TINASHE MAKICHI
MedTech Holdings’ revenue dipped by 31% to ZWL$70.4m last year from
ZWL$101m in the previous year due to reduced consumer spending.
Revenues during the period were also impacted by a stance by management to restrict sales due to the continual devaluation of the debtors’ book
with the aim of preserving shareholder value while stockouts were also experienced because of challenges in sourcing replacement stock of raw materials and goods due to stop supply from foreign creditors
because of overdue balances.
“Decreased consumer spending as income levels have not kept up with rising general price levels and this has caused aggregate demand to remain
subdued,” MedTech chairperson Rosemary Mazula said.
There was a significant sales volume decrease of approximately 70% as compared to the corresponding prior period.
Mazula said margins are artificially high and for several years, there has been a decrease in volumes resulting in slower stock turn over. Such stocks
are recorded at historical costs.
However, due to inflation during the period, selling prices regularly increased to be able to cover real replacement costs, and this disparity caused artificially high margins.
The inflation-adjusted net exchange rate loss included in the net finance costs for the year of ZWL$62.2m was mainly due to the translation
of monetary liabilities (mainly foreign creditors) during the period. Mazula noted that there is a possibility that these losses may reverse if the legacy
debts are dealt with by RBZ as promised.
The FMCG segment which includes MedTech Distribution, Smart Retail, and Choice Brands recorded a revenue decrease of 38% compared to the
comparative prior period due to grey market imports. Margins in this segment decreased due to reduced real selling prices as well as promotions
entered into so as to try and increase sales volumes which had significantly decreased compared to the prior period.
The FMCG segment however posted an inflation-adjusted loss before tax of ZWL$22.3m.
The loss is attributable to a loss on the exchange on amounts owing to foreign creditors.
The Medical segment which includes MedTech Medical and Scientific (Private) Limited and Education and Laboratory Services Division including Laboratory Services posted an inflation-adjusted profit before tax of ZWL$5.2m which is attributable to the holding of fixed assets which resulted in a net monetary gain.
The manufacturing segment which comprises of Chicago Cosmetics (Private) Limited posted a revenue increase of 18% compared to the same
period in prior year due to increased product offering while
margins remained stagnant.
The manufacturing segment posted an inflation adjusted profit before tax of
ZWL$7.9m which was attributable to the holding of fixed assets which resulted in a net monetary gain.
The extent of liabilities amounting to R27.8m owing to the foreign creditors also left the group in a precarious position which resulted in subdued
supply and stock-outs which remains one of the contributing factors to decreased sales volumes.
The group owes legacy debts amounting to a considerable amount to foreign creditors where some of the debts have been validated by Reserve
Bank of Zimbabwe (RBZ) while appeals have been put in for others.
“At this stage, the group is unsure when payments will be made for the debts validated and when a response will be received for appeals lodged. Delays in the payment of legacy debt have resulted in cuts in supply and stock-outs which is one of the contributing factors to the decreased sales volumes.
“For prudence, these foreign creditors have been restated to the interbank rate of 16.77 at the end of the reporting period. The extent of liabilities
owing to the foreign creditors leaves the Group in a precarious position,” Mazula said.
Going forward, the trading environment and macro-economic conditions remain volatile, according to Mazula and the full impact of Covid-19 is
yet to be felt but will undoubtedly have a significant adverse
impact on the Zimbabwean economy.
