Timothy
Business Writer
Specialty retail and distribution group, Axia Corporation, is projected to experience volumes recovery in the current financial year as consumer spending improves in line with relaxed local lockdown restrictions.
The country is also expecting increased economic activity on the back of eased lockdown restrictions, which adds to improved disposable incomes while the festive season is also traditionally marked by increased spending.
Its furniture business, TV Sales and Home as well as Transerv, are seen performing above prior year levels. Already TV Sales and Home’s volumes rose 35 percent in the financial year 2021 (FY21) as the business re-introduced credit sales allowing the company to defend market share and grow volumes while increased store network was an added advantage for the group.
Market watchers are therefore projecting improvements’ in the group’s volumes and earnings performance for the current financial year.
“We expect a strong recovery in business activity for TV-Sales and Transerv going into the first half of FY22 as the local lockdown restrictions are eased.
“Consumer spending will be further driven by a consecutive year of above average rainfall that will likely lead to improved consumer earnings,” said stockbrokers IH Securities in their earnings review for the group.
DGA Malawi and Zimbabwe also concluded major distribution agencies and are expected to make a positive impact on operating profit going into FY22.
IH Securities also notes that management’s strategy to take control of their value chain and focus on local products will aid in containing operating costs. As such margins are seen trending lower but most likely not to historical levels.
Revenue is forecasted to increase by 77 percent for FY22 at $32,18 billion. In historical terms, AXIA’s revenue for FY21 came in at $18,18 billion which was up 397 percent year on year versus annual inflation of 106 percent for the matching period (ended June 2021) on the back of improved volumes.
Earnings before interests, tax, depreciation and amortization is projected to rise by 77 percent to $5,29 billion from $2,99 billion.
Resultantly, IH forecast net income attributable to shareholders to rise 68 percent year on year to $2,11 billion.
However, the depreciation of local currencies in Zambia and Malawi remains a cause for concern as they negatively impact the net assets of the consolidated business.
During the previous financial year, DGA – Region was adversely affected by the devaluing Kwacha, loss of distributorship agency in Zambia as well as shrinking modern trade space in Malawi. Therefore, consolidated turnover for DGA Zambia and Malawi, in US$ terms, declined by 7 percent over the comparative period while contribution to the ZWL$ top line decreased from 16 percent in FY20 to 14 percent in FY21.
The group is targeted to reach $43,73 on the local bourse, the Zimbabwe Stock Exchange (ZSE).
Bongani Ndlovu