Meikles profit after tax falls to $3bn

MEIKLES Limited recorded a reduction in profit after tax to $3,1 billion in the financial year ended February 28, 2023, owing to significant increases in net operating costs.

The decrease in profit after tax was from a 2021 comparative of $8,09 billion.

Meikles noted that pricing, salary reviews, low margin units, utility costs and declining disposable incomes weighed down the company’s profit margins.

In a statement accompanying the financial statement for the period ended February 28, 2023, Meikles chairperson John Moxon said the economy faced elevated levels of inflation, a depreciating exchange rate and rising interest rates during the period under review.

“Profit after tax (excluding investment income of $3,6 billion and $179 million profit on distribution of subsidiary equity to shareholders in the previous year) declined by 48% to $3,1 billion. In historical cost terms, profit after tax increased by 206% on a like for like basis,” Moxon said.

“Total comprehensive income was boosted by the exchange rate impact on the translation of foreign subsidiary and increased to $25,4 billion.”

Group revenue grew to $278,9 billion, up from $191,7 billion recorded in the prior period.

“Growth in sales units was achieved at the supermarket segment under tough operating conditions characterised by declining customer disposable income during the greater part of the period under review,” Moxon said.

Meikles operates in supermarket, hospitality, property and security services niches.

In its supermarkets niche, revenue was up 44% to $275,6 billion during the period under review, making it the group’s largest contributor to overall revenue.

“For the greater part of the period under review, the segment focused on striking a balance in advancing the needs of all stakeholders in a tough trading environment,” Moxon said.

“Supplier payment terms tightened, and the cost of goods escalated in response to high interest rates and inflation. Profit after tax decreased by 40% to $4,2 billion.”

Hospitality saw revenue increase by 242% to $2,6 billion, from $750 million last year, largely owing to room occupancy levels rising 11,57 percentage points to 28,33%.

Profit after tax in this segment increased to $1,3 billion.

In the property segment, the concern is continuing to refurbish and develop its properties in Harare, Mutare and Bulawayo.

“Gross profit margin decreased by two percentage points to 23% from 25% in the previous year, partly reflecting the impact of the supermarket segment’s strategic thrust on responsible pricing to support customers during the challenging times. In addition, the sales mix was dominated by grocery items that have low margins,” Moxon said.

“Group net operating costs increased by 63% to $67,1 billion. The group reviewed employee remuneration on a regular basis to cushion employees from the rising cost of living. Consequently, employee costs increased by 64% and were 50% of total operating costs.”

In addition, the increases in costs denominated in foreign currency and utility costs weighed down revenue.

Total assets rose 48,4% to $104,4 billion during the period under review. Driving this increase was a $16,13 billion rise in cash and bank balances.

Resultantly, the company ended the period under review in a very liquid position having $1,73 to every dollar of debt.

“The economic direction of the country during our forthcoming financial year is difficult to assess in terms of a determination of possible financial performance of the group, primarily due to volatile exchange rates and high inflation,” Moxon further noted.

“Group sales for the first three months of the financial year and trends to the date of the release of this report have exceeded expectations, as has trading profit.”-newsday