OK's working capital dries up

Retailer OK Zimbabwe Limited is weighing the sale of an additional US$17,2 million worth of properties, over and above the US$10,5 million already earmarked for disposal, as it grapples with severe working capital shortages and mounting liquidity pressures.

The cash squeeze has led to persistent stock shortages across key product categories, with tight supplier trading terms limiting the group's ability to rebuild optimal inventory levels. While engagement with suppliers has allowed for a partial resumption of deliveries, stock cover remains well below required thresholds, continuing to weigh on trading performance. This is despite suppliers having received 50% of their legacy debt through OK's US$20 million capital raise.

Operational disruptions over the past two years have pushed the group's debt burden beyond US$30 million, triggering the capital raise and the decision to dispose of seven freehold properties valued at US$10,5 million, first announced in July. However, the disposal process has yet to gain momentum, with management still evaluating offers.

"Property valued at US$10,5 million has been identified for disposal, and as at the end of September 2025, offers worth US$7,3 million were under management consideration. All prospective buyers are prepared to enter long-term sale-and-leaseback agreements," OK said in a statement accompanying its half-year results for the period ended September 30, 2025.

"The group has additional owned properties worth US$17,2 million, and these may be disposed of to fund working capital requirements, should it be necessary, and subject to board approval," the retailer added.

To maintain product availability, OK has also resorted to supplier-finance arrangements under which third-party financiers settle suppliers if the retailer misses payment deadlines, leaving the company indebted to the financiers instead. In addition, the group has secured new banking facilities.

"US$19,6 million in banking facilities have been secured, with US$12,3 million still undrawn at approval," the company said. "Four key relationship banks have provided formal letters of support, subject to normal conditions, reinforcing confidence in continued financial backing."

OK's financial and operational challenges have intensified since last year, with revenue plunging amid supply-chain disruptions, exchange-rate volatility, tight liquidity conditions, weakening consumer spending and rising competition from the informal sector.

For the half-year ended September 30, 2025, revenue collapsed by 84,07% to US$28,26 million, from US$177,43 million in the prior comparative period. Sales volumes fell by 82,68% to 24,23 million units, down from 139,88 million units previously.

"This substantial decrease was primarily due to a steep decline in sales volumes," board chairperson Herbert Nkala said, attributing the slump to liquidity constraints affecting inventory replenishment, supplier disruptions and the closure of underperforming stores under the group's rationalisation programme.

The group recorded a net loss of US$17,81 million, compared to a net profit of US$3,71 million in the same period last year. Nkala said the deterioration was driven by high costs relative to sharply reduced sales.

"Operating costs decreased compared to the prior period; however, they remained high relative to the reduced sales for the period," he said. Employee benefits amounted to US$9,51 million, while other operating expenses totalled US$11,76 million.

Utilities and backup power costs, which reached US$5,3 million, continued to weigh heavily on operations due to higher tariffs and prolonged electricity outages across several sites.

The retailer's balance sheet weakened further, with total assets declining to US$92,2 million as of September, from US$101,83 million in March. OK remained technically insolvent, holding just 47 US cents for every dollar of short-term debt, down from 56 US cents in March.

Nkala said the group's immediate focus would be on stabilising operations and restoring financial viability.

"Key constraints to recovery remain centred on liquidity needed for product procurement, limited stock availability due to short supplier terms, revenue levels that are still below break-even, and delays in realising property disposal proceeds," he said.

He added that management remains confident that progress on property disposals would unlock the liquidity required to rebuild inventories and improve trading performance.