The Group performed commendably during the year under review, given the difficult operating environment in Zimbabwe, and despite increased competition. The numbers we are reporting suggest that we have been able to further increase our market share.
We maintained the focus on building the Electrosales Hardware brand to be the biggest and best supplier of hardware and home improvement products throughout Zimbabwe. Although year on year growth was slower than we planned, we still recorded an increase in total volumes.
The environment has been characterised by increasing regulation, fast deteriorating infrastructure, acute shortages of power, water, fuel, foreign and local currencies; increased taxation, harsher borrowing conditions, escalating costs, reduced disposable incomes and hyperinflation. All of these factors are working against formal business, and diminish the ‘ease of doing business’. In the past year, we saw significant growth in both the numbers of, and volumes traded by informal traders. This informalisation, resulting from the actions and inactions of Government, does not augur well for national growth and development…
As in previous years, our key strategy was to grow sales volumes. We have had to increase inventories, to mitigate against the impact of erratic supplies. These improved levels of product availability, have led to increased sales, as well as profitability. However, the shift in product range towards building materials, has put our margins under pressure.
Revenue for the year rose by 224.8%, to $267.9m, while gross profit rose 181.5%, from $22.1m to $62.1m…
Only one new branch was added during the year, bringing our total number of branches to 19 countrywide. In addition, we carried out some extensions and renovations to a number of branches, raising our total retail space to 13 405 square metres.
The main focus this past year, has been on maximising our utilisation of the existing branch network, by broadening the range of products on offer, thereby increasing the customer choice; and by optimising stock models, to minimise stock outs. Erratic supply of both local and imported products continued to be the greatest challenge, we faced during the past 12 months. Imports were hampered by various trade barriers, notably Bureau Veritas, import licenses, punitive duties, payable in foreign currency, disorder and corruption at the ports of entry, and a dysfunctional interbank foreign currency market. Many local manufacturers, operating in the same environment as us, were unable to meet our demand…
It is difficult to tell where our country is going. Statements of, and actions by our leaders do not seem to reflect the reality of everyday experiences of citizens. The country yearns for a coherent, credible, macro-economic policy framework, and regulatory regime, within which economic agents can operate and plan for the future.
Notwithstanding the uncertainties and instability in the market, we have found the hardware sector to be remarkably resilient. Understanding that financial/monetary savings rapidly waste away, the people opt to put any spare disposable incomes into their homes. We, in turn, will strive to support the people’s value preservation instincts, offering a broad range of value for money products, and providing our customers with excellent service.
Lastly, we have worked extremely hard to consolidate our buying power, and to channel this into procuring product from the global best sources. In this way, we have been able to push costs down, and we believe that this will be key to remaining ahead of both formal and informal competitors, who cannot access these sources.
The good performance of the business over the past year, has put us in a position to share the rewards with our shareholders. Accordingly, the Board has resolved to declare a dividend of 1 cent per share, for the 12 months ended 30 September 2019, to shareholders on the register on 3 January 2020.
Given the volatility of the RTGS Dollar, the Board also resolved to offer shareholders a scrip option.
The Board commends and thanks Management and all employees, for their dedicated efforts during very difficult circumstances. We are also grateful to all our partners, especially the customers, suppliers, bankers and other service providers, for supporting us in ways that enabled us to achieve what we have.
I am deeply indebted to my fellow directors for leading and guiding our Management diligently, zealously and effectively, over the past year.
We remain committed to our growth strategy, despite the economic headwinds facing the formal economy, and we will be doing everything that we can to achieve our objectives.
Dr S.H. Makoni