Academy Press Plc Reports Q1 - Strong Financial Turnaround and Growth Potential

Subject: Academy Press reports N716.5m profit - Quiet Performer with Strengthening Fundamentals and Dividend Upside

Academy Press Plc has emerged as a quietly transforming small-cap player in Nigeria’s printing and publishing space. With Profit After Tax (PAT) surging to ₦716.5 million in FY 2025 (from ₦73.6 million in 2024), and a solid 344% growth in Profit Before Tax (PBT), the company has significantly improved earnings quality, balance sheet strength, and shareholder value. While topline growth was marginal, the profitability surge — aided by strong cost control and non-operating income — offers investors a compelling case for exposure to a defensive, dividend-paying company with improving fundamentals.

Catalysts

1. Massive Bottom-Line Growth on Operational Leverage: Despite flat revenue (₦4.59bn vs ₦4.51bn), gross profit jumped 38.5% to ₦1.38bn, and PAT grew almost 9.7x — suggesting significant improvements in efficiency and scale.
2. Surge in Other Operating Income: Other operating income nearly tripled to ₦996.9m from ₦367.6m. While this may be non-recurring, it significantly enhanced earnings and signals smart asset utilization or ancillary income growth.
3. Improved Cost Management: Finance costs dropped 30% YoY, from ₦179.9m to ₦125.2m, underscoring more prudent debt or liquidity management.
4. Dividend Growth & Stronger Balance Sheet: Proposed dividend of 15 kobo per share (up 50% YoY) is backed by positive retained earnings of ₦484.2m and rising equity base (₦782.2m). This signals sustainable capital return and growing shareholder confidence.

Assumptions

• Revenue Trajectory (2025–2030): Modest top-line CAGR of 5–7%, assuming stable growth in publishing demand, institutional contracts (e.g., for exams, educational material), and possible digital transitions. Revenue could reach ₦6.5–₦7.0bn by 2030.
• Net Profit Margin Outlook: We expect net margins to stabilize around 10–15% from the current ~15.6% (₦716.5m PAT on ₦4.59bn revenue), especially if other operating income normalizes. Normalized PAT range: ₦600–₦800m over the medium term.
• Dividend Policy: With a growing equity base and positive retained earnings, Academy Press could sustain dividend growth at 10–15% annually, barring capex shocks.

Valuation

• Current PE Ratio (Trailing): Assuming current market cap (e.g., ~₦3.5–₦4.5 billion range), trailing PE falls between 5–6.5x, which remains attractive relative to broader NGX industrial and small-cap peers trading at 7–10x.
• Fair Value Estimate: If normalized earnings of ₦750m are sustained, and valued at 7x PE (justified by growth + dividend), fair equity valuation = ₦5.25 billion or ₦2.62/share (assuming 2 billion shares outstanding). This implies 30–50% upside from typical current price levels around ₦1.70–₦2.00/share.

Risks

1. Revenue Stagnation: With revenue growing just 1.7% YoY, there’s a risk that top-line remains flat without expansion into adjacent services or new customer segments.
2. One-Off Income Boost: The sharp jump in other operating income may not repeat, which could temper future earnings unless replaced by recurring revenue.
3. Sectoral Pressures: Printing/publishing faces structural headwinds from digital disruption, import dependency for materials, and possible FX shocks.
4. Low Liquidity & Small-Cap Volatility: Being a small-cap stock, liquidity risk and price volatility may be concerns for institutional or large-volume investors.

Strengths:

• Explosive earnings growth and cost efficiency.
• Rising dividends and growing retained earnings.
• Stronger balance sheet and improving equity book.

Weaknesses:

• Marginal revenue growth.
• Limited scalability unless diversification occurs.
• Heavy reliance on non-core income this year.

Conclusion: Academy Press Plc is shaping into a dividend-yielding, efficient micro-cap with upside potential. The FY2025 earnings turnaround and proposed dividend hike make it a Buy, especially for income-focused investors or those seeking small-cap alpha in a defensive sector. Strategic investors may consider accumulating on dips, with a 12–24 month horizon for 30–50% upside.