In their financial results for the interim period ending September 30 2009, OK Zimbabwe chairman Dave Lake said high stocking levels were underpinned by credit from third party suppliers as well as credit from local banks.
During the period under review, the group said the bulk of the merchandise was imported from South Africa as local manufacturers are still working on increasing their production levels.
“Overhead expenses amounted to US$11,1 million, driven in the main by staff costs, maintenance of equipment after lengthy periods of neglect, utilities and distribution costs. The cost of finance was US$206 million,” said Lake.
Renaissance Capital valued OK Zimbabwe at R334 million (US$32,9 million). The company’s share price has been hovering below 10c over the past three weeks.
Analysts said the company’s share price was poised to rise following news that the group had adequately stocked its entire branch network ahead of the festive season and was interested in investment.
The period under review Shoprite, South Africa’s biggest retail chain, put on hold a R167 million deal (about US$16,1 million) to buy a stake in OK Zimbabwe, a move that was described by local analysts as having no effect on economic turnaround efforts.
“Capital expenditure was limited at US$0,18 million, the bulk of which was spent on opening a shop in Chipinge, housing for management in Ngezi and replacement of computers in areas of need in the company,” Lake said.
The company’s said due to its “recovery, strategy” they have deemed it prudent not to declare an interim dividend.
Analysts said OK Zimbabwe was more interested in investments into production as opposed to retail.
Presently Zimbabwe boasts local retail giants such as Spar outlets, Afrofoods, Savemor, TM Supermarkets and Batanai.
“Zimbabwe has more than enough retail outlets so the economy is not worried about Shoprite’s decision. What we need is real investment in production to anchor the economy,” said one commentator.
Going forward OK Zimbabwe said the economy was expected to continue growing slowly due to the limited liquidity.
“The current low disposal income resulting from low economic actively is anticipated to continue to improve as the economy grows and that improvement is expected to boost demand for consumer products,” said Lake.
The group said capital expenditure has been reduced to a minimum in order to preserve cash for operations.
The bulk of the capital expenditure in the coming period will be in the re-building and equipping of the Masvingo store which was destroyed by fire two years ago.
During the current reporting season the month of October saw sales exceeding forecasts.