PUMA: REALISING VALUE FROM RETAIL
Energy, Puma Energy (Z) Plc

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. 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 watch. Ok! Tanks full. Gotta go!

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