Published: 20 July 2017

ZIMBABWE stock exchange-listed electrical goods manufacturer and retailer, Powerspeed Electrical, has failed to declare a dividend to shareholders since 2003. The company's chief executive officer Hilton Macklin (HM) spoke to The Financial Gazette's Online Editor Paul Nyakazeya (PN) about the company's fortunes and its long-terms plans.

PN: At the company's Annual General Meeting in March this year, you said Powerspeed increased throughput of locally manufactured goods and cut on imports and this offset foreign currency challenges and helped maintain stocks. Are you still operating with this strategy?

HM: There has not been any change in this strategy and we are continuing to grow our distribution of locally produced products, in particular building materials.

PN: You said the company was on a growth trajectory through increase of its branches. How many branches do you have at present compared to the same period last year?

HM: Last year, we had 16 branches. We have opened only one more in Harare on the corner of Harare Drive and Alpes Road in Vainona. However, this is not a fully-fledged branch as we do not yet have the space. We are working on making more space available to allow the operation of a full branch.

PN: Presenting your financial results for the six months to March 2017, you highlighted that foreign currency shortages had an effect on the company's quest to import products, resulting in stock outs.

HM: Foreign currency shortages have limited the availability of stocks. However, import restrictions in the form of SI 64 as well as the Bureau Veritas programme have also had a huge negative impact on our ability to provide products to our customers. Products affected by these have become harder to source, less freely available and more expensive.

PN: It seems Powerspeed has been growing the business, not through increasing branch network but store space. How effective has been this strategy?

HM: I believe that this has been very effective, as evidenced by our recently published half year results to March 31 2017 which show our turnover up by over 13 percent as compared with the same period the previous year.

PN: The company last paid a dividend in 2002, a situation some shareholders have not taken lightly. Do you see this situation changing any time soon?

HM: Given the growth trajectory and our current level of borrowing, it is extremely unlikely that we will be paying a dividend any time soon. Indeed, it is our strategy to grow shareholder value, rather than to pay out cash for the time being.

PN: So they will have to wait longer?

HM: It is extremely difficult to both grow a business rapidly, and to simultaneously generate cash. We believe that the former is of greater benefit to the majority of our shareholders, rather than the latter. The beauty of being a public listed share is that those shareholders who do not like this strategy are free to sell their shares and to invest in another counter which offers a higher dividend yield. It is their choice.

PN: Powerspeed is said to have grown its net asset base from around US$1 million in 2009 to around US$9 million recently, largely on borrowed funds.

HM: This is correct. Shareholders will benefit in the value uplift without having had to fund it.
- fingaz