At The Market with Tetrad

Cash/bearer cheques: difference is the same!

Brian Mugabe

IT seems one of the few things in this country not affected by hyperinflation are the figures released by the Central Statist

ical Office (CSO)!



To the surprise of many, the just released inflation figure for the month of August indicated a lower than anticipated 27,1 percentage points month-on-month increase to 426,6%.


As a weekly visit to the supermarket will show, the rate at which prices are moving is truly mind-boggling. Yet the publication from the CSO would have us believe that the month-on-month food inflation for August dropped 0,5 percentage points on the July rate. I find that very difficult to reconcile.


Press reports this week announced that the central bank would next week introduce a new payment method by way of bearer cheques in an effort to help ease the prevailing cash shortages. These cheques will be issued in denominations of $5 000, $10 000 and $20 000, and will be printed on bank note paper.


It is also intended that the cheques will be available via ATMs and will be “as good as cash and circulate freely and can be used for all transactions as money”.


If you ask me these bearer cheques are simply a reverse listing of cash on to the market, given the features described above, and one wonders why instead of using the bank note paper to simply print – well, bank notes, the resource is used to print travellers’ and bearer cheques.


Let’s just throw pride aside and print the higher denomination notes that our hyperinflationary economy demands. As it stands now, the new $1 000 note won’t even buy a loaf of bread by the time it is injected into the market.

Turning to results, this week we look at those of Celsys, Colcom, Murray & Roberts and National Tyre Services (NTS).


Celsys experienced a truly phenomenal year, presenting its first set of annual results since listing. Driven by the unprecedented success of its new community payphone project c-phone, which contributed more than half the company’s turnover in its short period of existence, turnover was up 1 035% to $10,3 billion.


Total income at $11,1 billion increased at an even higher pace as other income at $3,6 billion, grew 67 times on 2002. The latter figure mainly comprised the company’s gains on stock market investments, the proceeds of which were to be utilised for negotiating new bulk supply agreements.

Operating profit was up 1 879% to $9,8 billion, representing a staggering operating margin of 95%, up from 55%. The growth in margins was attributed to the ongoing success of the credit retail business, where high margins are enjoyed on both the handsets and by way of finance charges, as well as the sterling performance of the investment portfolio. Also, operating expenses growth was kept well below that of turnover.


Attributable earnings of $7,7 billion were attained, as the company achieved exponential growth compared with the $314 million recorded in 2002. Colcom also produced a margin-driven set of impressive financials for its half year to June.


Turnover was up a sub-inflation 262% to $8,1 billion, with overall volumes having experienced a 9% decline.


A change in the sales mix towards more value-added products, the introduction of new products, increased exports and the benefits of strategic stock purchases made during the prior year, all contributed towards a significant improvement in operating margins which went from 14% to 38%.


As a result, operating profit went up by 885% to $3,1 billion, more than making up for the relatively poor turnover performance.


Higher borrowings to finance increased levels of working capital saw finance charges up 864% to $319 million, while income from associates and from the joint venture went up 397% and 408%, respectively.


Buoyed by the strong operational performance, attributable earnings of $2,5 billion were recorded, an increase of 854%.


One of the companies that has adeptly re-engineered itself in response to the current economic scenario is Murray & Roberts and the group’s interim results to June reflected some of the benefits.


Turnover was up 435% to $30 billion with all the divisions recording improved volumes. Yields at agro-exporter Bonnezim were affected by cyclone Japhet but output still managed to exceed contract commitments while the manufacturing division saw increased export volumes. Local construction activity remained high while regional projects were described as “satisfactory”. Operating profits grew by 609% to $9,9 billion with margins jumping from 8% to 33%. The increase in margins was attributed to good export performances from the manufacturing and agro-industrial divisions.

Margins in the construction division remained low, mainly as a result of the division having to undertake low margin building projects rather than higher margin civil works projects.


A 10-fold increase in finance charges from $22 million to $219 million was experienced as the group took advantage of the negative real interest rates by increasing borrowings to fund working capital requirements. Bottom line earnings growth of 668% to $7 billion was achieved compared with $916 million in 2002.


Lastly we take a look at the interim results of NTS.


Turnover was up 377% to $8,8 billion, despite volumes, particularly in the first quarter, being affected negatively by price controls and their impact on availability of tyres with Dunlop at that stage having ceased production.

Overall tyre volumes were down 10%, with light commercial,

off-road/agricultural and passenger volumes down, while volumes for the truck tyre market, both retread and replacement were up by approximately 20%.


The retread business performed well with volumes on the increase during the half year. Operating profit was up 626% to $2,9 billion courtesy of expenditure growth being kept below that of revenues at 325%.