Zimbabwe’s leading retailer OK reports 1,050% rise in profit after tax

ZIMBABWE – OK Zimbabwe Limited, leading retail group in Zimbabwe has reported a 464% growth in revenue to ZWL $4.525 billion (US$12.5m) in the year ended March 31 from ZWL $801.9 million (US$2.215m) recorded in prior year, despite a tough economic environment.

According to the retailer, the operating environment was unstable, characterised by shortages of foreign currency, local currency depreciation, hyperinflationary conditions and a decline in real incomes.

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The country also experienced widespread food shortages following the 2018/2019 drought which was further exacerbated by poor yields in the current season.

In addition, the poor agricultural output combined with fuel and electricity power deficits worsened the overall economic performance during the year.

“Despite the effects of the drought and shortage of foreign currency, our stores were adequately stocked for a significant part of the year thanks to the support of our supplier partners,” stated the company.

After reporting a volume retreat of 23% at half year, the retailer ended the year with the sales volume deficit narrowing to 15.7%.

During the year under review, OK recorded profit before tax of ZWL $788.6 million (US$2.179m) up by 1,068% from prior year’s ZWL $67.5 million (US$186,515), while profit after tax increased by 1,050% to ZWL $566.2 million (US$1.56m) from ZWL $49.2 million (US$135,950).

The company’s overheads grew by 427%, 37 percentage points below growth in revenue.

“Generator fuel costs for alternative power, electricity costs, maintenance costs and spares, bank charges and rentals are the major overheads growth drivers. Significant increases were noted in expense lines directly linked to revenue,” stated the company.

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Despite the growth in overheads the company internally generated funds which were adequate to fund working capital and capital expenditure requirements hence no borrowings were utilised in the year.

Capital expenditure for the year was ZWL $236.4 million (US$653,000), up from ZWL $25.8 million (US$$71,290) in prior year as the Group continued with its refurbishment programme.

The refurbishment programme was undertaken at OK Gweru, OK Mutare, OK Triangle and Bon Marche’ Westgate stores, which reported pleasing sales performance.

Towards the end of the company’s financial year, COVID-19 was declared a global pandemic and this changed the way people live and how business was conducted worldwide.

A new OK store was opened in Karoi during that period and thus the contribution of the new store to the results of the year is not significant but the company believes the store’s full potential will be realised when normal operations resume and economic conditions improve.

With the pandemic the group is operating with reduced trading hours which will affect its performance for the first quarter of the current financial year, showing a significant decline from prior year.

“Management have implemented measures to ensure viability of operations and will evolve these measures as the uncertain environment demands. The COVID-19 pandemic has disrupted supply chains and the Group will work closely with suppliers to ensure adequate product supply,” stated the company.

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