Cash-rich Meikles retail expansion on track

Meikles also owns and operates some commercial properties and during the period under review, in Mutare, the company managed to repurpose and refurbish a property which is now already occupied.

Meikles Limited, one of the oldest and well diversified listed retailer, with operations in Fast Moving Consumer Goods (FMCG), Hospitality and Properties released its 11 months to 28 February results. After a series of selling non-core assets including disposing of the asset and operations in Meikles Hotel, unbundling Tanganda and selling its shareholding in Mentor Africa, the company changed its financial year to align with its major subsidiary TM Pick n Pay, which it owns jointly with the South African division.

The supermarkets' division i.e. TM Pick n Pay managed to stretch out marginal gains of 2% in sales volumes albeit the difficult operating environment characterised by high inflationary pressures, hiking of the policy rate and declining disposable incomes.

With over three-quarters of transactions now concluded in foreign currency according to Zimstat, the pressures on the sales volumes also came from the informal competition in the form of tuckshops.

The company’s ability to compete with the smaller informal players, especially in the dry groceries sector is also limited by the restrictions by authorities especially relating to exchange rate.

Essentially the company’s revenue comes from the supermarket division, which contributed 99% towards revenue for the 11 months to February 2023 in Inflation adjusted terms. The contribution has increased over the past few years as the company transitioned from being a conglomerate into mainly a retailer. The company battles with OK Zimbabwe, another listed retail giant in that space with both companies increasing their branch networks and footprint. 

The company opened three new stores in the 11 months under review, at the Highland Park Phase 1, Madokero and Simon Mazorodze. T M PicknPay has been an anchor tenant in most of the recent developments in the country. Another two branches were reported to be at advanced stages by the end of the reporting period, one of which is the Orr Street branch and is now operating.

The hospitality sector, where the company partly own The Victoria Falls Hotel together with First Capital Bank, recorded positive results. For the greater part of the period under review, the tourism and hospitality sector witnessed great recovery from the Covid-19 induced lockdowns and also benefited from 100% foreign currency retentions. According to Zimstat, the Accommodation & Food services sector was the fastest-growing sector in 2022 recording a 23.7% growth.

The group registered a 107% revenue growth in the hospitality segment in US$ terms underpinned by a 15% increase in average room rates and a sixteen-percentage point increase in the occupancy levels.

The company also managed to furbish 47 rooms at the Victoria Falls Hotel. However, the contribution of the hospitality sector towards the company’s assets, revenue and profitability is very minimal.

Meikles also owns and operates some commercial properties and during the period under review, in Mutare, the company managed to repurpose and refurbish a property which is now already occupied. In Harare and Bulawayo, the company also has commercial properties that are being reconfigured and refurbished to meet the appetite of tenants. Meikles have their own security division, which essentially is used in the TM Pick n Pay stores and under the period that business was self-sufficient.

Through internally generated cashflows the company managed to deploy US$15 million into capital expenditure for the period under review. The company’s cash flow from operations was only under 10% of the total cash and bank balances, with the translation of foreign entity and the net effect of foreign exchange rate on bank balances contributing significantly to the total cash flow numbers. Early in 2022, the company pocketed US$14.6 million from the disposal of its shareholding in Mentor Africa, which could be another source of capital expenditure.

Meikles has been very generous to its shareholders with consistent dividend pay-outs stretching since the beginning of the de-dollarisation era. Over that time the company has also managed to dish out US-Dollar dividends, although its shares are denominated in local currency. The total dividend for the period under review was US$0.0165, with the latest set of financials accompanied by a dividend payment of US$ 0.8 cents.

With a current weight of 2% of the entire market cap, Meikles used to be considered as one of the heavyweights on the bourse but now falls under the mid-cap zone and so far in the year is up over 570% in nominal terms. OK, Zimbabwe its local peer with similar weighting is up 364% with its financial results yet to be published.

The expansion and competition in the retail stores continue to be exciting as the companies fight for market share and establish themselves as the brand of choice in the minds of the consumer.

Meikles’ partnership with the South African entity seems to propel it and well position it for the fight but OK Zim seem also to stand its ground.

  • Hozheri is an investment analyst with an interest in sharing opinions on capital markets performance, the economy and international trade, among other areas. He holds a B. Com in Finance and is progressing well with the CFA programme. — 0784 707 653 and Rufaro Hozheri is his username for all social media platforms.

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