LISTED construction firm, Masimba Holdings, says payment delays dragged down its cashflows in the half-year period to June 2022 despite a 75 percent growth in order book.
Greg Sebborn , Masimba Holdings chairman, in the statement accompanying half year financials, said the decrease in operating cash flow was primarily caused by the increasing need for working capital to fulfil the expanding order book.
The concern highlighted that the first six months of 2022 were characterised by persistent and widening differences in foreign exchange prices between the official and alternative markets which made it difficult to analyse financial statements.
Masimba, which is one of five companies contracted by the government to undertake roadworks on the Beitbridge to Harare highway, said the operational environment remained unpredictable.
“The decline in cash generated by operating activities was due to the impact of delayed payments resulting from contractory fiscal policy,” said Sebborn.
Consequently, owing to the aforementioned predicaments, Masimba did not manage to declare a dividend for the period.
“The board, having evaluated the cash flow associated with the growing order book, deteriorating cash flow cycle coupled with the need to strengthen capacity, has resolved not to declare an interim dividend.
“The positive performance was underpinned by production efficiencies and exchange gains emanating from a net foreign currency asset position and fair value adjustment on investment properties,” he said.
However, the company’s order book was worth about US$145 million in the first six months of 2022, up from $83 million in the comparable period last year, aided by demand for its construction and services business.
According to Sebborn the group has a stable, varied order book with tenures ranging from three to eighteen months.
“The book is well balanced and diversified between public and private sectors. However, execution thereof may be hampered by pricing distortions emanating from an inefficient foreign currency allocation system and prevailing hyperinflation,” he said.
In terms of financial performance in the six-months, inflation-adjusted revenue increased 52 percent to $9,6 billion, aided by a strong order book in the mining, infrastructure and roads segments. The percentage of revenue received in US dollars increased to 55 percent of total revenue as a result of a diverse project portfolio from 35 percent in 2021.
Resultantly, profit before tax grew by 319 percent to close the period under review at $5,3 billion.
Cash generated by operating activities declined by 74,96 percent to $194 million from $775 million in the previous period.
The total asset position as at the reporting date closed at $28 billion, up from $25 billion in the prior period.
This was attributable to the revaluation of plant, equipment and investment property, resulting in a revaluation surplus of $6,2 billion and a fair value gain of $2,4 billion under inflation adjusting reporting.
In its long term plans the group maintains a cautious optimism and highlighted that it will be implementing strategies to protect the company’s ability to create value.
Masimba, however, acknowledges the future is likely to bring contracts given the country’s growing need to ramp up dam infrastructure and road construction projects currently underway throughout all of the country’s provinces.
“While the economic outlook is forecast to remain constrained, the current state of infrastructure development presents opportunities for the business in the future.”