Axia’s HY capex up 124% to ZWL$203m

TINASHE MAKICHI

Axia Corporation Limited’s capital expenditure (capex) in the six months to December 31,2020 was 124%  up to ZWL$203m compared to ZWL$91m reported in the prior comparative period, driven by the need to expand its footprint on the market.

Inflationary pressures also played a huge role in the significant increase in capex.

The capital spending, board chairman Luke Ngwerume said, was towards critical maintenance and expansion projects.

Axia operates TV Sales & Home, Transerv and Distribution Group Africa.

“The group’s capital expenditure for the period totalled ZWL$203m and this was limited to critical maintenance and expansion projects as these were also affected by inflationary pressures,” Ngwerume said.

In its financial results published last week, revenues for the group grew 28% to ZWL$9.711bn during the reviewed period from ZWL$7.6bn reported in the prior period.

Volumes, according to Ngwerume, were above those traded in the prior period.

Profit for the group was ZWL$503m from ZWL$408m.

Borrowings for the group increased by ZWL$464m to support its strategic working capital investments.

Cash from operations increased 241% to ZWL$157m in the period under review.

Turnover for TV Sales & Home TV Sales and Home was 30% above prior year while volumes were volumes 40% above the comparative period.

The growth was driven by an increase in the store network, increased promotional activity and the reintroduction of credit sales.

“This is encouraging as the period under review was characterised by relative price stability across the value chain.

“The black Friday promotion was very successful with very pleasing volumes on the day making up a significant portion of monthly turnover,” Ngwerume said.

 The debtors’ book grew by 130% in value and collections on the book remained good while inventory holding remained good as the group’s relationships with local suppliers continue to support the value chain.

The group’s manufacturing units also grew volumes with Restapedic producing 35% more volumes than they achieved in the comparative period while Legend Lounge witnessed volumes growth above 100%.

The distribution business in Zimbabwe delivered a fair set of results. Turnover increased by 6% on the prior comparative period, with volume growth of 4% on the comparative period.

Volume growth was largely driven by local products which do not require sourcing of foreign currency thus were reasonably priced.

“The business continues to preserve its balance sheet in real terms and will also be focusing on improving volumes,” Ngwerume said.

The regional operations according to Ngwerume continue to operate in challenging local environments where Zambia has experienced resurgent inflation and currency depreciation.

Consolidated turnover for Zambia and Malawi, in US$ terms, declined by 16% over the comparative period and the decline in turnover was a result of a distributorship agency business which was discontinued in Zambia as well as shrinking modern trade space in Malawi due to the harsh economic environment created by the Covid-19 pandemic.

Gross margin was up 4%, despite decline in revenue while operating costs were below the prior comparative period resulting in a decent operating profit which increased by 49% on the comparative period.

This however, was diluted by significant exchange losses in Zambia as the local currency depreciated by 39% and 16% to the South African Rand and US$ respectively, resulting in a decline in profit before tax.

Despite the continued challenging trading environment, Transerv remained profitable and while the effects of the Covid-19 pandemic were felt in the supply chain, the business managed to achieve an operating profit growth of 22% on the comparative period.