The operating environment continued to be unstable during the year under review characterised by shortages of foreign currency, local currency depreciation, hyperinflationary conditions and a decline in real incomes. The country also experienced widespread food shortages following the 2018/2019 drought which was further exacerbated by poor yields in the current season. In addition, the poor agricultural output combined with fuel and electricity power deficits worsened the overall economic performance during the year. Foreign currency shortages worsened as the year progressed, leading to a slowdown in the importation of both essential capital goods and merchandise either directly or through supplier partners. This shortage in foreign currency led to a runaway exchange rate which triggered rapid price increases of goods, and the resultant inflation eroded consumers’ real disposable incomes and demand. Inflation continued to soar during the year closing March 2020 at 676.39% compared to 66.80% for the same period last year. Despite the effects of the drought and shortage of foreign currency, our stores were adequately stocked for a significant part of the year thanks to the support of our supplier partners. After reporting a volume retreat of 23% at half year, we ended the year with the sales volume deficit narrowing to 15.7%.
Towards the end of the financial year, COVID-19 was declared a global pandemic and this changed the way people live and how business is conducted worldwide. The Government of Zimbabwe proclaimed a lockdown which became effective 30 March 2020 in an effort to contain and control the spread of Coronavirus. In the lead up to the lockdown the Group experienced heightened activity in the stores as people were stocking up on provisions, thus causing depletion of stocks particularly basic products. The Board and management have implemented various measures along World Health Organisation guidelines to minimise the impact of the pandemic on all stakeholders.
A new OK store was opened in Karoi towards the end of the year on the eve of the COVID-19 pandemic lockdown. As a result the contribution of the new store to the results of the year is not significant. We believe the store’s full potential will be realised when normal operations resume and economic conditions improve. The refurbishment programme continued during the year, with makeovers being completed at OK Gweru, OK Mutare, OK Triangle and Bon Marche’ Westgate. Sales performance of these branches is pleasing.
With effect from October 2019 Zimbabwe adopted inflation adjusted financial statements in terms of IAS 29, Financial Reporting in Hyperinflationary Economies under the guidance of The Public Accountants and Auditors Board (PAAB). The commentary on the performance of the business is based on historical figures.
Revenue for the year grew by 464% to ZWL $4,525.6 million from ZWL $801.9 million in prior year. Profit before tax of ZWL $788.6 million was 1,068% up on prior year’s ZWL $67.5 million, while profit after tax increased by 1,050% to ZWL $566.2 million from ZWL $49.2 million in prior year. Overheads grew by 427%, 37 percentage points below growth in revenue. Generator fuel costs for alternative power, electricity costs, maintenance costs and spares, bank charges and rentals are the major overheads growth drivers. Significant increases were noted in expense lines directly linked to revenue.
Internally generated funds were adequate to fund working capital and capital expenditure requirements hence no borrowings were utilised in the year. Capital expenditure for the year was ZWL $236.4 million, up from ZWL $25.8 million in prior year as the Group continued with its refurbishment programme.
The Directors declared a final dividend of 9 ZWL cents per share to be paid to the shareholders on or about the 3rd of July 2020. The final dividend brings the total dividend declared for the year to 13 ZWL cents per share.
The short to medium term prospects of the Group depend on the duration and severity of the COVID-19 pandemic which will impact the timing of the return to full normalcy of operations. The Group is operating during the lockdown period, albeit for reduced trading hours. Volume performance for the first quarter of the current financial year will therefore show a significant decline from prior year.
The Group takes the safety of its staff, customers, suppliers and other stakeholders seriously and will therefore continue to follow the guidelines from authorities for measures that will ensure their safety.
Management have implemented measures to ensure viability of operations and will evolve these measures as the uncertain environment demands. The COVID-19 pandemic has disrupted supply chains and the Group will work closely with suppliers to ensure adequate product supply. Hyperinflation and a constrained sales performance make cost control a key area of focus for management in order to protect margins.
Mr. Freeman Terrence Kembo retired from the Board of Directors with effect from 27 July 2019 after having served the Group for seventeen years. The Board extends its gratitude to Freeman for his contribution to the Group. During the course of the year, the Board welcomed Mrs. Lyndsay Webster-Rozon and Mr. Bruce Armstrong Carter as non-executive Directors with effect from 1 June 2019 and 1 July 2019 respectively. On 1 June 2020, Mrs. Keresia Mtemererwa and Mr. Tawanda Lloyd Gumbo joined the Board as Independent non-executive Directors. The Board congratulates its new members and wishes them well in their new roles.