According to the group’s latest results, 26.4% of its print revenue comes from books, 22.45% from retail inserts and catalogues, 7% from newspapers and 2.9% from magazines.
Newspaper print volumes will come under further pressure after Media24’s decision to discontinue the print versions of City Press, Rapport, Beeld, Soccer Laduma and Daily Sun from October.
Media24 had reached a deal with Novus Holdings to sell its media logistics business, On the Dot, and its community newspaper portfolio subject to regulatory approvals. Caxton has made a competing offer to buy On the Dot and the community newspaper portfolio.
Novus has been diversifying its business and bought Maskew Miller Learning (MML) in November 2022. Novus Education with MML operates nationally offering educational resources and materials that are used in schools, technical and vocational education and training colleges, higher education institutions, and home and professional environments.
“MML’s national textbook market share remains constant and we have committed additional resources to strengthen our publishing team. Our biggest threat and opportunity is the impending curriculum change where we will be required to submit textbooks for approval and where success is not guaranteed,” Van der Veen said.
“The department of basic education has also called for submissions to supply books and materials for the new coding and robotics curriculum.”
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