Delta no surprises but OK was okay

By Admire Mavolwane


SOME years back, before the advent of “money link” cards and lately cellular phones, the wallet was among the items that distinguished a gentleman from the common man. According to the Miriam Webster dictionary, a wallet is “a folding

pocketbook with compartments for personal papers and usually unfolded paper money”.

At one time, the crocodile skin wallet was the most fashionable thing in town and owners would proudly pull them out from their pockets with a flourish before fishing out either a Standard Chartered money link card or a wad of crispy $20 notes.

At that time “nzou/elephant”, as the $20 note was called in street jargon, was the highest denomination in the country.  This once prized possession (wallet) has now been relegated to the back shelves and is no longer displayed in most shops.

In normal circumstances, technological advancement has been held responsible for driving most gadgets into obsolescence. The popular long play vinyl “album” form of storing and playing music was nudged out of prominence by compact discs. Peculiar to Zimbabwe, however, inflation has been driving a number of gadgets and apparel both into, and out of, fashion.

The wallet would count as the biggest casualty whilst note counters, satchels for carrying money, and laptop bags are the trendiest things in town. Most of the laptop bags seen on the streets are now being used for carrying cash rather than their intended use.

If the bags are not being used for carrying cash then Zimbabwe has the highest number of laptops per head among developing countries. Not an altogether amazing statistic, as the nation is considered to have one of the highest number of Mercedes Benz vehicles per head in the world.

Patience as a virtue is now more necessary than before. One needs patience to wait for the supermarket cashier to count all the notes when paying for one’s shopping and for the person being served by a bank teller to pack away his/her bundle of notes.

Inflation has also come with a change in culture. It used to be considered improper to openly carry cash in a shallow pocket or even to be seen with wads of notes. Standard behaviour was to have the notes neatly packed in one’s wallet.

Money was not thrown about, but one would count out the notes and coolly hand them over or place them on the counter. These days, Zimbabweans openly carry bricks of notes around and do not hesitate to casually toss them to another party.

Even thieves have had to change their modus operandi. Rather than practising the subtle art of “pick pocketing”, like the artful dodgers in Charles Dickens’ Oliver Twist, inflation has thrust upon the nation a new brand of daring “snatch and run” street operators.

Other tricksters are now mixing different denominations of notes such that instead of having a straight $5 million of $50 000 bearer cheques, one might find $10 000 bearer cheques slotted in between, thus prejudicing the individual of as much as $1 million. Supermarket till operators and fuel service station attendants will bear testimony to this new wave of fraud.

Management of OK Zimbabwe, at their results briefing conceded as much, and indicated that the till operators had the responsibility for counting the cash, regardless of whether it was in a sealed pack or not. So shoppers are advised to have the patience to wait whilst the operator goes through the cash bundle by bundle. In other words, not too much trust should be invested in the bundle, even if it is sealed.

Incidentally, the retailer became the first listed entity with a March reporting date to present its results. In the 12 months to March 31 net sales grew by 504% to $7,1 trillion, a growth figure in between the official average inflation for the period of 427% and an internally measured annual inflation rate of 637%. Volumes in most product lines were said to be approximately 20% lower than in previous years, a fact which filtered through into total sales.

Gross margins notched up nine percentage points to 27% which is even higher than the 2003 level of 21% and highlights the benefits of replacement cost pricing, squeezing of suppliers through strategic purchasing and lower shrinkage.

After having had their fingers rapped over the high shrinkage ratio of $12,3 billion or 1,05% of turnover in 2005, management took corrective measures which resulted in only $7,5 billion — 0,11% of turnover ­— disappearing.
This figure does not include the cash received discrepancies resulting from the aforementioned notes fraud.

Operating margins improved to 13% from 6% in tandem with gross margins. The corresponding profits surged ahead by 1 269% to $890,3 billion. Finance income, which is a significant non-core contributor to earnings, increased by 660% to $303 billion with the bulk of the inflows being recorded in February and March of this year.

After providing for $281 billion due to the taxman, $912,7 billion was the balance that was attributable to shareholders, up 971% on 2005. And true to form, approximately 50% of earnings will be paid out as a dividend to shareholders.

Former parent company of OK Zimbabwe, Delta, also released its full year to March 31 results that were broadly in line with market expectations.

Net sales for the group increased by 474% to $13,4 trillion, which, surprisingly, works out to be in line with average inflation for the period. It was surprising because every consumer of the waters of wisdom would testify that most of the price increases experienced on lager and opaque beer last year were above inflation.

Volumes shrunk across all products, a trend attributed to lack of inputs, especially soft drink concentrates, grains and bottle tops, as well as diminishing consumer spending power. The major impact was felt in the last quarter where sales were down by as much 40% when compared with last year.

Operating income grew by 478% to $3,6 trillion, with margins growing marginally from 32% to 34%, as the group struggled to contain imported inflation as well as the rising cost of fuel which is a major cost component  of product distribution.

The group incurred an exchange loss of $562 billion on long term external loan commitments which were netted against net interest income, resulting in only $13,7 billion finance income.

Associates, mainly Afdis, contributed $79,8 billion, whilst Ariston, consolidated for the first time, contributed approximately 14% to operating profits. Delta also accessed close to US$1 million of Ariston’s foreign currency.
 
With its products becoming more and more unaffordable, Delta is now firmly considering coming up with “value brand” carbonated soft drink products. The overall strategic intention going forward is to recover some volumes presumably through less aggressive pricing and more aggressive marketing of the value brands.

Whilst the results did not surprise many the pedigree of the Delta brand is beyond question. The share price will, however, reflect the disappointment of those who were banking on the blue chip producing heart-stopping numbers. These investors are likely to exit the counter at the first available opportunity and probably switch to either CFI or Cottco, again on the same premise of spectacular results. This is how others play the game on the Zimbabwe Stock Exchange.

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