11 January 2013

Zimbabwe: Powerspeed Indigenised - Macklin

POWERSPEED Electrical Limited has claimed to be 98 percent indigenised, indicating that there was no basis for it to be called to comply with the indigenisation law.

Presenting the company's financial results for the year to September 30, 2012 on Thursday last week, managing director, Hilton Macklin said there was no need to change the company's shareholding as it was already indigenised.

"As far as indigenisation is concerned, we are 98 percent compliant as we stand today," he said.

Zimbabwe's Indigenisation and Economic Empowerment Act compels all foreign-owned companies operating in the country to cede at least 51 percent shareholding to locals.

Macklin said the company had failed to meet its revenue target during the quarter to December, adding that nothing significant was expected during the second quarter of its financial year as it was traditionally a quiet period.

"December was a bit quiet. We are behind on what we thought we would achieve and failed to meet our targets," he said without giving figures.

"The first quarter of the year is not quite a good period. However we do not have any significant debt save for our Zambian operations whose debt is fairly small," said Macklin.

He said the loan in Zambia was long- term and had an interest of 12 percent per annum.

Commenting on the outlook, Macklin said Powerspeed was "looking forward to maintaining its margins in the current year to become more competitive".

Powerspeed's turnover rose by 11 percent to US$29,2 million during the period under review, from US$26,3 million the previous year.

Macklin said finance costs remained at a similar level to the prior 12 months at US$676 000. Profit before tax came in at US$711 000, an increase on the previous year's US$460 000.

Earnings per share worked out to 0,14c/share, higher than 0,09c/share last year.

"The increased profits have been achieved with little increase in stock and a decrease in both trade receivables and trade payables," he said

"These results were somewhat weighed down by poor performance of some of the non-core engineering operations. If we isolate the results of the core business, a different picture emerges," Macklin said.

Trading turnover was at US$25,8 million, with a 31,5 percent gross profit of US$8,1 million and profit before tax of US$1,57 million. Profit after interest was 3,5 percent of turnover at US$892 000.

Macklin said he believed that the company had established a strong trading base on which to build upon in future.

Electrosales was being widely recognised as a premium brand in the supply of quality electrical products and hardware. Improvement of existing branches and the opening of new ones would continue during the coming year as the group anticipates that this would position it better to weather the challenge in the Zimbabwe business environment.

"The group's engineering infrastructure has been reduced and overhead expenses cut. We will maintain this infrastructure at levels and in conditions that would enable us to quickly take up new opportunities as they emerge," he said.

He said the core business operations did contribute appreciably to the group profit in the last financial year and are expected to continue to do so.

The company however, said given the ongoing need for working capital to fund growth of business, as well as the need to reduce borrowings, the board considered it prudent not to declare a dividend for the 12 months.

Analysts said the group generated pleasing results for the period under review despite the macro-economic environment remaining uncertain, levels of investment being depressed, industrial activity continuing to decline and liquidity remaining tight.

While there is no indication of likely change to this situation in the foreseeable future, the group has put in place various mitigating strategies such as containing costs downsizing such as containing costs downsizing vulnerable business and expanding profitable areas.

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