Zimpapers returns to profitability

Happiness Zengeni and Golden Sibanda

A decrease in operating expenses following the full implementation of cost reduction iniatives saw the country’s largest media house bounce back to profitability in the year to December 31, 2015. Zimpapers managed to overturn an $11,8 million loss achieved in 2014 to report a $2,74 million profit largely due to a successful cost reduction exercise.Operating expenses decreased 26 percent to $28,5 million from $38,4 million recorded in 2014. The position helped the group to report a profit in spite of a 3,64 percent decline in revenue to $40,09 million. According to chairman Delma Lupepe’s report the decrease in revenue was mainly attributed to the general economic slowdown.

The company undertook a rationalisation exercise to trim its costs in light of the difficult environment. Chief executive Pikirayi Deketeke said the group was a “little heavy” relative to its revenue.

“Like most companies, Zimpapers has not been spared from the harsh realities of the current economic challenges. The revenue base particularly on our products such as the newspapers was affected by job losses and reduced salaries throughout the economy. As such, the group had to be right sized,” he said adding that the cost management exercise looked at head count, better procurement decisions and more efficient processes.

Mr Deketeke said that all Zimpapers products, as confirmed by the ZAMPS survey, continue to be popular to the extent that virtually all of them have been growing their respective market shares.

Lukewarm growth was only registered in The Sunday News in Bulawayo, but all other newspaper products have gained readership.

The only flipside to this was that revenue did not grow at the same level as the increase in readership. Mr Deketeke said revenue was also weighed down by reduced advertising as spending power of companies has been negatively affected by the difficult economic environment.

“Management of costs therefore became paramount in order for the company to protect the bottom line.”

The newspaper division recorded an operating profit of $3,6 million before finance costs compared to an operating loss of $600 000. The commercial printing division narrowed its losses after revenue increased 71 percent to $3,6 million while the broadcasting division reported an operating profit of $200 000.

Finance director Farai Matanhire noted that while the cash flows remained depressed the position had narrowed from cash and cash equivalents of negative $3,2 million in 2014, closing 2015 at a negative position of less than $1 million, having recovered from the weight of business transformation that made it difficult to maintain a cash positive balance sheet.

“Focus going forward is to work harder on collections.”

Mr Matanhire also said Zimpapers restructured its expensive debt and this saw interest income declining 10 percent to $1,5 million.

“We converted our short-term debt into medium- term paper which is coming at reasonably lower interest rates at an average of about 13,5 percent from about 18 percent,” he said.

The future looks increasingly brighter for Zimpapers, Mr Deketeke said, judging by positive growth in the first quarter of this year with revenue and profit well ahead of same period last year.

“At all our units across the board, revenue for the first quarter of 2016, actually surpassed 2015 numbers and performance is better both in terms of revenue and profitability. In the first quarter of 2016, we are actually in a better position than last year across all our product lines and branch business unit.

“We are quite hopeful that as we develop new niche products we will be able to generate revenue required to sustain our operations and to achieve profitability. In fact, our target for this year is slightly higher than the 2015 target,” he said.

Mr Deketeke said the group will be driven by new innovative products for new revenue streams, new business from new niche markets with efficiencies high after right sizing of the business. He said the business has invested heavily in innovation.