PCCS hives of loss-making packaging units

TheEdge Tue, Dec 21, 2021 07:47pm - 2 years View Original


KUALA LUMPUR (Dec 21): The major shareholders of PCCS Group Bhd are buying out wholly-owned  Mega Label (Malaysia) Sdn Bhd and 51%-owned indirect subsidiary Mega Label (Penang) Sdn Bhd, for RM8.5 million.

The two units are part of the label and packaging division of PCCS, which is involved in the printing of labels and stickers for garments and other products.

The units made losses of RM5.33 million and RM9.71 million for the financial year ended March 31, 2021 (FY21) and FY20 respectively and continue to require heavy capital expenditure (capex) for the next few years, PCCS said in a statement.

For FY20 and FY21, a total of RM15.48 million has been pumped in as capex for the packaging and labelling business.

The apparel company said the disposal will result in a one-off gain of RM6.26 million and also see PCCS’ cash level increase by RM38 million following the completion of the exercise.

The disposal also will result in the overall borrowings of PCCS dropping from RM71.32 million to RM28.32 million and will give PCCS a total cash balance of RM95 million. 

PCCS is selling the two units to CCSB Sdn Bhd, a predominantly dormant company.

The directors of CCSB are Tan Kwee Kee and Chan Wee Boon. Tan is the mother of PCCS managing director David Chan Wee Kiang, who is Wee Boon's brother.

“While the management of PCCS wants to continue growing the packaging and labelling business, these businesses are not earnings accretive and require further capex,” Wee Kiang said in the statement. 

“This has been eating up into PCCS’ profits and cash position for a few years now. For the sake of our shareholders, we are therefore hiving off the packaging business for now,” he said. 

He added that PCCS sees better profitability moving forward, anchored by the apparel and newly launched hire purchase business.

“As the company will have some RM90 million in cash following this exercise, we will be on the lookout for acquisitions. We also intend to grow our hire purchase and medical devices business,” he shared. 

Shares in PCCS finished unchanged at 42 sen on Tuesday, giving the group a market value of RM87.89 million. 

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