adminEnacy Mapakame : Business reporter
ANALYSTS have forecast Axia Corporation Limited’s revenue to jump 24 percent to $191 million this year on improved efficiencies, cost cutting measures and a diversified portfolio. The group, the latest to join the Zimbabwe Stock Exchange (ZSE) following an unbundling from parent company Innscor Africa Limited earlier this year, reported revenue growth of 63 percent to $155 million in 2015.Net income is expected to increase 35 percent to $14,35 million in the year. But its ability to generate cash in 2016 is expected to drop on the back of significant rise in credit sales in the distribution services, increase in inventory as a result of the interest in Transerve and yet however cushioned by extended payment terms with some suppliers.
Just like any other businesses, Axia has battled the depreciation of regional currencies against the green-back especially in Malawi and Zambia which have had a knock on effect on its business coupled with economic weaknesses and liquidity constraints in Zimbabwe.
Axia, generates at least 14 percent of its revenue from Zambia and Malawi where other costs like salaries are pegged in the United States dollar.
Brokerage firm IH Securities are however upbeat of the group going forward.
“We anticipate a significant rise in revenue (24 percent) for FY16 to $191,22 million on the back of acquisition of Transerve,” said IH Securities.
For the next 12 months, IH Securities have also guided Axia shares to climb 34 percent to 10c. The stock is currently trading at 7,5c.
EBIDTA margin for the year is forecasted to increase from 7 percent year on year to 11 percent on improved business stemming mostly from the creation of vital logistics and Distribution Group Africa (DGA) in 2015 which led to cost efficiencies across the group.
In the long term, favourable demographics in Zimbabwe, Zambia and Malawi – the group’s markets- are expected to work in Axia’s favour with rising working population also expected to increase productive potential.
Additionally, rapid urbanisation and growth of middle class is expected to continue which will result in more income although coming from the informal sector .
“As households move into middle-class income brackets, aspirational consumers switch purchases from basic food items and towards FMCG items as well as labour-saving devices such as consumer electronics and other such goods,” said IH securities.
Axia operates within the specialty retail, distribution and logistics industries with 88 retail stores and fitment centres across the country.
It sells products ranging from automotive spares, homeware, furniture, electrical appliances and the distribution of local and international branded FMCG products into the general retail and wholesale sectors.
This is in addition to offering transport logistics and storage services.
Axia was incorporated as a wholly owned subsidiary on February 24, 2016, and listed on the ZSE on May 17, by way of introduction and now separately owns three separate business units, Distribution Group Africa, TV Sales and Home and Transerve.
IH Securities maintain that being a stand-alone company will enable Axia to directly access capital markets with its new financial independence and enhance growth.
“We believe this enhanced transparency will allow for more accurate valuation of the business enabling it to trade at higher multiples as a stand-alone as opposed to under prior structure within the Innscor conglomerate.”
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