CHAIRMAN’S STATEMENT

OVERVIEW
Challenges presented by the declining economic environment have continued unabated and indeed have worsened coupled with the effect of a depressed world economy. Businesses continue to fail and unemployment continues to rise. Every business and company in Zimbabwe has been adversely affected. In our sector, the direct effect is that no matter how well-stocked our stores nor how competitive our service and pricing, people simply have less to spend on a day to day basis.

In line with national trends, we continue to reduce our prices for the benefit of our customers and to stimulate demand.

Under these conditions the Group posted a decline both in revenue and profitability. Operating costs declined meaningfully but the decrease was not adequate to counter the negative effects of lower sales and gross margins. The Group continued to invest in the future; a new OK store was opened in Zvishavane and a new OKmart was opened in Mutare. The contribution to sales and profitability from both these branches is pleasing. The Group has also invested in the launch of an every day low price store format (OK Value) to cater for the low income market.

GROUP PERFORMANCE
Revenue generated for the period decreased by 7.9% to $213.6 million from the $232.1 million posted in the prior year. Of this decline, approximately 5% was contributed by deflation. Profit before tax was down at $1.3 million from $5.8 million in the previous year, while profit after tax decreased to $1.2 million from $4.3 million in 2014.

Overheads decreased by 5.5% to $34.2 million from $36.3 million in the previous year which was primarily a result of cost-cutting initiatives implemented by the Company. This decrease was despite the increased dependence on generators necessitated by worsening shortages in electricity supplies. Controls over shrinkage were effective and will continue to be enhanced.

Capital expenditure for the period was $3.9 million and was mostly in respect of the new stores and in replacement of old plant and equipment.

DIVIDEND
At the meeting on the 12th November 2015 the Board decided that it would not declare an interim dividend and that it would be preferable to channel resources to re-investment in the business.

OUTLOOK
The difficulties of the economic environment with which we continue to grapple are expected to persist. Nevertheless, the Group will increase its efforts to improve sales generation and profitability. The expansion of the OKmart chain will continue as will the refurbishment programme.

Considerable effort is being made to improve our operating efficiencies as well and to ensure that our well-motivated staff deliver an even better service for our customers. Early indications are that these initiatives give cause for optimism.

In conjuction with our supplier partners we are importing raw materials for increased local production which will help to reduce imports of finished goods and stimulate local demand from increased employment.

D B Lake
Chairman
12 November 2015

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