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Axia refines model to contain costs

30 Sep, 2020 - 00:09 0 Views
Axia refines model to contain costs

The Herald

Enacy Mapakame

Business Reporter

Specialty retail group, Axia Corporation, remained resilient to record fair performance during the year to June 30, 2020 despite the effects of Covid-19 pandemic that weighed down its operations especially the retail businesses.

Axia’s main operating business units are the country’s leading furniture and electronic appliances retailer — TV Sales & Home (TVSH), Distribution Group Africa (DGA) and Transerv.

During the year under review the business environment remained volatile due to Covid-19, which resulted in reduced business hours with the retail services closed for almost the whole month of April in compliance with lockdown regulations.

“The operating environment was volatile and presented a number of challenges characterised by the weakening Zimbabwe dollar, re-emergence of hyperinflation, shortage of foreign currency and liquidity constraints, which led to reduced consumer disposable income and demand,” said chairman Mr Luke Ngwerume in a statement accompanying the group’s results.

“These challenges necessitated management to pro-actively refine business models as a way to manage ever-changing operating costs, working capital levels as well as protect the business units’ balance sheets in real terms. Resultantly, the group’s business units were resilient despite these adverse factors and this helped the group to record a fair performance,” said Mr Ngwerume.

He said the implementation of various stages of lockdown in the country had a negative impact on retail operations.

Said Mr Ngwerume: “The group’s retail businesses TV Sales & Home and Transerv, were significantly affected as they were closed for almost the whole of April 2020. The distribution business in Zimbabwe was operating at reduced levels with minimal staff as it is part of essential services providing FMCG products to mainstream retailers and wholesalers.”

As a result, total group revenue went down by a marginal 1 percent to $7,84 billion during the year. The impact of inflationary price increases negatively affected demand thus turnover volumes were below those traded in the prior year resulting in a decline in revenue. Despite the inflationary pressures on costs, the group sustained growth in profitability by recording an operating profit of $874,11 million, representing a 43 percent growth in the comparative period.

Basic earnings per share and headline earnings per share both improved by 494 percent and 481 percent respectively.

Net borrowings decreased by $481 million mainly as a result of increased positive cash and cash equivalents balances.

At TV Sales & Home turnover was 11 percent below the prior year, with volumes 23 percent below prior period.  Credit sales were a strong driver of volumes in the first half of the financial year, but were later suspended after the Covid-19 outbreak.

Turnover for DGA operations was down 16 percent with operating profit also down from the comparative period.  Volumes were 31 percent below the prior year and this led to a decline in turnover as the consumer spending power was negatively affected by the economic challenges. Operating costs were under control and this resulted in the business being able to maintain its profitability levels against prior year.

On the other hand, DGA regional operations reported a fairly decent set of results with consolidated turnover going up by 11 percent over the prior year in US$ terms.

Mr Ngwerume said the growth in turnover was contributed by the acquisition of new distributorship agencies like Nestle and Blue Band in Zambia and the addition of Pro Group and Blue Band distributorship agencies in Malawi.  Improved margins and a decline in operating cost resulted in a 63 percent growth in operating profit over the comparative period.

“The operating environments in both Malawi and Zambia continue to be considerably challenging but our businesses have shown resilience. The depreciation of the local currency in Zambia to the US$ has negatively affected the net assets of the business and management will continue to focus on how to improve shareholder value in US dollar terms,” he said.

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