Construction firm, Masimba Holdings recorded a significant drop in full year (FY) profit for the year ended December, 31, 2023 due to delayed payments from key clients in the last quarter of the year.
The group posted a profit for the year of US$ 7.55 million, which was 39 percent below previous year’s US$ 12.4 million.
The construction sector has benefitted immensely from on-going infrastructure development boom from the public and private sectors.
The group had a firm order book which grew revenue by 8 percent to US$ 53.8 million from US$ 49.8 million prior year but a conservative approach in work execution in line with clients’ s payment patterns saw revenue declining in the fourth quarter of 2023.
Earnings before Interest, Taxes, Depreciation and Fair Value Adjustment (EBITDFVA) declined by 11 percent to US$ 12.6 million.
“The decline in EBITDFVA was attributable to slow down of works in the fourth quarter due to delayed payments and liquidity constraints which negatively impacted project efficiencies,” the group said in its FY23 financial results statement.
“In addition, profitability of the Group was impacted by the sub-optimal currency payment mix on most of the projects that were not in line with the increased dollarization of the economy.”
Total assets of the Group improved to US$85.8 million from US$ 63.3 million in 2022, mainly driven by growth in contracts in progress and contracts receivables.
“The growth in contracts in progress and contracts receivables was attributable to growth in revenues coupled with the impact of delayed payments from clients on the back of liquidity constraints.”
The decline of the current ratio to 1.01 (2022: 1.31) was attributable to a strategic decision to purchase property, plant and equipment with short term facilities in order to capacitate the execution of long-term projects.
“Based on the forecast cashflows, this position should improve in the second half of the 2024 financial year.”
Cash generated from operating activities increased to US$5 million from US$ 0.8 million and this was largely applied to capital expenditure of US$ 4.2 million.
The capital expenditure incurred was mainly aligned towards the demands of a growing order book.
Capital expenditure was funded by a combination of internal resources and borrowings. Resultantly, borrowings at the end of the financial period closed at US$ 1.9 million compared to US$ 0.5 million in 2022.
Included in borrowings is a US$ loan in the amount of US$ 1.4 million against US$ 0.5 million in 2022.
