Meikles posts interim profit despite group’s increased operating losses
Zimbabwe Stock Exchange (ZSE) listed retail and hospitality group Meikles Limited reported an inflation-adjusted profit of $9,6 billion in its half-year ended August 30, 2022.
During the period under review, Meikles operating losses widened to $17 billion from $6,9 billion in 2022 however, the losses were reversed by net monetary gains of $64 billion after exchange losses of $15,6 billion were incurred.
Commenting on the performance, the group said increased electricity costs, which rose by 200 percent during the same period, as well as the pegging of employee costs to the official exchange rate, drove costs.
Gross profits increased by 158 percent to $216,3 billion after revenue increased by 101 percent to $869,8 billion.
Economic analyst Namatai Maeresera believes the performance suggests the challenging operating environment had an adverse effect on the group’s performance.
“Moderate improvement in gross profit margins was dragged by escalating operating costs as the staff costs to revenue ratio increased to 15 percent and rental costs to revenue ratio increased to 6 percent,” he said.
According to Maeresera, monetary value gains from the group’s off-shore assets were seemingly the key factor in keeping it profitable.
Arguably, the enforced in-store exchange rates are effectively a handicap for formal retailers in their ongoing battle to win back consumers from the informal sector. The view remains that it is a potentially sensitive issue, with a socio-political dimension that might be a slight challenge for policymakers.
“There’s also the long-term downside risk presented by a potentially subdued 2023/24 agricultural season that could lead to rising agricultural commodity prices and depressed consumer disposable incomes,” he added.
The positive aspect is that the group’s working capital position looks stable, and it has the benefit of a foreign currency-generating subsidiary.
Overall, the outlook for the group’s second half-year looks promising, with the relatively stable local currency and the festive period set to drive volumes.
Maeresera believes Meikles’ long-term outlook is uncertain though, as downside risks could significantly dampen consumer demand. — Business Weekly