Axia poised for growth

12 Oct, 2018 - 00:10 0 Views

eBusiness Weekly

Enacy Mapakame
Retail and specialty distribution group, Axia is poised for further growth in the financial year 2019 on higher disposable income especially for civil servants.

Market watchers contend rising inflation in the country will also provide room for increased prices in certain lines and run rate in top-line should outperform rate of growth in costs enabling the business to sustain margins.

In the financial year 2018, Axia’s revenue growth came in at 30 percent year-on-year relative to overheads growth of 9,3 percent year-on-year, a trend IH Securities say will continue in the current financial year.

“We expect significant growth in TV Sales & Home in FY19 due to higher disposable income of civil servants stemming from the 17,5 percent pay rise in relation to inflation at approximately 5 percent,” said the brokerage firm.

In the year to June 30, 2018, Axia reported revenue grew 31 percent to $275 million on strong performance across board.

Its main operating business units, TV Sales and Home (TVSH), Distribution Group Africa (DGA) and Transerv all recorded earnings growth for the year under review.

IH Securities forecasts equity accounted for earnings of $1,24 million in financial year 2019 driven by Transerv, which also has sizeable footprint in the country.

TVSH recorded a turnover growth of 36 percent on the back of a 19 percent increase in units sold driven by a significant growth in cash and lay-bye sales.

The instalment debtor’s book decreased by 11 percent over the comparative period as sales slowed in the first half of the financial year.

Originally designed to be driven by credit sales, TVSH has over time migrated from an 60/ 40 credit to cash mix towards a 30 /70 credit to cash mix presently.

“We believe that while this was partly a symptom of the environment and worked to Axia’s advantage under current macro conditions, rebalancing this mix while maintaining book quality is a management focus going forward,” said IH Securities.

TVSH currently has a good footprint in the country with 43 stores.

For DGA, the unit has been resilient although there are concerns of downside risks in the business on the back of limited import licenses.

IH said: “We are, however, encouraged by the level of scale in this business and the scope to further diversify into the region, explore opportunities for vertical integration and de-risk the Zimbabwe business to some extent.”

At $47,75 million, inventories at group level was adequate to ensure stock cover of five months, which at time of release of financials was encouraging.

However, in the past week, there has been a spate of price increases as parallel market rates shot up resulting in panic buying with most shops running out of stocks for both furniture stores and supermarkets.

Share This:

Sponsored Links