A LEADING advisory firm, Inter Horizon Securities (IH) has projected that revenue at the retail and specialty distribution group, Axia Corporation Limited, will rise by 11% to US$ US$226,83 million in the financial year 2023.
Over the same period, it is anticipated that earnings before interest, taxes, depreciation, and amortisation (EBITDA) will increase 34% to US$31,76 million.
“We believe the cost containment measures adopted during the Covid-19 pandemic can be sustained moving forward,” the securities firm said in its analysis of Axia's operations.
“We forecast stronger top line growth, driven by increased United States dollar sales, better pricing structure and anticipated higher volumes driven by a wider TV Sales and Home network, promotions, and backward integration.”
As such, IH predicted that the EBITDA margin will increase from 12% to 14% in the financial year 2023.
Axia has three operating business units, namely TV Sales & Home, Transerv and Distribution Group Africa (DGA).
TV Sales is a leading furniture and electronic appliance retailer with 54 sites located countrywide and its volumes have been increasing at an average rate of 2,59% over the past five years.
The retailer over the years invested in manufacturing through the acquisition of 49% in Restapedic (shareholding now at 60%) and formation of Legend Lounge.
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In the second quarter of the financial year 2023, volume performance for TV Sales & Home was up 22% compared to the same period in prior year attributable to successful market activation promotions.
Its year-to-date volume performance increased by 3% compared to prior year and this was on the back of a disappointing first quarter performance which was affected by restrictive pricing pressures experienced in the first two months of the quarter.
Volumes for the unit are expected to increase by 3,3% over the next five years due to increased footprint, increasing population and rapid urbanisation.
Transerv retails automotive spares and accessories, by utilising its network of 45 home-grown retail branches and numerous fitments centres, has seen its volumes increasing at an average rate of 7,35% over the past five years.
“During half-year in 2023, the company’s revenue and volumes were on an upward trend as the company started recovering from the restrictive pricing challenges experienced during the first two months of the financial period,” the report reads in part.
The company increased its store network by opening two retail stores in Harare and plans are underway to open at least six shops during the current year.
DGA is a large and successful distribution and logistics concern, with operations in Zimbabwe, Zambia and Malawi.
Its business, which contributes 66% of the logistics business revenue, has been under pressure over the past few years.
Volumes increased at an average rate of 4,13% between 2018 and 2021.
“However, due to the adverse effects of the COVID-19 pandemic, there was a sharp decline in volumes of 17,51% in 2022. This situation was exacerbated by weaker demand in the formal sector resulting in a further decline in volumes in HY23 resulting in a decline in revenue,” IH said.
Cost containment strategies allowed the business to end the first half with profit ahead of last year despite decrease in revenue and for financial year 2023.
The advisory firm forecasts that the company’s volumes will increase by 5%.
