Analyst comments on Zimpapers

The market views this company as an old media Government company and it’s high time that management starts to deal with the perception that is associated with such companies and market the company for what it’s really worth since information is power. Zimpapers’ return to profitability though commendable, carries only one blemish. The bulk of the profits came from property and asset revaluation gains. Only $535 955 came from operations. Profitability is a good sign, but cash is also king, which in this case was negative. Revaluations gains cannot and should not be shared as dividends, in case the properties or assets lose value in future. The attendant sharp rise in earnings per share is welcome, but the question remains, the quality of earnings is affected by the structure of the income statement.

The Commercial Division continues to be the under-performer in the group, although management noted as much in its commentary. Clearly rationalisation is needed to enable the division to return to profitability.

Newspapers remains the flagship and its notable that the division was able to increase its revenue in an otherwise difficult environment, although all printed media benefited from spending on the election in 2013. However, accounts receivable rose in the period by $1,7 million and the question to ask is if this is collectable? Many companies have been forced to make provisions because of their debtors and Zimpapers are owed $9 million. Imagine if it was able to collect that money? It would be able to reduce its loans of $10 million on which it paid interest of $1,3 million in the year.

Certainly media, that being newspapers and radio, are what carry the group and unless they can get the Commercial Printing side right next year, we should ask what it is doing in there? There are also strong indications that Zimpapers is looking to venture into television, which would be a natural fit, and given they are unlikely to own the transmission towers, you may ask what they are doing owning printing presses. Zimpapers should focus on what it does best — the provision of content!