Zeco reports a $1.3 million loss

Published: 30 August 2013

THE troubled Zimbabwe Engineering Company (Zeco) which is linked to flamboyant businessman Philip Chiyangwa recorded a depressing set of results for the financial year ended 2013.

The depressing set of results were attributed to liquidity constraints, low capacity utilization, lack of funding capacity by financial institutions and prohibitive borrowing rates.

The group's performance was negatively affected by the environment in which the subsidiaries were operating from which was depressed and in addition some of the anticipated contracts were postponed due to the wait and see attitude that was characterized by the pre-election period.

Revenue for the reporting period was $340,684 which is 62% lower in comparison to the prior year as a result of low activity in the construction and infrastructure sectors in the economy. A loss before tax of $1.4m (+45% year on year) was incurred compared to a loss of $1m in the same period in 2012. The group recorded a staggering attributable loss of $1.3m.

Imara Edwards Securities in a note to its clients on Friday 29 August said: "Although, the board is hopeful that the business will experience resurgence in the post election period led by positive government policies which are expected to bring a positive change in the economic growth we do not foresee how ZECO will be able to do so. The group's financial position is precarious to say the least."

"The current ratio is very weak at 0.2x. To imagine how the company will survive with staff costs ahead of revenue is mind boggling. Despite the poor fundamentals the share price has rallied 900% YTD. We advise investors to stay clear of ZECO shares. We maintain our Sell/Avoid recommendation," concluded the statement.
- businessdaily