Good morning, everybody. Thanks for joining us this morning. Our interim results presentation is the order we're in. You can see from our results that it's been a disappointing trading period for us. I'm going to update that our full year presentation last year, we hinted at some uncertainty in the advertising spending market and in the government spending on education, and both of those items, to a greater or lesser degree, did realise in the current financial period. If you look at the results of the group, you can see our print, publishing, and distribution segment did very well compared to the prior period. Some of that performance is related to earlier orders from the DBE in the first six months compared to the prior period.
We expect that our full year performance will be slightly below last year's full year performance as a result of lower volumes that we think we will sell into the DBE, into the workbook market. The balance of the print business has improved, and we continue to restructure that business and focus on providing value to our clients. As you see at the end of the presentation, essentially, our print business is a business that has to deliver good value for brand owners. That focus and analysis of our products to deliver that is continued. We expect that the margin improvements that we've seen in that business will continue to be realised and sustained for the full year period. On the education side, you can see that there's a loss-making period compared to a substantial profit in the prior year.
In essence, that is the result of late orders coming through from the provincial departments. If you recall, in our education business, the government announced a while ago that they were planning to update the curriculum, and we expended probably ZAR 35 million in the prior period on the development of new material, which we did submit for the early phases of the curriculum, [audio distortion] phases three to three. Those submissions were accepted, and we're waiting the final catalogue. As we expected, the government's got a budgetary problem in education. Not only does it not have the funds to roll out the new curriculum, as I've said, extensive, it's also facing significant pressure just to continue with its current procurement program.
So we've seen a number of provincial departments either delay procurement or delay payment of outstanding balances, and some of the provinces, such as [audio distortion], have placed under administration by the Treasury. So we've seen a recovery in orders following the September close. And we've got a very positive and substantial order book, and that business is profitable. But we still expect that the volume of orders which we will receive for the full year will probably be 20%-25% lower than the orders which we received in the prior year. So the business will still be pretty profitable, but it will produce substantially less EBITDA than the prior period.
And we've continued to invest in that business in our technology strategy, which we expense, not capitalising those costs, because we think that is an essential part of the future of that business, is our ability to deliver learning outcomes through technology. So disappointing first six months for education, but a portion of that's timing related and came through in the October and November months. You should see that returning to approximately 75% of the prior year. On the packaging side, we're slightly down compared to the prior period, mainly as a result of a decision to retain margins and walk away from marginal business. The economy's difficult, but our strategy there is to focus on our large, profitable clients and walk away from marginal business. And the business is performing very well, exceptional customer focus, and we're continuing to see the benefits of that in the second six months.
So if I talk specifically about print and publishing, we can see the delta compared to the prior year, which was mainly timing related, as I indicated. But we managed to improve margins substantially in our print business. We continue to invest in technology processes, and we streamlined the management structure in print now. We've got a single management structure responsible for all plants, and we're driving efficiencies, making sure that not only are we efficient in terms of our production processes, but our procurement processes, our staffing levels, our customer service levels, our quote success rates, etc. All of those are continuing to be improved, and I expect this business to continue on that trend going forward. In general, I think that printing itself, especially on the retail side, has stabilised, but we still see pressure from digital advertising taking away insert revenue on retail.
That's a trend which we're talking to our clients, and we still have faith that print advertising is a very cost-effective medium. And it's about educating the people that continue to be employed in the marketing and advertising departments that there is a place for print and that print is actually a very successful and essential part of the brand communication process in South Africa. I mentioned the third bullet point, the DBE contract is a timing-related issue, and we will have a slightly lower profit from that segment in the full year results, mainly as a result of slightly lower volumes. And that's also reflective of the pressure that the education departments are under at the moment. In education, I think I've commented on that. I think going forward, it'll be interesting to see how the national and local education departments navigate the proposed changes.
In many provinces, there are still gaps in textbooks. So not only are they planning to roll out a new curriculum, but we don't even have full compliance with respect to everybody receiving textbooks. The procurement budgets are under pressure because stationery takes a big portion of the budgets. And all provincial departments and national departments are under pressure. We can see that generally in the economy. So that pressure is filtering through to the education budgets, and a big portion of the education budget is going to salaries. So the balancing factor typically is materials. So the process for government to navigate a curriculum change plus spending constraints is going to be very interesting. I think you can see from the national minister of education that she has asked for more money, but in general, government budgets are tight.
So what the spending profile looks like going forward would be interesting. I mean, it's clear that a child cannot study without a textbook. So there's a point where there just aren't enough textbooks, and money will have to be appropriated for that. And how we impact it through a curriculum change process would be interesting. The thing with the curriculum change is you have to replace all textbooks, where our current process is really a top-up process. So to move from a model where you move from topping up textbooks, depending on what the percentage is every year, to replacing all textbooks has got a substantial impact on spending. Plus, you've got the concomitant training requirements for teachers. There's a training spend and a training budget which also has to accommodate it.
And as we indicated in our full year results, you've got an additional subject, Coding and Robotics, which government wants to make compulsory from grade R. And that requires a completely new way of thinking and classroom materials. Coding and Robotics will require additional materials, support materials, in order to teach that properly. So we've got a lot of questions in that process. And in the meantime, we continue to supply our material outside of the foundation phase. And we are strong in the mid and upper phases. So anything from grade four and up, we've got a large portion of the catalogue. As the top of orders come in, we should benefit from that, but it does require budgets in the education department. You can see that the fifth and the fourth bullet points there.
Our strategy in education is not to be a textbook provider, but to be a business that delivers learning outcomes. And in the past, I think there was a tendency by education departments to deliver electronic textbooks. We think that is a solution, but I don't think it's applicable necessarily quicker in a broad sense. So the use of technology in a different format, whether it's used on a phone, etc., or video format, I think is going to become more important. Our focus is to continue to invest in products which enable the delivery of learning outcomes using textbooks and other methods in order to really improve education. So we've got a very good team focused on that. Our Maski product is rolled out. We've got about 100,000 students on the platform, and they continue to use it.
We see extensive use during exam times and times when children are forced to study, mainly in grade 11 and 12th grades, and we want to extend that to other grades. The focus of that team is to really do a lot of user research now to make sure that the usability of that product improves substantially. We see increasing use of the product, and our active users are growing. And we expect that spend and that investment to continue. And hopefully, we'll reach a point where the product is adopted widely. It's a very difficult problem to solve. In the face of it, doing something digitally is quite easy. But for anybody that's used a tool to teach themselves over their phone or online, the initial phase is easy, but the continued use and continued delivery of value is quite difficult.
It's a problem which many companies and many industries are struggling with, and we're not unique in that instance. Many people are trying to do something in education, but I don't think there's a clear successful blueprint, especially in a country such as South Africa, where you've got varying demographics, technology challenges all over the country, lack of support, lack of funding for devices, etc. So it's an interesting challenge, but if we do solve that challenge, I think we'll have a unique value proposition in education. On the packaging side, as I said, we retained or made the decision to retain margins. The business is very healthy. Our sales to our top 10, 20 clients is increasing. Those are the large users of packaging material. We continue to invest in equipment and unique packaging solutions so that we don't compete in the run-of-the-mill market and offer unique solutions.
So while we're down compared to the prior year, I think the business is in a very healthy position, and we've got a settled management team for their contribution going forward. I'm going to hand over to Craig and the team to take you through the numbers, and then I'll wrap up with the article at the end.
Thanks, André. What do you all say? If you look at the revenue, it ended up 1% up, but as André noted, a lot of DBE in H1 in terms of timing with Novus Print. And on the MML side, their timing is leaning towards H2. So DBE on the print side, partially offsetting the drop in MML or the timing on MML. We already saw the orders flowing through now in October and November. So MML are already catching up on their provincial orders on the revenue side.
On the GP, a pleasing percentage there. We finished 2025 on 31.4%, so very much in line with that. But up on September last year, you'll remember that we were a bit squeezed on paper pricing in the prior year, so that has at least recovered in the current year. Overheads up, but that is largely because of the introduction of On the Dot Novus Media and Novus Sport. So they make up 109 million of that difference on the overheads, or 25 of the 28%. So the rest only up 3%, and that includes the digital costs at MML that we've been expensing. So the net result with the additional overheads coming through, but the top line fairly static, is that we are down on last year in terms of EBITDA, operating profit, earnings per share.
We will see a recovery in H2 as we see the orders flowing through from MML. So nothing surprising on the cash flow, a pleasing result to finish at 742. Last year, we finished on 310, but you would remember that we had the volume one DBE receipt was received on the 1st of October, received on the 1st of October last year. So that did make a big difference. But if I just focus on the outflows in the turquoise, you will see that we had a 70 outflow in working capital. That is from March until September, so that is expected as we're ramping up not just on DBE, but on other core printing products as well as packaging side. So we do ramp up from March to September.
Then taxation paid, the acquisition of PPE, that's a combination of expansion across the businesses of ZAR 18 million, maintenance assets of ZAR 23 million, and intangibles of 13. And then the external dividend, of course, that we paid to shareholders in July, that is reflecting there. And then the acquisition of associates or investments, that 39, so the biggest portion of that was an increase in our stake in Mustek. So we're up to 39.95% holding in Mustek at the moment. And then just that little blue block there as well, just noting we've already successfully delivered volume two of DBE that will go into the schools for the 2026 calendar year. So that over ZAR 400 million will be flowing in now in the first two weeks of December on top of that ZAR 742 cash balance that we've got. So similar story with working capital.
You can see September 2024, that almost ZAR 600 million was sitting in there that came in just after half year. So very favourable if we compare September to September last year as well as to March. Happy with where the working capital is given given the cycle that we're in, and this is in our peak season with the order book very full for November.
So on the outlook side, I think it's well known that we acquired a substantial stake in Mustek and we're in a period where we have to and have made a mandatory offer. Frustratingly, we're still waiting for the TRP to issue a compliance certificate, and we haven't appointed ourselves or possibly appointed to the board of Mustek. So we really haven't been involved in that business.
We still think it's a very good acquisition for the group, and we were very positive about the actions which management are taking to reduce the working capital and improve profitability of that business. But we do look forward to getting involved in more detail once this process is completed. And hopefully, that happens soon. But we don't really at this stage have a clear indication from the TRP what the timing is on that process, and it is very frustrating, to say the least. Under the second item there, as I alluded to in the intro, our business is really focused on meeting our customers' advertising and promotion needs. It touches many of our businesses. It touches our print business, but also now with our media assets. What we are delivering is content to an order brand to communicate with customers.
So across the group, we've got to focus on understanding what that value proposition is, communicating that value proposition more clearly to advertising agencies, brand owners, marketing people, etc. And then we're investing in technology to make that more measurable. So we do have a distribution business through On the Dot, where we touch a lot of distribution points. More than 3,000 independent outlets. We deliver magazines and other products to a number of houses and home addresses. We deliver newspapers and pamphlets too. And we think that if we're smart about the use of technology and the ability to give feedback to our customers, that will enable our customers to see the value and also track the value that they receive from the products which we do. We also think that we can do some things very smart with technology and actually create different businesses.
So On the Dot specifically, I think that they have got a number of initiatives, maybe too many initiatives at the moment, in order to leverage their distribution platform in place and to provide a value-added service to the people that we deliver products to. So not only do we deliver the products, but we should help our customers sell more magazines, more newspapers, more content, more advertising. We can't continue to see ourselves just as a facilitator or a logistics function. We really need to drive business intelligence. And I think that is the future of the On the Dot businesses. Yes, we do distribution, but intelligence and other services will determine whether that business becomes a substantial business or whether it remains a marginal business in our group.
Our media business, the newspaper business, I think didn't have a great first six months advertising spend on a national basis under pressure, but the team's focused on that. We're opening up new publications and acquiring new publications in niche sectors. So we do that carefully and with a lot of thought. We understand the concerns of expanding into print media, but we do think that print media has got a place. And as books have shown us with the increased sales of books, we think there's a point in time where printed media will stabilise and will still be seen as a valuable product, not only to customers but to brand owners. So we're working on that in our media and newspaper business. And I think that team is very energised and focused. So we look forward to a larger contribution from them in the future.
Then we own an AI business or a share of an AI business, Bytefuse. There's probably two big focus areas or three big focus areas for Bytefuse. One, to assist MML to build Maski, which is our AI tutor for education, and there's a team that does that. Secondly, there's a team that is focused on driving efficiencies. A lot of effort going into the process, which we follow to produce content, books, etc., and to automate and improve and add value to that process. And thirdly, across the group and externally to provide services to implement AI on an enterprise basis. So all three of those initiatives have got teams focused on them. And it's challenging to develop. It's easy to develop an AI product using open-source tools, but to really industrialise a product, I think, requires a unique team.
And I think that team demonstrated their ability to do that very well in certain niche sectors. So I look forward to seeing their contribution going forward. And then the green block, I've talked a lot about that. Not enough certainty from provincial education departments and budgets for us to have a real clear outlook in our education business. So we're looking at the cost base, making sure that we're efficient in terms of the number of people that we employed and what they do. Secondly, the processes that we use to produce and manage content and to remain nimble so that when we are required to develop products for the next submission, we can do that very cost-effectively and smartly. Then finally, we are investing in additional print technologies.
Part of the evolution in print is that the new technology, which is available to us, provides us to be fast, flexible, and provide unique products to our clients with great turnaround times. We've got a very good business plan around that. And in the new year, we'll be installing some new print equipment, which changes the capability which we've got in the group. But just on an overall basis, it's been a disappointing first six months. We were frustrated and disappointed in what we were able to deliver. But we're looking to see improvement in the second half of the financial year. Fortunately, our NAV, which is kind of an underpinning increase by 5%, that's edging closer to the six-round level. And our ability to manage our cash resources, I think, has shown to be good. We restructured our debt.
We're busy restructuring our debt package at the moment to enable us to even have more flexibility to pursue opportunistic acquisitions. So we're sitting with a cash balance, as Craig indicated, it will be more than a billion in December. But we've also worked with our bankers to put together a really flexible debt package to enable us, if we want to, at short notice, to execute opportunistic transactions and acquisitions to the extent that they become available. I think it's important to have that flexibility in the balance sheet. Part of, I think, what's made us successful in the past is our ability to react quickly in terms of opportunities. So we've got the ability now with our funding package to do that. But there's nothing on their rise, and we just wanted to make sure that we've got that facility available.
And then for the second six months, clearly, our main job will be to get the Mustek acquisition implemented, hopefully, and work with that team to embed that transaction. Let me leave it there and go to any questions. Yeah, sorry, it's on the screen there. The question from Nicholas Hobbs regarding Mustek. Do you worry that if too much time passes without the TRP compliance certificate, that the opportunity to create or extract value from Mustek will diminish? I don't think so. The business has got a very substantial net asset value. I think it's a stable business. It's been around for many, many years.
I think the management team there is on track and is focused on the right things to do there, which is focus on the working capital, improve the margins in their business, and make sure that the trading volume which they require in order to support that group, that increases. They've already reduced working capital a bit, and the benefit of that comes through the interest cost line, which is reduced. So the big broad strokes, I think they will continue to execute. What we're keen to do is to sit down with management and understand the longer-term plans in that business. They've got a substantial customer base, which they surprise credit to. They've got a footprint across South Africa. What the product suite is that they deliver and where they go to with their services business is an interesting conversation which we'd like to have over time.
But for now, the main focus is to get the excess inventory down and make sure that they execute on the margins and the volume of business which is out there. So I don't think our non-involvement makes any difference to that process. But obviously, there's a large shareholder we'd like to work with management and give them the support that they require in order to really create more momentum. So I don't think so, Nicholas. Any other questions? Someone likes to ask a verbal question.
Thank you very much. Hi, everyone. Thanks for all the information. Sorry, can you just go through the details of the you were talking about the foundation to the grade three. Is that the only part that's been out for tender now? Sorry, I half heard it.
You explained some clarity, and you're saying grade four onwards stays the same, of which you'll hopefully get top-ups. And you'll find out on the foundation to grade three by the end of the year. Is that right?
Yeah. So there was a general statement, Barry, that the government is revising the curriculum. And I previously expressed my concern about curriculum revisions. I don't think we've got a problem with the curriculum in South Africa. Countries like Norway and Finland, their curriculum stayed the same for many years. But look, I think that there is a desire by, let's say, academically focused people to continue to tweak things because that's what people and academics do. They study things and propose recommendations. And unfortunately, I think that the academic voice in government, especially in education, is very, very strong, and the practical voice is not so strong.
So there's always things which you can do to improve a curriculum, but I don't think the problem in South Africa is the curriculum. I think the problem in South Africa is we need to make sure that our teachers are adequately equipped to teach children. And in my opinion, I think that's borne out by empirical evidence. But nonetheless, there was a statement, a broad statement made that the curriculum change will be happening, and we complied with that and submitted materials for grade R to three. The intention is to roll out the curriculum change across all grades up to grade 12. But the actual practical implication of doing this, I think, became, I don't know, more apparent at a point in time, which is why you saw the submissions made. There was an initial acceptance of material, but the final catalogue had not been announced.
And you can only start procuring if there's a final catalogue. So the first procurement cycle, government has said, for grades R to three will happen in 2026. The issue with that curriculum now includes Coding and Robotics from grade R. So you've now got a new compulsory subject. Now, teaching Coding and Robotics is substantially different to anything that's been done. And the teachers out there in the field, they would have never had exposure to Coding and Robotics when they went through their studies. So you've got a compulsory subject, which is different to teach compared to any other subject. And the teachers in the system have not been taught how to teach that subject. So there's a cost which you have to incur in order to do that.
Plus, there's a cost which you have to incur in order to update the teachers on the effect and implications of the new curriculum. So while the intention is to roll it out across all grades, I think that this cost machine that's starting to build is creating second thoughts in terms of the timing. And now there's been various engagements between interested parties as to what is the timing, but we've got no idea what the timing is. So we're ready to do the next submission. We're ready to supply to the curriculum when it is released, but there's just a lack of clarity. Secondly, the trend of government trying to develop their own materials or free materials or donor-funded materials, that threat and that trend is also out there. So part of the strategy might be to have more donor-funded/free material on the catalogue.
Whether that's the right or the wrong thing to do, everybody's got their opinions, but we think that there will still be a place for paid-for textbooks in the curriculum. But all of that, I think, is in the air at the moment. Until such time as those things aren't announced, children need textbooks. So you need top-up orders to go through to the schools. There's no choice. Otherwise, the children can't be taught. So we think that there's still runway left for the current curriculum and current catalogue, but the extent of orders is really determined by needs. And as soon as there's a priority to roll out grade R to three, then the procurement goes to grade R to three because it's a new curriculum. You don't have a choice. You have to buy those books.
Then there's no money left for the top-up books for grade four through to twelve. But there's a practical problem is that children don't have textbooks. So you've got this issue, which I don't think the education departments and provincial education know how to deal with clearly. So there's just a lot of uncertainty. I don't think that I'd be surprised if they roll out or start the next phase of the submission next year because it's just got such cost implications. And I think there are noises from government that they've indicated that maybe it should happen over a longer period, but you don't know anything more than I know at the moment, Barry.
Thank you very much, André.
Morning, Anthony. I see your hands up.
Yeah. Good morning from my building sites. Firstly, thanks for the presentation.
I note of a cash on hand of ZAR 742 with the additional ZAR 400 million coming in and the ring-fenced amount that you have to hold for Mustek. Two parts to this question, please. An earlier question indicated you're still interested in Mustek, but I've had some conversations with you in the past regarding the current progress from those slow bunch of bastards with TRP. How is it currently going? And what stage are you currently at? My first part. And the second part, given the cash that you have and that is building up, what's the current strategic intent of the board to look at perhaps acquisitions in new areas or perhaps in packaging or related areas to effectively utilize the cash, which is clearly building up at a rapid pace? Thank you.
So let me deal with the first issue of the TRP.
We continue to receive questions from the TRP. I have no idea when they're going to be finished. It's a mystery. So it's incredibly frustrating, and the fact that the regulator can take such a long time in what's completed transaction is a concern. We'll continue to respond to the questions and continue to give them reams and reams of information. And hopefully, that process resolves itself very quickly. And the indications each time in the correspondence is like, "This is the last," or, "We're nearly there," or, "We're about to finalize," and then the next round comes. So our legal advisors, they haven't seen this before. They're also baffled. So hopefully, it closes soon.
Then on the excess cash on the balance sheet, as we said in the past, our preference is to deploy the cash in good acquisition opportunities.
We paid a dividend, and we'll continue to look at paying dividends. But our preference is to find good investment opportunities. And we've looked at acquisition opportunities in packaging and all sorts of areas which are not related to our core business at the moment. But we are cautious not to overpay. We're not in a rush to deploy the cash. I don't think there's any need for us to rush to deploy the cash. So if the right opportunity becomes available, Anthony will do it. We've structured our balance sheet and our debt facilities at the moment to enable us to even do larger acquisitions. So we've been targeting a small set of companies in the past. But if something more substantial comes across which generates EBITDA, which also supports the acquisition, we'll definitely look at that. The only thing is we don't want to overpay.
And the conundrum which we see and which everybody sees is that transactions in the private market are substantially more expensive than the public market. We are not going to pay somebody a six times EBITDA multiple for a business. It's just not going to happen in our world. And as I said in the past, private equity companies, they have to unload their portfolios, but the prices are too high. And they will remain sitting with those assets unless people with too much money come along and buy those assets. So I think between myself and André and the board, we're very focused on not overpaying and rather say no to an acquisition than sit with something which is marginal. We don't need to do marginal transactions at the moment. So that's why we wanted to restructure our balance sheet.
And we actually had a good discussion with our bankers to enable us to do transactions and have covenants which reflect the transactions rather than sticking with gearing and/or EBITDA covenants that could trip us up. The thing which we didn't want to do is burden our balance sheet with a debt structure which suddenly places a lot of pressure on us because you've got a debt service covenant or an EBITDA covenant which doesn't give you the flexibility to not extract cash or do something in the underlying business. So we think we've got a good financing structure to enable us to do that. But we need to find the right deals. And I think staying patient is probably the right thing to do more than anything else at the moment.
And just to ask further, given that you mentioned you would look at considerably larger transactions going forward with a ZAR 2.2 billion rent market value, what sort of scale optimally would you be looking at? I know I can't hold you to it, but what size checkbook would you be allowed to spend?
The function of the check, I think, will be determined by the underlying EBITDA which you acquire and whether you acquire 100% or a non-controlling stack. So the issue is if you control 100% of the business, then you've got full access to the cash flows in order to support the debt package. So the size of the deal and you can do a fairly large deal if it's a 100% deal, and you've got a stable EBITDA which comes from that at 100% acquisition.
So I wouldn't be able to tell you now what the size of the deal is, but I'd say that I'd be able to do something you could do something larger than our current group if you bought 100% of a business which is cash flow generated and has got the ability to support the debt package in itself. And if it's a stable business, then even more so because you don't need such a big equity underpin in order to support the transaction. So it's not that that's what we're chasing, but we need to open up that opportunity to be able to do that. If it's a partial acquisition such as Mustek, then you're really looking to the asset, the share price, to support any debt packages.
And there you need to be much more cautious because if the share price falls, you sort of look at all sorts of covenant issues. And so those acquisitions are potentially less attractive to us because you don't have direct access to the cash flow. But in the case of Mustek, because the discount to now was so big, we said, "Look, that definitely is a good acquisition for us to use our excess cash on, even though we can't gear that. We haven't geared that per se. We've used our current balance sheet against our current assets and their cash flows to gear the acquisition, but we haven't used the Mustek cash flow to support the transaction." So depending on the asset which we acquire, that's what you look at. The thing with 100% acquisitions is that you're probably looking at the private market.
And again, as I said, the private market has got stupid EBITDA multiples. And you've got a founder that's built a business over 50 years, done their cash flow calculations as a six times EBITDA multiple, and that's what they want. And that's kind of embedded in their minds, but that's not where the market is. So until such times, the pressure really happens. And what fortunately is, the private equity market or the buyers has really disappeared there. So you don't really have the pressure anymore from the private equity market that has to deploy a fund which they've raised in order to do the transactions. So the pressure probably will come from listed companies who seek to bolt on acquisitions in a particular vertical or segment. And at least there, we're seeing people are also paying reasonable prices.
So it's not a great answer, but it gives you a framework in the way which I think Craig and I are thinking.
Great. Thanks, André.
Okay. All right. I think that's it. Thank you. Thanks, everybody. Thank you.