OK Zimbabwe continue to import most of its products

OK Zimbabwe continued to import most of the products sold in the stores as supplies from the local manufacturing base remained inadequate, the Group reported.

South Africa subsists as the major source of imported products and prices of goods were generally stable with minimum movement linked to the Rand/US$ exchange rate. While it was necessary to import goods, the Group recognises the need for and continues to support local industries' revival and the consequent generation of employment. In pursuit of this, the Group continues to participate actively in the "Buy Zimbabwe" campaign and activities. Supplies of most products from both local and foreign sources were generally adequate during the year.

Against the background outlined above, the Group recorded a lower rate of growth in sales than had been experienced in the previous three years. The Group was able to achieve improved margins through efficient procurement. Operating costs increased in part due to expansion and refurbishment initiatives. Nevertheless, better profitability growth was achieved. The tax benefits of the sustained capital expenditure programme assisted in reducing the tax charge.

Revenue generated for the year increased by 16,3% to $479,6 million from $412,6 million in the prior year. Profit before tax was 12,8% up at $16,9 million from $15 million in the prior year, while profit after tax grew by 20,1 % to $12,4 million from $10,3 million. Overheads increased by 19.2% to $65,2 million from $54,7 million in the previous year. The increase in overheads was mainly a result of increases in employee benefits as more employees were engaged to man both the new branch opened during the year and the refurbished branches in order to provide adequate service in the improved facilities with broadened product offering.

Insurance costs also increased significantly due to growth in asset values and the insurance excess paid under the fire claim. Costs incurred in moving products to the branches increased pursuant to greater use of the distribution centre for warehousing and supply of imported products. The cost of borrowing increased to $0.8 million from $0.5 million in the prior year as the convertible loan from Investec Africa Frontier Private Equity Fund (IAFPEF) and other bank facilities were accessed during the year. Capital expenditure for the year was $12. million, up from $11.5 million in the prior year and was mainly in respect of store refurbishments and replacement of plant and equipment.