eBusiness Weekly
Nelson Gahadza
Retail and distribution specialty group, Axia Corporation Limited (Axia), says migrating to the Victoria Falls Stock Exchange (VFEX) will allow the company to raise capital in foreign currency and enhance opportunities to attract a broader investor base.
Axia operates within the specialty retail and distribution sector. It has three operating business units, namely TV Sales & Home (TVSH), Transerv and Distribution Group Africa (DGA). TVSH is a leading furniture and electronic appliance retailer with sites located countrywide.
The company is among a number of Zimbabwe Stock Exchange (ZSE) listed firms that have shown intent to de-list from ZSE and migrate their shares to VFEX.
VFEX on its part is offering a raft of incentives including tax exemptions on capital gains and the ability to repatriate funds from a countries where foreign exchange is in short supply to attract global capital.
In this regard, Axia is now seeking shareholder approval for the termination of the ZSE listing and the subsequent listing on the VFEX from an extra-ordinary general meeting to be held on February 2, 2023.
“The VFEX’s potential to become a regional exchange enhances Axia’s opportunity to attract a broader investor base which would assist the company in its domestic and regional expansion drive.
“Furthermore, the US$ reporting requirement on the VFEX will contribute to a lower risk perception for Axia,” read part of a circular to shareholders.
Axia said the migration to VFEX will provide the company with increased leverage to access other forms of finance at favourable terms.
The company also seeks to benefit from lower trading costs and increased liquidity.
“The VFEX’s lower trading costs of 2,12 percent compared to 4,63 percent on the ZSE would enable the company to make savings and retain more value for shareholders.”
Offshore settlement which allows for efficient dividend repatriation Foreign shareholders on the VFEX can freely repatriate their dividends and proceeds from the disposal of shares.
VFEX is also offering tax incentives which include a 5 percent withholding tax on dividends and no capital gains tax on share disposal, thus providing optimised earnings for shareholders compared to the ZSE.
Valuation volatility on the ZSE has also been a major concern.
Axia said provision of a de facto third-party USD valuation of the company enables Axia’s existing shareholders to realise the real value of their holdings and to provide a more accurate benchmark of the stock’s performance while mitigating valuation volatility.
Since the launch of VFEX in 2020, five counters have de-listed from ZSE namely SeedCo International Limited, Padenga Holdings, Bindura Nickel Corporation, Simbisa Brands and National Foods.
However, in an Fy2023 first quarter trading update ended September 30, 2022, Axia said the first two months of the quarter were characterised by restrictive pricing laws which negatively impacted business operations.
It noted that warranted stance taken by both fiscal and monetary authorities helped stabilise the exchange rate during the quarter although this diminished demand especially in the retail sector.
“The Group was affected by the high interest rates and management had to embark on an aggressive repayment programme to reduce the finance costs thus improving profitability and free cash generation in the second half of the quarter.”
In the region, the trading environment has been positive in Zambia whilst in Malawi there continues to be significant pressure on access to foreign currency.
The group’s flagship business, TV Sales & Home volumes decreased by 19 percent compared to the same period last year due to the restrictive pricing pressures experienced in the first two months of the quarter.
Axia said the business remained focused on its growth initiatives by opening two new stores in Harare during the quarter and the re-introduction of US$ smart credit has been extremely well received by the market and will significantly boost revenue in the second quarter and beyond.
“Plans are underway to increase the store network during the remaining part of the financial year,” the company said.
Transerv first quarter volumes were 9 percent down compared to the comparative period with the business having been affected mostly by pricing pressures in July 2022.
DGA Zimbabwe volumes were 27 percent below the prior comparative period as a result of the dampened demand in the formal sector and management’s decision to stop supplying some customers to manage the risk on the extent of debtor balances.
In the region, at DPA Zambia, volumes increased by 3 percent in the comparative period and the business continues to monitor and correct its pricing positions in response to market conditions.
During the quarter under review, the Malawian Kwacha depreciated by 15 percent as Malawi continues to face shortages of foreign currency.
