OK Zimbabwe Ltd’s attributable earnings increased by a whopping 800% in the full year to March 31 (FY17), helped by improved margins and aggressive cost cutting measures, CE Alex Siyavora says.
The group’s attributable income grew 800% to US$6,1 million in FY17 from US$700 000 in FY16 buoyed by improved margins emanating from better sourcing.
“I think our margins were much better because we sourced cheaper and smart for the period,” Siyavora said after the analyst briefing in the capital this week.
A decision by management to tilt the company’s products towards higher margins lines and management of mark-downs during promotions improved margins from 16,1% to 16,5%. Earnings before interest, taxation, depreciation and amortisation (ebitda) was up 84% at US$16 million.
Ebitda margins increased to 3,5% from 2,1% in the prior comparative period, Siyavora said.
Earnings per share at 0,52 US cents were up 766% in FY17.
Siyavora said management of mark downs on promotions also helped OK achieve the solid numbers. “What we discovered is consumers are chasing promotions. They come to you when there is a promotion. If Pick n Pay runs a promo, they go there,” he said.
Operating profit margins were up 1,8% from 0,3%. OK and its Bon Marché outlets ran several promotions through the year on top of its traditional Ok Grand challenge to respond to increased competition.
The group’s revenues increased by 8% to US$472 million buoyed by promotions the group ran in FY17.
Siyavora conceded competition was tough in the retail sector from Choppies, PicknPay, TM supermarkets partners and wholesalers-cum-retailers such as N. Richards and Metro peach.
Also a new entrant, Gain Cash & Carry, has not helped the competition situation.
“We took a bold decision on cost reduction in the year as well,” Siyavora said. “But as you know costs are stubborn. Remember we said to investors that we were going to drive sale contain costs.
That is what we did. And this has been achieved against negative growth in the economy.”
He said Kawena had become its strategic partner on the money transfer side of the business. “We brought in products through this facility,” he said.
The availability of some products locally also improved the availability of goods thanks to a government protectionist policies.
“Since introduction of SI 64, local manufacture of certain products is improving, e.g body creams & lotions, coffee creamer, baked beans, biscuits, potato chips, cooking oil, milk & milk products,” management said.
Overheads remained the same as prior year levels comprising bank charges, reorganisation costs, accelerated depreciation of leasehold improvements on closed and relocated branches savings in other areas.