RNS Number : 5845C
Meikles Africa Ld
03 September 2008
Chairman's Statement for Half Year ended 30 June 2008
The six months period to 30 June 2008 continued to be extremely difficult with conditions creating an environment where the prosperity
and survival of some local operations were dependant on the overall strength and structure of Kingdom Meikles balance sheet and cash flows.
The Group's financial services, foreign assets and operations together with export earnings were key to revenue generation and maintaining
real values in uncertain Zimbabwean trading conditions. The terms of the Kingdom Meikles US$31m deposit with the Reserve Bank of Zimbabwe
(RBZ) were successfully re-negotiated with effect from 1 January 2008 further strengthening the Group's asset base. We are grateful to the
RBZ Governor and his team for the resolution of this substantive matter.
The Group has focused on the preservation of capital being mindful that investment in assets must provide returns to continue future
trading cycles. Exports of bulk tea, textile product, foreign exchange trading in the financial services group and the performance of the
hotels, from a foreign currency earnings perspective, were all satisfactory, given the local constraints to produce goods and services at
the added value level.
The financial services businesses have had to contend with a volatile trading environment, so maintaining a very strong balance sheet
structure and profit generation requires a shift to an earnings flow aside from net interest income. This policy has proved successful, but
as is the case in all forms of business in Zimbabwe at present, strategies are short term and have to be flexible to contend with the
changing environment.
The merger between the former Meikles Africa Limited Group, Kingdom Financial Holdings Limited, Tanganda Tea Company Limited and Cotton
Printers (Private) Limited was effective from 31 December 2007. From a statutory financial statements presentation point of view the
comparatives in the Group income statement refer to the former Meikles Africa Group. However, for information purposes an indicative
segmental income statement has been presented.
Any comment on financial information is based on the inflation adjusted financial statements.
Group subsidiary/divisional reports for 6 months to 30 June 2008
Kingdom Financial Holdings Ltd
* Operating profits increased by 367% to $678 quadrillion.
* Group cash inflows amounted to $141 quadrillion.
* Interest and non-interest income contributed 4% and 96%, respectively.
* Net interest margin was 53% compared to the prior year of 46%.
* Cost to income ratio came down marginally to 14% from 15%.
* A modern Point of Sale system was successfully rolled out within our Kingdom Meikles local till points in retail and hotel
subsidiaries and the Kingdom Bank merchant clientele.
Meikles Africa Hotels
* Operating profits increased by 8.6% to $29 quadrillion.
* Group room occupancy increased by 8% to 42%.
* In US dollar terms, revenue per available room was flat for Zimbabwe operations, but increased by 17% at the Cape Grace.
* Refashioning budgeted at US$8 million for Cape Grace has progressed and is on target for completion by the start of the fourth
quarter busy season.
* Maintenance of Zimbabwe operations is at a level to ensure Leading Hotels of the World standards are satisfied and a phased
refashioning of the Victoria Falls Hotel has commenced.
Tanganda Tea Company Ltd
* Operating profits increased by 514% to $92 quadrillion.
* Tea production was 4 089 tonnes, 12% down on prior year. Shortage of labour and irregular weather patterns were the main
constraints.
* Exports of bulk tea, at 2 962 tonnes were 2% down on prior year.
* Approved US$1,6 million foreign loan facilities will ensure the mechanisation project advances with plucking machines being a
priority to increase production capacity given the shortage of labour.
* World tea prices remain constant.
Retail
* Operating loss reduced from $79 quadrillion to $59 quadrillion.
* Suppliers are driving harder for cash terms.
* Product availability was constrained by low manufacturing output and available cash flows for local and imported goods.
* There was focus on optimising retail space with available stock.
* Key retail sites have been retained and retail systems were improved.
* Frequent electricity outages resulted in increased costs.
* Margins are under pressure because of cost of supply.
* Introduction of Kingdom Bank Point Of Sale devices has been successful.
* One new TM branch has been completed and two are still under construction. Openings are determinant on sufficient stock
availability.
* Zimbabwe industry capacity utilisation continues to fall and business closures continue to be a reality reducing supplies to our
retail units.
Cotton Printers (Pvt) Ltd
* Operating profit increased by 69% to $2 quadrillion.
* Production of yarn for export has been constrained by erratic lint supply and low plant utilisation.
* A maintenance programme is in place. Funding is from offshore facilities and increases in production volumes should occur by the
fourth quarter.
* The local market for bed linen has been confined to small volumes to the hospitality industry.
Financial Institutions Capitalisation
On 4 July 2008 the RBZ issued a circular requiring that financial institutions increase their capital levels to new prescribed limits.
The new capital levels are United States dollar linked and financial institutions are required to re-adjust their capital levels using the
prevailing inter-bank exchange rate. The Group banking subsidiaries affected are Kingdom Bank Limited, The Discount Company of Zimbabwe
(Private) Limited and Kingdom Asset Management (Private) Limited and the total amount required in order to capitalise the three entities to
the statutory level is US$22.5 million. The Group has utilised the United States dollar funds it has on deposit with the RBZ to capitalise
the entities concerned, which has resulted in all of them attaining the capital levels required prior to the deadline of 30 August 2008. The
fact that the capital levels are actually denominated in United States dollars has the added advantage that the Group will avoid having to
inject Zimbabwe dollars every time the inter-bank exchange rate changes.
Directorships
On 1 April 2008 Mr T. Nyambirai resigned as a director of the company in order for him to pursue other business interests. His
contribution during his brief tenure on the board is appreciated. Mr D. Mboweni was appointed a Director with effect from 28 August 2008.
Outlook
The merged Group continues to take advantage of synergies and resources across its business entities and the diversity of the Group with
its solid asset base provides the strength to manage the current difficult environment. Our operating divisions strive to trade within
agreed policy parameters and continue to contribute to operating profit. All our businesses in Zimbabwe are attempting to manage the ravages
of chronic hyper-inflation and erosion of capital accentuated by a lack of foreign currency, declining public utilities, the shortage of
product at either raw material or manufactured level and pricing that must ensure adequate cash flow, despite imposed pricing controls. Loss
of skills in certain operating divisions is also of concern.
Kingdom Meikles continues to examine opportunities aligned to all of its businesses in the region. Alliances established so far are
expected to consolidate during the second half of the year, in pursuance of the strategic focus the Group has to leverage off the strength
of the balance sheet and potential investor interest. Those at a more advanced stage include a joint regional expansion programme with Pick
'n Pay and utilisation of hospitality assets to expand potential foreign investment opportunities.
The RBZ has agreed to restore the fungibility of Kingdom Meikles shares on the London Stock Exchange. This should facilitate the Group's
fund raising efforts for new projects which have been identified in the region and, at the opportune time, in Zimbabwe.
Social Responsibility
The Group continues to be mindful of the plight of the aged and other vulnerable persons in Zimbabwe. Shortages and non-availability of
basic commodities and services have compounded the hardships endured by those who have least. In an effort to assist in the welfare of our
country's orphans, vulnerable children and senior citizens the Group contributes to homes and institutions across Zimbabwe.
Conclusion
I would like to thank my fellow Directors for their contributions during the period and pay particular tribute to all management and
staff who have performed admirably under testing circumstances.
J. R. T. MOXON
CHAIRMAN
UNAUDITED RESULTS FOR THE 6 MONTHS TO 30 JUNE 2008
SALIENT FEATURES
References are to inflation adjusted
information
Revenue
$350 quadrillion
Operating profit
$726 quadrillion
Attributable profit
Increased to $2,581 quadrillion
Cash generated and funds available
Funds generated from operations were
$788 quadrillion
Funds on hand amount to $2,573
quadrillion
References are to historical information
Revenue
$121 quadrillion
Operating profit
$568 quadrillion
Attributable profit
Increased to $2,991 quadrillion
Cash generated and funds available
Funds generated from operations were
$333 quadrillion
Funds on hand amount to $2,573
quadrillion
UNAUDITED CONSOLIDATED INCOME STATEMENT
For the 6 months to 30 June 2008
INFLATION ADJUSTED HISTORICAL COST
(all amounts in billions of 6 months to 6 months to 6 months to 6 months to
dollars)
30 June 2008 30 June 2007 30 June 2008 30 June 2007
Revenue and net interest 350,210,124 443,574,359 120,501,077 1,627
income
Operating profit / (loss)
before monetary adjustment and 726,478,236 (66,615,213) 568,024,125 388
exchange gains
Net monetary (loss) gain from (290,131,619) 87,886,908 - -
operating activities
Exchange gains on net current 759,067,759 17,692,109 523,161,889 46
assets
Operating profit 1,195,414,376 38,963,804 1,091,186,014 434
Investment income 60,349,066 13,297,254 10,125,243 34
Finance costs (6,217,678) (3,944,101) (1,003,522) (11)
Net exchange gains on foreign 1,793,290,724 82,375,358 2,339,644,554 2,531
funds
Increase in value of quoted (33) 10,141,973 457 117
investment
Net monetary gain from 50,871,006 96,236,055 - -
financing activities
Biological assets impairment (11,141,372) - - -
Share of profits / (losses) of 272,948 5,070,987 (49,261) 9
associates
Profit before taxation 3,082,839,037 242,141,330 3,439,903,485 3,114
Income tax expense (502,242,751) (37,782,227) (448,198,963) (372)
Profit for the period 2,580,596,286 204,359,103 2,991,704,522 2,742
Attributable to:
Equity holders of the parent 2,581,109,298 207,176,318 2,991,349,954 2,691
Minority interest (513,012) (2,817,215) 354,568 51
2,580,596,286 204,359,103 2,991,704,522 2,742
Basic earnings per share ($) 10,633,766,540 1,265,919,500 12,323,893,868 16,446
IIMR Headline earnings per 10,679,667,250 1,265,919,500 12,324,103,773 16,443
share ($)
Weighted average number of 242,727,663 163,656,787 242,727,663 163,656,787
shares
UNAUDITED CONSOLIDATED BALANCE SHEET
At 30 June 2008
INFLATION ADJUSTED HISTORICAL COST
(all amounts in billions of At Audited at At Audited at
dollars)
30 June 31 December 30 June 31 December
2008 2007 2008 2007
ASSETS
Property, plant and equipment
Banking 419,078,606 69,927,302 2,935,415 107,297
Non-banking 588,887,411 458,291,540 424,297,982 13,645
Investment property - banking 14,352,000 10,547,760 14,352,000 3,542
Biological assets 1,571,518 12,572,739 1,571,518 4,222
Investment in associates 72,133,749 63,876,187 10,225,559 6,231
-banking
Other financial assets and 1,149,772,794 322,620,901 1,148,010,949 108,245
investments
Goodwill 1,749,522,360 1,749,522,602 613,686 613,686
Other intangibles 259,010 259,078 476 87
Current assets - banking
Balances with banks and cash 832,429,666 430,555,279 832,429,666 144,583
Financial assets at fair value 238,138,761 116,349,953 238,138,761 39,071
through profit and loss
Advances and other accounts 397,278,664 49,948,498 397,278,664 16,773
Available for sale 214,122,466 21,997,827 212,638,750 6,805
Customers' liability for 6,467,758 202,498 6,467,758 68
acceptances
Current assets - non banking 1,955,905,316 689,916,422 1,899,899,462 224,011
Total assets 7,639,920,079 3,996,588,586 5,188,860,646 1,288,266
EQUITY AND LIABILITIES
Attributable to equity holders 5,637,014,204 3,029,827,708 3,375,634,036 983,295
of the parent
Minority interest 6,376,913 6,887,908 354,853 285
Deferred tax
Banking 268,303,160 31,134,058 198,210,718 11,480
Non-banking 351,721,579 110,962,913 241,458,270 18,592
Other non-current liabilities 266,824,025 156,897,187 266,824,025 52,687
Current liabilities - banking
Financial liabilities at fair 11,992,226 61,056,105 11,992,226 20,503
value through profit and loss
Customer deposits 897,321,001 414,617,500 897,321,001 139,231
Acceptances 6,467,758 202,498 6,467,758 68
Other current liabilities 70,790,206 44,338,114 70,790,206 14,889
Current liabilities - non 123,109,007 140,664,595 119,807,553 47,236
banking
Total equity and liabilities 7,639,920,079 3,996,588,586 5,188,860,646 1,288,266
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 6 months to 30 June 2008
INFLATION ADJUSTED HISTORICAL COST
(all amounts in billions of 6 months to 6 months to 6 months to 6 months to
dollars)
30 June 2008 30 June 2007 30 June 2008 30 June 2007
Profit for the period 2,581,109,298 207,176,318 2,991,349,954 2,691
attributable to parent
Share premium on issue of 3,469,565 - 596,339 -
shares
Share issue expenses (13,445,941) - (853) -
Translation of foreign (95,677,499) (3,660,174) 235,777,138 355
entities
Share of reserves of - 225,377 - 2
associates
Fair value adjustment on 131,733,601 - 146,928,674 -
available for sale securities
Share based payments 1,703,311 - 1,703,311 -
Dividend - current year (1,703,822) - (1,703,822) -
interim
Dividend - prior year final - (5,665,320) - (27)
Attributable to equity holders 2,607,188,513 198,076,201 3,374,650,741 3,021
of parent
Minorities (513,012) (2,817,215) 354,568 51
Shareholders' equity at the 3,036,715,616 132,575,349 983,580 28
beginning of the period
Shareholders' equity at the 5,643,391,117 327,834,335 3,375,988,889 3,100
end of the period
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
For the 6 months to 30 June 2008
INFLATION ADJUSTED HISTORICAL COST
(all amounts in billions of 6 months to 6 months to 6 months to 6 months to
dollars)
30 June 2008 30 June 2007 30 June 2008 30 June 2007
Cash flows from operating
activities
Profit before taxation 3,082,839,037 242,141,330 3,439,903,485 3,114
Adjustments for:
Non-operating cash flow (54,131,388) (51,960,578) (9,121,721) (110)
Non-cash items (2,268,934,553) (77,870,102) (2,875,681,315) (2,600)
Operating cash flow before 759,773,096 112,310,650 555,100,449 404
working capital changes
Working capital changes 47,292,430 32,886,086 (214,550,964) 52
Cash generated from operations 807,065,526 145,196,736 340,549,485 456
Income taxes paid (19,093,095) (43,502,082) (7,805,507) (6)
Net cash generated from 787,972,431 101,694,653 332,743,978 450
operating activities
Net cash used in investing (870,716,981) (20,910,473) (80,252,606) (29)
activities
Net cash generated from / 3,831,941 (64,079,075) 25,381,761 (63)
(used in) financing activities
Net (decrease) / increase in (78,912,609) 16,705,106 277,873,133 358
cash and cash equivalents
Cash and cash equivalents at 1,010,443,354 883,191,568 339,313 17
the beginning of the period
Net effect of exchange rate 2,898,282,741 16,632,213 3,320,677,749 1,969
changes on cash and cash
equivalents
Translation of foreign entity (1,256,908,166) 60,997,372 (1,025,984,875) 41
Cash and cash equivalents at 2,572,905,320 977,526,258 2,572,905,320 2,385
the end of the period
UNAUDITED SEGMENT INFORMATION
HISTORICAL COST
INFLATION ADJUSTED
(all amounts in billions of 6 months to 6 months to 6 months to 6 months to
dollars)
30 June 2008 30 June 2007 30 June 2008 30 June 2007
Revenue
Banking 29,252,466 - 15,038,196 -
Hotels 115,686,992 79,316,633 32,127,783 232
Retail 101,181,178 364,257,726 17,915,656 1,395
Agriculture 100,683,165 - 54,610,875 -
Textiles 3,406,323 - 808,567 -
350,210,124 443,574,359 120,501,077 1,627
Operating profit / (loss)
before monetary adjustment and
exchange gains
Banking 678,330,494 - 511,424,579 -
Hotels 29,146,479 26,827,368 3,798,290 57
Retail (59,036,296) (79,598,624) 471,583 352
Agriculture 92,092,175 - 58,698,374 -
Corporate and other (14,054,616) (13,843,957) (6,368,701) (21)
726,478,236 (66,615,213) 568,024,125 388
Segment assets
Banking 2,194,001,670 - 1,714,466,573 -
Hotels 725,637,742 99,685,564 655,167,800 1,127
Retail 68,253,393 44,528,700 23,749,198 1,090
Agriculture 150,428,963 - 102,566,548 -
Corporate and other 4,501,598,311 2,580,312,072 2,692,910,527 2,616
7,639,920,079 2,724,526,336 5,188,860,646 4,833
SUPPLEMENTARY INFORMATION
INFLATION ADJUSTED HISTORICAL COST
(all amounts in billions of 6 months to 6 months to 6 months to 6 months to
dollars)
30 June 2008 30 June 2007 30 June 2008 30 June 2007
Capital expenditure 411,669,734 715,087 84,334,141 77
Capital commitments authorised
but not yet contracted for 685,147,345 35,271,528 685,147,345 313
Depreciation 19,507,949 10,806,910 2,817,193 16
Commitment to capitalise
Kingdom Financial Holdings 1,130,512,500 - 1,130,512,500 -
Limited Group
Interest bearing borrowings 94,351,944 16,452,534 94,351,944 146
Below is segment information for the six months ended 30 June 2008 assuming the Group was in existence from 1 January 2007.
INDICATIVE SEGMENT INFORMATION
INFLATION ADJUSTED INFLATION ADJUSTED HISTORICAL COST HISTORICAL COST
(all amounts in billions of 6 months to 6 months to 6 months to 6 months to
dollars)
30 June 2008 30 June 2007 30 June 2008 30 June 2007
Revenue
Banking 29,252,466 57,321,320 15,038,196 200
Hotels 115,686,992 79,316,633 32,127,783 232
Retail 101,181,178 364,257,726 17,915,656 1,395
Agriculture 100,683,165 51,611,374 54,610,875 183
Textiles 3,406,323 3,487,063 808,567 95
350,210,124 555,994,116 120,501,077 2,105
Operating profit / (loss)
before monetary adjustment and
exchange gains
Banking 678,330,494 145,276,889 511,424,579 645
Hotels 29,146,479 26,827,368 3,798,290 57
Retail (59,036,296) (79,598,624) 471,583 352
Agriculture 92,092,175 14,987,582 58,698,374 188
Corporate and other (14,054,616) (12,458,024) (6,368,701) 57
726,478,236 95,035,191 568,024,125 1,299
Accounting policies
Accounting policies are consistent with those used in the previous year.
Note to inflation adjusted financial statements
The consumer price indices used to restate the financial statements at 30 June 2008 are as follows:
30 June 2007 94,204,140.4
31 December 2007 3,564,825,238.9
30 June 2008 10,615,731,618,730.9
For further information contact:
Zimbabwe Nigel Chanakira or Bryan Thorn +263-4-252068/78
This information is provided by RNS
The company news service from the London Stock Exchange
END
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