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OK Zimbabwe pays off debt

OK ZIMBABWE, the country’s second largest retail group, says it has paid off a US$7, 2 million debt to Investec Africa with money raised from a rights issue.

CEO WIlliard Zireva says the group now needs to settle its debt to Central African Building Society at the end of the year.

Speaking at the company’s AGM on Wednesday, Zireva said the loan had been used to fund the reconstruction of the Masvingo branch.

He said he would use Masvingo branch as a benchmark to refurbish other stores.

OK Zimbabwe raised US$15 million through a renounceable rights offer in a rather dry market in March this year.

Zireva said the group achieved a turnover of US$73,9 million between April and July this year against a budgeted US$75,3 million.

The figures were however 68% higher than what was recorded during the same period last year.

Zireva says sales volumes have been hit by a government ban on protein, particularly chickens.

Margins were 18% compared to 19% last year. Zireva says his company would target low-end customers to grow volumes.

“With better sourcing, we expect an improvement in margins,” he said.

Shrinkage remains a major problem, Zireva said, although it had come down to around 1,5% from 2,5-3% where the group had lost US$3,5 million.
“It is now under control with the eventual target being under 1%,” he said.

In their financial results for the period ending September 30 2009, OK Zimbabwe chairman Dave Lake said high stocking levels were underpinned by credit from third party suppliers as well as credit from local banks.

During the period under review, Lake said the bulk of the merchandise was imported from South Africa as local manufacturers are still working on increasing their production levels.

Renaissance Capital in December valued OK Zimbabwe at R334 million (US$32,9 million). The company’s share price has been hovering below 10c over the past week.

Analysts said the company’s share price was poised to rise following news that the group had adequately stocked its entire branch network and was interested in investment.

Analysts said OK Zimbabwe was more interested in investments into production as opposed to retail.

Presently Zimbabwe boasts local retail giants such as Spar outlets, Afrofoods, Savemor, TM Supermarkets and Batanai. The supermarket chain opened the rights offer on March 26 and 70,4% of the 250 375 139 shares were taken up at US$0, 06 per share.

The rights offer paved way for a US$5 million convertible loan, which left the retail chain US$20 million richer.

OK Zimbabwe was able to recapitalise its operations which had been affected by high inflation, price controls and a general economic decline.

The offer was underwritten by a Mauritius-based investment vehicle which was formed by Investec Africa Frontier Private Equity Fund.

The additional shares were listed on the Zimbabwe Stock Exchange in April.

OK Zimbabwe’s success was attributed to its cash-rich shareholders, the top three being  Old Mutual Life Assurance —  14,27%, Old Mutual Zimbabwe — 13,23% and the National Social Security Authority with 10,42%.

 

Paul Nyakazeya

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