We have extracted below the Chairman’s Statement from the 2018 annual report of Press Corporation Limited (PCL.zm), listed on the Lusaka Securities Exchange:
THE GENERAL OPERATING ENVIRONMENT
Key macroeconomic indicators were relatively stable in 2018. Average inflation rate was 9.2% per annum compared to 11.6% in prior year. The Policy Rate remained at 16% throughout the year. The value of the Malawi Kwacha remained stable against major currencies. The stability was underpinned by foreign exchange reserves of US$1.08 billion as at end December 2018 representing 5.19 months’ worth of import cover, a position that held throughout the reporting period.
The Malawi stock market was buoyant for the second consecutive year as it registered a positive return on index of 33.42% (US$ terms) compared to 62.09% in 2017. Market liquidity improved both in total traded value and volume compared to the corresponding period of 2017. Listed companies within the Group registered significant positive movements with trading gains in PCL (90%), TNM (93%) and NBM (23%). For the first time in the past five years, the PCL share price registered a significant share price increase, moving from MK600 in January to closing at MK1,140 in December, 2018. This reflects growing investor confidence in the strategic direction of the Group.
Power challenges continued impacting on the cost of production and service delivery for most of the Group entities due to over-dependence on diesel generators. However the power situation improved in the 4th quarter with the onset of the rains and completion of the rehabilitation works on some hydro power stations under the Millennium Challenge Compact project funded by the United States Government.
Like many companies, the highlighted factors have shaped the operating landscape of Group Companies in one way or the other. Management’s task has been to ensure that Group Companies are prepared for all risks while at the same time taking advantage of opportunities availed by such an operating environment.
Notwithstanding the challenging operating environment, our management team delivered a strong performance, building on the previous year’s positive results. The Group recorded a consolidated profit after tax of MK36.71billion (2017:MK39.67 billion). In 2017 the Group had a once off transaction which resulted in a profit of MK14.28 billion arising from the sale of 19% of Castel (Malawi) shares whilst in 2018 there was a once off transaction arising out of the restructuring of OCL resulting in a gain of MK6.16 billion. Without the two once off transactions the Group registered a 20% growth in its underlying profit after tax.
In addition to the strong financial performance, the year under review was a momentous year for PCL as it started implementing its strategic goal of diversifying into the tourism sector. The Group firmly set its foot into the sector with an initial acquisition of a 15% stake in Sunbird Tourism PLC. Going forward the Group’s ambition is to steadily grow its presence in this growing important segment of the economy.
Another major milestone during the year was the acquisition of our own ‘home’ to house the Group’s Corporate Office and other subsidiaries. PCL, throughPress Properties Limited, purchased a 51% controlling interest in Indetrust Holdings Limited, a prime property in the City of Blantyre. The property has now been christened “PCL House”.
PROSPECTS FOR 2019
The macro economic environment will inevitably be unpredictable it being a tripartite election year as this could undermine effective policy making and implementation. Initial crop estimates indicate a good agricultural season due to the favourable rainfall pattern which, if combined with sound monetary policy, bodes well on the inflation front. However, the otherwise good harvest could partly be undermined by flooding which happened late in the cropping season caused by cyclone Idai, affecting mainly the southern part of the country. The GDP growth rate has therefore been projected at 4.5%.
Building on the strong foundation laid in 2018, the Group is well positioned for growth and expansion in new and existing profitable business areas in spite of the risks highlighted above. The efficiency measures, capital adequacy improvements and the successful restructuring exercises undertaken in most business units during the year has favourably repositioned the Group for continued growth. Directors are that the restructuring and strategies being implemented in loss making entities are now bearing fruit.
THE BOARD OF DIRECTORS
Mrs Edith Jiya, a director nominated by Old Mutual, retired during the year and was replaced by Mr Jim Nsomba. I would like to welcome Mr Jim Nsomba and look forward to his contributions on the Board. In the same vein, I would like to take this opportunity to thank Mrs Edith Jiya for her valuable contributions while serving on the Board and wish her well in her retirement.
I wish to thank my fellow Directors for their wise counsel, Management and staff for their hard work, cooperation and dedication during the year. With their efforts, the Group achieved excellent results as outlined in this report. Equally, my thanks go to all Group customers and suppliers, for without their continued loyalty and trust, these results would not have been possible. I look forward to another successful year.
PATRICK W KHEMBO