Axia Corporation Limited (AXIA.zw), listed on the Zimbabwe Stock Exchange has issued the following assessment of its future earnings prospects, as at 30 June 2018, as part of its investor relations reporting:
FINANCIAL OVERVIEW
The Group registered a good performance in an environment of increased risks and opportunities and notwithstanding some challenges characterized by delays in making foreign payments to suppliers of goods and services, difficulties in securing import permits and constraints in the supply of some local products.
The Group reported revenue of US$275.925 million during the year to achieve a 31% growth on the comparative period. The Group sustained growth in profitability by recording an operating profit of US$25.808 million and a profit before tax of US$24.335 million for the year notwithstanding substantial once-off legacy charges recorded in the distribution businesses. Most of these once-off charges were incurred as a result of derecognising some historical debtors and inventory balances that arose as a result of a compromised control and governance environment. Management has dealt with the control environment issues and believes that they have cleared all historical balances as part of the balance sheet restructuring exercise in the affected subsidiaries.
Basic and Headline earnings per share for the year amounted to 2.02 US cents. Headline earnings were 47% above the comparative period and when adjusted for income earned on the derivative option, were 28% above prior year at 1.76 US cents.
Significant focus was placed on reducing the Group’s foreign creditor positions and to secure additional inventory as a way to ensure superior offerings to customers. Although this has resulted in a significantly changed working capital profile, the Group managed to generate cash from operating activities.
The Group’s capital expenditure for the year totalled US$3.997 million. Net borrowings have increased by US$10.558 million mainly to support strategic working capital investments resulting in increased gearing.
As advised in the interim report, the Board reassessed its position of control of Transerv, where the Group has an effective 26.01% share. The Group has equity accounted the results of Transerv and will only consolidate the business when an effective holding above 50% is achieved.
Following this reassessment, the comparative Statement of Profit or Loss and Other Comprehensive Income has been restated, together with the Statements of Financial Position, Statement of Changes in Equity and Statement of Cashflows to show the effect of equity-accounting for Transerv.
In addition, through a scheme of reconstruction, the Group has consolidated the results of Hat On Investments (Pvt) Ltd (‘Hat On’) and Baobab Africa (Pvt) Ltd (‘Baobab’) through its subsidiary Distribution Group Africa (Pvt) Ltd (‘DGA’), with effect from 1 July 2017. The change in accounting treatment is notwithstanding the fact that there has been no change in the Group’s effective shareholding in Baobab whilst the effective shareholding in Hat On increased by 0.02%. This change will improve efficiency in reporting, monitoring and control and other administrative work in the distribution business. The acquisition of Hat On and Baobab by DGA Zimbabwe resulted in goodwill of US$0.42 million on consolidation of DGA. Management has decided to immediately impair the US$0.42 million goodwill.
