HomeBusiness DigestTPH to dispose of loss making Puzey & Payne

TPH to dispose of loss making Puzey & Payne

TRACTIVE Power Holdings (TPH) is set to dispose of its loss-making motoring subsidiary Puzey & Payne as the group seeks to streamline its operations following the acquisition of a majority stake in TPH by agricultural implements manufacturer Zimplow.

Report by Staff Writer

TPH early this week issued a cautionary statement, saying it was involved in negotiations which might have a material impact on the company’s share price.

Well-placed sources told businessdigest the cautionary points to the disposal of the unit, which has been constantly making losses since dollarisation.

Puzey & Payne is a motor vehicle, spares and Perkins generators dealer in addition to servicing motor vehicles.
Puzey & Payne is one of the holders of the Peugeot dealership in Zimbabwe.

Like most direct importers of brand new cars in the country, Puzey & Payne has been struggling to compete with grey imports which are much cheaper, with small second-hand family sedans averaging about US$6 000. Brand new cars like the Peugeot 508 have a US$40 000 price tag.

Puzey & Payne recently launched the Peugeot 508 locally, with the expectation that this passenger model would turn around its fortunes.

Last year, the group said Puzey & Payne sales had grown, mainly on the back of Toyota vehicles, following the acquisition by the unit of the Mutare Toyota franchise.

Recently, Zimplow acquired 57,21% of Tractive from the Reserve Bank of Zimbabwe’s Finance Trust of Zimbabwe.

Zimplow said the investment offered the group potential to increase revenue and reduce costs through exploitation of regional cross-selling opportunities, enhancing economies of scale, technology and product sharing.

Analysts say the disposal of Puzey & Payne was imminent as the passenger vehicle business was not aligned to what Zimplow does, but the rest of the business units such as Farmec, which specialises in agricultural equipment and Barzem, specialising in mining and construction machinery, fit in with the manufacture of agricultural implements, bolts and screws.

At its last annual general meeting, TPH said revenue in the first quarter of the just-ended financial year was up 22%.

Sub unit Barzem performed particularly well, with volume sales of machines and equipment up 350% quarter on quarter. Other units Farmec and Northmec contributed positively to group profits, whilst Puzey and Payne recorded a loss.

Group profit after tax recorded for the period was US$397 000. Chief Executive Charles Nyambuya said projected 2012 growth in mining and agriculture would drive volumes in Barzem, Farmec and Northmec going forward.

Tractive, currently in a closed period pending the release of its August finals, last year said it was targeting a 30% growth in its top line this financial year.

In the six months to February 28, the group reported earnings of 0,39 US cents per share, from net income of US$908 134, which was 56% below the comparable period in 2011.
Revenue for the group amounted to US$21,92 million, which was 16% above US$18,93 million the group reported last year.

The operating environment has been harsh on engineering and other capital-intensive industries due to lack of capital, suppressed infrastructural development, low disposable incomes and high financing costs.

Despite surging profits, the performance was subdued by the 20% growth in operating costs.

Analysts expect Tractive will continue to deliver solid results in the tough operating environment owing to its leading position in the markets. The most optimistic of forecasts are projecting revenue upwards of US$50 million, earnings of US$6 million and earnings per share of 1,2 US cents.

TPH is currently trading at 11 US cents per share, with a year to date gain of 10%.

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