daniel chigunwe
Business Reporter
Research and stockbroking firm IH Securities says it expects Axia Corporation margin to inch up in FY2025 as restructuring efforts begin to bear fruit in reducing costs in the medium term.
The firm forecasts group net income to close FY25 at US$6,42 million, but currency issues in the group’s markets remain a key downside risk to the business. In the year ended June 30, 2024, Axia reported revenue of US$193,849 million representing a 5 percent decline compared to the prior year.
The decline was largely a result of the distribution business in Zimbabwe, whose revenue declined by 23 percent from the prior year, which affected the group position.
According to IH, while Distribution Group Africa-Zimbabwe (DGA) is expected to continue weighing on group performance, Axia deployed US$3,2 million in capex during the period under review.
The group has also committed to continuing an expansion drive, including three new TVSH stores, new Transerv stores, and completion of the bedding manufacturing plant in FY25.
“Volumes growth for FY25 will be underpinned by this expansion drive. Although TVSH has not gained sufficient traction with exports, the group is pursuing strategic partnerships to bolster its regional customer base,” IH said.
In Zimbabwe, DGA continues to face an uphill battle considering informalisation and currency volatility, especially in the Zimbabwean market where retailers have bemoaned foreign currency shortages as well as stocking challenges that may persist in the short to medium term.
According to management, the focus for DGA Zimbabwe is on gaining traction in the informal market while also making efforts to boost demand in the formal market through close partnerships with retailers.
IH said although management anticipates these measures will lead to a recovery of the unit’s performance, it believes DGA will continue to hamstring the group’s top line growth to FY25.
“We therefore forecast the group’s revenue to close FY25 at US$194.48 million, a marginal 0.3 percent growth weighed on by DGA’s performance,” IH said.
According to the financials, despite the decrease in revenue, the gross margin increased by 2 percent from the prior year. Operating expenditure increased by 5 percent over the prior year due to inflationary pressures on both local currency and United States dollar costs.
The group posted an operating profit of US$19,645 million, representing a 6 percent decline in the comparative year.
The company said substantial once-off costs were incurred as a result of restructuring the distribution business as a significant debtor, and inventory balances were written off as a result of the final reconciliation processes. Profit after tax of US$5,964 million was reported, which was down four percent against the prior year.
Bongani Ndlovu