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    OKZim posts ZWL$2.8bn Profit as Management Shakeup Targets Growth

    By Yona Banda

    • Retail group OKZim saw its inflation adjusted profits rise by 49% to ZWL$2.7 billion in its 2022 financial year ended 31 March.
    • The bottom line growth was supported by a 50% inflation adjusted rise in revenue, which stood at ZWL$80 billion with the operation reporting a 26% rise in sales volumes.
    • EBITDA stood at ZWL$7.2 billion, with net monetary gains of ZWL$4.8 billion contributing significantly.
    • The group reported a 37% increase in overheads during the financial year, however the operating margins remained relatively stable with the Net Profit Margin at 3% and EBITDA margin at 9%.
    • The group declared a final dividend of ZWLc 36.5 and USc 0.13.
    • Net cash flows for the financial year were at a ZWL$555 million deficit as the company continued to invest in storefront refurbishments and openings. Capital expenditures for the financial year stood at ZWL$3.1 billion.
    • At the end of the financial year the groups portfolio of outlets stood 68 after the openings of OK Banket and OK Mart Chivhu.
    • Behind the scenes, the group experienced some major management changes. The group welcomed a new CEO – Mr. P. Karombo, who replaced the long serving Mr. A. Siyavora. The group also welcomed a new CFO – Mr. P. Mushosho.

     
    Commentary and Analysis
     
    The group seemed to benefit from the somewhat stable operating environment experienced in the first half of the financial year. The contribution of monetary gains to the bottom line suggests the remittance services are becoming quite important to the operation. The consistency in the operating margins suggests the group is effectively managing the inflationary operating environment in one way or another. Anticipating the trend to continue, the approach taken by the authorities to control rising food prices will be a major concern for OKZim. The impact of rising interest rates on the group should be moderate, with no long-term liabilities and short-term payables relatively low. In the event of more “price control” oriented measures, the group’s operations will most certainly face some disruptions.



    Narrowing the commentary a bit, OKZim has identified competition from existing operators, new entrants, and informal retailers as a significant threat. TM-Pick ‘n Pay Supermarkets are OKZim’s most recognizable competition in the retail sector. Analyzing the combined revenue figures suggests both operators have been struggling for a while to find sustained growth in the market. In that time, the distribution of the sales between the two retailers has been fairly stable. On average, between 2011 and 2021 OKZim took up 55% per year of combined annual sales. The situation seems to call for a more aggressive approach from OKZim towards the competition. This aligns with the recent management change, with a marketing specialist and business strategist Mr. P. Karombo taking over the CEO role from Chartered Accountant Mr. A. Siyavora. Beyond refurbishing stores, expectations will be for the group to add to its portfolio of services to compliment the main retail operations. The group will also be expected to invest in improving internal efficiencies to defend/improve operating margins.



    In YTD terms, the OKZim share has gained 45% in nominal value and lost 55% value in implied USD terms. By comparison, the share has outperformed industry peer Meikles which has gained 27% in nominal terms and lost 61% in implied USD terms. However the OKZim share has underperformed relative to the market. Looking ahead, there could be some upside to the share if the sentiment shifts towards safety given its liquidity and the stature of OKZim – Harare

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