LISTED manufacturing, retail, distribution and services company, Medtech Holdings, has gone digital, adding an online retail platform — HeyZoom to its fast-moving consumer goods (FMCG) segment.
In recent months, a number of companies have been compelled to introduce e-commerce platforms after the Covid-19 pandemic and accompanying lockdowns highlighted the need for businesses to have efficient online systems.
Notwithstanding the new e-commerce platform, Medtech’s FMCG segment still saw a dip in sales over the year to December 2020.
“HeyZoom is a new addition to the Group and FMCG segment. HeyZoom is an online retail platform. Segment revenue increased by four percent compared to the comparative prior period. Sales volumes decreased 24 percent compared to the comparative prior period,” said chairperson Mrs Rosemary Mazula.
“Margins decreased due to reduced real selling prices as well as promotions entered to try and increase sales volumes, which had significantly decreased compared to the prior period.”
However, the FMCG segment posted an inflation-adjusted profit before tax of $36,7 million. Medtech’s FMCG segment also includes MedTech Distribution, Smart Retail and Choice Brands.
For the period under review, the group’s revenue increased by 12 percent compared to the comparative prior period, although group sales volumes decreased by five percent.
Management attributed the decline in volumes to a number of factors, including the stance by the company to restrict sales due to the continual devaluation of the debtors’ book with the aim of preserving shareholder value, decreased consumer spending due to increases in prices and this has caused aggregate demand to remain subdued, and stock-outs because of challenges in sourcing replacement stock of raw materials and goods due to stop supply from foreign creditors because of overdue balances and key local suppliers demanding prepayment.
Mrs Mazula said margins were reduced mainly due to the reduction in real selling prices to boost sales volumes and focus was placed on ordering and selling lines with a fast stock turnover.
“One should also note that the margins in the prior year were artificially high,” she said.
“Previously there was slow-moving stock recorded at historical cost but due to inflation selling prices were regularly increased to cover real replacement cost resulting in artificially high margins.”
Management attributed the inflation-adjusted net exchange rate loss included in the net finance costs for the year of $160,5 million “to the translation of monetary liabilities (mainly foreign creditors) during the period.”
The group is hopeful that these losses may reverse if the legacy debts are dealt with by the central bank as promised. The company posted an inflation-adjusted profit before tax for the year of $66,6 million.
Meanwhile, the group has renewed a cautionary statement that it was still in discussion over restructuring the group into an investment holdings company.