LISTED diversified concern, Axia Corporation Limited has snapped up an additional 24,5% stake in cars and spare parts firm, Transerv for US$900 000 in a move geared towards maximising shareholder value.
BY FIDELITY MHLANGA
The acquisition was done through the group’s wholly-owned subsidiary domiciled in Mauritius, Excalibur Mauritius Limited.
“The group increased its shareholding in Transerv from an effective 26,01% to 50,51%, with effect from January 1 2020. The acquisition was done through the group’s wholly-owned subsidiary domiciled in Mauritius, Excalibur Mauritius Limited, for a purchase consideration of US$900 000. Goodwill amounting to $15,63 million was recognised at the date of the transaction,” said Axia chairman Luke Ngwerume in a statement accompanying the company’s financial results for the period ended June 30, 2020.
“This acquisition will enable Transerv to pursue strategies that maximise shareholder value with further alignment and support from the Axia group, which will enhance long-term returns. As a result, the group has consolidated the results of Transerv with effect from January 1 2020.”
The group recorded $7,84 billion revenue during the year, a marginal decline compared to the prior period.
It said 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.
“An improved performance was noted in the last quarter of the financial year, where volume growth was better than that achieved in the prior year. The group sustained growth in profitability by recording an operating profit of $874,116 million, representing a 43% growth in the comparative period, despite the inflationary pressures on costs. The financial income line mainly comprised income earned on the derivative option, unrealised exchange gains on foreign-denominated cash and cash equivalents as well as profit on disposal of assets. Equity accounted earnings are mainly comprised of the results of Transerv for the first six months and Restapedic Bedding,” Ngwerume said.
Basic earnings per share and headline earnings per share both improved by 494% and 481%, respectively.
Profit after tax for the period was $636,63 million compared to $108,253 million recorded during the prior period.
Net borrowings decreased by $481 million mainly as a result of increased positive cash and cash equivalent balances.
The group generated cash of $1,1 billion from operations which was up 278% from the comparative period. The group’s capital expenditure for the year totalled $124,76 million and this was limited to critical maintenance and expansion projects as these were also affected by inflationary pressure.
The group’s subsidiary, TV Sales & Home had a slow start to the year with subdued volumes in the first quarter which were later offset by improved trading in the second and third quarters. Turnover was 11% below the prior year, with volumes 23% below prior period. Quarter four performance was commendable despite not trading in the month of April and the business witnessed improved margins. The improved margins together with controlled overheads led to higher profitability for the year. Credit sales were a strong driver of volumes.
“Inventory holding remains good as access to foreign currency has improved significantly, and the local supply chain remains funded from the foreign currency auction system. Legend Lounge production has improved and was only limited by reduced working hours under lockdown. This entity is now well placed for the financial year ahead, with a complete range of lounge suites to compete locally as we gear up to increase capacity for future exports. Volumes at Restapedic were 26% below the prior year, however the business remained profitable despite trading in a challenging environment,” Ngwerume said.
The company opened three new stores during this year, of which two stores — one each in Victoria Falls and Rusape — were opened in the first half of the year while a third store was opened in Harare at Megawatt House.
Distribution Group Africa operations delivered a fair set of results in Zimbabwe with turnover down 16%, and operating profit also down from the comparative period.
“Volumes were 31% below the prior year and this led to a decline in turnover as 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. Competition in this market remains strong with numerous independent traders,” Ngwerume said.
Distribution Group Africa regional operations reported a fairly decent set of results during the year under review with consolidated turnover going up by 11% over the prior year in US dollar terms.
The growth in turnover was contributed to 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 costs lead to a 63% 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$ terms. As previously explained in the interim report, the regional business model is being aligned to the group model on operating standards,” Ngwerume said.
Transerv suffered a volume decline of 38% compared to prior year. The strategy to focus on fast-moving stock lines and managing operating costs despite inflationary pressures helped the business to remain profitable. “The business witnessed an operating profit growth of 274% against prior year. Despite the adversities, the business maintained its 24 trading outlets, 15 fitment centres, a diesel pump room (ADCO), Clutch and Brake Specialists (CBS) and an Autocycle Centre. Renovations were completed on five retail outlets and five fitment centres, giving a much-improved customer experience. In the coming year, management will continue to explore ways to improve volumes as well as expanding the store footprint,” Ngwerume said.
Based on the historical results, the board has declared a final dividend of 19,16 cents per share in respect of all ordinary shares of the company. This brings the total dividend paid for the year to 23,76 cents.