Meikles says wage bill guzzled 55% of operating costs |

By Alois Vinga

DIVERSIFIED listed group, Meikles Limited says the wage bill gobbled 55% of total operating costs attributable to the indexation of Collective Bargaining Agreements in US$.

Presenting the group’s performance for the half year’s period ended August 31 2023, Meikles Limited chairman, John Moxon said the period was characterised by significant labour costs.

“Employee costs, which made up 55% of operating costs increased by 169% (Historical cost: 931%) on a like-for-like basis. In the current period, salaries and wages were fixed in US$ at collective bargaining forums with an option to pay in ZWL at the interbank exchange rate ruling at the time of payment.

“Accordingly, employee costs increased in ZWL in line with the exchange rate depreciation,” he said.

The figure contradicts international best practices which state that labour costs should constitute between 20 to 35% of total operating costs.

Human Resources experts are of the view that dealing with the challenge is a huge task which requires a balancing act of finding ways to streamline labour costs without sacrificing workforce morale or productivity.

During the period, group revenue grew to ZWL 869.8 billion representing a like-for-like increase of 101%. (In Historical cost terms, a like-for-like growth of 654%) attributable to price adjustments in the supermarkets segment, which contributed 98% of the group’s revenue.

Gross profit margin was above last year by 5,44 percentage points on a like-for-like basis.

In historical cost terms, the gross profit margin increased to 34.78% from 32.40% in the same period last year.

Net operating costs increased by 147% (Historical cost: 872%) on a like-for-like basis. Overall, most prices in the economy were pegged in US$ and converted to ZWL at the time of payment during the period under review.

As a result, operating cost increases in ZWL were mainly due to the exchange rate depreciation.

Electricity tariffs were increased by 200% in US$ terms. The retail sector negotiated to pay the bills in ZWL and thus monthly the cost in ZWL escalated in line with the depreciating exchange rate. In the prior year, electricity tariffs were pegged in ZWL, and the reviews were not as frequent.

Investment income increased to ZWL 1.3 billion from ZWL 63 million on a like-for-like basis and it was primarily interest received on the Group’s offshore subsidiary funds on call. Interest rates on US$ deposits on call averaged 5% during the period under review up from 1% in the comparative period.

“Going forward, the group will continue to leverage its strong liquidity position to adapt to the evolving economic environment during the second half of the financial year and beyond.

“The supermarket segment is stocking up for the festive season in anticipation of increased sales. The property segment will accelerate the refurbishment of the properties outside Harare,” added Moxon.

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