We have extracted the Chairman’s Statement from the 2019 half year report for Zimbabwe Newspapers (1980) Limited (ZIMP.zw), listed on the Zimbabwe Stock exchange:
On behalf of the Board of Directors, I am pleased to present the financial results for Zimbabwe Newspapers (1980) Limited (Zimpapers) for the six months ended 30 June 2019.
2. Operations review
2.1 Operating environment
The country’s macroeconomic environment during the period under review continued to be characterised by foreign currency shortages, high inflation and low manufacturing sector capacity utilisation. The official Government of Zimbabwe (GoZ) year on year inflation rate for the month of June 2019 was at 175.66% compared to 2.91% for June 2018.
In line with the currency reforms tone set in October 2018, the GoZ introduced the Zimbabwe dollar (ZWL$) as the sole legal tender on 24 June 2019, bringing an end to the multi-currency regime and the fixed exchange rate policy. Statutory Instrument (SI) 142 of 2019 and the Exchange Control Directive RU102/2019 were instituted to operationalise the introduction of the Zimbabwe dollar. The country experienced unstable weather patterns, mainly from the El-Nino phenomenon and Cyclone Idai. The situation was exacerbated by foreign exchange shortages as well as inadequate power and energy supplies amongst other challenges. As a result, the IMF projected the Country’s Gross Domestic Product (GDP) to contract to negative 2.1% by year end. In the same vein, the Ministry of Finance also forecasted a contraction to the economy.
2.2 Media environment
The media landscape remained challenged, with publishers and broadcasters optimistic that the on-going process to open up the media space will be good for their businesses. The prevailing economic difficulties, however, continue to impact negatively on disposable incomes. Consumption of content on digital platforms is growing and this is in keeping with global trends where digital revenues are rising while print remains stable. In Zimbabwe, the print business continues to be the mainstay of media companies, followed by radio and television.
The World Association of Newspapers 2018 World Press Trends report shows that globally, print circulation declined marginally by 0.5 percent while digital circulation revenues increased by more than 18 percent. Digital advertising revenues also increased by more than 5 percent. In Zimbabwe and most of Africa, internet access is still largely restricted to urban areas and this means digital platforms will continue to lag behind print and broadcasting. The Zimbabwe All Media Products Survey for the period underreview showed that internet usage is highest among the 21 to 25-years age group (48 percent) but declines to as low as 9 percent among those over the age of 56 years.
Increasingly, more people are migrating to internet for news, with a high use of social media platforms such as Facebook and Twitter amongst others. In light of these developments, Zimpapers has been consolidating its digital footprint to take advantage of the changing news consumption habits of audiences. Digital products under focus in this regard include digital newspapers (www.newsbub.co.zw), electronic newsletters, digital magazines, (farming magazine, BH24), mobile news (breaking news, farming news), news apps (Kwayedza app) and mobile sites since users are increasingly shunning desktops for more mobile sources. Research is underway to experiment with web-based pay walls over and above currently running SMS-based paid content platforms. Worldwide, publishers are increasingly concerned about declining audience trust in their products and calling on their editors to take measures to regain trust. Zimpapers remains committed to professional and ethical journalism, which is the bedrock of its business.
Exciting developments are on the horizon in the broadcasting sector. The reconstitution of the boards of directors for key institutions such as the Broadcasting Authority of Zimbabwe and Transmedia, will speed up activities in broadcasting, where Zimpapers has interests. Community radio stations are set to be launched, offering more choices for audiences. Already, online radio stations are in operation but not having a significant impact on the market. The Company is continuously looking at synergies in the market and opportunities for growth to remain competitive. Innovation remains key, with new revenue streams being adopted.
3 Financial Performance
Revenue for the period increased by 63% to ZWL$32.9 million compared to ZWL$20.2 million recorded in the prior comparable period. The Company revenue growth of 63% was below the official inflation of 175.66% as the Company could not increase either sales volumes nor selling prices to match inflation owing to the liquidity challenges that were obtaining in the economy.
Therefore, below inflation revenue growth was recorded across all the Divisions, with a significant percentage growth being recorded from the Commercial Printing Division. The Company’s gross profit margin improved to 67% compared to 64% for 2018. As a result, a 70% increase in gross profit to ZWL$22.0 million was recorded during the period under review.
As the gross profit margin of the Company was below inflation at 67%, operating costs were curtailed at ZWL$17.0 million. This was an increase of 57% from ZWL$10.9 million that was recorded during the same period last year. The management team remained focused at cost management to improve operating profit margins. To that end, the Company’s EBITDA grew by 97% to ZWL$6.8 million compared to ZWL$3.5 million recorded for the same period last year. Subsequently, the Company recorded a 165% increase in net profit before tax to ZWL$5.7 million from the ZWL$2.1 million recorded in 2018.
The Company’s trade receivables at ZWL$9.6 million were 5% above same period last year. However, the increase was 61% when compared to 31 December 2018. The increase in receivables was driven by the price reviews at the background of credit sales as the Company was focused at value preservation. Management is enforcing various strategies to improve debt collections. Cash generated from operations after changes in working capital increased by 56% to ZWL$6.7 million compared to ZWL$4.3 million for the same period in prior year. The improved cash flow from operating activities was a result of better gross profit margins.
3.2 Newspaper Division
The Newspaper Division recorded a 52.0% growth in revenue to ZWL$21.6 million from ZWL$14,1 million recorded for the same period last year. Operating profit for the Division improved by 121% to ZWL$4.2 million compared to ZWL$1.9 million for 2018.
3.3 Commercial Printing Division
The Commercial Printing Division recorded a 100% revenue growth to ZWL$7.0 million as a result of an increase in market share. Operating profit increased by 293% to ZWL$2.0 million compared to ZWL$0.5 million following optimisation of the Division’s operating efficiencies and improved sourcing strategy.
3.4 Broadcasting Division
The Radio Broadcasting Division’s revenue improved by 58% to ZWL$3.5 million on the backdrop of market consolidation whilst operating profit increased by 212% from ZWL$0.2 million to ZWL$0.7 million on account of both revenue growth and better cost management.
4. Corporate Governance
The Board of Directors and Management remain committed to high standards of good corporate governance. The Board and its established Sub Committees; Audit, Finance and Risk, Business Development and Marketing and the Human Resources, Ethics and Remuneration Committees, met twice during the period under review to assess operations and adequacy of systems and procedures that safeguard the Company’s assets. The meetings were all fully constituted.
5. Corporate Social Investment
During the first half of 2019, the Company’s Community Social Responsibility initiatives included the refurbishment of a Speech Therapy ward at St Giles Medical Rehabilitation Centre and the publishing of an Arts coffee table book whose objective was to promote art. In days leading to Cyclone Idai in March, Zimpapers used all its media platforms, particularly radio and print, to warn the public as a community service. Following the devastation caused by Cyclone Idai in Chimanimani and Chipinge, the Company mobilised donations using all its media platforms. Foodstuffs, blankets and clothing were collected from businesses and members of the pubic for distribution to affected communities.The Company also adopted Chikukwa Primary School in Chimanimani, which was badly damaged by the Cyclone and also started reconstructing a classroom block. So far ZWL$100, 000 has been committed to this initiative.
The Board of Directors has resolved not to declare an interim dividend in view of the need to finance new business growth initiatives and service the legacy statutory obligations.
Performance of the Company for the second half of the year is expected to be better than the first half as the Company is working on revamping some of its products and making headway on new strategies. The Board and Management is focused at initiatives that improve the Company’s product portfolio in the wake of disruptive innovations. Focus will remain on the digitalisation strategy and new projects as the Company diversifies to broaden its revenue base.
Subsequent to the half year end, on the 7th August 2019, the Company appointed new Board members following the retirement of Messrs. D Lupepe, T. Hussein, G. Manyere, F. Moyo, Dr N. Madzingira, Dr R. Mbire, Mrs D. Sibanda and Bishop T. Manhanga. The Board extends its gratitude to the outgoing members for their contribution to the Company. Following the retirement of the above members, the Company appointed to the Board Mr T. A. G. Sithole, Ms P. Kurasha, Mrs S. Madzikanda, Ms T. Chibvongodze, Messrs T. Chiweshe, L. Mhango and Dr S. Munyeza. Mr T. A. G. Sithole was appointed the new chairman of the Board with effect from 29 August 2019. The Board welcomes the new members to the Zimpapers family.
I would like to extend my appreciation to our shareholders, customers, readers, listeners, and all stakeholders for their unwavering support to the Company. Furthermore, I would also like to applaud the management team and all members of staff, for their continued dedication and commitment which has contributed to the success of the Company.
Mr T. A.G Sithole