OK Zimbabwe’s annual profit jumps 1 000pc

THE country’s biggest retail group, OK Zimbabwe’s profit for the year to March 31 2020, surged 1 000 percent to $566 million from $49 million recorded in the prior year.

In historical terms, before tax profit also rose by over 1 000 percent to $788.6 million from prior year’s $67.5 million.

Net asset value per share rose 478 percent to 81.32 cents compared to 14,05 cents recorded in the comparable year. At $4.5 billion, revenue for the year was 464 percent above the $801 million recorded in 2019.

The year under review was, however, a difficult period characterised by foreign currency shortages, inflationary pressures that eroded disposable incomes significantly.

“Foreign currency shortages worsened as the year progressed, leading to a slowdown in the importation of both essential capital goods and merchandise either directly or through supplier partners,” said chairman Herbert Nkala in a statement accompanying group results.

“This shortage in foreign currency led to a runaway exchange rate, which triggered rapid price increases of goods, and the resultant inflation eroded consumers’ real disposable incomes and demand,” he said.

By close of the year under review, annual rate of inflation was at 676 percent compared to 66 percent in the prior year.

Towards the end of the financial year, Covid-19 was declared a global pandemic and this had an impact on businesses worldwide. For OK, in the lead up to the lockdown there was heightened activity in the stores as people were stocking up on provisions, thus causing depletion of stocks ,particularly basic products.

During the year under review, overheads grew by 427 percent, 37 percentage points below growth in revenue as erratic utilities supplies persisted. According to OK, generator fuel costs for alternative power, electricity costs, maintenance costs and spares, bank charges and rentals were the major overheads growth drivers.

“Significant increases were noted in expense lines directly linked to revenue,” said Mr Nkala.

Capital expenditure for the year was $236.4 million, up from $25.8 million in prior year as the group continued with its refurbishment programme.

The refurbishment programme continued during the year, with makeovers being completed at OK branches in Gweru, Mutare and Triangle, and Bon Marche’ in Westgate.

A new branch was also opened in Karoi towards end of the year.

Prospects for the retail giant in the short to medium term are hinged on the duration and severity of the Covid-19 pandemic.

OK declared a final dividend of 9 cents per share, which brings the total dividend declared for the year to 13 cents per share.