MEIKLES LIMITED, a once formidable group of companies in Zimbabwe, has over the years been involved in mergers, disposals and unbundling as part of business remodelling to its current status.
The group, which is more than 100 years old, has primarily invested in the agriculture, hotel and retail sectors. The entity, whose roots can be traced to a family business, has grown to become one of the largest companies in Zimbabwe.
Its early businesses were hotels, Tanganda Tea Company and Thomas Meikles (TM) Supermarkets.
The family business was listed on the Zimbabwe Stock Exchange (ZSE) in 1996, and in that same year, Pick n Pay South Africa acquired 25 percent of TM Supermarkets.
However, in the last decade in particular, the group conducted a number of transactions, which, according to the group’s 2022 annual report, left the company operating in four business sectors.
The business segments are retail (TM Pick n Pay), hospitality (The Victoria Falls Hotel, operated in partnership with African Sun Limited), property (Thomas Meikles Properties) and security services.
Since 2013, Meikles has been undergoing phased restructuring, which saw the group, in 2020, dispose of its flagship hotel, Meikles Hotel, for a consideration of US$20 million to Dubai-based Albwardy Investments.
The deal was consummated after the group conceded that it had no capacity to mobilise the US$30 million required for the hotel’s refurbishment to turn it into a five-star property.
The unbundling of Tanganda Tea marked another major transaction in 2022. During the same timeframe, Pick n Pay South Africa increased its shareholding in TM Supermarkets to 49 percent, and in 2014, Meikles Guard Services (Private) Limited was formed as a wholly owned subsidiary company.
In 2019, the group closed the department stores trading as Meikles Stores, Barbours and Greatermans.
Mr Malvin Chidzonga, chief investment and research officer with Nivteil Capital, told The Sunday Mail Business that the Meikles group made the right business decisions. He further said its board, management and shareholders exhibited incredible business foresight, which enabled the group to remodel its business.
He said the timing of the group’s disposal of Meikles Hotel, just before Covid-19, was a masterstroke.
Maintaining the group’s investment in the legendary Victoria Falls Hotel was also a great decision, especially with the modernisation of the airport in Victoria Falls, he added.
“The entry of new airlines is poised to result in more business for the Victoria Falls Hotel, including many other hotels in that resort city,” he said.
Chidzonga said, while other retailers have been facing many challenges, including a significant reduction in sales volumes, the same cannot be said of TM Pick n Pay, as the business is getting decent sales volumes.
“The decision by the group to partner with Pick n Pay South Africa has proved to be a key pillar for the group, both in brand terms and from the perspective of the supply of merchandise,” he said.
Chidzonga said the repurposing of the properties owned by the group, which used to house Barbours and other sub-business units, was a step in the right direction.
He said the property arm of the group maximised on the revolution of the local retail business landscape, moving away from large departmental and retail chain stores to a market dominated by small players in various shopping malls.
On the creation of the security company, Chidzonga said it was also a brilliant move, similar to a chess gambit in which the group had to sacrifice and invest a lot with a view to making this sub-business unit a success.
“The security company has helped TM Pick n Pay reduce theft of merchandise at reduced costs. The security company appears to be winning decent security mandates from various corporate clients as the company’s brand is visible at many business premises,” he said.
The group’s disposal of 35 percent of its shareholding in Mentor Africa in 2022 was for a consideration of US$19,08 million, while Tanganda was relisted on the ZSE on February 3, 2022.
As of March 2021, Meikles had cumulatively injected US$20,8 million for macadamia nuts and avocado plantation development, an avocado processing facility and solar power plants.
Chidzonga said in the short to medium term, the business will benefit from the impetus injected into the group through the remodelling of its sub-business units and aligning with the right partners.
“Resultantly, revenue will grow significantly across all business units. Other sub-business units, such as the security company, will increase their share of the market by leveraging on a solid brand, business relationships with key suppliers, service providers and manufacturers, as well as robust operating systems for the company,” he said.
According to Chidzonga, the operating environment, especially the economy’s transition from a more formal set-up to a less formal structure, has influenced the group to close Greatermans and Barbours as more informal retailers were aggressively competing against their business units but with lower cost structures.
He noted that the repurposing of the properties to cater for small retailers was influenced by the proliferation of such businesses, whose market segment is thirsty for operating in high-traffic places where the Meikles group has properties.
Investment analyst Enock Rukarwa said a demerger in its plain vanilla format should enhance strategic focus and reduce diseconomies of scale and scope, and on the other hand, it creates cash flow flexibility for the parent shareholders.
He noted that the flagship business for Meikles, TM Pick n Pay, is currently hamstrung by informal sector penetration and the dollarisation of the economy; however, volumes should start picking up optimally once pricing becomes competitive.
According to the group’s financials for the period to February 2023, group revenue grew to $278,9 billion, representing a 45 percent increase.
Growth in sales units was achieved in the supermarket segment under tough operating conditions characterised by declining customer disposable income during the greater part of the period under review.
Gross profit margin decreased by two percentage points to 23 percent from 25 percent in the previous year, partly reflecting the impact of the supermarket segment’s strategic thrust on responsible pricing to support customers during the period.