Zimbabwe’s leading retail chain, OK Zimbabwe posted good results despite operating under a restrictive economic environment characterized by high unemployment, liquidity constraints as well as shortage of foreign currency affecting international settlements.
Deflation however eased into inflation during the period, as OK Zimbabwe recorded internal inflation of 4% by March 2017 versus a -5.3% at end of the 2016 financial year.
According to OK Zimbabwe, group revenue grew 8.0% year on year to US$472.40m against a US$437.51m in 2016, bolstered by a sharpened focus on customer service and product mix.
Competition in the sector continued to intensify, with the emergence of wholesaler Gain Cash and Carry, continued expansion of Pick n’ Pay, Choppies, wholesaler cum retailers and specialist traders such as Food Lovers as well as the re-emergence of Spar under new management.
As such, the group continues to adopt the use of promotions to defend market share; gross profit margins however increased during the period (16.5% versus 16.1% in 2017) as the product mix shifted towards higher margin goods and as the group better managed mark-downs during promotions.
Earnings before interest, tax depreciation and amortization was up 85.7% year on year to $16.73mn (versus FY16: $9.01mn) while EBITDA margin firmed to 3.5% (versus FY16:2.1%); an improvement attributable to the $8million improvement in GP, as OPEX remained relatively flat during the period.
Depreciation was 4.3% year on year higher at $7.76million versus $7.44million in 2016 due to depreciation of leasehold improvements on closed and relocated branches.
CAPEX of $10.89million (+147.3% year on year) was expended on 3 new OK Stores Branches, the relocation of 2 branches as well as the refurbishment of 3 branches.
The group repaid its remaining loans ($1.11million) to close the year without any long-term or short term debt; this led to a 73.9% decrease in finance costs to $87 000 compared to $333 000 recorded last year.
