Axia Corporation (Zimbabwe) PBT jumps by 88% to ZWL$3.5 billion in HY2022

By Published On: March 24th, 2022Categories: Corporate announcement, Earnings

Axia Corporation Limited (AXIA.zw) HY2022 Interim Report

CHAIRMAN’S STATEMENT AND REVIEW OF OPERATIONS

DIRECTORS’ RESPONSIBILITY

The Directors of Axia Corporation Limited are responsible for the preparation and fair presentation of the Group’s consolidated financial results and this press release represents an extract thereof. The reviewed interim financial results have been prepared in accordance with International Accounting Standard 34: Interim Financial Reporting and in the manner required by the Companies and Other Business Entities Act (Chapter 24:31) and the Zimbabwe Stock Exchange listing requirements. The principal accounting policies of the Group are consistent with those applied in the previous annual financial statements.

AUDITOR’S STATEMENT

The reviewed interim financial results for the six months ended 31 December 2021 have been reviewed by Deloitte & Touche, Chartered Accountants (Zimbabwe) and a modified review conclusion has been issued thereon. The reviewed report carries an adverse conclusion with respect to non-compliance with International Accounting Standard 21: The Effects of Changes in Foreign Exchange Rates. The review conclusion has been made available to management and those charged with governance of Axia Corporation Limited. The Engagement Partner responsible for the review is Mr. Stelios Michael.

COMPLIANCE WITH INTERNATIONAL ACCOUNTING STANDARD 29: FINANCIAL REPORTING IN HYPERINFLATIONARY ECONOMIES

The Group adopted the Zimbabwe Consumer Price Index (CPI) as the general price index to restate transactions and balances as appropriate. Non-monetary assets and liabilities carried at historic cost have been restated to reflect the change in the general price index. Monetary assets and liabilities and non-monetary assets and liabilities carried at revalued amounts have not been restated as they are presented at the measuring unit current at the end of the reporting period. Items recognized in the statement of profit or loss have been restated by applying the change in the general price index from the dates when the transactions were initially earned or incurred. A net monetary adjustment was recognized in the statement of profit or loss. All items in the statement of cash flows are expressed in terms of the general price index at the end of the reporting period. Comparative amounts in the Group financial results have been adjusted to reflect the change in the general price index. Interim financial results prepared under the historical cost convention have also been presented as supplementary information. The auditor has not expressed any review conclusion on these historical results.

The CPI increased from 2,986.4 in June 2021 to 3,977.5 in December 2021, representing a 33% increase in the period under review, this is compared to the Reserve Bank of Zimbabwe Auction rate which increased by 29% during the same period. Due to the disparities currently prevailing in the economy, significant distortions can occur in the preparation of inflation-adjusted financial statements in accordance with the requirements of IAS 29. Of significance in the inflation-adjusted financial statements is a net monetary loss of ZWL$ 238.912 million in the current period.

OPERATING ENVIRONMENT AND OVERVIEW

In the six months to 31 December 2021, the trading environment was characterized by increased levels of inflation, unstable exchange rates and uncertainty. With the easing of COVID-19 lockdown restrictions, business activity improved across the region before the onset of the fourth wave in December 2021. Improved business activity resulted in the Group businesses recording volume growth except for the distribution businesses in Zimbabwe and Zambia. In Zimbabwe, the consumer disposable income benefited from increased economic activity driven by infrastructure spending, improved mining activity and better agriculture output. The increased use of foreign currency in the local market enabled businesses to generate foreign currency which will help the Group to undertake critical capital investments. However, the widening of the gap between the official auction and parallel market exchange rates present pricing and value-preservation challenges to the businesses. The result of this growing level of arbitrage and market distortions have negative effects on the entire economy.

The indexed cost base and high interest rates had a significant impact on the Group’s financial results. Management will continue to adapt business units’ operating models to manage business growth and sustainability.

FINANCIAL OVERVIEW

Commentary of the Group’s financial results is confined to the financial information prepared under the historical cost convention.

The impact of improved business activity during the reporting period improved demand resulting in volumes above those reported in the comparative period. The Group reported revenue of ZWL$15.168 billion during the period to achieve a 70% growth compared to the prior comparative period. The revenue growth filtered into gross margin which increased by 93% on prior period. Operating expenditure increased by 105% on comparative period due to certain indexed cost base. The Group posted an operating profit of ZWL$3.194 billion, representing an 84% increase on the comparative period. Profit before tax of ZWL$3.462 billion was reported which was 88% ahead of prior period. Basic Earnings Per Share and Headline Earnings Per Share both improved by 81%.

The Group’s statement of financial position remained solid. Net borrowings decreased by ZWL$1.19 billion as a result of improved cash sales which improved cash and cash equivalents balances resulting in decreased gearing.

The Group generated cash of ZWL$2.481 billion from operations which was up 577% from the comparative period. This translated into enhanced free cash generation enabling the Group to easily incur capital expenditure for the period totaling ZWL$217.373 million. The Group’s free cash generation will enable it to execute its exciting expansion opportunities.

SUSTAINABILITY REPORTING

The Group continues to apply the Global Reporting Initiatives (GRI’s) Sustainability Reporting Guidelines as part of its commitment to ensuring the sustainability of its businesses. The Group will continue to uphold these practices and values across its operations to ensure that long-term business success is achieved in a sustainable manner.

OPERATIONS

The main operating business units in the Axia Corporation Limited Group are TV Sales & Home (TVSH), Distribution Group Africa (DGA) and Transerv. TVSH is Zimbabwe’s leading furniture and electronic appliance retailer with sites located countrywide. DGA’s core areas of expertise lie in inbound clearing and bonded warehousing, ambient and chilled warehousing, logistics, marketing, sales, and merchandis