Meikles Limited says it will pay more attention to the performance of its retail operations at a time the hospitality business is battling the negative impacts of Covid-19.
This comes as the group is unbundling Tanganda Tea Company, the group’s agriculture business, which will then be listed separately on the Zimbabwe Stock Exchange.
While the Covid-19 pandemic has affected businesses across sectors, tourism has suffered the most due to travel restrictions.
Meikles is currently weighing its options in the business.
This leaves the retail business, which has always been the group’s cash cow, as the main area of focus for immediate growth.
“It is envisaged that Meikles Limited will focus on the retention of its investment in retail, primarily supermarkets,” said chairman John Moxon in a performance update for the year to March 31, 2021.
Commenting on the hospitality business, Mr Moxon said: “The status of the hospitality assets is yet to be decided, but a strategy to unlock and enhance shareholder value will be determined,” he said.
While the group’s hospitality business reported a loss of $629 million in the financial year to March 2021, the retail business — supermarkets — trading as TM Pick n Pay remained resilient although it also recorded lower volumes due to reduced trading periods in compliance with the Covid-19 restrictions.
“The strength and stability of the segment is reflected through the generation of sufficient cash flows from operating activities to fund the operations, investment in new stores, refurbishment of the existing stores and a payment of a dividend to shareholders during a period with significant Covid-19 disruptions.
“The segment invested $578,5 million in store upgrades and two new stores, Pick n Pay Aspindale and Pick n Pay Chiremba. In the next three years, a substantial growth in investment in this segment will be implemented,” said Mr Moxon.
The segment recorded a 3 percent increase in revenue. Sales volumes went down 21 percent primarily due to Covid-19 induced restrictions in trading times. In addition, some stores had to close for certain periods of time when staff tested positive.
Mr Moxon said the decline in volumes reduced in the second half of the financial year and volumes are currently increasing on a month-on-month basis.
Operating profit grew to $1,1 billion from $734, 1 million in the same period last year on tight margin control and substantial savings in operating costs, other than employee costs.
According to the group, the pandemic resulted in unforeseen costs, for instance the cost of sanitisers, masks and tests.
Employee costs expressed as a percentage of revenue increased, due to statutory increases in basic salaries and the need to cushion employees through cost-of-living adjustments during the challenging economic times while other payroll related costs increased such as staff uniforms, transport allowances and medical aid expenses.
The segment posted an after-tax profit of $632 million, a 68 percent reduction from the $2 billion recorded in the previous year.
Overall, the group’s profit after tax for the year from continuing operations was also on the downside declining by 90 percent to $373,3 million from the previous year’s $3,5 billion. Included in the previous year’s profit is a monetary gain of $4,5 billion, whereas the year under review has recorded a monetary loss of $725,2 million, a decline of $5,2 billion from the previous year.
Group revenue for continuing operations grew by 3 percent to $28,4 billion from $27, 6 billion in 2020. Operating profit for the year from continuing operations was $878,3 million, down 2 percent from $894,5 million in the prior year.
All other expense items increased to a lesser extent than the growth in revenue. Meanwhile, the group is upbeat the unbundling of Tanganda will further unlock value of capital invested in crop diversification for its shareholders.
As at FY21 end, Meikles had cumulatively injected US$20,8 million for macadamia nuts and avocado plantations development, an avocado processing facility and recently for solar power plants.
Further capital has been provided after the year-end.
Said Mr. Moxon: “Tanganda is now in a strong financial position and well set to independently sustain its operations going forward. Subject to shareholders’ approval, Tanganda is to be unbundled in the months before the end of the calendar year and is to be separately listed.”
The group is also looking at ways to unbundle properties from its vast portfolio and to provide an opportunity for shareholders to enhance value.
This will be implemented after the Tanganda unbundling process. Meikles declared a final dividend of $1 a share.