• The group reported a 452% annual revenue growth rate
• In the quarter ending 31 December, the group opened its newest and biggest branch in Avondale in Harare
• Electrosales faces unfavourable trading terms relative to the informal sector

HARARE- Powerspeed Electrical Limited has gazetted its group’s first quarter trading results for the period ended 31 December 2022. Although the group was delisted from the Zimbabwe Stock Exchange (ZSE) on 18 December 2020, it maintains its publication of company and investor-related information in order to gain shareholder interest in its stocks which now trade over the counter (OTC). The nature of the aforementioned market which operates on a one-on-one basis without a central exchange implies that many trades can occur without public knowledge. Stocks traded in this manner tend to have low levels of liquidity; the quality of information is undermined when fewer participants have the incentive to verify publications. 

Across the group’s product range and operational activities which span the supply of electrical, hardware, building, and home improvement products and services, the group reported a revenue increase from 3,3 to 18,3 billion from 2021 to 2022. This represents a 452% annual growth rate. Additionally, the group traded profitably resulting in an 8.7% growth in shareholders’ funds within the period under review.

Trading through its own chain of hardware retail outlets known as Electrosales Hardware, the group supplies electrical products and solutions to the painting, plumbing, electrical, building, hand and power tools, outdoor and gardening, and automotive industries in Zimbabwe. In the quarter ending 31 December, the group opened its newest and biggest branch in Avondale in Harare. This is expected to increase consumer exposure to the company’s brands for the retail and wholesale supply of all types of hardware and home improvement products. This strategy of opening an outlet in an upper market area may allow an increase in overall volumes and the sale of higher-end products in its product mix, the cumulative effect will be a growth in revenue. The group informed the public that it will continue to pursue new markets, expand its branch footprint, and develop its sourcing of products directly from the best manufacturers globally.

This is however complicated by the tight economic environment. Although the economy recently saw an interest rate cut of 50 bps, from 200% to 150% the environment remains hostile to investments and general capital expenditure. Moreover, the outlook for household purchasing power is expected to contract as the local economy brasses itself to face a slowdown as the economic development of the country continues to be hampered by price and exchange rate instability.

According to a source deemed reliable by African Financials, Inflationary pressures continued to push up the real costs of basic household expenses during the period resulting in less demand for the group’s products, effectively shrinking the potential market. The resultant shrinking market has increased competitive pressures for the group which is expected to shrink margins.

Moreover, controls limiting pricing ratios between ZWL and USD continue to make it expensive for customers with USD to purchase from formal retailers such as Electrosales. The group highlighted their view that this is an incentive that is driving business from formal to informal trade and is having a negative effect on all formal retailers. Although the group reported increases in trading volumes, it was achieved despite the surging competition pressure from the informal sector which enjoys the above-mentioned favourable terms of trade.

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