Meikles exits financial services market

Meikles exits financial services market
Published: 30 November 2017
ZIMBABWE Stock Exchange listed diversified conglomerate, Meikles Limited, has disposed its financial services arm due to the worsening cash crisis in the country and stringent central bank regulations.

"The group disposed of its financial services operations on August 31, 2017. The group does accommodate all financial services participants to ensure ease of transacting for customers," Meikles chairman John Moxon said.

Meikles Financial Service (MFS), which offered mobile financial solutions and bill payment services in the country under the name MyCash, was established early last year and became a hit with shoppers because it allowed them to withdraw large amounts of cash at a time banks were limiting withdrawals.

The product backed by the People's Own Savings Bank and 30 percent owned by Veritran Limited  allowed mobile money transactions, including transfers, utility payments, and savings, in addition to other regular banking services at lower transaction costs.

For instance, MyCash card holders could make instant transfers of up to $1 000 to any account at another bank using ZIPIT and would be charged only $1.

MFS, however, ran into problems when the central bank introduced stringent measures that forced all retailers to bank their money at the close of business every day as part of strategies to ease the worsening cash shortages.

The southern African nation, which ditched its own currency for the greenback and other foreign currencies in 2009, is experiencing acute shortages of cash, forcing banks to limit daily withdrawals.

United States dollar notes have largely disappeared, with those holding them selling the cash at a premium of up to 40 percent, especially to businesses seeking to import goods.

Government said cash shortages stemmed from a lack of confidence in the financial system, a mismatch between cash dollars and bank balances and poor cash circulation due to "lack of discipline and rent seeking behaviour".

Meanwhile, Meikles returned to profitability in the six months to September after registering a $3,2 million profit compared to a loss of $1,4 million in the same period in 2016.

The company's revenue in the half year period grew 12 percent to $254 million from $225,9 million in the previous year.

"Earnings before interest, tax, depreciation and amortisation (Ebitda) for the period grew by $5,7 million or 60 percent from $9,5 million in the previous year to $15,3 million," Moxon said in a statement accompanying the financial results.

In the period under review, Meikles supermarket chain, TM Pick n' Pay saw its revenues surging 15 percent to $232 from $202 million in the previous year.

The growth in revenue included a substantial increase in the number of units sold, Moxon said.

"Ebitda for the period grew by 38 percent to $13,2 million. Profit before tax was at $9,1 million, a 49 percent growth from $6,1 million in the previous year.

"Refurbishment works are in progress at a number of branches with completion expected before the commencement of the festive season. Additional branches are soon to be opened and others are under consideration in terms of forward planning," he said.

Meikles agricultural unit, Tanganda, also performed above expectations when its revenues surged 26 percent to $12,9 million from $10,2 million achieved during the six months ended 30 September 2016 due to an increase in international bulk tea prices to an average $1,65/kg compared to $1,51/kg a year ago.

Moxon said the bulk tea production of 3 077 tonnes was 37 percent higher than 2 251 tonnes produced in the comparative prior year period.

"The average price on avocadoes of $1,62/kg was 80 percent higher than the previous season's average price of $0,90/kg due to significant improvement in quality as the trees mature. Some 629 tonnes of avocadoes were exported compared to 127 tonnes in the previous season," he said, adding that macadamia nuts sales of 192 tonnes for the six months to September 2017 were 19 percent higher than 162 tonnes for the six months to September 2016.

Average price of $4,39/kg was 57 percent higher than $2,80/kg realised in the previous period.

In September 2017, Tanganda accessed the concessionary Reserve Bank of Zimbabwe's export finance facility which has assisted significantly in sourcing inputs and retiring expensive debt. This development has placed Tanganda in a sound financial position.

The group's hospitality unit registered a 13 percent increase in revenue to $8,7 million, with the growth primarily attributable to a surge in tourist arrivals in Victoria Falls after new airlines commenced flights to the resort town during the period under review.

The Meikles chairman said room occupancy grew by 4,59 and 13,14 percentage points at Meikles Hotel and Victoria Falls Hotel respectively.

"The average room rate grew marginally at Victoria Falls Hotel. At Meikles Hotel the average room rate declined by seven percent as the mix of business during the period was dominated by conference groups," he said.

"Ebitda for the period grew by 84 percent to $2,1 million from $1,1 million in the previous year," Moxon said adding that the lease for the Victoria Falls Hotel was recently renewed with plans to refurbish the hotel at an advanced stage.

Under its Meikles Stores and Meikles Mega Market unit, the diversified conglomerate closed seven outlets during the period under review due to working capital constraints.

"Ebitda for the period resulted in a loss of $1,8 million compared with a loss of $1,6 million in the previous year. Funding arrangements for working capital requirements have very recently been secured. The division will shortly be in a position to trade in a normal fashion and the turnaround lead period to profit is expected to be relatively short," he said.

- Fin Gaz
Tags: Meikles,


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