As I poured through the Puma 2015 Annual Report whilst the
petrol attendant put gas in my car, I could not help but feel proud of the
strides that J.J. Sikazwe (its chairman) and his management team had placed in
ensuring that their company took pride in the safety of its customers and
employees. Their Health and Safety Program, aptly named HSSE, stands out in
their report and rightly so. The spate of accidents they experienced during the
2015 annual showed a marked increase that would have any management team
concerned. Furthermore, the number of thefts at its retail shops also signaled
the need for improved security services (note to self, open a security company
to provide…).
Puma’s fortunes were very interesting. Although sales were
down by 3%, they experienced what I would term a positive zero sum. Their
business-to-business (B2B) sales suffered at the decision by the mines to cut
back on production. In addition, because of the sensitivity of the industry
they are in, pressure to ensure continuity in supply was paramount hence the
decision import Jet A1 fuel when Indeni could not cope. However, at the same
time, with a growing retail offering and increase in cars on our roads, they
actually enjoyed 9.35% increase in volume sales (Zambians are “gassing” up,
literally).
Its management yielded impressive operating results.
Operating profit and EBITDA were up 50% and 31% respectively. A 5% decrease in
cost of sales versus a 3% decrease in revenue soothed what could have been a
disappointing financial year. Being a margins business, net margins remained flat at
2% from the previous year. Shareholder and debt funds saw an increase in return
on capital employed from 15% in 2014 to 22% in 2015 while return on equity rose
to 13% from 11%. Business risk was also lowered with gearing down by 8% and it
maintaining a 3 times multiple on its quick ratio.
The growth in non-current assets (the retail outlets) by
26% will definitely be a subject of discussion as value seekers demand for more
sweating of the newer assets. The astute investor will also be demanding, come
the next AGM, for improved efficiency as they assess working capital performance
albeit cooled by the 10% in shareholder equity. Therefore, more fuel will need
to be sold out of its outlets to better manage the 38% increase in inventory
that has come as a result of more outlets. Conversely, the key may also depend
on what happens in the mining industry. Either way, we shall be watching. Ok! Tanks
full. Gotta go!
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