OK Zim fights to survive market turbulence

TAURAI MANGUDHLA

One of Zimbabwe’s largest re­tail chains OK Zimbabwe is fighting to survive market tur­bulence arising from foreign currency shortages and loss of value on the local dollar that  has seen prices rising.

The group’s internal infla­tion averaged 12 percent in the first half of its financial year ended September, more than double the 5,39 percent official inflation figure for the month.

Fixed assets, that had be­come a safe haven in times of economic uncertainty and tur­bulence, are no easy options as the market is holding on to them while the few avail­able for sale are now beyond the reach of many.As a result, the group is focused on ensur­ing stocks are adequate to keep shops open at capacity.

“In terms of assets, after the fall in confidence on RTGS balances, the options are now limited. We stay focused on remaining in business so we are using our resources to try and quickly restock so that we trade,’’ CEO Alex Siyavora said at an analyst briefing yes­terday.

“We use the cash to procure products, where we would have normally worked on ex­tended terms we shorten terms to incentivise the supplier.”

The group’s internal infla­tion position gives a peek into the harsh reality of the obtain­ing huge disparities between official inflation figures, based on a basket of basics to determine cost of living, and reality which includes items that are non-essentials on the basket but consumed daily all the same including items that are consumed by the high income bracket.

The internal inflation, Siya­vora said, is passed on to the sales, partly accounting for a 23 percent revenue growth in the half year.

“Our measure of inflation at the point of procurement is 12 percent which then goes through in sales. So you can say crudely 23 percent minus 12 percent amounts for real growth but we have also seen physical movement of volumes in our shops,” Siyavora said.

“If you look at items like fuel; if the price is higher inter­nationally it tends to be higher without increasing duty, cook­ing oil as well.”

Asked to give an analysis and projection of internal in­flation, Siyavora said the com­pany was yet to conclude the research.

OK Zimbabwe reported revenue growth of 23,2 per­cent in the period under re­view to $330,1 million while gross profit margins remained flat at 17,5 percent.

Total comprehensive in­come stood at $8,4 million, 62 percent above same period prior year.

Overheads went up 18,4 percent on prior year largely due to staff costs after increas­ing floor space and opening new shops, rentals, promotions and bank charges arising from increased use of plastic money. The group spent $7,5 million capital in the reporting period on opening OK Glenview, acquisition of property –OK Malvern in Waterfalls along Harare-Masvingo highway.

Total assets closed the pe­riod at $178 million, 39,6 percent above same period last year. Earnings per share went up 61,4 % to 0,71 cents per share.