OK Zimbabwe revenue to hit US$346m in 2023, says r...

OK Zimbabwe revenue to hit US$346m in 2023, says research firm

Zim Now Writer

Retail giant OK Zimbabwe is expecting to register a US dollar at US$346 million revenue in the 2023 financial year, figures from a research firm show.

Inter Horizon Securities projected earnings before interest, taxes, depreciation, and amortisation margin of 6 percent in the financial year 2023, in a review of the company’s report for the half-year to September 30, 2022.

The report said for estimates to remain relevant in the present inflationary environment, OK Zimbabwe has shifted to a US$-based valuation of the business.

Dividend yield is expected to register lower to FY23 on account of planned acquisitions.

While contractionary measures implemented by monetary authorities have remained in place, constraining spending in the local currency, researchers forecast marginal volume uplift in the second half of the retailer’s financial year, based on seasonal spending patterns.

“We, however, expect that with increased dollarisation in the economy, there is a steady uptick in foreign currency sales going into the company’s coffers,” Inter Horizon Securities said.

“The retail space has been getting more competitive with increased market entrants in both the formal and informal channels. As such, it is encouraging that the company is now actively re-inventing itself.”

Last week, OK Zimbabwe settled the acquisition of Food Lovers Market branches in the country as well as the rights to expand the brand locally.

The company is also plundering into the pharmaceutical space with the introduction of the in-store Alowell Pharmacies.

“We await to see if the said acquisitions will be value accretive. On outlook for the rest of the financial year, incessant power blackouts are said to be driving up the cost of doing business and given no tangible short-term solutions at national level, we expect margins to continue to be under pressure,” the researchers said.

Challenges faced by OK Zimbabwe included difficulties in product pricing due to run-away inflation and unfavourable trading terms from suppliers.

Some manufacturers in the period also prioritised supply into channels offering hard currency, straining supply for formal retailers.

Margins for OK Zimbabwe within the period registered lower due to a spike in operating costs. EBITDA margin for the first half of the financial year 2023 decreased from 8 percent at the start of the period to 6,5 percent while net margins eased from 3,9 percent to 2,3 percent.

Operating cash flow or EBITDA closed the period at 24,3 percent.

OK Zimbabwe reiterated the adverse effect of the IMTT on its business with the effective tax rate at the end of the period standing at 38 percent.

Nevertheless, the company remained in a profitable position and subsequently declared a dividend of US$0,13. At current levels, this translates to a dividend yield of 2,81 percent, according to researchers.