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Harare – Zimbabwean diversified conglomerate Meikles Africa Limited said it is on a sound footing in the country’s difficult economic environemtn, with turnover for the nine-month period to end-December rising 12% to US$347m.
The group advised that the government has expressed willingness to settle an outstanding amount owed to the company.
Meikles Africa runs hotels, agricultural processing and Tm Supermarkets, a retail division in which South Africa’s Pick n Pay [JSE:PIK] has a 49% stake.
Zimbabwe’s economy is struggling, with economic performance declining and purchasing power wilting owing to companies scaling down operations and cutting salaries for employees.
Retail operators have also been forced to lower their profit margins and are required to pick half their stock from local suppliers.
“Overall margins, together with operating income margins at 21.8%, were marginally better than those of the previous period (2015) of 21.2%. The sales mix in the group as a whole does distort this comparison, as margins vary over group activities,” Meikles said in a trading update issued on Tuesday.
Expenses for the period also declined in line with corporate strategies in Zimbabwe to lower costs in a bid to enhance profitability prospects. Meikles said its earnings for the period under review expressed as a percentage of turnover further decreased from 21% in the same period in 2015 to 19%.
Earnings before interest, tax, depreciation and amortisation had firmed up by $9.5m, the company said. Hotel operators are calling on the government to lower the VAT tax on the industry, which they say has hit profits in the industry and heightened costs for tourists.
Referring to the dispute between Meikles and the Zimbabwe Stock Exchange, the company said: "Shareholders are advised that a basis on which funds are to be recovered has been agreed. The government has undertaken to repay the outstanding funds in terms of the Reserve Bank of Zimbabwe Debt Assumption Act.
“Negotiators in both government and the company are to be commended on the conclusion of the agreement,” Meikles said, giving no further details.
However, the company has previously said that the government was settling the money it owes the company through issuance of treasury bills.
Zimbabwe’s debt market is tainted by uncertainty over the government’s ability to honour long-term borrowings at a time when it is struggling to meet its regular obligations - such as civil servants' salary payments - on time.
Despite the worries over the Zimbabwean VAT tax on the tourism industry, trading in the Meikles’ hoteling division during the year to March 31 2015 was described as “satisfactory”.
Revenue at $16.4m for the 2015 full year was up 5% on the prior full-year period.
