MEIKLES Limited ditches short-term borrowings

Last week MEIKLES Limited said it will no longer rely on expensive, short-term borrowings from the domestic market to fund medium term expansion projects as part of a strategy to reduce finance costs, 'The Financial Gazette' reported.

Chairperson, John Moxon, said the group had adopted the funding policy after suffering a loss of US$3,4 million for the financial year to March 31, 2012. The group had posted a profit of US$6,1 million during the same period last year.

Moxon said long-term funding, shareholder funding or minority shareholder funding would be sought for the company's projects instead of short-term local borrowings.

"The full implementation of this financial policy will result in a reduction in finance costs as well as securing a sound balance sheet structure for the group," he said.

"These factors, together with the improving performance in the divisions and further profits from the region will enable the resumption of dividend payments to group shareholders," Moxon said.

"Funding for partly owned subsidiaries or associates will only be provided in proportion to the group's percentage shareholding and will be provided with the co-operation and participation of other shareholders in these companies," said Moxon.

Moxon said the group would continue to fund its investment of retail store debtors from borrowings or from the sale of the debtors book to a third party.

"The groups will retain minimal and inexpensive short-term borrowings from local banking institutions," Moxon said.

Moxon, said the group's agriculture division suffered from a severe frost last winter and an unusual adverse weather pattern in the summer.

"Losses that arose and were accounted for in the second half of the year as a direct result of the adverse weather amounted to US$2,9 million in direct revenue and US$2,3 million loss of profit," he said.

The group's finance costs were US$4,3 million and US$4,2 million in the first and second half of the year respectively.

Moxon said these sums have been significant in their impact on group's performance for the year under review.

He said Meikles was in negotiation with various financiers regarding the injection of significant funding. In addition, the discussions with the Reserve Bank of Zimbabwe were continuing for the freeing of funds held on deposits.

"These initiatives will retire all group borrowings other than those identified, will leave substantial credit balances with the group's bankers and will provide funding for expansion opportunities," Moxon said.

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