RNS Number:1892B
Meikles Africa Ld
22 November 1999
MEIKLES AFRICA LIMITED
Interim results for the six months ended 30 September 1999
Meikles Africa Limited (" Meikles Africa"), the Southern African based
hotel and retail group, which floated on the Zimbabwe and London
Stock Exchanges in 1996, announces a strong operating performance for
the six months ended 30 September 1999.
* Group turnover up 74% to Z$2,954m (1998: Z$1,701m)
* Operating profit up 119% to Z$358m (1998: Z$164m)
* Strong operating cash flow per share of 202 cents, up 80%
* IIMR headline earnings per share at 34 cents shows effect of non-
cash movements, particularly the reduction in currency exchange
gains
* Interim dividend up 75% to 70 cents (1998: 40 cents)
* Acquisition strategy significantly progressed
* Balance sheet remains very strong
Chris Parvin, Chief Executive, commented:
"We are pleased to report an excellent operating performance despite
the persistent difficult economic conditions. Our balance sheet
remains particularly strong and the acquisition of the Cape Grace
Hotel in Cape Town marks an important strategic step for the Group,
as we embark on our strategy of regional expansion. We continue to
seek growth opportunities in the local market in our core businesses
and in complementary business areas."
22 November 1999
Enquiries:
Meikles Africa Tel: + 263 4 252 064
Chris Parvin, Chief Executive
Charles Golding, Finance Director
College Hill - London Tel: + 44 171 457 2020
Corinna Dorward
College Hill - South Africa Tel: + 27 11 447 3030
Kim Paton
CHAIRMAN'S STATEMENT
INTRODUCTION
The economic and social problems facing Zimbabwe have persisted in
the last six months. Escalating inflation, high interest rates, a
poor investment climate and worsening unemployment have begun to
impact negatively on consumer spending and costs, although in the
reporting period little effect is evident in the Group's results.
RESULTS
In spite of the difficult environment, the Group has produced strong
operating results at the half-year mark. Turnover was 74% up on the
first 6 months of the last financial year and operating profit
increased by 119% over the same period. Turnover indicates a gain
in market share in the two retail divisions particularly in the
second quarter.
Expenses have been contained and stockturns have improved. Operating
cash flow at Z$309 million shows growth of Z$137 million over the
same period last year. The Board has recommended an interim dividend
of 70 cents per share (1998 interim: 40 cents per share) based on a
cover of 1.9 times earnings, excluding the decreased value of
exchange gains and quoted investments.
At attributable profit level, there are two major items which reflect
a negative comparison against the previous year's interim results.
Firstly, currency exchange gains are Z$774 million less than last
year, and secondly, the value of the Group's quoted South African
investments is Z$194 million lower than at the end of March 1999,
although only Z$37 million lower than at the end of September, 1998.
Neither of these items have any bearing on cashflow.
Both these items were brought to account in the Income Statement at
31st March 1999. Fluctuations in the value of these assets must be
expected as the Company retains a US$41 million cash deposit and the
Zimbabwe dollar exchange rate is unlikely to remain constant. In
addition, the South African investments are expected to recover
strongly in the medium term.
HOTELS
For the 6 months under review, Meikles Hotel and the Group's 50%
share of the Victoria Falls Hotel, produced an operating profit of
Z$119 million (1998 Z$66 million including two months income from the
Victoria Falls Hotel).
Meikles Hotel revenue grew by 56% with a slight growth in room
occupancy. At the Victoria Falls Hotel, revenue was 70% up on the
same period last year, although room occupancy was affected by the
coming on stream of nearly 300 extra beds in the Victoria Falls town
and very modest growth in tourist arrivals since the beginning of
1999. Both the Meikles Hotel and the Victoria Falls Hotel continue
to win international awards for excellence.
The acquisition of 50% of the business of the Cape Grace Hotel has
been finalised at a cost of R32 million and all necessary approvals
from the relevant authorities have been received. The Cape Grace is
a luxury hotel in a prime position on Cape Town's Victoria and Alfred
Waterfront. It is a member of the Small Luxury Hotels of the World
and has won several prestigious awards.
The Hotel Division will be accounting for this investment from 1st
October, 1999. The Group also has the right to acquire 50% of the
property of the hotel and the Reserve Bank have approved the
remittance of a further US$7.5 million in this regard. The
investment is expected to realise a net contribution to profits well
in excess of the return currently being earned on the Group's US$
funds. It is anticipated that substantial marketing benefits will
arise from the association of the Cape Grace, Victoria Falls Hotel
and Meikles Hotel.
RETAIL
Sales and operating profits in the Retail Division were up 73% and
223% respectively on the same period in the prior year. The
Department Stores experienced strong demand throughout the period,
particularly in the second quarter which benefited from the public
distribution and sale of Old Mutual shares. The gross margin has
improved significantly, as have stockturns, while a favourable ratio
of expenditure to sales has been achieved.
Clicks and Diskom turnover increased by 102% over the first half of
last year. The Club Card credit scheme has been highly successful,
and a similar concept is to be introduced into the Diskom Chain.
Stockturns have improved substantially. Credit operations throughout
the Division are tightly controlled from a central location.
The Division has now disposed of its Flame Diner takeout chain at no
loss. All that remains of the Food Franchise business excluding our
instore outlets are two Blacksteer Restaurants for which we will
continue to seek buyers.
TM SUPERMARKETS
Turnover was 71% up and operating profit grew by 110% on the same
period last year. Economic hardships have tended to shift consumer
buying patterns, but effective merchandise selection and aggressive
price oriented promotional activity have improved gross margin.
Improved inventory management, coupled with increased interest rates,
is reflected in net interest income of Z$35.5 million (1998: Z$7.0
million).
YEAR 2000 COMPLIANCE
The Group's plans to test all systems and acquire new computer
hardware where appropriate have been successfully carried through.
No material operational difficulties, which may arise from the
Group's own non-compliance are anticipated, and the Group has
contingency plans in the event of non-compliance by critical service
providers.
OUTLOOK
Rapidly increasing costs and the effects of an overvalued currency
are beginning to influence trading, particularly in the Hotel
Division. On the positive side, the retail divisions are showing
real growth and the Group continues to expand its core businesses.
The acquisition of the Cape Grace Hotel is an initial step in
realising Meikles Africa's aim of acquiring leading regional hotels.
The Group will continue to look for opportunities to invest its US
dollars in activities which have a strong hard currency income stream
and consistent profit growth.
In Zimbabwe, two new Clicks Stores and four new TM supermarkets are
currently under construction. Numerous sites have been identified
for development and negotiations are proceeding to bring these
opportunities to fruition.
Shareholders will have noted the cautionary announcements concerning
the negotiations with Kingdom Financial Holdings Limited. The
objective is to develop financial services with the aim of delivering
convenient and easy banking for our many customers. Negotiations are
continuing and shareholders will be kept informed of developments.
Good rains have been forecast and a normal agricultural season is
expected with commodity prices modestly firmer. The underlying
weaknesses in the economy are well known but notwithstanding these,
your Group is expected to produce growth in operating profit and
dividends.
Meikles Africa Limited
Consolidated Income Statement for the six months ended 30 September
1999
Unaudited Unaudited Audited
6 months 6 months to Year
to 30 ended
Notes 30 September 31 March
September 1998 1999
1999 Z$000 Z$000
Z$000
Turnover 2,954,435 1,701,119 4,193,467
Cost of sales (2,126,316) (1,252,232) (3,021,749)
Gross profit 828,119 448,887 1,171,718
Employee costs (254,445) (155,526) (350,522)
Occupancy costs (74,468) (40,458) (105,787)
Other operating costs (246,732) (143,285) (359,783)
Other income 105,922 54,035 161,668
Operating profit 358,396 163,653 517,294
Net interest 2 (71,393) (19,812) (89,968)
Profit after interest 287,003 143,841 427,326
Exchange (6,183) 767,968 973,936
(losses)/gains
Change in valuation of
quoted investments (193,557) 172,046 327,698
Profit before taxation 87,263 1,083,855 1,728,960
Taxation 3 (12,555) (93,023) (193,440)
Profit after taxation 74,708 990,832 1,535,520
Minority interest (32,475) (12,064) (37,860)
Net profit
attributable to 42,233 978,768 1,497,660
shareholders
Retained earnings
brought forward 1,753,639 470,032 470,032
Dividends (107,027) (61,158) (214,053)
Retained earnings
carried forward 1,688,845 1,387,642 1,753,639
Earnings per share -
basic (cents) 4 28 640 980
IIMR Headline earnings
per share (cents) 4 34 643 990
Meikles Africa Limited
Consolidated balance sheet at 30 September 1999
Unaudited Unaudited Audited
30 30 31
September September March
Notes 1999 1998 1999
Z$000 Z$000 Z$000
ASSETS
Non-current assets
Property, plant and 697,666 590,400 671,311
equipment
Investments 5 366,994 404,405 560,551
Goodwill 408,010 434,040 417,779
Long term debtors 171,531 99,277 166,762
1,644,201 1,528,122 1,816,403
Current assets
Stocks 701,773 416,187 513,622
Debtors and prepayments 425,555 350,326 372,071
Cash and cash equivalents 2,048,373 1,643,870 1,962,236
3,175,701 2,410,383 2,847,929
Total assets 4,819,902 3,938,505 4,664,332
EQUITY AND LIABILITIES
Capital and reserves
Equity capital 15,289 15,289 15,289
Non-distributable reserves 1,048,368 1,048,368 1,048,368
Retained earnings 1,688,845 1,387,642 1,753,639
2,752,502 2,451,299 2,817,296
Minority interest 6 28,080 12,815 19,961
Non-current liabilities
Interest bearing borrowings 751,028 648,328 574,260
Deferred tax 253,980 237,290 297,574
Other financial liabilities 29,628 6,557 7,331
1,034,636 892,175 879,165
Current liabilities
Creditors 785,336 432,125 672,602
Interest bearing borrowings 32,047 41,639 62,705
Proposed dividend 107,027 61,158 152,895
Other financial liabilities 80,274 47,294 59,708
1,004,684 582,216 947,910
Total equity and liabilities 4,819,902 3,938,505 4,664,332
Meikles Africa Limited
Consolidated cashflow statement for the six months ended 30 September
1999
Unaudited Unaudited Audited
6 months 6 months Year
to to ended
Notes 30 30 31
September September March
1999 1998 1999
Z$000 Z$000 Z$000
Cash flows from operating
activities
Operating cash flow before
working capital changes 7 406,507 193,990 591,240
Increase in stocks (188,151) (12,770) (110,205)
Decrease / (Increase) in non-
interest bearing debtors 35,346 (16,820) (18,060)
Increase in creditors 55,414 7,454 240,590
Operating cash flow 309,116 171,854 703,565
Income tax paid (18,350) (10,149) (47,135)
Net cash from operating 290,766 161,705 656,430
activities
Cash flows from investing
activities
Purchase of 50% joint venture
in Victoria Falls Hotel - (377,306) (377,306)
Purchase of property, plant
and equipment - replacement (55,220) (71,473) (144,847)
Purchase of property, plant
and equipment - expansion (13,631) (10,544) (48,263)
Proceeds from disposal of
property, plant and equipment 4,156 1,415 3,924
Dividends received - - 5,209
Increase in interest-bearing
debtors (93,599) (76,079) (164,069)
Interest received 84,336 45,154 114,077
Net cash used in investing
activities (73,958) (488,833) (611,275)
Cash flows from financing
activities
Proceeds from interest bearing
borrowings 188,394 516,807 496,117
Repayments of interest bearing
borrowings (42,284) - (32,312)
Interest paid (98,410) (72,307) (204,045)
Dividends paid - Ordinary
shareholders (152,895) (53,513) (114,671)
- Minority interest (19,293) (9,214) (18,316)
Net cash (used in) / from
financing activities (124,488) 381,773 126,773
Net effect of exchange rate changes on
cash and cash equivalents (6,183) 767,968 969,051
Net increase in cash and cash
equivalents 86,137 822,613 1,140,979
Cash and cash equivalents at 31
March 1999 1,962,236 821,257 821,257
Cash and cash equivalents at 30
September 1999 2,048,373 1,643,870 1,962,236
Meikles Africa Limited
Notes to the financial statements
1. Accounting policies
The accounting policies are the same as those used in preparing
the 31 March 1999 Annual Financial statements and no
adjustment has been made for the effects of hyperinflation.
Unaudited Unaudited Audited
6 months to 6 months to Year
30 30 ended
September September 31 March
1999 1998 1999
Z$000 Z$000 Z$000
2. Net Interest
Interest receivable:
Related parties - 6,334 -
Third parties 84,336 38,820 114,077
84,336 45,154 114,077
Interest payable:
Related parties (1,545) (979) (3,000)
Long term borrowings (152,345) (103,532) (195,459)
Less: Amount capitalised - 40,000 -
Overdrafts and short
term borrowings (1,839) (455) (5,586)
(155,729) (64,966) (204,045)
(71,393) (19,812) (89,968)
3. Taxation
Income tax - current 49,644 22,328 56,110
Income tax - deferred (4,475) 36,474 65,752
Capital gains tax -
deferred (39,119) 33,922 65,131
Withholding tax on
interest 6,505 299 6,447
12,555 93,023 193,440
4. Earnings per share
Basic earnings per share have been calculated by dividing the
net profit for the period attributable to shareholders by the
number of shares in issue.
IIMR Headline earnings per share
Net profit for the
period attributable to
shareholders 42,233 978,768 1,497,660
Amortisation of goodwill 9,769 3,800 16,107
52,002 982,568 1,513,767
Number of shares in issue 152,895,305 152,895,305 152,895,305
Meikles Africa Limited
Notes to the financial statements continued
Unaudited Unaudited Audited
30 30 31
September September March
1999 1998 1999
Z$000 Z$000 Z$000
5. Investments
Cost 13,706 13,706 13,706
Revaluation surplus 353,288 390,699 546,845
Closing net book amount 366,994 404,405 560,551
6. Minority interest
At 31 March 1999 19,961 10,496 10,496
Share of net profit of
subsidiary 32,475 11,421 37,860
Share of dividends paid
and proposed (24,356) (9,102) (28,395)
At 30 September 1999 28,080 12,815 19,961
Unaudited Unaudited Audited
6 months to 6 months to Year
30 30 ended
September September 31 March
1999 1998 1999
Z$000 Z$000 Z$000
7. Cash flows from operating activities
Profit before taxation 87,263 1,083,855 1,728,960
Adjustments for:
Amortisation of goodwill 9,769 3,800 16,107
Depreciation 38,400 27,494 55,635
Net interest 71,393 19,812 89,968
Exchange losses / (gains) 6,183 (767,968) (973,936)
Change in valuation of 193,557 (172,046) (327,698)
quoted investments
Dividends received - - (5,209)
Realised exchange gains - - 4,885
Profit on disposal of (58) (957) 2,528
property, plant and equipment
406,507 193,990 591,240
8. Segmental Information
By industry segment:
Turnover
Hotel 300,920 149,727 449,951
Supermarkets 2,133,895 1,251,436 2,937,224
Retail 519,620 299,956 806,292
Corporate and other - - -
2,954,435 1,701,119 4,193,467
Operating profit
Hotel 119,619 66,311 210,284
Supermarkets 153,270 73,039 187,261
Retail 90,839 28,121 127,412
Corporate and other (5,332) (3,818) (7,663)
358,396 163,653 517,294
Total assets
Hotel 985,925 411,690 946,118
Supermarkets 801,314 399,909 648,589
Retail 1,143,607 749,809 829,027
Corporate and other 1,889,056 2,377,097 2,240,598
4,819,902 3,938,505 4,664,332
Meikles Africa Limited
Notes to the financial statements continued
9. Foreign exchange rates
The principal foreign exchange rates used in the financial
statements are as follows:
(shown as the Zimbabwe dollar equivalent of one foreign currency
unit).
Average transaction rate Balance sheet rate
30 30 31 30 30 31
September September March September September March
1999 1998 1999 1999 1998 1999
Britain 61,14 33,74 50,68 62,39 57,50 61,45
United States 38,04 20,41 31,72 37,95 33,71 38,15
Germany 20,53 11,53 17,69 20,66 20,14 20,93
Switzerland 25,09 15,29 20,16 25,22 24,31 25,64
Japan 0,33 0,16 0,28 0,36 0,25 0,31
South Africa 6,26 3,60 5,25 6,35 5,79 6,17
Meikles Africa Limited
Financial Highlights
6 months to 12 months
30 September to
31 March
1999 1998 1999
Group turnover (Z$m) 2,954 1,701 4,193
Group operating profit (Z$m) 358 164 517
Operating cashflow per share 202 112 460
(Zcents)
Operating earnings per share 131 57 191
(Zcents)*
Headline earnings per share 34 643 990
(Zcents)
Dividends (Zcents) 70 40 140
Dividend cover (times)* 1.9 1.4 1.4
Capital expenditure (Z$m) 69 82 193
*: excluding exchange gains and changes in the valuation of quoted
investments (net of tax)
Dividend announcement
On the 18th November 1999, the Board approved an interim dividend
Number 60 of 70 cents per share on 152,895,305 shares payable to
members registered in the books of the company at the close of
business on 3rd December, 1999. The Transfer Books and Register of
Members will be closed from 4th December, 1999 to 12th December,
1999. Dividend cheques will be mailed to shareholders on or about
13th December 1999. The dividends payable to non-resident
shareholders will be paid in accordance with Exchange Control
Regulations. Shareholders' withholding tax will be deducted where
applicable.
By order of the Board
A.P. LANE-MITCHELL
Company Secretary
All current financial, operational and structural information on
Meikles Africa Limited can be obtained as changes in these areas
occur by visiting Meikles Africa's website at: http://www.meiklesafrica.com
END
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