Meikles Africa Ltd has turned the corner and returned to profitability, aiming to regain its former blue chip status.
Report by Clive Mphambela
The group is pinning its hopes on a new mining subsidiary and expects all its other operations to once again become profitable.
Meikles posted a turnaround half-year profit before tax of US$1,016 million, reversing a US$7,040 million loss incurred in the same period last year.
Group revenue continued to recover and profit was boosted by US$1,1 million realised from the disposal, earlier in the year, of the Cape Grace hotel to Mentor Holdings.
Meikles last week announced its entry into the currently lucrative mining sector but did not disclose where or what it intended to mine.
Announcing its new mining subsidiary, Meikles Resources, group chairman John Moxon said the new entity would capitalise on the long-standing reputation and history of the group in Zimbabwe and would apply its customary high standards to the implementation and operation of the division.
“Meikles Resources has commenced exploratory mining operations on one opportunity and will start full mining operations as soon as the full extent of the resource has been established,” Moxon said.
Pointing to the significance of the new operations, Moxon disclosed that profits from Meikles Resources were expected to exceed those anticipated from the entire group.
He said discussions would take place on further resource opportunities.
Meikles’ revenue for the six months to September 30 were up 26,67% to US$189,491 million, from US$165,591 million in the prior year.
Cost of sales rose 14,25% from US$130,843 million in the first half of last year to US$149,490 million in the current half-year, boosting gross profit by 15,27% to US$40 million from US$34,7 million last year.
Although net profit was US$767,000, attributable earnings per share were a negative 26 US cents per share, after taking into account a profit of US$1,433 million accruing to non-controlling shareholders.
The company also had a reduction in its exchange rate losses following the sale of the Cape Grace hotel, which used to impact negatively on the group’s balance sheet due to translation of foreign assets.
Moxon said gross profit performance of the subsidiary TM Supermarkets was still below expectations, adding it would continue to refurbish the stores, reduce costs and shrinkage and deliver a wider range of merchandise through bigger refurbished shops.
Meikles is modernising its retail unit in partnership with South African grocers Pick‘n’Pay, who have injected US$13 million for a 49% stake in the local retail chain.
Meikles announced it had shelved plans to inject further capital into its agriculture unit Tanganda, citing changing economics relating to the tea business.
“There appears to be a change in the balance of world supply and demand which will favour the producer. This fact, together with anticipated good rainfalls for the coming season, would result in a substantial rise in Tanganda’s profitability,” Moxon said in his statement.