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Business Reporter
Specialty retail and distribution group, Axia Corporation Limited, maintained a solid full-year performance on the back of improved business activity and strong demand, which resulted in volume growth above the comparative period last year.
This was despite a challenging operating environment across the firm’s markets, including Zimbabwe which experienced exchange rate volatility and resurgent inflation.
The regional markets did not have it easy either.
“In Zambia, consumer demand remains constrained although the economy shows signs of recovery as evidenced by a stable exchange rate and declining inflation.
“Malawi, on the other hand, continues to suffer huge forex shortages, with the official currency exchange rate depreciating by 25 percent in the last quarter. Some companies are either closing or downsizing,” said chairman Luke Ngwerume in a performance update for the group.
During the year to June 30, 2022, total revenue grew by 32 percent to $75,534 billion compared to the same period the prior year.
Mr Ngwerume said the revenue growth filtered into gross margin, which increased by 92 percent in the prior period.
Operating expenditure increased by 57 percent in the comparative period due to indexing of cost base to the US dollar.
The group posted an operating profit of $14,448 billion, representing a 149 percent increase on the comparative period. Profit before tax rose 146 percent to $7,423 billion while profit for the period was $4,5 billion compared to $1,8 billion recorded in the prior year.
Basic earnings and headline earnings per share improved by 123 percent and 124 percent, respectively.
The group’s statement of financial position remained solid. Net borrowings increased by $1,85 billion mainly to support strategic working capital investments. The increase, however, had an impact on the results through high finance charges and this is being managed going forward.
Mr Ngwerume added that the group generated cash of $2,724 billion from operations which was up 148 percent from the comparative period.
“This translated into enhanced free cash generation enabling the group to easily incur capital expenditure for the year totalling $2,01 billion.
“The group’s free cash generation will enable it to execute exciting expansion opportunities like the 10,000-bed production facility,” he said.
At TV Sales and Home, revenue grew by 38 percent on prior year whilst volume performance improved by 8 percent over prior year.
Year on year volume growth benefited from a consistent and broad product offering as well as successful market activation promotions rolled out during the financial year.
Distribution Group Africa (DGA) Zimbabwe recorded year to date volumes were 18 percent below the prior comparable period, but fourth quarter volumes were 3 percent above the comparative period.
Effective July 1 2021, DGA Zimbabwe acquired a 50 percent stake in National Foods Logistics, a warehousing and distribution company that provides National Foods Limited with its warehousing and distribution requirements.
“The purchase and funding consideration for this transaction was US$1,1 million. The transaction was approved by the Competition and Tariff Commission (CTC) on the 4th of March 2022,” said Mr Ngwerume.
For the DGA region, year to date volumes and revenue in Zambia decreased by 15 percent and 3 percent respectively compared to prior year owing to some disruptions in supply chain. But the strengthening kwacha enabled the business to take advantage of Forward Exchange Contracts thus enabling pricing at reasonable rates. The business increased its profit after tax by 257 percent.
In Malawi, the economy continues to face shortages of foreign currency and the Malawian kwacha depreciated by 29 percent during the reporting period.
Despite the foreign currency challenges, the business witnessed a 46 percent growth in volumes, which resulted in a 103 percent increase in revenue over the comparative year.
This was primarily a result of the addition of two key distribution agencies in the first quarter of the financial year which led to improved profitability.
On the other hand, Transerv’s earnings were below expectation as the business experienced severe challenges in pricing and obtaining foreign currency to always ensure adequate stocking levels.
Volumes increased by 7 percent to the comparative period which resulted in improved revenue.
Management will continue to focus on improving revenue generation, obtaining the right stock mix and managing the operating costs to ensure that the business improves its profitability.
While the business environment is expected to remain challenging, management at Axia is upbeat progressive policies will build confidence in the market.
Mr Ngwerume said: “The operating environment remains challenging and both fiscal and monetary authorities face a huge task of continuously addressing macro-economic adversities on the back of an unfolding global recession.
“We remain hopeful that progressive and consistent policies will be adopted and that they will be aimed at building confidence and promoting stability in the market.”
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