HARARE—Research and stockbroking firm IH Securities has projected an improvement in Axia Corporation’s margins for the financial year 2025 (FY2025), as the company’s ongoing restructuring efforts are anticipated to reduce costs in the medium term. Despite the challenges, IH Securities forecasts Axia’s net income to reach US$6.42 million by the end of FY2025, though currency issues across its markets pose significant risks.
For the year ending June 30, 2024, Axia reported revenue of US$193.85 million, marking a 5 percent decline compared to the previous year. This decrease was primarily attributed to a 23 percent drop in revenue from its Zimbabwean distribution business, Distribution Group Africa-Zimbabwe (DGA), which negatively impacted the overall group performance.
While DGA-Zimbabwe is expected to continue weighing down the group’s performance, Axia has invested US$3.2 million in capital expenditures during the review period. The company remains committed to its expansion plans, which include opening three new TV Sales & Home (TVSH) stores, new Transerv outlets, and completing a bedding manufacturing plant within FY2025.
“Volume growth for FY2025 will be supported by this expansion drive. Although TVSH has yet to gain significant traction in export markets, the group is actively pursuing strategic partnerships to strengthen its regional customer base,” noted IH Securities in its analysis.
DGA-Zimbabwe, however, faces ongoing challenges, particularly due to the informalization of the economy and currency volatility in Zimbabwe. Retailers in the market have raised concerns about foreign currency shortages and inventory issues, which are likely to persist in the short to medium term.
According to Axia’s management, the focus for DGA-Zimbabwe is to increase its presence in the informal market while also working to boost demand in the formal market through closer collaboration with retailers. Although management is hopeful these strategies will lead to a recovery, IH Securities remains cautious, predicting that DGA will continue to constrain the group’s revenue growth through FY2025.
“We forecast the group’s revenue to reach US$194.48 million by the end of FY2025, representing a marginal growth of 0.3 percent, largely weighed down by DGA’s ongoing challenges,” IH Securities reported.
Financial data from the company shows that despite the decline in overall revenue, Axia’s gross margin improved by 2 percent year-on-year. However, operating expenses increased by 5 percent, driven by inflationary pressures on both local and US dollar costs. The company reported an operating profit of US$19.65 million, reflecting a 6 percent decrease compared to the previous year.
Axia also faced substantial once-off costs due to the restructuring of its distribution business, including the write-off of significant debtor and inventory balances following final reconciliation processes. As a result, the group’s profit after tax fell to US$5.96 million, down 4 percent from the prior year.
The outlook for Axia remains cautiously optimistic, as the company continues its restructuring and expansion initiatives to navigate economic headwinds and leverage new opportunities in the market. – Herald