Legacy debt burden hangs over MedTech, carries over into FY-20 operations

Author Name
Rugare Mukanganga
Author
Stock Market 1 month ago

For the year ended December 31st 2020, the manufacturing, retail and distribution group faced internal operational challenges due to macroeconomic disruptions as well a historical legacy debt matter yet to be addressed by the central bank.

Sales

Sales were restructured in the period to focus on foods aligned to the FMCG segment. Additionally, prices were reduced across the board, dampening segment and overall Group profits in the period. Stock-outs continued to affect operations, with FMCG segment sales volumes down 24% in the period.

Manufacturing sales inched up 6% from prior year volumes, with the segment’s revenue growing by 17.6% from FY-19 volumes.

Costs

Cost of sales ballooned in the period, growing to ZWL 238 million from ZWL 132 million in the previous year. With higher costs of production and stock shortages, Group sales fell 5%.

Earnings

Price model adjustments artificially boosted Group turnover from ZWL 313 million in the prior year to ZWL 352 in the period under review. Group profitability however remained subdued, with operational profit decreasing by 69%.

Household MedTech brands

Looking ahead, legacy debt issues remain out of the Group’s control; but for manageable issues such as cost control and overall competitiveness, the Group will focus on them to maintain market share.

Introduction of a new digital platform (HeyZoom) was timely and its profitable launch will encourage further developments by the Group to expand its e-footprint. Margins in the coming financial year are unlikely to appreciate if the Group maintains its price cut-volume push approach.

While this strategy contributes towards revenue growth, it compromises overall profitability.


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