Depressed set of results from Meikles

Published: 03 December 2013

Meikles Limited released a depressed set of results showing a worsening in the adjusted loss before tax (excluding non-trading income of $42.7m) to $5.5m.

The poor performance was due to increased finance cost (+26%), a depressed operating performance by the departmental stores, and reduced profitability from TM Supermarkets.

The Supermarkets contributed 87.3% to revenue, Tanganda 5.7%, hotels 4.1% and departmental stores 3.4%. Tanganda recorded improved earnings with earnings before interest, depreciation and amortization (Ebitda) margins improving to 3.1% from a negative 12.8%.

The retail division is likely to continue struggling given the prevailing liquidity challenges and low disposable incomes. However, the supermarkets are expected to benefit from the renovations and the expansion of its branch network.

The newly renovated Meikles hotel together with the renovation of the Victoria Falls Hotel is expected to provide a better performance platform for the hospitality division. Tanganda continues to recover with tea prices having firmed. Nonetheless, the departmental stores continue to haemorrhage the group.

The report also highlighted that negotiations with RBZ have been forthcoming to date, and the release of the funds is most likely to happen soon. Management believe that if the money at the RBZ can be accessed the interest burden will significantly reduce as the short term borrowings ($50m) are expunged.

In a note to investors, Imara Edwards Stockbrokers wrote, "The group's turnaround is based on accessing the funds held by the RBZ, however, we do not believe that Meikles will be able to access the money, at least in the short term, given the current financial situation of the RBZ/government." They advise shareholder to sell the stock.
- businessdaily

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