Retail group OK set to double revenue
The country’s largest retail group, OK Zimbabwe’s revenue for the financial year 22 is expected to nearly double to $52,24 billion on organic growth.
The country is also projecting an economic upturn on the back of good agriculture output which will spur activity across value chains.
Resultantly, disposable incomes will improve although there are concerns emanating from the recently introduced lockdown measures that may threaten normal trading hours.
Retailers across the country have been adversely affected by reduced trading hours that were implemented last year during various lockdown periods. Although retail groups like OK are classified as essential service, the reduction in trading hours caused a strain on volumes.
“We forecast OK Zimbabwe’s revenue to FY22 will grow 94 percent to $52,24 billion from a mix of organic growth and mild inflation.
“The group’s topline is set to continue growing as returns from the ongoing investments into capacity expansion materialise with a further $1,69 billion authorised but not contracted for,” said brokerage firm IH Securities in their earnings update.
USD sales for the group are, however, expected to remain muted on effects of Statutory Instrument 127 which tilts consumer behaviour to favour purchases in the local currency.
For the financial year 2021, the group’s sales remained predominately in the local currency with revenue for the period surging 494 percent to $26,8 billion from $4,53 billion in FY20.
But volumes eased 13 percent year on year on weakened aggregate demand although signs of recovery began to show during the second half of the financial year following the easing of lockdown restrictions, which improved trading hours.
The re-introduction of the foreign currency auction system also improved its availability on the formal channels as well as bringing price stability and reduce supply chain disruptions.
For the current financial year, margins for the group are expected to continue collapsing into historical range on full indexation of costs and overheads accrued to remain compliant to health regulations squeezing the bottom-line.
Said IH: “On this basis, we estimate gross margin will shed 5,89 percentage points to 17 percent whilst earnings before interests, tax, depreciation and amortisation (EBITDA) margin is expected to fall to 6 percent from 9,9 percent in 2021.”
IH Securities also see net margins maintain a downward trend from 7,4 percent in FY21 to 4,1 percent in FY22 and 3,2 percent thereafter.
“Going forward, we believe that prudent cost containment measures from management and success of marketing initiatives will be the deciding factors in influencing profitability for OK Zimbabwe,” said the brokerage firm.
On the Zimbabwe Stock Exchange (ZSE), the group’s shares are expected to close the financial year at $16,78. By close of Wednesday session, the group was trading at $15,85.-herald.cl.zw
