happiness Chikwanha
Golden Sibanda
Senior Business Reporter
MEIKLES Limited only managed to trade itself out of a possible significant loss in the interim to September 2013 due to a significant growth in interest income anticipated as yet unpaid investment deposit at the Reserve Bank of Zimbabwe.With revenue in the six months to September 30 remaining largely unchanged at US$190 million from US$189 million in the comparative period last year, the company appeared firmly headed for a loss considering trading activities had failed to yield positive returns.
But US$42,7 million accrued interest income emanating from the deposit, the central bank lifted the conglomerate to a US$37,5 million profit for the period from a US$406 000 loss in the comparative period last year.
Meikles finance director Mr Onias Makamba said the company has been in discussions with the RBZ regarding the terms on the RBZ deposit with retrospective implications and the aspect regarding the return on the deposit had been concluded as reflected in the interim financial statements.
“Our interim results are prepared in conformity with International Financial Reporting Standards and are consistent in all material respects with the policies applied in previous financial periods,” he said.
However, he would not explain circumstances behind the non-trading income vaulting from US$3 million in the six months interim to September 2012 to US$42,7 million in the half year period to September 2013.
Ostensibly, the company accounted for the anticipated income after getting assurances that the deposit at the RBZ will come through amid indications that a payment plan was being worked out was in sight.
“There are indications that a solution to our longstanding deposit at the Reserve Bank of Zimbabwe may be forthcoming shortly,” Meikles chairman Mr John Moxon said in a statement to the group’s results.
The total balance of US$87 million including the interest on the initial amount that remained at the RBZ after Meikles’ 1996 initial public offering is now listed in the group’s balance as part of current assets.
Mr Moxon said last week that while an agreement with the RBZ on the payment plan was well insight, he was not aware what form this will take neither was he aware when the funds will be realised.
But this largely depends on when Government will be able to mobilise the resources to pay off creditors owed by the RBZ to the tune of US$1,3 billion after Cabinet approval for debt assumption last week.
“When this solution is achieved, the group expects to retire all local short-term borrowings and if necessary assist the group companies with the redemption of term loans on due date,” Mr Moxon said.
“A solution to this outstanding issue is undoubtedly the most important matter for all stakeholders in the group and has been the single largest impediment to growth and stability (of the group),” Mr Moxon added.
Barring extraordinary developments and considering Government’s financial position and the fact that the funds owed by the RBZ would be converted into Treasury bills, the funds may not be paid anytime soon.
Further, though the company is not clear on when the funds would come through, it has also earmarked part of them for loan funding to an employee share trust for the acquisition of 10 percent its equity.
This will go towards fulfilment of its indigenisation plan provisionally approved by Government.
By deduction, since Meikles Limited fulfilment of its indigenisation obligations depends on it getting the RBZ deposit and interest, its compliance will take as long as it will take it to lay its hands on the funds.
Meikles said it was not able to declare a dividend due to the prevailing liquidity situation rocking Zimbabwe and is banking on the RBZ repaying the deposit for capacity to resume rewards to shareholders.
With the retail operations expected to continue facing challenges due to the tight liquidity conditions characterising the economy, Meikles is actually banking on the investment income to leverage profitability.
Despite challenges faced by most of its retail units, the group has since introduced a new addition, Meikles Mega Market, to its stores chain targeting the lower end of the market slated for launch this month.
Online Reporter