ZIMBABWE’S retail sector is seen picking up in the short-term as consumer spending is expected to firm up following Treasury’s timely payment of bonuses for civil servants this year.
BY TATIRA ZWINOIRA
Government, for the first time in years, has managed to pay-off bonuses for its workforce on time after Finance minister Mthuli Ncube indicated that the 13th cheque would be calculated on basic salary.
The move has saved government $75 million from the $175 million spent on bonuses in 2017.
“We expect the consumer and retail sector’s performance to be sustained by the additional purchasing power granted to the civil service in the month of December, resultantly cushioning the lowering demand,” a local financial services firm, IH Securities, said in a recent research note.
“We expect to see an increase in the money supply and most likely a related increase in the parallel market rates as the bonus payments add approximately $100 million into customers’ pockets”.
IH advised investors to hold onto shares of listed retailer, OK Zimbabwe, adding that the company’s momentum is expected to continue going into 2019.
In its half year results released in September, the company recorded a strong increase in both revenue and profitability.
The performance came as a result of increased sales on the back of sales promotions and restriction of overheads to below sales growth.
Revenue was up 23% to $330,1 million in the half year from $267,99 million recorded in the comparative period last year.
EBITDA (Earnings before interest, tax, depreciation and amortization) grew 42 % to $16,1 million over the comparative period.
Profit after tax amounted to $8,43 million, up 66,3% from $5,07 million in the previous year.
At the end of the period, OK Zimbabwe’s earnings per share was up 61,4% to 0,71 cents from a 2017 comparative of 0,44 cents.
OK Zimbabwe had a net profit margin of 14,84% and a current ratio of 1,47, which means the business is in a position to meet its liabilities when they became due.
Capital expenditure increased by more than half to $7,5 million from $4,9 million last year.
Year-to-date, OK Zimbabwe has gained 48% on the Zimbabwe Stock Exchange to trade at 29,66 cents on Tuesday.