Chairman’s Statement

Operating Environment

On behalf of the Board of Directors, I am pleased to present the financial results of OK Zimbabwe Limited (“the Group” or “the Company”) for the year ended 31 March 2024.

The operating environment remained constrained throughout the course of the financial year characterised by uncertainties, currency fluctuations, price instabilities, high interest rates and volatile macroeconomic conditions. During this period, formal retailers were compelled to use the official exchange rate which created market distortions and gave impetus to the informal sector that was not bound by similar regulations. In addition, the rapid deterioration of the exchange rate, especially during the fourth quarter of the financial year, created difficulties in long-range planning and operational execution for the Company.

Group Financial Performance

The commentary on the financial performance is based on inflation adjusted results. Historical cost figures are included as supplementary information alongside the inflation adjusted results to enhance comprehension and analysis.

Items sold declined by 29.2% against prior year driven by the market pricing distortions imposed on the group. This was compounded by constraints within the macro-economic environment that resulted in steep price increases, decline in consumer spending power as well as restrictive supplier trading terms that adversely impacted product availability.

The Group revenue grew by 29.4% to ZWL12.4 trillion (Last year: ZWL9.5 trillion), whilst in historical cost terms, revenue grew by 676.6% to ZWL2.0 trillion (Last year: ZWL260 billion) against a blended annual inflation of 55.3%. Revenue growth was muted, which in the face of imposed market pricing distortions, reflects the resilience of the business model and the loyalty of our valued customers. Our strategic initiatives to enhance product offerings, optimise supply chain efficiencies, and to expand our digital presence have yielded positive results and positioned the Group well for future growth.

Operating income grew by 330% to ZWL2 trillion (Last year: ZWL468.7 billion), whilst in historical cost terms, operating income grew by 605% to ZWL87 billion (Last year: ZWL12 billion) demonstrating the operational resilience of the Group underpinned by a robust pricing model and cost containment measures.

Operating costs increased by 107% from ZWL1.67 trillion to ZWL 3.44 trillion during the financial year driven by significant increases in energy costs, utilities and property operating costs. Utilities providers such as ZESA and the local municipal authorities increased tariff s for electricity, water and rates in an unsustainable manner further increasing the cost of doing business. In addition, erratic power supply, resulted in reliance on generators which further drove energy costs higher.

Labour costs grew during the year in response to wage increases approved by the National Employment Council (“NEC”) for the Commercial Sector.

Profit after tax grew by 482.40% to ZWL931 billion from ZWL160 billion in prior year while in historical cost terms, profit after tax declined by 1,330.59% to a loss of ZWL62 billion from a profit of ZWL5 billion. The loss after tax in historical cost terms was caused by the net exchange losses of ZWL411.7 billion (Last year: ZWL77.5 billion) incurred by the Group on foreign currency balances, particularly on trade creditors, in line with the group’s procurement approach which was meant to address availability and price competitiveness.

The Group utilised bank credit facilities to fund strategic growth initiatives in accordance with its short to medium term growth plans. Finance charges incurred increased by 23% to ZWL204.5 billion (Last year: ZWL166.3 billion).

Capital expenditure for the year was ZWL157.4 billion down from ZWL189 billion. The bulk of the expenditure was channelled towards the store footprint expansion.

Directors

The Board of Directors remained appropriately constituted, functioning effectively, with regular meetings held in accordance with the Company’s governance framework. During the year, one of the non-executive Directors, Mr. Masanga, retired from the Board of Directors. The Board would like to express its sincere appreciation to Mr. Masanga for his dedicated service and valuable contributions during his tenure.

Sustainability

The Group is committed to reducing its impact on the environment and promoting social responsibility. During the year ended 31 March 2024, the Group successfully implemented a range of initiatives focusing on health and wellness, environmental sustainability, waste and emissions reduction, support for local communities and suppliers. The business continues to adopt sustainable practices in its operations, centred on promoting environmental preservation, education, health, responsible sourcing, waste management and reducing its carbon footprint in light of climate change risks.

Dividend

The Directors have considered it prudent not to declare a dividend in view of the need to restore working capital to support the business.

Outlook

Subsequent to the end of the financial year, the authorities introduced a new currency, Zimbabwe Gold (ZiG). Whilst the full impact of the introduction of the new currency are still being assesses, the Group’s foreign currency collection have declined in favour of ZiG. The Group continued to implement its volume recovery strategies and is looking forward to volume growth in the coming financial year.

The business intends to sustain this volume growth trajectory through consistent availability of product, continuance of the fair price campaigns and other key volume recovery initiatives implemented by the business.

As we look ahead, the Group remains optimistic about the business landscape and remains resolute in weathering any challenges. The Group is committed to sustaining this momentum, fostering innovation, and creating long-term value for our stakeholders.

I would like to express my gratitude to our dedicated team members, loyal customers, supportive shareholders, and all our stakeholders for their sustained trust and confidence in OK Zimbabwe Limited. Together, we will continue to build on our successes and chart a path towards sustainable growth and prosperity.

Herbert Nkala
Chairman
27 June 2024

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