BUSINESS REPORTER
Zimplow Holdings Limited is bullish its unit Tractive Power Solutions (TPS) will be able to contribute significantly to the group after signing service level agreements as it seeks to smoothen the process after losing the Caterpillar distributorship.
South Africa’s Barloworld had a joint venture with Zimplow in Barzem, which was the distributor of Caterpillar equipment in the country. The partnership ended last year and is buying out Barloworld from Barzem as well as looking for a new world-class original equipment manufacturer.
Zimplow CEO Vimbayi Nyakudya told Business Times that TPS becomes the foundation on which the group “can build our business going forward”. He said the fact that TPS is wholly owned by the group meant that “whatever that is coming from that business would follow through to our balance sheet”.
In terms of the order book, TPS has a couple of pieces of equipment it needs to deliver, he said.
“Over and above that we have got quite a list of SLAs [service level agreements] that we have signed and that we expect to be following through on and we believe that by year end we should be able to contribute, if not 60 to 70% of what we used to do with Barzem from the after sales perspective,” Nyakudya said.
He said there are three options in the transition from the Barzem deal.
The primary option is to get an internationally acclaimed original equipment manufacturer.
Another option was to multifranchise and third one was the TPS option “whereby we cater for the after sales side or the fleet maintenance side for our existing customers and any new customer that we may bring on board”.
“So far, this is the option [third option] that we are running with, we believe we can easily add the second option and if we ever get or conclude on the first option we add it on top of that,” Nyakudya said.
In the five months ended May 31, Zimplow’s revenue (excluding Barzem) was 4% ahead of the prior year.
“Scanlink, Powermec and Trentyre recorded significant growth in revenues. Costs remain contained on a year-to-date basis with a focus to unlock operating margins, which are currently below the group’s targets,” Nyakudya said.
He said the board and management were taking a cautious approach in the second half of the year.
“Financially, management is focused on cash generation, cost containment and balance sheet preservation. Operationally, the group will follow through in establishing capacity in factories, efficiencies in new operating units and safeguarding its market share in this already depressed trading environment,” he said.
Meanwhile, Zimplow shareholders are meeting today at an extraordinary meeting to bless or disapprove the delisting of the company from the Zimbabwe Stock and list on the Victoria Stock Exchange (VFEX) to enjoy the incentives offered by the dollar denominated bourse.
According to a circular to shareholders, Zimplow said listing on the VFEX would increase marketability of the group regionally, which can lead to improved flexibility in raising external capital and funding for regional expansion against a ‘dollarised’ balance sheet.
It said listing on the bourse would allow Zimplow to take advantage of offshore settlement options, which allow investors to efficiently repatriate their dividends thus eliminating the foreign currency risk of holding shares as a foreign investor.
