Upmarket Meikles targets the poor

HARARE - Meikles Limited (Meikles) intends to make forays into the lower end of the market as part of strategies to boost revenue and unlock shareholder value.

The Zimbabwe Stock Exchange-listed group, whose departmental stores — Barbours, Greatermans and Meikles — targeted the affluent, plans to establish a mass market unit Meikles Mega Market that will cater for the poor.

“The first unit will be launched in Harare in early December 2013 and will be extended to other locations next year,” said group chairperson John Moxon.

This comes as most Zimbabwean retailers are finding the going very tough due to an acute liquidity crisis coupled with low disposable incomes.

Also, the retailers are facing stiff competition from cheaper imports, particularly from China and South Africa.

Recently, Meikles Stores retrenched 55 workers due to viability challenges.

Moxon conceded that in the short term, it is expected that the group’s retail divisions will continue to encounter demanding environmental challenges particularly tight market liquidity conditions and depressed consumer expenditure.

“However, TM Supermarkets will look to benefit from the renovation of its units and the expansion of its branch network, which is gaining momentum,” he said.

In the half year to September 2013, Meikles recorded a $37,5 million boosted by $42,6 million from non-trading income against $3 million recorded prior year.

The bulk of the non-trading income is interest accrued on the funds on deposit at the Reserve Bank of Zimbabwe (RBZ).

Management believes that a solution to the long outstanding deposit at the RBZ may be coming shortly.

“When this solution is achieved, the Group expects to retire all local short-term borrowings, and if necessary assist Group companies with the redemption of term loans on due date.

“The Group will also be in a position to provide funding for further working capital in the Group divisions.

“There will be funding available to support the Employee Share Schemes, which are an important part of the group’s indigenisation processes,” said Moxon.

Meikles revenue in the six months rose marginally from $189 million in September 2012, to $190 million.

However, the group’s earnings before interest, taxes, depreciation, and amortisation (Ebitda) in the period under review declined to $1,45 million against $2,27 million prior year comparative.

Moxon noted that due to liquidity constraints, capital expenditure and working capital requirements, the group is unable to pay an interim dividend.

“However, on repayment of the RBZ deposit there should be sufficient capacity to resume the payment of dividends. 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,” he said.

Meikles forms one of the leading retail and hospitality groups in Zimbabwe comprising TM Supermarkets, Meikles Hotels, Tanganda Tea Estate, and Thomas Meikles Stores, trading under the names of Meikles, Barbours and Greatermans.

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