Powerspeed Electrical turnover at $60.1m, up 62% in HY’2019
Read the Powerspeed Electrical Limited 2019 Half Year Report
We have extracted the financial summary from the 2019 Half year Report of Powerspeed Electrical Limited , listed on the Zimbabwe Stock Exchange under the share code PWS.zw. Powerspeed Electrical is a leading supplier of electrical, hardware, building and home improvement products and services; trading through its own chain of hardware retail outlets known as Electrosales Hardware.
FINANCIAL OVERVIEW
The confusion that surrounds our various currencies and exchange rates make reliable financial reporting difficult. However, we believe that the information presented gives the best possible indication of our financial performance.All figures are presented in RTGS$.
Turnover, at $60.1m, was 62% up on the previous period. However, our gross margin fell from 28.1% to 24.1%, primarily because of a shift in product mix. This resulted in a 39% increase in GP to $14.5m.
Due to a combination of our branch expansion program as well as inflationary pressures, operating expenses grew by 50%, to $11m. The net result of which was a 14% increase in operating profit, from $3.32m to $3.80m.
Borrowings reduced to $10.2m, despite the significant investment in both property and stock. Attributable profit after tax came in adjust over$2.44m, up from the $2.05m reported for the corresponding period last year.
Of significance is the growth in balance sheet value, driven largely by significant investment in property and inventory, while maintaining a very limited foreign creditor exposure.As a result, equity value has risen threefold.
REVIEW OF OPERATIONS
TRADING – ELECTROSALES HARDWARE
Despite the difficulty in sourcing stock, both locally and internationally, we have been able to improve the range of products on offer to our customers both by way of different products, as well as different types of the same product, thereby increasing customer choice. Simultaneously, we have ensured good value for money by charging reasonable prices for good quality products. Hence, we are growing our reputation for being a dependable retailer.
We have made further progress in identifying, and sourcing directly from, the best manufacturers globally, for a good number of products. This has given us excellent prices as well as access to new technologies. In this way, we have been able to reduce our reliance on South Africa. as a source of goods. saving significant value in ‘middle man’ costs.
During the period under review. we opened a new branch at 85 Cameron Street, in Harare. Interestingly, the premises is the site of the original Electrosales which opened there in 1955. The branch opened at the beginning of March and began making a positive contribution in its first month of operation.
ENGINEERING
Although not the core focus of our activities, we continue to maintain our competence and capacity within the Engineering Division, in the hope for growth in investment in industry and mining at some point in the future. However, during the period under review, through put dropped as a result of the reducing investment across almost all sectors of the economy but the unit remained profitable.
OUTLOOK
As always we, remain optimistic about the long term prospects of Zimbabwe, and the opportunities that these will bring to our business. However, the current situation, with increasing distortions, endless corruption and waste, accelerating regulation and a growing tax burden on the economy, the short term prospect for the Zimbabwean economy are bleak.
Having said that, we believe that we have identified a formula that works for both our customers and our shareholders a decline in spending have enabled us to take market share from our traditional competitors, and grow our income despite a decline in spending power being felt by all of our customers. We are, therefore, confident that we will continue to grow both throughput and profitability
Of concern is the growing informal sector which does not comply with the mounting bureaucratic and financial burden that the authorities are placing on the formal sector. Every hurdle placed in the way of formal business, is an incentive to the informal sector, so there is no wonder that the latter is thriving.
