OK Zimbabwe profit collapses 91 percent in ‘disappointing’ FY16, fears worse to come

OK Zimbabwe profit collapses 91 percent in ‘disappointing’ FY16, fears worse to come

HARARE, June 6 (The Source) – OK Zimbabwe reported an 88 percent decline in operating profit at $1,3 million for the year ended 31 March 2016 compared to $10,7 million in prior year as the increasingly competitive retail sector contends with declining consumer spend.

Profit after tax and finance charges fell by a massive 91 percent to $700,000, from $7,5 million previously.

OK Zimbabwe, the country’s largest retail group, is often considered a bellwether for the nation’s economy.

Earnings Before Income Tax Depreciation and Amortisation (EBITDA) was 48.9 percent down, at $9 million from $17,7 million in the prior year.

Finance Director Alex Siyavora told analysts at a briefing late Monday that the 5.4 percent decline in revenue to $437,5 million was a result of reduced volumes and price markdowns.

Gross margin was at 16.1 percent compared to 17.8 percent in 2015 largely on product mix and significant mark-downs during promotions and obsolete stock.

Siyavora said overheads went down 3.3 percent as staff costs dropped 10 percent while some service providers extended reduction in charges and tariffs.

Stock turn down was at 47 days against internal standard of 30 days. In the prior year, it was at 41 days.

Capital expenditure for the year was at $4,4 million compared to $11,3 million in prior year.

Chief executive Willard Zireva described the results as disappointing and pointed out that the environment is likely not to change in the near term hence the company will continue to leverage different platforms to achieve growth.

He said the company will ride on the Kawena project to sustain product availability from South Africa, at the same time expanding its financial services contribution.

Zireva sought to allay fears of imminent basic food shortages amid the ongoing banknote shortage in the country, saying products such as cooking oil, which had started to run out amid panic buying, had started to re-appear on the shelves.

The company, he said, will spend in excess of $5 million towards refurbishments and new store developments.  Two new stores were opened in the year; OK Mart Mutare and OK Zvishavane.

Zireva said instore bakeries, which now total 32 and back off bakeries at eight, will continue to be an area of key focus.

OK management acknowledged the increasingly competitive retail sector, where South African retailer Pick n Pay continues to expand, while Meikles is rolling out its Megastore brand. The entry of Botswana’s Choppies has also eaten into OK’s market share, especially in the low end segment.

Wholesalers-cum-retailers such as N Richards and Metro Peech, as well as informal traders selling basic foodstuffs have also mushroomed over the past few years.

The financials also showed OK cut 491 jobs, nearly 12 percent of its total workforce, in the past financial year. The group now employs 3,690 workers.