Powerspeed’s strategy shift pays off

15 Jun, 2018 - 00:06 0 Views
Powerspeed’s strategy  shift pays off

eBusiness Weekly

Business Writer
Powerspeed Electricals’ showed again this week that its decision to emphasise a certain business model — retail hardware — and de-emphasise another — engineering — has made the company’s earnings flourish in a so called difficult operating environment.

The Electrosales Hardware brand has continued to improve its already good position as the foremost supplier of hardware products with continuous improvement to the range of products on offer.

The proof was evident in its latest interim results where the growing branch network, increasing floor space and product range was the main growth driver.

With turnover of $37,2 million at half year to March 2018, up 55 percent from prior year and profit for the period of $2 million up 252,5 percent from prior year comparative and ahead of the $1,4 million the whole of last year, the company’s growth trajectory seem to be on a well-defined path as envisaged by management when it made the decision to transform its business model from an engineering firm to retailer of hardware and home improvement products.

Earnings per share for the half year amounted to 0,55 cents up from 0,16 cents for the comparative prior year and 0,12 cents at full year back in 2012.

Just before the dramatic shift in its business model, back in 2012, Powerspeed’s full year turnover was approximately $29 million.

That turnover has since been eclipsed, even at half year, with the Company’s turnover for the half year to March 2018, at $37,2 million. At full year, turnover has grown by 88 percent in the five years to September 2017.

On a year-on-year basis, turnover for the full year to September 2018, should easily reach the $80 million mark considering the company usually makes more sales in the second half of the year. In financial year 2017, $23,9 million (or 44 percent) of revenue was made in the first half, while $30 million (or 56 percent) was earned in the second half.

A notable fact about the company’s turnover growth is that it was not only price driven, but was actually backed by increased throughput, resulting from increased footprint and market share, now at 20 percent and earmarked to reach 50 percent.

Talk of growth in customer base and throughput also makes the results more credible. More is expected going forward, given the continued drive to resize undersized branches as well as expansion of the branch network.

Management has also identified a number of opportunities for increasing its footprint in the market, and will be moving to open more branches to grow its market share.

Despite the general sluggish performance of the Zimbabwe economy, which has left consumers with very limited disposable incomes, management is encouraged by substantial growth in throughput that the business has achieved.

And management is backing this confidence by investing in property at some of its outlets. In the period under review Powerspeed purchased its Pomona branch building for $2,5 million.

So optimistic is the company, that the board has since promised to consider the declaration of a dividend at the end of the financial year as long as economic prospects remain as is now or better.

The plus for Powerspeed is the fact that they have managed to grow their brand visibility and strength in a very competitive market. Turnover has already responded and reflects this.

Another plus for the business is that cost lines are being well managed and increasing at a slower rate than the top line. Cost of sales went up by just 51,5 percent lower than the 55,3 growth in revenue. Operating expenses and finance costs also grew by just 37,6 percent and 39,6 percent respectively.

This has resulted in an improvement in net margins. Net margins at 1,83 percent back in 2012, stood at 5,5 percent at half year to March 2018 and is expected to remain at such high level at the financial year- end.

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