Press Corporation Limited (PCL.mw) HY2019 Interim Report

We have extracted the Chief Executive Officer’s Statement from the 2019 half year report for Press Corporation Limited (PCL.mw), listed on the Malawi Stock Exchange:

BASIS OF PREPARATION

The Directors have prepared the summary consolidated and separate financial statements in order to meet the requirements of the Malawi Stock Exchange Listings. The Directors have considered the listing requirements of the Malawi Stock Exchange and believe that the summary statements of financial position, comprehensive income and cash flows are sufficient to meet the requirements of the users of the summary consolidated and separate financial statements.

The accounting policies applied in the preparation of the consolidated and separate financial statements, from which the summary consolidated and separate financial statements were derived, are in terms of International Financial Reporting Standards and are consistent with the accounting policies applied in the preparation of the previous consolidated and separate financial statements.

PERFORMANCE OVERVIEW

Group Results

The Board is pleased to present interim results for Press Corporation PLC for the six months period ended 30 June, 2019. Group profit before tax for the period at MK18.92 billion (2018: MK31.49 billion) represents a 40% decrease. The reduction should be read in the context of a one-off gain of K11.18b in the first half of prior year arising out of the restructuring initiatives of the telecommunications segment (OCL MK8.48b and MTL MK2.7b). The underlying comparable result without the one-off gain in similar period of 2018 is therefore MK20.31b, representing a 7% decrease.

The general business environment was subdued occasioned by challenges and uncertainties usually posed by a general election year, aggravated in this particular year by the immediate aftermath of the contested results. As a result, the Group did not reach its full potential and registered an 8% growth in revenue. Net finance costs increased by 88% following increased borrowings to fund capital investments, and overheads took into account a once off cost for functional reviews in some of the Group companies amounting to MK1.3b. The Group will continue with its initiatives to improve operating efficiencies through the re-engineering of its processes and emphasis on cost control.

SEGMENTAL PERFORMANCE

The Financial Services Segment (National Bank of Malawi)

The Bank registered a 7% growth in its earnings driven by a 26% growth in the loan book and 8% growth in customer deposits. Non-performing loans were within acceptable levels.

The Telecommunications Segment (mobile phone company: TNM, and the fixed telephony and broad band company: MTL)

Profit from the telecommunications segment declined by 31% as prior year results included a once off gain from the restructuring of assets. The mobile phone company registered a 2% decline on its net earnings, due to an increase in depreciation expense following the company’s heavy capital investment.

The Energy Segment (ethanol manufacturing: PressCane and Ethco)

The segment delivered outstanding results mainly due to excellent performance by Ethanol Company which registered a 108% growth in its net earnings driven by improved sales volumes and availability of raw materials from carryover stocks. Similarly, PressCane registered 11% growth in its net earnings. Both companies are expected to deliver planned results for the year.

The Consumer Goods Segment (retail chain: Peoples)

The retail chain registered a 44% increase in its losses as a result of a 15% decline in sales revenues and a 44% increase in interest and reorganisation costs. The company requires substantial equity injection to support the reorganisation efforts for it to return to profitability. Directors are weighing options of various avenues for recapitalisation.

All-Other Segment: (fish farming: Maldeco and real estate: Press Properties)

The Foods Company continued to register positive gains with a reduction of 23% in its losses. The company is on the path to recovery with the ongoing investment in capacity expansion after a successful restructuring of its operations. The real estate business registered a profit compared to a loss made in the similar period of last year following a successful restructuring and capital injection. The company is positioned for growth.

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; and Castel, a bottling and brewing company, Open Connect Limited: a telecom fibre back borne infrastructure company)

While most companies within this segment produced satisfactory results, the Group’s share of profit from equity accounted investments declined by 53%. This was mainly due to poor results reported in the bottling and brewing business (Castel) as a result operational challenges some of which emanated from changes in regulations. Management is in discussions with the authorities for amicable resolutions of the matters. The company also incurred significant exchange  losses following the depreciation of the Malawi Kwacha against the USD during the second quarter, which have since partly reversed due to recent appreciation in the Malawi Kwacha rate The tobacco processing company and the fibre back bone companies, on the other hand, delivered excellent results, while profit from the fuel distribution company declined by 34% mainly due to reductions in gross margins, as other recoveries were removed from the price build up on all fuels during the period.

OUTLOOK

Business confidence remains at a low ebb as the operating environment remains challenging in light of the contested presidential elections. Management is poised to deliver satisfactory results building on its strength of being a reasonably diversified Group, notwithstanding the consequences of the current tense political atmosphere with the resultant adverse economic implications.

DIVIDEND

Directors have resolved to pay an interim dividend amounting to MK721.20 million (2018: MK721.20) representing MK6.00 per share (2018:MK6.00 per share). The dividend will be paid on Friday, 25th October 2019 to members whose names appear on the register as at the close of business on 18th October 2019.

Patrick Khembo (Mr)
Chairman

Estelle Nuka (Mrs)
Director

Elizabeth Mafeni (Mrs)
Group Financial Controller

George Partridge (Dr)
Group Chief Executive