CHAIRMAN’S STATEMENT
OVERVIEW
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.
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 ZWL. However, the Group’s sales remained predominantly in ZWL.
The authorities introduced the foreign currency auction system to allocate foreign currency, guided by economic priorities for the country. Between allocations from the auction and the foreign currency sales generated in the business, the Group was able to pay for all its import requirements. The Group’s capital expenditure programme continued during the period and store refurbishments were completed at OK Avonlea and OK Machipisa. Customers responded positively to the improved facilities in-store, leading to improved sales.
The Group embarked on a refreshing exercise for all its three store brands, namely OK, Bon Marche’ and OKmart, to reflect how it is staying abreast with customers’ requirements and aspirations.
GROUP PERFORMANCE
The results were inflation-adjusted to reflect the impact of the general change in the purchasing power of the reporting currency in accordance IAS 29, Financial Reporting in Hyperinflationary Economies. The commentary is based on historical figures.
Revenue for the half year grew by 684% to ZWL 8.7 billion from ZWL 1.1 billion in the comparative period. Profit before tax of ZWL 1.3 billion was 621% up on prior year’s ZWL 185 million, while profit after tax increased by 634% to ZWL 968.3 million from ZWL 131.9 million in prior year.
Overheads grew by 680.6% over prior year. The Group’s response to fight Covid-19 pandemic impacted overheads, particularly RDT and PCR tests, purchase of face masks, thermometers, hand sanitizers and staff passage costs. Contingent rentals, repairs and maintenance, bank charges and cleaning expenses also significantly contributed to increase in overheads.
Capital expenditure for the half year was ZWL 384.9 million, up from ZWL51.5 million for the same period in prior year. Most of the capital expenditure was on store refurbishments and equipping new stores.
DIVIDEND
The Directors have declared an interim dividend of 26 ZWL cents per share to be paid to the shareholders on or about the 5th of January 2021.
OUTLOOK
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 Organization and the Ministry of Health and Child Care for measures that protect our staff and other stakeholders.
Post the reporting period, the Group opened a new OKmart store in Victoria Falls on 1 October 2020 and an OK Store in Harare’s Sanganayi Inn area on 5 November 2020. 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 Group will continue to work with supplier partners to ensure the stores are adequately stocked for the festive season and beyond. Our value offering to customers will assist to recover depressed volume sales.
H. NKALA
CHAIRMAN