Malawi conglomerate Press Corporation posts K24.7 billion profit
Dual-listed conglomerate Press Corporation plc has posted a profit after tax of K24.76 billion for the financial year ending 31st December 2019 representing a 33% decrease from the K36.71 billion profit recorded in the previous year.
In a statement signed by Press Corporation plc Board Chairman Patrick Khembo, Board Director Estelle Nuka, Group Chief Executive Officer George Partridge and Group Financial Controller Elizabeth Mafeni, PCL says the reduction should be read in the context of a one-off prior year gain of MK8.86 billion arising from restructuring initiatives of the telecommunications segment and a one-off cost of MK2.5 billion in 2019 relating to functional review exercises in some of its companies.
“The underlying profit excluding the one-offs puts the current year profit at 3% below prior year results,” reads the statement in part.
Press corporation plc also said the operating environment was a challenging one, characterized by unprecedented low consumer spending and business uncertainty arising from pre-election activities as well as protracted post-electoral disputes.
“Thus, revenue generation was impacted resulting in the Group registering only a 3% growth. The less than satisfactory growth in revenue in turn put pressure on working capital resulting in a 131% increase in net finance charges,” reads part of the statement.
Going forward, Press Corporation plc says it will continue with its efficiency drive and initiatives to turnaround the companies that have hitherto under-performed.
“During the year, a diagnostic study revealed that part of the underperformance of these companies is on account of severe under-capitalization which requires urgent attention. Management has already drawn up plans to remedy this. In respect of previously reported loss-making companies, it is pleasing to note that Press Properties Ltd and Ethanol Company Ltd (EthCo) have completely turned around and are profitable while The Foods Company Ltd is now significantly moving in the right direction,” reads the statement in part.
On segmental performance, Press Corporation plc hailed the financial performance of National Bank of Malawi (NBM) plc in the financial services segment after posting a profit after tax of K17.1 billion representing a 7% increase from the previous year.
“The results were after taking into account once-off staff rationalization costs incurred during the year amounting to MK812 million. Plans are now at an advanced stage for the Bank to make its first ever acquisition outside Malawi,” says Press Corporation plc in the statement.
Press Corporation plc says profit from the telecommunications segment declined by 33% adding that prior year results for the fixed line phone business (Malawi Telecommunications Limited) included a once-off gain from the restructuring of non-core assets amounting to MK2.7 billion.
“The mobile phone company (TNM), on the other hand, registered a 10% decline in its net earnings, due to a once-off restructuring expenditure of MK1,04 billion, a stock write-off of MK450 million and an increase in depreciation expense resulting from the heavy capital investment made over the past three years to reposition the company for sustainable growth. Plans are underway to identify a strategic partner in MTL,” reads the statement in part.
The energy segment, ethanol manufacturing consisting of subsidiaries Press Cane and EthCo delivered strong results with a 53% increase in its earnings.
“The performance was driven by the continued satisfactory performance by PressCane which registered a 10% growth in its earnings. Similarly, EthCo delivered good results and registered a 346% growth in its earnings from a loss made same period last year, driven by increased utilisation capacity due to the availability of raw materials from carry-over stocks and improved sales volumes,” reads the statement.
However, Press Corporation plc notes that things were not good in the consumer goods segment, retail chain which has Peoples Trading Centre (PTC).
“The retail chain continued making losses and registered a 44% increase in its losses as a result of a 21% decline in sales revenues due to closure of a number of stores following a restructuring of the business, attendant restructuring costs, and a 61% increase in interest costs. During the year, the Board approved an equity injection of MK3 billion for working capital. The impact will be fully felt in 2020. Directors are weighing various equity re-capitalization options to deal with the company’s unsustainable debt position. The search for a strategic investor is continuing,” reads the statement in part.
Press Corporation plc also said The Foods Company Ltd continued to register positive gains with an improvement of 23% in its losses. The company, trading as Maldeco Fisheries, is on the path to a complete recovery with the ongoing investment in capacity expansion after a successful restructuring of its operations.
“Similarly, the real estate business (Press Properties Limited) continued with its good performance and registered a 41% growth in its profit before tax. The company needs more capital to have critical mass in commercial properties,” reads the statement in part.
PCL also has equity accounted businesses, Joint ventures: PUMA, a fuel distribution company and Macsteel, a steel processing and trading company; associated companies, Limbe Leaf, a tobacco processing company; Castel, a bottling and brewing company, and Open Connect Limited: a telecom fibre back bone infrastructure company.
“While most companies within this segment produced satisfactory results, the Group’s share of profit declined by 32%. This was mainly due to poor results reported in the bottling and brewing business (Castel) as a result of operational challenges some of which emanated from changes in regulations. Some of the issues have since been resolved and the business is expected to be profitable going forward.”
“The tobacco processing company and the fibre back bone company, on the other hand, delivered good results. Profit from the fuel distribution and steel processing companies declined by 25% and 46% respectively mainly due to weak demand and reduced gross margins. There were no margin increases awarded to fuel distribution companies during the period,” reads the statement.
On the business outlook, Press Corporation plc says the general business confidence remains at a low ebb in light of continuing uncertainty following the nullification of presidential elections and in addition, the COVID-19 pandemic is likely to have an impact on the Group’s general productivity and business as supply chains world-wide are being severely disrupted.
“Management is closely monitoring the pandemic and taking all necessary precautionary and mitigation measures.”
“The foregoing notwithstanding, the Group is nonetheless poised to deliver satisfactory results due to the expected full re-capitalization of under-performing companies which will have a significant positive impact on Group results. The Group is implementing a new 5-year (2020-2024) Strategy whose focus is to create, sustain and grow its businesses through the identification of new revenue streams and efficiency improvements,” reads part of the statement.
Press Corporation plc is listed on the Malawi Stock Exchange (MSE) and on the London Stock Exchange (LSE) as a global depository receipt.
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