LISTED Meikles Limited group posted an inflation-adjusted profit after tax of $1,39 billion during the period ended March 2020 buoyed by the disposal of Meikles Hotel during the financial year.
BY FIDELITY MHLANGA
During the same period last year, the company posted a profit of $320,55 million.
“The group delivered strong financial results in a tough operating environment with several impediments. Commentary on financial performance is based on inflation-adjusted figures. Group revenue for continuing operations grew by 6% from $8,3 billion in 2019 to $8,8 billion in the year under review,” group executive chairman John Moxon said in a statement accompanying the results.
“Profit for the year grew from $320,6 million in prior year to $1,4 billion. Growth in profit for the year was boosted by $118,7 million profit on disposal of Meikles Hotel.”
The company said the sale of its Harare hotel to Dubai-based Albwardy Investments completed at the end of February 2020 increased the group’s current assets.
Total comprehensive income for the year was $1,1 billion (2019: $561,4 million), of which $790,8 million was attributable to the owners of the parent with the remaining balance of $340,7 million being for minority shareholders.
Meikles supermarket unit trading as TM Pick n Pay realised revenue growth of 2% over the previous year in inflation-adjusted terms but sales volumes declined by 22% due to diminishing customer disposable income over the period.
Profit after tax for the segment grew to $674,8 million from a loss of $21 million in the previous year. Profit growth was achieved through a focused approach to margin and operating expenditure control.
“The profit after tax was after deducting exchange losses of $380,6 million. These exchange losses arose from foreign currency-denominated liabilities (legacy debt) accumulated prior to the introduction of local currency on February 22, 2019. Going forward, there will be no exchange losses as legacy debt exposure has now been eliminated,” Moxon said.
The group’s legacy debt reduced to US$2,23 million as at March 31, 2020 from US$13,3 million at the beginning of the financial year. The payment of the legacy debt was funded from internally generated funds.
After year-end, US$0,6 million was paid, leaving the outstanding balance at US$1,63 million. In addition, $1,63 million was remitted to the Reserve Bank of Zimbabwe.
The segment invested $386,6 million in seven store upgrades and construction of an upmarket mall in Marondera during the year.
The clearance of foreign currency-denominated liabilities has positioned the segment for accelerated store upgrades, branch network expansion, commencement of dividend payment to shareholders and a boost on the working capital front.
In the agriculture segment, profit-after-tax was $157,2 million (2019: $332 million).
“The hailstorm of January 2019, Cyclone Idai in March 2019 as well as a very dry and hot September to November 2019 period affected our tea production and ensuing season’s macadamia crop. The company’s annual tea production of 8 319 tonnes (2019:10 171 tonnes) was reflective of these adverse weather conditions,” Moxon said.
The company said international tea prices weakened by 14% from US$1,64 per kilogramme in prior year to US$1,44 per kilogramme in the year ended March 31, 2020 due to increased supply of tea by Kenya which has not been matched by corresponding world demand.
Furthermore, the firm said the much-needed RBZ authority to increase promotional spend in South Africa had been secured and this would help to support market penetration efforts to grow packed tea exports.
“Export earnings from macadamia nuts, avocadoes and coffee grew by 78% from US$4,5 million in prior year to US$8 million in the year ended 31 March 2020. As a percentage of total exports, these three crops contributed 43% up from 25% in the prior year. Contribution of the high value crops to the company’s export earnings is expected to rise to 60% by March 2022 as the bulk of them reach maturity. In volume terms, macadamia and avocado export sales grew by 129% and 39% respectively,” Moxon said.
To mitigate the inefficiencies caused by power shortages in the country, the company has embarked on a 7,5 megawatt (MW) solar project covering all estates and its Mutare factory.
Phases 1 to 3 of the project covering Ratelshoek, Tingamira and Jersey estates are already under implementation. Ratelshoek’s 1,8MW solar plant is expected to be completed by end of next month.
“Tingamira’s 1,6MW and Jersey’s 2MW plants are expected to be completed by December 2020. By end of December 2020 we will have implemented 72% of the project. This project is expected to result in an efficient and integrated power supply system that will give impetus to the growth and maturity of our high value crops and efficient crop processing,” Moxon said.
On its hospitality subsidiary, profit-after-tax from continuing operations increased to $184,7 million in the current year from $72,5 million in the previous year.
“The refurbishment of The Victoria Falls Hotel was due to commence in April 2020 but has been disrupted by the outbreak of the COVID-19 pandemic. The hotel closed in March 2020 when international travel and tourism stopped as countries implemented travel restrictions and lockdowns to contain the spread of the coronavirus,” Moxon
In addition, the company said plans to renovate and upgrade the group’s property portfolio were at an advanced stage and the roll out was anticipated to commence during the second half of the forthcoming financial year.
He added that several tenants had expressed interest to lease the properties which were left vacant following the closure of the group’s departmental stores.
The security services segment, Meikles Guard Services fared well during the financial year and was not disrupted by loss of contract when the departmental stores closed. The segment secured additional contracts from third parties during the year.
“The group did not anticipate the advent of COVID-19. The impact of the virus has affected the latter part of the financial year under review. It is apparent that the continued impact of the virus will affect the world and Zimbabwe for an unpredictable period into the group’s new financial year,” Moxon said.