pcl business and strategy briefing
TRANSCRIPT
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BUSINESS AND STRATEGY BRIEFING20th SEPTEMBER 2010
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DR MATHEWS CHIKAONDAGroup Chief Executive
MR PIUS MULIPA- Group Operations Executive
MR ANDREW SESANI- Group Financial Controller
MRS AGNES VARELA- Group Projects Executive
MISS NINA KAPEZI Legal Officer
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This presentation might contain forward lookingstatements. These statements, which reflect PCLsassessment and future expectations with regard tothe development of the business, the timings and
the benefits, maybe influenced by a number ofrisks and uncertainties that could cause actualresults to differ materially from expectations. PressCorporation Limited is under no obligation to
update or amend forward looking statementsbased on new information, future events or for anyother reason.
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GCEs statement Performance Over Five Years
Divestures and Acquisitions
2010 Highlights Corporate Governance
Financial Highlights
State of Operations
Going Forward Question and Answers
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Turnover tripled from 15.7billion in 05 to47.6billion in 09 representing 202% growth
Profitability increased by 154% from 3.391in 05 to 8.611 in 09
Basic EPS grew by 80.8% from 15.06 to27.23
Ordinary shareholder funds improved by an
enormous 194% from 8.366billion to24.611billion
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DIVESTURES ACQUISITIONS Malawi Pharmacies
2005
Sold 30% interest inFDH - 2006
Chombe Tea - 2007
PGI - 2009
Presscane 2003/2006 Maldeco Aquaculture -
2004 MTL - 2006 TNM - 2007 Increased stake in BBGL
2009/2010
Divestures & acquisitions are strategic to position
PCL as a dominant company in the private sectorInvest only in businesses that have a leading
position or have the potential to become a leaderin their industry
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The Fish Eagle arrives in the country Fibre optic network cable connects Mzuzu
Mac steel increases sales of roofing products
due to introduction of Harvey Tiles National Bank switches over to T24 system
from Bank Master
BBGL setting up new plant in Lilongwe
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THE BOARD Responsible to shareholders for setting the
direction through establishment of strategicobjectives and key policies
STRUCTURE AND COMPOSITION Consists of six (6) Non Executive Directors and two
(2) Executive Directors
Chairperson is Non Executive Director Meets quarterly
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COMMITTEESAudit Two Non Executive Directors, One Non Board
Member
Meets at least bi-annually Group Chief Executive, Group Financial Controller,
Group Internal Audit Manager attend by invitation
Appointments & Remuneration
Three Non Executive Directors Meets three to four times a year
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POLICIES Share Trading Policy - to prevent insider trading
violations byDirectorsManagersEmployeesOther related individuals
Corporate Fraud Policy
HIV/AIDS policy on non discrimination
Sexual Harassment
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CODES Code of Ethics Business Code of Conduct (BAAC) Malawi Code of Best Practice for Corporate Governance Code II
All Governed by King III
REGULATIONS MSE - -Listing Rules and Continuing
obligations LSE- - Listing Rules and continuing
obligations Statutory - Companies Act -Taxation Act -etc
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PCL Clinic Open to - PCL- Subsidiaries- Public
United Nations Global Compact -Communication On Progress
PCL going green campaign - tree planting
- recycling
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2006/2007 took in huge losses from LimbeLeaf
Sold loss making/insignificant investments tostabilize the Groups earnings
2007/2008 saw a complete turnaround inPresscane
2008 full year impact of the acquisition of
TNM
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2009 2008 2007 2006 2005
Dividend paid 295 473 353 400 223
Dividend per share 2.45 4.17 3.21 3.64 2.03
Earnings per share 27.23 27.67 15.53 14.62 15.06
Return on investment 13% 12% 11% 11% 18%
Issued share capital 120.2 113.5 110 110 110
Share price 163 205 205 96.5 50
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(2,000)
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2,000
4,000
6,000
8,000
10,000
12,000
14,000
Fin. services Retail and
consumer
Telecom Food &
beverages
Real Property Discontinued
Turnover 4,074 12,729 7,005 397 88
PAT 2,148 423 140 (20) (368) 2
Segmental results
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Segmental resultsThe Financial Services consists of NBM.
The Retail & Consumer Goods consists of BpMalawi, PTC, Ethanol, Presscane.
Telecommunications consists of TNM and MTL.Food and beverages consists of Maldeco fisheries
and Aquaculture.
Real Property & Investments consists of Press
Properties and Corporate Office
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Results were driven by the strong performance ofthe bank, BP Malawi. PTC, BBGLLimbe Leaf made a loss as a result tax provision
made relating to prior yearsMTL made a loss because could not generate
planned revenues. Most projects still atdevelopment stageAquaculture made a loss due to growth problems
carried forward from prior year. Problem has sincebeen resolved
Ethanol manufacturing companies has just comefrom seasonal shut down
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105 outlets nationwide, and 4 Kwikfoods canteens
45 retail outlets, contributing 28% turnover; 30 wholesale,
49% turnover; 30 combination outlets, 23% turnover.
80% of stock-holding is sourced locally, which assists inpreserving jobs in the supplier companies.
Competition is rapidly emerging largely from single-
operator shops A big capital expenditure budget in place to refurbish
stores, replace aging equipment, re-arrange physicaloutlook, in order to meet competition and maintain marketposition.
The business has grown too big to be managed withmanual systems and a store/warehouse computerisationprogram has been embarked upon, the end result of whichwill be to link all stores real-time.
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PET plant installed two years ago helped to significantlyreduce stock-out problems but the market is still notadequately supplied with the key brands.
New products (Fanta Passion, Fanta Exotic, Malawi Rum)have been introduced to enhance the product portfolio.
A new brewery and combi-bottling line is to be installedin Lilongwe, which will double current productionvolumes and truly satisfy the market fro some time tocome.
It is also planned to export some products as this will befacilitated by the increased volumes.
Mzuzu plant is also being revamped. There has been a major truck replacement program in
the last 4 years such that the fleet is fairly young
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Inadequate raw material (Molasses) supplies acritical problem; production is consequentlyat around 50% of installed capacity.
Serious efforts underway to find addition raw
materials from other sources. Further development of export market
necessary and on-going, because localuptake is frequently inadequate to exhaust
stock holding Consideration to revert to a fuel blending
ratio of 20% is at an advanced stage.
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The installation of the FOC project is MTLs biggest andmost expensive project; it will create a platform on which
so many products will ride. The link from Blantyre-Lilongwe-Mzuzu is now complete
and work is underway on the back-loop to Blantyrethrough the lakeshore.
Currently there is one link to a sea-cable through Mwanzato Mozambique. However, insufficient capacity is being
provided on that link. To counter the above problem, a new link is expected to
be operational through Songwe and Dar es Salaam by theend of September.
Looking further into the future, two more links will beestablished through Mulanje and Chipata and Zambia
Vandalism and sabotage remain key threats toinfrastructure, but nothing is being spared to deal withthis challenge.
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Network reach has been expanded significantly in
the past two years, leading to greater newcustomer recruitment. In terms of network coverage, the gap with the
leading competitor is very nearly being closed. In view of the fact that most of the equipment
has been installed or upgraded recently, thenetwork contains the most modern technologiesin its systems.
The subscriber base exceeded the 1 million markin July and market-share has increased.
There is indeed growing competition with theadvent of a new entrant, but the entity is ready tohold its position...and more.
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The company still hold the leadershipposition in tobacco processing, although thisposition has been eroded in the past twoyears by the advent of new competing
processing facilities. The industry is facing threats from external
sources, but the real effect of this will taketime to settle.
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Head office building is expected to be complete by year-end, which will significantly improve efficiencies, as alldepartments will be in the same building.
We expect an impairment on the head office building, themagnitude of which we are yet to determine.
A new banking system has just been installed (went live on
6th September 2010) and this will also bring increasingoperational efficiencies. Refurbishment of branches is on-going in order to
maintain the Banks image and leadership position. New geographical locations are being explored to expand
the branch network in pursuit of better customer
satisfaction. Similarly, more ATMs are being installed at non-bank
premises for greater customer convenience.
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An ethanol distillery plant with capacity to produce60,000 litres of alcohol per day using molasses.
The plant was revamped two years ago at a totalcost of K1 billion.
A lot of production efficiencies are now beingachieved following this revamp.
Production stands at 65% Extra Neutral Alcohol(ENA), 23% in Absolute Alcohol and 12% in RectifiedAlcohol. ENA is all for export market.
Company operating at 50% capacity due to rawmaterial shortage (inadequate supply of molasses).Efforts are undergoing to find long lasting solutionsto the problem
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Joint venture between BP Africa and PCL.
Company leads in petroleum fuels distribution in Malawi(market share 40%).
Has 46 roadside service stations and supplies fuel to thekey economic drivers in the agriculture, industrial, miningand construction sectors.
BP sole supplier of aviation fuel in the country. Major challenge -fuel supply problems due to forex
shortages New service stations under construction and upgrading.
Kabula (construction), Chikhwawa (upgraded andcommissioned) Ntchisi (being upgraded).
BP Africa has indicated its desire to exit from Malawi andare seeking buyers for their 50% shareholding in BPMalawi.
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Joint venture partnership with Macsteel Exportsof South Africa. Largest and leading manufacture and distributor
of steel, wire and roofing products in the
country. Last year, introduced Harvey tiles to its range of
products. So far sales have been encouraging Business heavily dependent on imported raw
materials from South Africa hence performanceaffected by forex shortages and forex losses(when ZAR strengthens against the MK).
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Property portfolio comprises of residential properties in
an exclusive low density residential area in Blantyre andcommercial and industrial properties for letting acrossthe country.
The company has just completed a major propertydevelopment project (at a cost of K1.7 billion) on a 120ha site at Chapima Heights 6 km from centre of Blantyre.
The project involves sale to the public about 550serviced freehold high, medium and low density plotsand commercial plots. Provision has also been made fora recreation area and a school. Press Properties is toconstruct about 260 (30 already constructed) three
bedroom medium density houses for sale. Chapima Heights project offers an excellent opportunity
to individuals and corporate investors. The company isnow taking bookings for houses and plots.
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Largest commercial fishing and processing company in Malawi,fishes using three stern trawlers.
Annual catch amounts to about 7% of the total Lake Malawicatch, which fluctuates between 26,000 tonnes and 47,000tonnes annually.
Major catches: Ndunduma (diplotaxodomspp) contributing 60-70% of the total catch and Utaka (haplochromines). Tilapia(Chambo and Makumba) catches have been falling and are nowat their lowest point ever.
Population of Chambo (oreochromis karongae), fish in the lakehas declined due to overfishing and is presently not targeted byMaldeco Fisheries.
Main product is fresh fish representing over 90% of sales, 10%processed including smoked, frozen gutted and frozen fillets.
So far, fishing program mostly in the Southern part of the Lake.
A project (at an estimated cost of K500 million) to expand trawl fishing further up Lake Malawi, through the development of afish-land site at Domira in Salima and construction of newfishing vessel is almost at completion stage. The new vessel willbe launched in November 2010.
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Established 2003 with sole objective of farming and selling
Chambo (oreochromis karongae) using both pond and cageculture.
Established due to decline in availability of the nations favouritefish, Chambo.
PCL reasoned that any project increasing Chambo productionwould have significant socio-economic benefits. From a
developmental point of view Press Corporation also consideredthat Maldeco Aquaculture would act more generally as a catalystfor aquacultural expansion in Malawi.
Construction of all infrastructure completed in 2007 at a cost ofabout K500 million, including 2.5 km water pipeline, breedingponds, fingerling production facilities, sinking of net cages in to
the Lake, building a feed mill. Has 50 floating cages in the Lake with fish at various stages of
growth. First commercial Chambo harvest and sales commenced in 2008.
Fish harvest and sales over the last two years has averaged 450tonnes per year. The target is 1,000 tonnes per annum.
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