aurora
Business Writer
Diversified hospitality group, Meikles Limited, says it will pay attention to its retail operations at a time the hospitality business is battling impacts of Covid 19.
This comes as the group is unbundling Tanganda Tea Company Limited, which is its agriculture business, followed by its separate listing on the Zimbabwe Stock Exchange.
While Covid 19 pandemic has affected businesses across sectors, the hospitality sector has suffered the most due to travel restrictions and the group is currently weighing its options in that business.
This leaves the retail business, which has always been the group’s cash cow the main area of focus for 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, 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 hospitality business reported a loss of $629 million in the past financial year, the retail business – supermarkets – trading as TM Pick n Pay remained resilient although it also suffered reduced volumes due to reduced trading period 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 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.
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 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 cost of sanitizers, 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 avocados plantations development, an avocado processing facility and recently for solar power plants. Further capital has been provided after the year-end.
Said 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.
Bongani Ndlovu