IN the midst of an economic implosion characterised by massive company closures, retrenchments and job losses, some resilient firms have survived the turbulence and are positioning themselves for recovery and growth.
Zimbabwe Independent Comment
Several companies are struggling to remain afloat due to huge debts, capital and liquidity constraints, dwindling revenues, unsustainable cost structures and thin profit margins — where they exist — as the economy continues on a downward spiral.
From the December reporting season, most counters on the Zimbabwe Stock Exchange reported losses. The bleeding is continuing as companies report their interim results to June.
To get a sense of what has been brewing in corporate boardrooms, one has to look at the debt restructuring plans, retrenchments and aggressive cost-cutting measures, among other things.
Delta, the largest counter on the local bourse, reported a 11% decline in revenue in the first quarter to June 30 against a backdrop of weak consumer demand in the face of depressed disposable incomes.
Econet, a listed telecoms giant whose one-time main revenue stream — voice calls — has not only been affected by weakening aggregate demand, but has also been badly hit by new communication technologies such Facebook, Twitter, Viber and WhatsApp. This has seen its revenues tumble. Despite this bleak outlook, some listed companies have been bucking the trend. When a security or a class of assets sees its market-driven price move in the opposite direction of the broad market or its competition, it is bucking the trend.
The company or companies would be recording increased sales while competitors are losing business. This is usually extrapolated out from just asset prices to business and market fluctuations.
ZB Financial Holdings, for instance, saw a dramatic turnaround in its fortunes in 2015 notwithstanding the deteriorating economic environment. After reporting a loss of US$8,6 million in 2014, the group posted earnings of US$8,9 million in 2015.
This made it the Zimbabwe Independent’s Quoted Companies Survey 2016’s Turnaround Company of the Year. Results of the survey were released on Wednesday. Other winners were Afdis, Padenga, National Foods, Delta, Seed Co, FBC, Colcom, Innscor and CBZ. The best example in all this, though, is cigarette-maker BAT Zimbabwe, which retained its pole position on the survey for the third consecutive year.
The main aim of the survey, done by seasoned analysts and experts, is to identify not only companies that have performed well and have been ahead of others in the recent past as measured by various variables, but also are likely to remain thriving. The companies may not necessarily be good investments judged by metrics such as price-to-earnings ratios, but are undoubtedly solid businesses.
The top companies in the survey are chosen through a weighted set of quantitative ratios calculated from historic financial information combined with historic share price and market capitalisation growth rates. BAT continues to score highly in the quantitative metrics on which the rankings are based. And qualitatively as well. The company seamlessly transferred the reins from Lovemore Manatsa to Clara Mlambo in January of this year. It is consistently paying dividend, shelling out 100% of net earnings.