eBusiness Weekly
Business Writer
Price increases and a shift towards high profit margin products saw OK Zimbabwe report a 37,6 percent growth in revenue for the full year to March 2019, chief executive Alex Siyavora told analysts Wednesday.
Revenue for the period grew 37,6 percent to $800,1 million from $581,8 million prior year comparative with Siyavora saying volumes had only grown by one percent. The relatively low volume growth rate could be an indication that had the retailer not experienced panic buying, volumes would have been significantly lower.
Earnings per share was up 190 percent to 4,12 cents from 1,2 cents
Stock turn went down to 6,39 against 8,11 recorded in the prior year as the retailer was forced to hold more inventory to avoid stock outs. Inventory holdings more than doubled to $132,9 million from $64,6 million prior year comparative.
Siyavora said product supply particularly from local suppliers had remained a challenge because of shortage of foreign currency and limited capacity. Shortages of foreign currency constrained replenishment and this triggered a spiral of price increases.
Profit growth was, however, more pronounced as costs lagged the growth in revenue. This was in addition to a shift towards higher margin products as the availability of some basic products became a challenge.
Operating profit in the period under review increased by 189,3 percent to $67 million while attributable income grew by 196 percent to $49,2 million. Gross profit margin went up to 19,1 percent from 17,6 percent as the product mix tilted towards higher profit margin products. Net income margin also grew to 6,1 percent from 2,9 percent and the EBITDA margin increased to 9,6 percent from 5,4 percent.
“The growth in sales and increase in profitability are attributable mainly to successful and robust promotions, refurbished branches, continued customer focus and the lag of cost increases behind revenue growth in inflationary conditions.”
“The group’s overheads increased but were restricted to 31,4 percent which is below the revenue growth. The increase was mainly as a result of staff costs, rentals, promotions, maintenance costs and spares and bank charges.
Performance was also likely sustained by the net increase in trading space which went up by 3 755 square metres as new stores were opened in Glen View and Masvingo. Capital expenditure increased to $25,8 million from $15,5 million.
Refurbishments which were carried out in OK Marondera, Bon Marche Chisipite and Bon Marche Borrowdale also contributed to the increased trading space and contributed to the 37,6 percent revenue growth. Like for like revenue growth was 34,4 percent meaning the variance came from the additional capacity.
On the outlook, Siyavora stated that foreign currency shortages and product supply challenges are expected to continue.
“Management will remain focused on securing adequate product to sustain operations. Engagement and goal congruence with traditional suppliers and SMEs,” he said.
He noted that agricultural yields from the 2018/2019 season were low and that this will impact income and consumption.
