Performance of Hotels Division before disposing Meikles in 2020
- Seeking shareholder approval to dispose certain key assets, in a "Category 1" transaction
- The proposed asset sale is significant, reaching up to 30% of Meikles' existing assets
- This is 4 years down the lane after selling Meikles Hotel
Harare- Meikles Limited, one of Zimbabwe's largest diversified conglomerates, has announced that it is seeking shareholder approval for the disposal of certain key assets at a future Extraordinary General Meeting (EGM).
The proposed disposal transaction has been qualified as a "Category 1" transaction under Zimbabwe's regulations.
A Category 1 transaction is a significant type of corporate action, where the size of the transaction reaches up to 30% of the company's existing assets.
Meikles Limited stated that it will be convening an EGM to obtain shareholder approval for the proposed asset disposal. If approved at the EGM, the disposal of these key assets could have a material impact on Meikles Limited's operations and financial position.
The company has assured shareholders that further details on the specific assets involved and the rationale behind the disposal will be provided ahead of the scheduled EGM.
This announcement comes four years after Meikles’ decision in 2020 to dispose of its flagship Meikles Hotel asset to a Dubai-based company for US$20 million.
The iconic hotel, which was over 100 years old, had become less profitable especially since 2014 due to currency distortions and regulatory changes, such as the new requirement to charge foreign visitors VAT (15%).
Foreigners had constituted a larger chunk of Meikles Hotel's earnings, and the introduction of VAT effectively made Zimbabwe a more expensive destination, leading to declining profitability.
While the Hotels division's overall performance was concerning, the losses specifically at Meikles Hotel were significant as compared to Cape Grace Hotel in South Africa, and the Victoria Falls Hotel.
Between 2014 and 2018, Meikles Hotel racked up close to US$15m in losses.
By 2019, Meikles was constrained on capital and would have needed to invest another US$30 million to renovate the hotel, prompting the decision to sell the asset.
In terms of the group's current performance, Meikles has been performing well since the introduction of the Zimbabwean dollar (ZWL) in 2019.
However, the company continues to face mounting pressure on its retail sales due to price caps and the high informalization of the Zimbabwean economy. Retail sales declined by 10% in FY24 and by 4.8% in HY2024, remaining a recurring challenge for the group.
As Meikles Limited seeks approval for the disposal of additional key assets, the market will be closely watching the outcome of the proposed transaction and its impact on the company's future strategic direction.
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