Directors of the City Pharmacy Limited (CPL) Board will recommend at its Annual General Meeting that no dividends be paid in view of the challenging economic and liquidity situation faced by the company.
CPL Board Chairman, John Dunlop, said this in his statement to the Port Moresby Stock Exchange in December 2017.
This is attributed to CPL’s trading performance which had deteriorated since the devastating fire that destroyed its Gerehu warehouse in June last year, acute shortage of stock compounded by foreign currency issues, lack of warehousing space and disrupted logistics.
Opening his statement, Dunlop said CPL’s financial position has materially improved since June 2017.
He said the raising of funds from shareholders, receipt of insurance proceeds and the sale of property will enable the normalisation of trading terms, investment in store upgrades and reduce the level of debt owed to banks.
By February 2018, nearly K50 million was raised through a private share placement to a new investor (K10.6 m) and a combination of existing and new shareholders (K37.5 m).
CPL has also agreed to an amount of K83.1 million for the Gerehu head office and warehouse fire claim, with K68.5 million recorded cash received against assets lost worth K53.4 million.
The company has also entered into a sale and lease back arrangement for three buildings, which is expected to realise a further K20 million for reinvestment in the business and debt reduction.
Dunlop added that CPL’s trading performance declined after the June 2017 fire, foreign currency issues, insufficient warehousing space and disrupted logistics.
CPL is currently operating out of five temporary warehouses scattered around Port Moresby however there are plans for consolidation onto two sites from June 2018, as well as plans for a new centralised warehouse and office complex.
Dunlop said the operating loss before tax of K28.25 million is unsatisfactory but should be viewed in conjunction with the disruption to the business caused by the fire and the following extraordinary adjustments, which have been written off during 2017:
- K5.87 million due to the insolvency of the insurer of the Waigani Supermarket;
- K15.7 million being goodwill upon the purchase of shares in Hardware Haus;
- K2.56 million being investment in Paradise Cinemas;
- K2 million being pre-operating expenses relating to projects that will not proceed at this time.
He said while they expect the soft trading conditions to continue this year, they have embarked on a number of store upgrade and refurbishment projects, committing in excess of K15 million to improving refrigeration, IT and the Real Rewards and digital marketing programs.