In its half-year results to June 2008 the company reported an operating profit of $1 091 186 014 and ambitious future plans to create synergies with South African retail giants Pick ‘n’ Pay. As at 30 June 2008, year-to-date inflation was at 297,614 percent while industrial index return was at 1,991,479 percent.
“Because of the diversified nature of the group, it has shown potential to withstand the economic pressure and thus we believe the group can maintain the performance in the second half of the year,” the group said in a statement.
The group noted that they faced a number of problems owing to a deteriorating economic condition.
“The six month period to 30 June 2008 was extremely difficult with conditions creating an environment where the prosperity and survival of some local operations was dependant on the overall strength and structure of Kingdom Meikles balance sheet and cash flows,” said the group.
It said further that the current economic conditions pose a threat to the operations of the Group. “The hyper-inflationary environment is bound to continue eroding margins in treasury, retail and hotel operations of the Group. Loss of skills is also of concern. Price controls being administered by the National Incomes and Pricing Committee (NIPC) will remain a major hindrance to the smooth operation of the Group,” the group said.
It said sales margins and volumes are likely to be negatively affected by the operations of NIPC as it sometimes force sub-economic prices upon business.
Kingdom Financial Holdings’ operating profits increased by 367 percent to Z$678 quadrillion. Its interest and non-interest income contributed 4 percent and 96 percent respectively.
“Cost to income ratio came down marginally to 14 percent from 15 percent,” the group said. It said, during the period under review, a modern Point of Sale system was successfully rolled out in retail and hotel subsidiaries.
Meikles Africa Hotels’ operating profits increased by 8.6 percent to Z$29 quadrillion with group room occupancy increasing by 8 percent to 42 percent.
The group however admitted that this was not a flattering performance considering that in US dollar terms revenue per available room was flat for Zimbabwe operations and increased by 17 percent at the Cape Grace.
Tanganda Tea Company’s operating profits increased by 514 percent to Z$92 quadrillion. “Tea production was 4,089 tonnes, 12 percent down on prior year. Shortage of labour and irregular weather patterns were the major constraints,” said the group.
KMAL said exports of bulk tea, at 2,962 tonnes were 2 percent down on prior year, as world tea prices remained constant.
KMAL’s retail operations reduced losses from Z$79 quadrillion to Z$59 quadrillion though suppliers still insisted on cash terms.
It cited some of the problems it faced in this section as that product availability were constrained by manufacturing output; frequent electricity outages resulted in increased costs. The good news is that one new TM branch has been completed and two are still under construction.
Cotton Printers’ operating profit increased by 69 percent to Z$2 quadrillion even though lint supplies were erratic resulting in low production of yarn. “The local market for bed linen has been confined to small volumes to the hospitality industry,” the group said.
In its outlook the group said it would continue to take advantage of synergies and resources across its business entities and the diversity of the group with its solid asset base provides the strength to manage the current difficult environment.
“Kingdom Meikles continues to examine opportunities aligned to all of its businesses in the region. Those at a more advanced stage include a joint regional expansion programme with Pick ‘n’ Pay and utilization of hospitality assets to expand potential foreign investment opportunities,” the group said.
It also said the Reserve Bank of Zimbabwe (RBZ) has agreed to restore the fungibility of Kingdom Meikles shares on the London Stock Exchange.
“This should facilitate the group’s fund-raising efforts for new projects which have been identified in the region and, at an opportune time, in Zimbabwe,” it said. KMAL also said it was waiting for the 2010 Soccer world cup in South Africa with the hope of scoring a jackpot.
“The amount of business that is likely to be generated by the 2010 World should not be underestimated and if there is a company that is likely to benefit the most is KMAL through its diversified units especially the Hotel division,” it said.
Source: The Sunday News