Approvals for Pick 'n Pay investment into TM Supermarkets imminent

The regulatory approvals for Pick 'n Pay's US$13 million investment in TM Supermarkets are close to being received. Their receipt will see the implementation of plans to roll out new branded Pick 'n Pay stores, the re-branding of selected existing outlets and the refurbishment of some stores. Pick 'n Pay's investment in TM Supermarkets will also provide additional empowerment opportunities and enhance efforts in returning TM Supermarkets to the status of being Zimbabwe's largest and most profitable supermarket chain.

In a trading update statement for the quarter ended 30 June 2011 Meikles advise that TM Supermarkets turnover rose by 27% to $62 million, marginally below set targets. Gross margin after shrinkage was 17.3% in comparison to 17% in the prior period.

Despite active competitor marketing initiatives, TM Supermarkets has successfully defended its market share and is currently focusing on improving margins. Meikles is in the process of renovating TM Supermarket's Kamfinsa branch which should be re-opened by December 2011 as a Pick n' Pay outlet.

In addition, a 25,000m² supermarket and distribution centre will be developed on the leased former Msasa Jaggers site. Rental agreements for two additional locations for expansion have been secured.

TM's outlook is positive and we are committed to re-establish TM as the dominant supermarket chain in Zimbabwe.

TM Stores revenues rose by 105% to $5.8 million. Credit has continued to grow subsequent to our 31 March year end and the value of credit extended now stands at $7 million from $5 million in the comparable period.

The number of credit accounts increased to 34 000 at 30 June 2011 from 26 000 at 31 March 2011 and our target remains to grow this book to over 80,000 active customers by 2013.

The Group is mobilizing long term funding through our finance partners to allow credit to be extended for longer periods of up to 2 years from the current 6 month level.

Limited disposable incomes still constrain this sector in targeted market segments however, the situation is continuously improving and the recent increase in civil servants salaries, though small, is expected to stimulate spend.

Finance costs will weigh down TM Stores' overall performance in the short-term but recapitalization of this division is expected to have a positive impact on performance in the medium term.