Academy Press: Weak revenue, huge indebtedness erodes profit

Academy Press Plc migrated into loss as weak revenue and huge indebtedness depressed margins and cut net value.

But the 56 years old printing and publishing company appeared to be holding down costs and reducing debts, with appreciable improvement in liquidity and gearing level providing reasonable assurance.

The audited report and accounts for the year ended March 31, 2020 showed that Academy Press’ revenue was flat but a 100 per cent increase in interest expenses threw the company into a pre-tax loss of N53 million.

This coloured the entire profit and loss accounts negative as well as the balance sheet.

While the company had taken advantage of substantial tax gains to make dividend payment in the previous year, the modest tax gain in 2020 only helped to reduce net loss to N48 million.

Revenue rose by 0.3 per cent in 2020 to N2.44 billion as against N2.43 billion in 2019.

The performance was driven by 9.6 per cent increase in the main book publishing business, which moderated slowdown in annual report and other corporate businesses.

Cost of sales dropped by 0.9 per cent from N1.95 billion to N1.93 billion. gross profit thus increased by 4.9 per cent from N485.8 million to N509.6 million.

Selling and administrative expenses, and other incidental costs, rose by 2.1 per cent from N444 million in 2019 to N453.3 million in 2020.

Interest and other incomes dropped by 88 per cent from N15.5 million to N1.9 million while interest expenses rose by 100 per cent to N112.1 million in 2020 as against N56.1 million in 2019.

While gross profit margin improved from 20 per cent to 20.9 per cent, pre-tax profit turned negative at -2.2 per cent in 2020 as against 0.1 per cent in 2019.

Return on total assets stood at -2.1 per cent while return on equity relapsed from 11.2 per cent to -21.9 per cent.

Total equity funds on decline

Academy Press’ total balance sheet size dropped marginally by 1.5 per cent from N2.66 billion in 2019 to N2.62 billion in 2010.

Total long-term assets had declined by 7.8 per cent from N1.46 billion to N1.34 billion, offsetting 6.0 per cent increase in current assets from N1.20 billion to N1.28 billion.

Total liabilities increased marginally by 2.1 per cent from N2.35 billion to N2.40 billion.

Current liabilities had dropped by 4.1 per cent while long-term liabilities had risen by 18.6 per cent.

While the paid up share capital remained unchanged at N302.4 million, total equity funds declined by 29.2 per cent from N309.41 million to N219.19 million.

The proportion of equity funds to total assets thus dropped from 11.6 per cent in 2019 to 8.4 per cent in 2020. The ratio of debt-to-equity meanwhile improved from 54.4 per cent in 2019 to 47.0 per cent in 2020.

Both productivity and cost efficiency declined during the period with average pre-tax loss per employee at N0.25 million in 2020 as against modest pre-tax profit per employee of N0.01 million in 2019. However, average staff cost per employee rose from N1.29 million in 2019 to N1.44 million in 2020. Total cost of business, excluding financing charges, was steady at 97.7 per cent in 2020 as against 98.3 per cent in 2019, largely driven by top-line cost management.

The liquidity position of the company improved during the period, although still considerably negative. Current ratio- which indicates the degree of readiness of the company to meet emerging financing activities, improved from 0.7 times to 0.8 times. Working capital/sales ratio improved from -20.5 per cent to -14.6 per cent. Debtors/creditors ratio stood at 198.3 per cent in 2020 as against 121.7 per cent in 2019.

The Nigerian printing and publishing industry generally faces two major related challenges-piracy and dumping and global tech-driven change in the form and content of education. For instance, gradual adoption of electronic reports and diaries has seen gradual decline in turnover from that segment of the business. Besides, the industry is more susceptible to negative impact of fiscal and monetary variables. Inflation, high cost of capital, declining consumer purchasing power and foreign exchange scarcity among others imply lower patronage and higher cost for the publishing industry.

As stated earlier, with increasing digitization of educational materials, the traditional publishers will need to be quicker above the curves to protect existing market and carve out a niche in the emerging tech-driven knowledge environment. In an industry with low margins and unpredictable business trend, Academy Press needs to be mindful of the compounded effect of high leverage.

 About the company

Incorporated in July 1964 as a private limited liability company, Academy Press engages is a foremost printer of educational and general books as well as commercial printing of diaries, labels, calendars, periodicals, annual reports, confidential and other printing. The group includes subsidiaries which engage in security printing, flexibility printing and light packaging. Academy Press became a public limited liability company in October 1991. It undertook its initial public offering (IPO) in November 1994 and thereafter listed its shares on the main board of the Nigerian Stock Exchange (NSE) in June 1995.

The shareholding structure of the company remains unchanged. Alidan Investment Limited holds the single largest equity stake of 13.9 per cent. West African Book Publishers Limited holds the second largest stake of 10.4 per cent. Hambleside Limited holds 9.99 per cent equity stake while sundry individual and institutional investors hold 65.71 per cent. Academy Press complies generally with extant corporate governance codes and best practices.