OKZ.zw | Trading Update

The economic environment, characterized by declining consumption and falling product prices, continued to be difficult. Net sales for the quarter were close to budget but 3.5% below prior year.

Faced with a shrinking economy and declining revenues, management focus is on improving the company gross margin while managing costs to sustainable levels. During the quarter, the fruits of this thrust started bearing fruit with much better gross profit in the fully functional own bakeries as well as in other departments through better procurement. Efforts to reduce and contain overheads have also resulted in level of overhead increases coming down and shrinkage maintained at previous level. At the end of the quarter, operating profit grew by 1% against prior year which is a result of these efforts.

The trans-border initiative we started last year in partnership with Kawena (Pty) Limited of South Africa has been slow to take off but we have allocated resources to it and expect the project to make some contribution to the performance of the company by the end of the year. The financial services operation continues growing and has started to make a meaningful contribution to profit.

The capital expenditure programme continues with funding from cash generated from operations. The store refurbishment programme is continuing with work at Gweru and Mutare completed in July. Further refurbishment work is planned for Bon Marche’ Chisipite, OK Mbuya Nehanda and an expanded OK Houghton Park. Partial refurbishments will be carried out at OK Rusape. We are currently assessing possible entry into two centres.

While the outlook for the full year will be influenced by what happens to the general Zimbabwean economy, we remain focused on efforts to deliver reasonable performance and watchful for opportunities that may come up so we can exploit these.