Re­tail out­lets with­stand the heat Con­tinue to of­fer busi­ness op­por­tu­ni­ties, higher rev­enues

Chronicle (Zimbabwe) - - Business -

THE re­tail busi­ness in Zim­babwe con­tin­ues to of­fer more busi­ness op­por­tu­ni­ties, higher rev­enues and prof­itabil­ity de­spite neg­a­tive mi­cro-eco­nomic en­vi­ron­ment, re­cent re­ports show.

Af­ter its re­cent tra­vails, OK Zim­babwe this month an­nounced a good set of fi­nan­cials, com­ing off a low base.

Com­pe­ti­tion in the re­tail busi­ness is in­ten­si­fy­ing, with TM/Pick n Pay con­tin­u­ing to ex­pand while Chop­pies has in­creased its pres­ence and the es­tab­lish­ment of the new cor­po­rate Spar chain.

The mo­men­tum ap­pears to be with TM Su­per­mar­kets, thanks to its tie-up with Pick n Pay.

OK re­mains the largest re­tailer in Zim­babwe with 64 out­lets. TM Su­per­mar­kets has 58 stores, 15 of which trade un­der the Pick n Pay ban­ner.

The bulk of its prod­uct range is im­ported from South Africa. Pick n Pay has owned a 49 per­cent stake of TM Su­per­mar­kets since Novem­ber 2011. The half-year stakes OK Zim­babwe had an im­pres­sive im­prove­ment from the pre­vi­ous year, as profit af­ter tax in­creased by 87.11 per­cent to $2,29 mil­lion in the six months to 30 Septem­ber 2016 from $1,22 mil­lion recorded in the com­pa­ra­ble pe­riod last year. The mar­gins also im­proved from 0.57 per­cent to 1.05 per­cent. Net as­sets of OK Zim­babwe in­creased by 4.88 per­cent to $74,99 mil­lion in the six month pe­riod to 30 Septem­ber 2016 from $71,51 mil­lion recorded in the same pe­riod last year. TM Zim­babwe/Pick n Pay Su­per­mar­kets Profit af­ter tax in­creased by 81,52 per­cent to ap­prox­i­mately $4,27 mil­lion in the six month pe­riod to 28 Au­gust 2016 from ap­prox­i­mately $2,35 mil­lion recorded in the com­pa­ra­ble pe­riod last year.

Net as­sets in­creased by 46,15 per­cent to ap­prox­i­mately $42,91 mil­lion in the six month pe­riod to Au­gust 28, 2016 from ap­prox­i­mately $29,36 mil­lion recorded in the com­pa­ra­ble pe­riod last year. Full-year com­par­i­son OK Zim­babwe rev­enue dropped to $437,5 mil­lion in the full year to March 31, from the $462,7 mil­lion posted in the prior pe­riod. Gross mar­gin came in at 16.1 per­cent from 17.8 per­cent in the com­pa­ra­ble pe­riod last year on the back of com­pet­i­tive pric­ing and sales mix skew­ing to­wards low mar­gin prod­ucts and com­modi­ties. Op­er­at­ing profit mar­gin de­clined to 0.3 per­cent from 2.3 per­cent recorded in the same pe­riod pre­vi­ous year. Earn­ings Be­fore In­ter­est De­pre­ci­a­tion Amor­ti­sa­tion (EBITDA) de­creased to $9,04 mil­lion from $17,72 mil­lion recorded in the same pe­riod in the pre­vi­ous year. EBIDTA mar­gin de­creased to 2.07 per­cent from 3.83 per­cent.

PAT was down 91.07 per­cent to $670,000 from $7,53 mil­lion pre­vi­ously. Net as­sets were up 1.82 per­cent to $72,66 mil­lion from $71,51 mil­lion pre­vi­ously.

TM/Pick n Pay su­per­mar­kets’ rev­enue was up 10 per­cent to $395,3 mil­lion for the full-year ended March 31, 2016 rel­a­tive to the same pe­riod last year. The growth was driven by an in­crease in cus­tomer count which in­creased by 7.6 per­cent and this re­sulted in 12.6 per­cent in­crease in sales vol­ume. Its av­er­age bas­ket size in­creased by three per­cent, an in­di­ca­tion that cus­tomers were spend­ing more.

Gross mar­gin for the year slightly de­clined from 19.72 per­cent to 19.17 per­cent.

EBITDA for the year was $15.9 mil­lion (2015: $9.3 mil­lion). EBITDA growth was driven by an in­crease in sales, bet­ter shrink­age con­trol and im­proved cost man­age­ment.

PAT in­creased by 81.52 per­cent to ap­prox­i­mately $4,27 mil­lion from ap­prox­i­mately $2,35 mil­lion recorded in the com­pa­ra­ble pe­riod last year. Net as­sets in­creased by 58.44 per­cent to ap­prox­i­mately $42,79 mil­lion from ap­prox­i­mately $27,01 mil­lion recorded in the com­pa­ra­ble pe­riod last year.

An­a­lysts say the sub­stan­tial growth by TM Zim­babwe can be at­trib­uted to Pick n Pay branded shops, which are be­com­ing more pop­u­lar to many cus­tomers due to their in­ter­na­tional stan­dards and pro­vi­sion of a wide va­ri­ety of prod­ucts like their coun­ter­parts in South Africa. The im­pact of Pick n Pay can be seen in the table be­low which de­picts rev­enue and EBITDA trends be­fore and af­ter the brand­ing.

In 2012 TM Su­per­mar­kets launched some out­lets un­der the Pick n Pay brand name. Since then, rev­enue has risen steadily rose from $228,2 mil­lion recorded in 2011 to $395.3 mil­lion recorded in the full year ended 31 March 2016, rep­re­sent­ing a 73 per­cent rev­enue growth. The group also man­aged to im­prove its op­er­at­ing ef­fi­ciency, with EBITDA mar­gin in­creas­ing from 1.71 per­cent in 2011 to 4.03 per­cent in 2016.

While OK Zim­babwe recorded more rev­enue ($437,5 mil­lion) over the full-year pe­riod than TM Su­per­mar­kets ($395,3 mil­lion), its profit was very low at $670,000, rel­a­tive to the $4,27 mil­lion achieved by TM su­per­mar­kets.

Its EBITDA was lower at $9,04 mil­lion rel­a­tive to $15.911 mil­lion recorded by TM/Pick n Pay Su­per­mar­kets. This im­plies that more work has to be done at OK Zim­babwe to get rid of its cost base and en­hance prof­itabil­ity, thereby max­imis­ing share­holder value. A bright look­ing fu­ture For OK Zim­babwe, chief op­er­at­ing of­fi­cer, Al­bert Kat­sande said the group opened two OK Mart out­lets dur­ing the half-year pe­riod, in Gweru on July 17 and Vic­to­ria Falls on Septem­ber 1. It also plans to open two more out­lets in Houghton Park, Harare and in Chipinge in the sec­ond half of the year. These de­vel­op­ments could as well im­prove the group’s fi­nan­cial per­for­mance.

Go­ing for­ward, the TM/Pick n Pay group is ex­pect­ing to en­hance its fi­nan­cial per­for­mance through ex­pan­sion. Cur­rently it is de­vel­op­ing its Bor­row­dale prop­erty, with con­struc­tion ex­pected to be com­pleted by the end of this year. The group ex­pects the cen­tre to open in the first quar­ter of 2017. — The Source

In­side an OK Zim­babwe branch

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