Powerspeed Electrical releases its 2022 Annual Report

Chairman’s Statement

INTRODUCTION

The past twelve months proved to be extremely challenging for businesses and households alike. Inflation, leading to rising expenses, increasing regulation, informalisation, tight liquidity, interest rates, dollarisation and exchange rate disparities, and corruption; all combined to make the conduct of formal business difficult.

Despite these difficulties, the Group had a reasonable year, with an overall increase in volumes traded compared to prior year. The execution of multiple strategies to increase market share in several areas, bore fruit.

FINANCIAL PERFORMANCE

These financial reports are in Zimbabwe Dollars, as required by law, and are presented in historical format only. Unfortunately, the prevailing inflationary environment makes meaningful interpretation of any such financial reports difficult.

Revenue rose from ZWL 8.7 bn, to ZWL 26.9 bn, while operating expenses rose from ZWL1.6b to ZWL 6.0b. As a result, operating profit rose from ZWL 294 m, to ZWL 1.2 bn, and profit after tax rose from ZWL 154 m to ZWL 582 m.

We remained focused on growing throughput, and building real balance sheet value, both of which have been achieved during the year under review. Shareholder equity grew from ZWL2.1 bn, to ZWL 8.2 bn, representing a 14.7% growth in real terms.

REVIEW OF OPERATIONS

Electrosales Hardware opened its twenty-first branch in Kadoma, our first purpose-built store. The branch has been profitable from its first month, and throughput has been growing steadily ever since.

Maintaining reliable supplies of product has proved to be extremely difficult. Suppliers in China have been severely affected by Covid-19 lockdowns, and shortages of containers disrupted shipping throughout the year. Apart from the effects of Covid-19, suppliers in South Africa have also been buffeted by power cuts, as well as widespread industrial action, particularly at Portnet. The performance of local suppliers has been seriously hampered by the difficult conditions in the country, summarised above.

We continued to invest in stock and systems, and this has enabled us to further improve product availability in all our stores. This product availability has undoubtedly contributed to the increase in throughput over the reporting period.

The massive increase in interest rates in the last quarter of our financial year, had a significant negative effect on our business. This was compounded by a substantial decline in throughput, in Zimbabwe Dollar sales. Fortunately, we have been able to clear all our Zimbabwe Dollar borrowings, thereby shielding ourselves from further negative impact of the interest rate escalation. Whilst sales volumes have recovered, we are seeing accelerated dollarisation, with most product suppliers, and other service providers, demanding payment in USD.

OTC SHARE TRADING AND BUYBACK

The Group’s shares have been available on an OTC market managed by Imara Edwards Securities. However, the volume has been very limited, the only trade being the buyback and cancellation of 2 261 478 shares by the Company, representing a little over 0.5% of the issued share capital.

OUTLOOK

In spite all we face in the business every day; we continue to strive for excellence in everything we do. We believe that the drive for sustained improvement will enable us to maintain our position as the pre-eminent hardware supplier in Zimbabwe.

There is a national culture of investing in housing development or home improvement, which culture spurs demand for our products and services. We strongly support this culture, by offering a broad range of home improvement products, excellent value for money.

Our ability to procure product from the best global sources enables us to deliver excellent quality and price to our customers. We are relying on this strategy to increase our market share, despite the business environment being heavily tilted in favour of informal business.

DIVIDEND

The satisfactory performance of the company over the past year enabled us to share the rewards with shareholders. Accordingly, the Board has resolved to declare a dividend of ZWL 1.64 per share, for the 12 months ended 30 September 2022, to shareholders on the register on 9 January 2023.

APPRECIATION

The Board commends and thanks our Management and all employees for their dedicated efforts during difficult circumstances. We are also grateful to all our partners, namely the customers, suppliers, bankers, and other service providers, for supporting us in ways that enabled us to achieve the results we are reporting here.

I am deeply indebted to my fellow directors, for leading, guiding and supporting our Management diligently, zealously, and effectively, over the past year.

We remain committed to our growth strategy, despite the economic head winds facing the formal economy, and we will be applying ourselves fully, in the coming year, to achieve our objectives.

Dr S.H. Makoni
Chairman

16 December 2022

Powerspeed Electrical Limited 2022 Annual Report.pdf