OK half-year sales volumes jump 43pc





HARARE – Listed retail giant OK Zimbabwe Limited’s sales volumes for the half-year to September 30, 2021 recovered by 43 percent compared to the same period last year although the group buckled under the weight of Covid-19 constraints and negative impact of taxes.

OK said the operating environment was less turbulent during the review period than in the comparative period last year, as evidenced by receding inflation and relative exchange rate stability.

“Nonetheless, the group faced a number of challenges during the period, key among them being spikes in Covid-19 infections, high interest rates, excessive levels of intermediated money transfer tax (IMTT) and limited foreign currency availability.

“Covid-19 lockdown restrictions remained in place at varying levels of intensity throughout the period.

The lockdown restrictions impact the business mainly through supply chain disruptions, decline in consumer real disposable incomes and reduced operating hours,” said chairman Herbert Nkala.

Total revenue grew by 42,2 percent during the interim to $25,2 billion from $17,7 billion in the comparative prior year period.

The group said profit before tax went down 66 percent to $798 million compared to $2,4 billion recorded during the same period in the prior year.

Profit for the period went down 76 percent to $365 million from $1,5 billion during the comparable prior year period.

Overheads grew by 60 percent over prior year mostly as a result of the IMTT—also popularly known as the 2 percent tax—staff costs, electricity charges, rentals, bank charges, cleaning expenses and security charges are the cost lines that contributed most significantly to overheads growth.

Said Mr Nkala: “Whilst the business implemented a raft of cost containment measures, the overhead increases were driven by exogenous factors such as NEC wage adjustment and expansion of IMTT thresholds which adversely impacted the Group’s profitability.”

According to the group, the IMTT burden on the business grew by 233 percent to $450 million from $135 million for the prior year as a result of the increase in tax ceiling to $800 000 per transaction in the current financial year from $25 000.

The increase in tax, Mr Nkala said, significantly eroded the business’ gross margins.

“In addition, the huge IMTT expense is not tax deductible and this further compounded the tax burden on the business. Resultantly, the effective tax rate for the group increased from 27,4 percent in the prior year to 39,4 percent recorded in the first six months of the financial year.

“We urge the fiscal authorities to review the structure of this tax so as to reduce its undesired consequences on tax compliant formal businesses,” he said.

Net finance charges increased by 299 percent as the group increased borrowings for working capital and capital expenditure purposes.

Total assets marginally grew by 3 percent to $15,6 billion.

Capital expenditure for the period was $1 billion, up from $649 million for the same period in the prior year.

Most of the capital expenditure was on store refurbishments. The group continued with its store refurbishment programme, with makeovers completed at OK Masvingo and OK Queensdale during the period under review.

OK declared an interim dividend of 21 cents per share.