• Axia Limited to open three new stores for TV Sales and Home, and Transerv in FY2025, expanding its nationwide presence
  • Group reports $5.96 million profit after tax in FY2024, with gross margins increasing by 2% to $61.66 million
  • Axia's ROE stands at 9.81%, generating $0.0981 in net income per dollar of equity, while Net Profit Margin remains relatively low at 3.07%

                                                 

Harare- Axia Limited is poised to open three new stores for its flagship asset, TV Sales and Home, as well as Transerv, in the first half of fiscal year 2025. The group comprises three operating units: TV Sales and Home, Transerv, and Distribution Group Africa.

In addition to store expansions, the group aims to complete its bedding manufacturing plant in Harare within the same year. The group announced this in its FY2024 financial results, which capped a year of profitability with a profit after tax of US$5.96 million, slightly down from US$6.18 million in the previous year.

                           

The group's gross margins increased by 2%, rising from US$60.51 million to US$61.66 million. Net profit margin closed at 3.07%, indicating that for every dollar of revenue earned, approximately $0.0307 is retained as net income. This relatively low margin suggests high operating costs, thin profit margins, or intense competition.

Profit margins can be classified into three categories. A high profit margin, exceeding 15%, indicates strong profitability. Medium profit margins, ranging from 5% to 15%, signify average performance. Conversely, low profit margins below 5% suggest room for improvement.

Axia's profit margin analysis reveals a net profit margin of 3.07% in 2024, with revenue totaling $193.85 million and net income reaching $5.96 million. This falls into the low profit margin category.

To enhance its profit margin, Axia may consider several strategic initiatives. These include implementing cost reduction strategies to minimize expenses, making pricing adjustments to optimize revenue, enhancing operational efficiencies to streamline processes, and pursuing revenue growth initiatives to expand its customer base and increase sales.

However, Axia's Return on Equity (ROE) closed at 9.81%, reflecting reasonable profitability and moderate efficiency in utilizing shareholders' equity. This means that Axia generates $0.0981 in net income for every dollar of equity invested. While this performance is satisfactory, it indicates room for improvement in optimizing equity usage.

Collectively, these metrics provide insight into Axia's financial performance, highlighting the need for improved cost management and profitability while underscoring the company's ability to generate returns for shareholders.

The group’s flagship asset, TV Sales and Home, faces intense competition from the informal sector. Beds priced at US$300 and wardrobes at US$400 are available for half that price or less in the informal market, particularly in Glen View 7. Similarly, a 60-inch television that retails for nearly US$600 can be found for under US$300 in informal outlets. This competitive landscape continues to squeeze profit margins. To counter these challenges, Axia leverages its commitment to quality, providing top-notch products that offer a competitive advantage.

Additionally, the group is fostering relationships with retailers to combat the grey market. Its efforts to boost demand in the formal market through close partnerships have begun to yield positive results. Axia also offers better payment plans, including hire purchase, lay-by, and credit sales.

However, given Zimbabwe's economic context, where price often overrides quality, Axia may need to reconsider production costs to reduce prices or introduce lower-priced variants to compete effectively. Targeted marketing campaigns that emphasize the value proposition, durability, and warranty of its products could further distinguish Axia in the market.

Unit Performance

The TV Sales & Home Group reported a 15% increase in sales volumes, totaling 144,886 units, driven by strong brand presence and the opening of four new Bedtime shops in Harare and Gweru. Restapedic experienced significant growth, with sales volumes rising 54% to 41,963 units, fueled by strong market demand and improved production efficiencies. Production surged by 47% to 42,204 units, owing to enhanced capacity utilization at the new Sunway City facility.

Legend Lounge also saw a 15% increase in sales volumes to 6,108 units, thanks to a positive reception for new lounge suites introduced during the year. In contrast, Distribution Group Africa (DGA) Zimbabwe faced challenges, with sales volumes declining by 45% to 4,751,806 units due to strategic restructuring, including the formation of a joint venture that alleviated working capital constraints. In Malawi, DGA reported relatively flat sales volumes of 1,950,557 units. Despite challenges posed by grey products and foreign currency shortages, management remains optimistic about mitigating these impacts through strong supplier collaborations and foreign currency generation initiatives.

Looking ahead, the group's key focus areas include volume growth, expanding the debtors' book, improving gross margin dollars, managing costs, enhancing profitability, and increasing regional presence.

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