Increased overheads dampen OK earnings

Increased overheads dampen OK earnings
Published: 06 June 2014
Giant retailer OK Zimbabwe yesterday reported a decline in profitability for FY2014 as overheads increased and deflationary pressures weighed heavy.

Profit for the year ended March 31, 2014 amounted to $9,68 million compared to $12,3 million in the prior year.

Basic earnings per share was 0,85 cents down from 1,19 cents last year.

The decline in profitability was attributable to depressed demand but also mainly to an increase in overheads, which went up by 6,3 percent ahead of the growth in revenue of 0,9 percent.

CEO Willard Zireva told analysts yesterday that the tight liquidity situation that prevailed during the period under review resulted in depressed demand.

"Deflationary cycle for retail trade set in around July 2013 and official operating environment negative inflation was -0,91 percent by March 2014...there were reversals in sales growth at some locations," he said.

Overheads increased by 6,3 percent to $69,4 million from $65,2 million prior year. The increase in overheads was mainly a result of increase in employee benefit to $31 million up from $27 million last year.

"This increase was mainly a result of increases in employee benefits as more employees were engaged to man both the new branches opened during the year and the refurbished branches in order to provide adequate service to match the improved and broadened product offering," said management.

OK Zimbabwe's total number of stores has increased from 54 in FY2013 to 59 in FY2014.

Revenue was up a marginal 0,9 percent to $483,6 million against $479,6 million prior year comparative. The group said the cost of borrowing decreased to $0,2 million from $0,8 million in the prior year as the more expensive Investec Africa Frontier Private Equity Fund loan was converted to equity on April 1, 2013.

Capital expenditure for the year was $12,4 million, up from $12,1 million in the prior year and was mainly in respect of opening of new shops, store refurbishments and replacement of old plant and equipment. OK Zimbabwe declared a final dividend of 0,22 cents per share.
- BH24
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