OK Zimbabwe has rolled out two outlets in Harare and Victoria Falls, demonstrating that the firm remains confident despite the depressed economic situation which has adversely hit revenues and profit.
OK Zimbabwe chairperson Hebert Nkala said in a commentary to OK’s financial results for the half year ended September 30, 2020 a new branch was opened in Victoria Falls on October 1, with another added this month at Sanganayi in Harare.
“Post the reporting period, the group opened a new OK Mart store in Victoria Falls on October 1, 2020 and an OK Store in Harare’s Sanganayi Inn area on November 5, 2020,” Nkala said.
“The new stores were well-received in the respective markets and are expected to contribute meaningfully to the group’s revenue. The group’s refurbishment programme will continue and eight stores have been targeted for completion by the end of the financial year,” the OK chief noted.
The new outlets are expected to power OK Zimbabwe to high revenues in the coming year after seeing its top line come off 16% to ZW$11,64 billion (about US$135 million) during the period, from ZW$13,79 billion (about US$160 million) previously, after spending power was hammered by blanket lockdowns announced by government in from March to mid-September.
The lockdowns also reduced operating hours and traffic for all retailers including OK. The retail giant posted a 33,23% decrease in profit after tax to just under ZW$1 billion (about US$12 million) for the half-year ended September 30, 2020, after Covid-19 induced restrictions triggered depressed demand.
OK has posted ZW$1,49 billion (about US$12,5 million) in post-tax profit during the comparable period in 2019.
Apart from hammering spending power, the blanket lockdowns announced by the government from March to mid-September reduced operating hours and traffic for all retailers, including OK.
The decline in profit after tax saw attributable earnings per share go down to 80,31 ZW cents from a 2019 comparative of 122,74 ZW cents.
“Covid-19 was declared a pandemic and the country went into lockdown from 30 March 2020. The lockdown restrictions remained in place at different levels throughout the period under review. The containment measures affected business through limited production, supply chain disruptions, logistical bottlenecks and reduced aggregate demand,” Nkala said.
“Hyperinflation, underpinned by runaway depreciation of the local currency, continued into the current financial period with official inflation peaking at 837,5% by July. Earnings did not keep pace with increases in prices and this, in addition to the effect of Covid-19, constrained demand.
“As a result, sales volume for the period declined by 26,9% compared to the same period in prior year, in an environment where aggregate demand has declined. With effect from April 2020, the authorities allowed the US$ to be used to settle transactions alongside the ZW$. However, the group’s sales remained predominantly in ZW$,” he said.
Overheads grew by 680,6% during the period, Nkala said, noting that OK responded to the threat of the pandemic by providing recommended equipment and taking appropriate action to protect workers and consumers.
“Capital expenditure for the half year was ZW$384,9 million (about US$4,7 million), up from ZW$51,5 million (about US$642 000) for the same period in prior year. Most of the capital expenditure was on store refurbishments and equipping new stores,” he said.
Total assets rose to ZW$9,72 billion, (about US$119 million) from a 2019 comparative of ZW$7,97 billion (about US$99 million), owing to increased inventories, property and equipment as well as right of use asset (a lessee’s right to use an asset over the life of a lease). In terms of liquidity, OK had a current ratio of 1,63 showing the company was liquid enough to cover its liabilities heading into the second-half year period.
“The Covid-19 induced restrictions have been relaxed in recent months. However, developments elsewhere around the world show that the fight against the pandemic is not yet over.
“The group continues to be guided by pronouncements from the World Health Organisation and the Ministry of Health and Child Care for measures that protect our staff and other stakeholders,” Nkala said. ■