TIDMMIK
MEIKLES LIMITED
UNAUDITED RESULTS FOR THE SIX MONTHSENDED 30 SEPTEMBER 2011
Group review
Indigenisation
After meeting the various requirements set by the Ministry of Youth
Development, Indigenisation and Empowerment, the Company was accorded its
indigenous status and is now in compliance with the Empowerment Act. The
Company will now be in a position to raise capital on external markets and to
pursue projects that have been held in abeyance pending the granting of this
status. The Board thanks all stakeholders and Government for their assistance
in this important matter.
Pick n Pay investment into TM Supermarkets
Save for the Competition and Tariff Commission, the regulatory authorities have
now approved the Pick n Pay investment into TM Supermarkets, paving the way for
Pick n Pay to increase its shareholding in TM Supermarkets from 25% to 49%.
This investment will unlock opportunities for TM Supermarkets.
Disposal of the Cape Grace
The disposal of the Cape Grace Group is expected to be completed in the second
half of our financial year.
Employee Share Trust ("Trust")
As stakeholders will remember, on 18 August 2011 the shareholders approved the
allocation of 24 million Meikles shares into the Meikles Limited Employee Share
Trust. The shares were to be allotted upon the Trust raising the necessary
funding for the shares. Funding has now been sourced for the purchase of these
shares in tranches.
Executive share scheme
The Group executives together with an indigenous consortium have set up a
special purpose vehicle to acquire shares in the Company through the Zimbabwe
Stock Exchange. This vehicle has raised funds in the market and has thus far
acquired approximately 5% shareholding in the Company. This initiative aligns
the interests of key executives to those of the shareholders.
Ex-Cotton Printers equipment
Following the conclusion of the liquidation of Cotton Printers, the spinning
and weaving equipment remained unsold. The Company subsequently entered into an
agreement to dispose of this equipment to the former workers of Cotton Printers
who, with the support and guidance of the Ministry of Youth Development,
Indigenisation and Empowerment, organized themselves through a new company,
Winds Cotton (Private) Limited. In addition to the disposal of the equipment,
the Company also extended a lease to the former workers at generous lease
terms. It is expected that the new owners will resuscitate the fortunes of this
venture and in the process help in the revival of the City of Bulawayo. The
Company has no financial involvement in Winds Cotton (Private) Limited.
Funds held at the Reserve Bank of Zimbabwe
Negotiations with the RBZ for the repayment of our deposit of US$37 million are
still continuing. We remain confident that the deposit, that is accruing
interest, will be repaid. Shareholders are advised that there are no further
outstanding issues with the RBZ.
Group results
The Group has continued to make progress under very difficult conditions, with
high borrowing costs and inadequate capitalisation. Revenues from continuing
operations increased by 39% compared to the same period in 2010. The gross
profit margins averaged 20.4% compared to 22.6% in 2010. Working together with
our supply chain partners, the various arms of the group are constantly
improving their offerings of the best product at the best price in a convenient
location to deliver real value to our customers.
The loss for the 6 months period ended 30 September 2011 was $5 million (6
months ended 30 September 2010: loss of $519,000) after finance costs of $4.3
million. The weighted average cost of borrowings was 15% p.a. Interest rates
have remained high due to tight market liquidity conditions and this has
constrained the recovery process not just of the Meikles Group but industry as
a whole.
TM Supermarkets ("TM")
Revenues increased by 36.4% to $136.6 million (2010: $100.2 million). The
EBIDTA for the 6 months ended 30 September 2011 was $3.5 million (2010: $2.1
million). This translated into an EBIDTA of 2.5% and a profit before tax
percentage of 1.4%, compared to prior period ratios of 2.1% and 1%
respectively. The company opened its 50th supermarket in Mutoko in September
2011. The refurbishment works on the Kamfinsa branch that started in June 2011
will be completed in the last quarter of our financial year. TM largely
operated from 48 branches during the period following the closure of the Mkoba
branch in May 2011. The launch of the Pick n Pay clothing in TM was delayed as
the investment transaction awaited regulatory approval. The launch will now
coincide with the reopening of the Kamfinsa branch. A large Pick n Pay
supermarket will be opened at the former Jaggers site in Msasa, Harare, during
the first half of our next financial year.
Thomas Meikle Stores
The revenues increased by 114.9% to $12.2 million (2010: $5.7 million). The
gross margin was 32% (2010: 33%). The EBIDTA for the 6 months ended 30
September 2011 was $234,000 (2010: loss of $579,000). The growth was achieved
on the back of credit sales which accounted for 76% of sales (2010: credit
sales accounted for 52%) and the number of credit customers increased to 37,000
from 27,500 at 31 March 2011. With the gradual positive adjustments in market
conditions and an improved stockholding, the company's performance will
continue to improve.
Tanganda Tea Company
The peak season for tea remains November to March in any given year and is
heavily influenced by the rainy season. Therefore, in the 6 months ended 30
September 2011, the company's main focus was plantation development and
diversification into other crops. In this regard 36ha of macadamia, 46ha of
coffee and 25ha of avocados were planted. The company's goal is to have 200ha
of coffee, 600ha of macadamia and 400ha of avocados planted in the next 18
months which will constitute a very significant investment. A new water
bottling plant has been commissioned which will result in increased production.
For the 6 months ended 30 September 2011, the company recorded an EBIDTA loss
of $2.3 million (30 September 2010: loss of $164,000). The bulk tea production
was 2,415 tons (30 September 2010: 2,501 tons). Parts of the estate were badly
affected by frost. The cost of production driven by power and wages continues
to increase, affecting the viability of tea and driving the diversification
into other crops. The company's profits coincide with the peak season, and will
impact on the second half of the financial year.
Meikles Hospitality
The tourism sector in Zimbabwe continues to recover due to the relative
political and economic stability. The tourist arrivals have increased by around
16% this year according to the Zimbabwe Tourism Authority. Our Zimbabwe hotels
have seen revenues increasing by 25% to $7.9 million (30 September 2010: $6.4
million). The EBIDTA for the Zimbabwe hotels was $988,000 (30 September 2010:
$720,000), whilst the EBIDTA for the Cape Grace Hotel (CGH) was $351,000 (30
September 2010: $673,000). The occupancy levels were 56% (30 September 2010:
44%), 63% (30 September 2010: 59%) and 52% (30 September 2010: 38%) for the
Victoria Falls Hotel (VFH), CGH and the Meikles Hotel (MH) respectively. Apart
from the CGH, hotels also recorded an increase in revenues per available room
(REVPAR) as follows $154 (30 September 2010: $136), R1,616 (30 September 2010:
R1, 837) and $62 (30 September 2010: $52) for the VFH, CGH and MH respectively.
The refurbishment of the MH North Wing will now start in January 2012 as all
the preparatory work has been completed. Rates available to the hotel industry
in the Cape are more heavily discounted than in the past year. Despite this,
the CGH enjoys a higher occupancy level and REVPAR than its main competitors.
Directorships
The Company announced the resignation of the then Group CEO Mr. B Beaumont with
effect from 30 September 2011. The Group has reorganised its management
structures to cover the gap left by Mr. Beaumont who will not be replaced in
the short to medium term. The Meikles Limited board which is made up of 4
indigenous and 2 non indigenous members is in compliance with the empowerment
laws of the country.
Outlook
The success achieved in obtaining most of the requisite approvals for the PnP
investment into TM Supermarkets and of the company being accorded its
indigenous recognition all augur well for the future. These recently acquired
approvals have had no impact on the results for the first half of the financial
year. However, these approvals clear the way for the restructuring of
subsidiaries and of the Company's balance sheet. The investment by PnP will
enable the refurbishment of the TM Supermarkets infrastructure that has been on
hold for some time and once completed should reposition TM's standing in the
market. The group will be able to source funding at a lower cost and will be
able to introduce partners into its different operations as was stated in the
last annual report.
We thank all stakeholders for the support they continue to render the Company
and its subsidiaries. With the removal of the impediments that had constrained
our recovery, we look forward with hope and excitement to what lies ahead for
this Group and its stakeholders.
For and on behalf of the Board
J R T Moxon
Executive Chairman
24 November 2011
Directors' responsibility statement
We confirm that to the best of our knowledge:
a. As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs. The condensed set of financial
statements included in this half-yearly financial report has been prepared
in accordance with IAS 34 Interim Financial Reporting and gives a true and
fair view of the assets, liabilities, financial position and profit or loss
of the Group; and
b. the Group Review includes a fair review of the developments and performance
of the business, the position of the Group, together with a description of
the principal risks and uncertainties that they face.
By order of the Board
Onias Makamba
Group Finance Director
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSENDED 30 SEPTEMBER2011
6 months to 6 months to
30 September 30 September
2011 2010
US$ 000 US$ 000
CONTINUING OPERATIONS
Revenue 165,591 119,319
Cost of sales (131,791) (92,403)
Gross profit 33,800 26,916
Other income 2,695 2,874
Employee costs (19,575) (14,141)
Occupancy costs (7,707) (6,505)
Other operating costs (11,475) (9,353)
Operating loss (2,262) (209)
Investment revenue 1,220 733
Finance costs (4,253) (2,889)
Net exchange losses (1,745) (44)
Fair value adjustments - (33)
Loss before tax (7,040) (2,442)
Income tax 1,463 (336)
Loss for the period from continuing operations (5,577) (2,778)
Profit for the period from discontinued operations 580 2,259
LOSS FOR THE PERIOD (4,997) (519)
Other comprehensive (loss) / income
Exchange differences on translating foreign (2,612) 276
operations
Other comprehensive (loss) / income for the (2,612) 276
period, net of tax
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD (7,609) (243)
(Loss) / profit attributable to:
Owners of the parent (5,349) (694)
Non-controlling interests 352 175
(4,997) (519)
Total comprehensive (loss) / profit attributable
to:
Owners of the parent (7,961) (418)
Non-controlling interests 352 175
(7,609) (243)
Loss per share (cents)
Basic loss from continuing and discontinued (2.18) (0.28)
operations (cents per share)
Basic loss from continuing operations (cents per (2.42) (1.20)
share)
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER2011
Unaudited Audited
30 September 31 March 2011
2011
US$000 US$ 000
ASSETS
Non-current assets
Property, plant and equipment 85,866 84,278
Investment property 44 44
Biological assets 7,888 7,661
Other financial assets and investments 15,286 16,600
Intangible assets - trademarks 124 124
Balances with Reserve Bank of Zimbabwe 37,715 36,825
Deferred tax 2,600 2,356
Total non-current assets 149,523 147,888
Current assets
Inventories 41,453 40,713
Trade and other receivables 17,738 16,153
Cash and bank balances 4,784 3,286
63,975 60,152
Assets held for sale 35,957 41,440
Total current assets 99,932 101,592
Total assets 249,455 249,480
EQUITY AND LIABILITIES
Capital and reserves
Share capital 2,454 2,454
Non-distributable reserves 1,391 2,627
Retained earnings 105,108 111,205
Capital and reserves relating to assets classified 17,287 18,083
as held for sale
Equity attributable to equity holders of the parent 126,240 134,369
Non-controlling interests 1,283 763
Total equity 127,523 135,132
Non-current liabilities
Borrowings 1,544 3,750
Deferred tax 14,611 15,997
Total non-current liabilities 16,155 19,747
Current liabilities
Trade and other payables 36,294 30,004
Current tax liabilities 484 488
Short term borrowings 55,825 49,031
92,603 79,523
Liabilities relating to assets classified as held 13,174 15,078
for sale
Total current liabilities 105,777 94,601
Total liabilities 121,932 114,348
Total equity and liabilities 249,455 249,480
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSENDED 30 SEPTEMBER2011
Share Non-distributable Retained Disposal Attributable Non- Total
capital reserves earnings/ ( group to owners of controlling
accumulated capital parent interests
losses) and
reserves
US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000
30 September 2011
Balance at the 2,454 2,627 111,205 18,083 134,369 763 135,132
beginning of the
period
Loss for the - - (5,929) 580 (5,349) 352 (4,997)
period
Other - (1,236) - (1,376) (2,612) - (2,612)
comprehensive
loss for the
period
Minority interest - - (168) - (168) 168 -
write back on
disinvestment by
minority
shareholder
Balance at the 2,454 1,391 105,108 17,287 126,240 1,283 127,523
end of the period
30 September 2010
Balance at the - 102,466 (31,066) 63,568 134,968 906 135,874
beginning of the
period
Loss for the - - (2,953) 2,259 (694) 175 (519)
period
Other - (442) - 718 276 - 276
comprehensive
income for the
period
Share capital 2,454 (2,454) - - - - -
redenomination
Balance at the 2,454 99,570 (34,019) 66,545 134,550 1,081 135,631
end of the period
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSENDED 30 SEPTEMBER2011
30 September 30 September
2011 2010
US$ 000 US$ 000
CONTINUING AND DISCONTINUED OPERATIONS
Cash flows from operating activities
(Loss) / profit before tax from continuing and (6,460) 255
discontinued operations
Adjustments for
- Depreciation expense and impairment 1,905 1,356
- Net interest 2,998 1,633
- Net exchange losses 1,550 367
- Fair value adjustments (1) (8,049)
- Share of profits of associates - (188)
-(Profit) / loss on disposal of property, plant (23) 2,183
and equipment
Operating cash flow before working capital (31) (2,443)
changes
Increase in inventories (626) (5,394)
Increase in trade and other receivables (1,583) (48,380)
Increase in trade and other payables and 6,383 16,183
financial liabilities
Cash generated from / (used in) operations 4,143 (40,034)
Income taxes paid (73) (356)
Net cash generated from / (used in) operating 4,070 (40,390)
activities
Cash flows from investing activities
Payment for property, plant and equipment (3,426) (6,420)
Proceeds from disposal of property, plant and 1,356 8
equipment
Net movement in service assets (55) (7)
Payment for other investments (259) -
Plantation development expenditure (227) (181)
Investment income 151 817
Net cash used in investing activities (2,460) (5,783)
Cash flows from financing activities
Proceeds from interest bearing borrowings 4,537 26,003
Finance costs (4,252) (2,894)
Net cash generated from financing activities 285 23,109
Net increase / (decrease) in cash and bank 1,895 (23,064)
balances
Cash and bank balances at the beginning of the 4,785 30,281
period
Net effect of exchange rate changes on cash and 237 (376)
bank balances
Translation of foreign entity (529) 6,759
Cash and bank balances at the end of the period 6,388 13,600
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
Accounting policies and methods of computation are consistent in all material
respects with those used in the prior year.
2. Discontinued operations
Cape Grace Hotel operations in South Africa
In March 2008, a binding put and call option agreement for the sale of the Cape
Grace Hotel to Mentor was entered into between Meikles, Cape Grace Hotel
Limited (BVI) and its subsidiaries which own the Cape Grace Hotel on the one
hand, and Mentor on the other. In November 2008, a notice to exercise the
option for the purchase of Meikles Group's interests in the Cape Grace Group
was sent from Mentor to Meikles, and receipt thereof was acknowledged by
Meikles. This resulted in a legally binding agreement for the purchase by
Mentor of the Cape Grace Hotel. The consummation and implementation of this
transaction was delayed as a consequence of the litigation initiated by Meikles
against Mentor, which litigation has now been settled and withdrawn. Mentor
stands ready to comply with its obligation to purchase the Cape Grace Hotel as
a result of the binding agreement referred to aforesaid, and is ready to
consummate such transaction and deliver the proceeds of the sale against the
delivery of the Cape Grace Hotel in compliance with the agreement.
2.1 Profit for the period from discontinued operations
30 September 30 September
2011 2010
US$ 000 US$ 000
Revenue 6,753 7,039
Net interest - 4,305
Fees and commissions - 14,452
Other gains 220 2,403
Total income 6,973 28,199
Expenses* (6,393) (25,503)
Profit before tax 580 2,696
Income tax - (438)
Profit for the period from discontinued 580 2,259
operations (attributable to owners of the parent)
Other comprehensive (loss) / income
Exchange differences on translating foreign (1,376) 718
entities
Other comprehensive (loss) /income for the (1,376) 718
period, net of tax
Total comprehensive (loss) / profit for the (796) 2,977
period
Cash flows from discontinued operations
Net cash flows from operating activities 145 (18,265)
Net cash flows from investing activities (138) (940)
Net cash flows from financing activities 78 (34)
Net cash flows 85 (19,239)
*The expenses exclude depreciation expense of US$987,056 (2010: US$1,460,453)
which has been written back in line with the requirements of IFRS5.
1. Assets held for sale
2.
Audited
30 September 31 March 2011
2011
US$ 000 US$ 000
Assets held for sale
Cape Grace Hotel group of companies 35,957 39,977
Motor vehicles - 1,463
Total assets held for sale 35,957 41,440
Liabilities relating to assets held for sale
Cape Grace Hotel group of companies 13,174 15,078
Total liabilities held for sale 13,174 15,078
Net assets held for sale 22,783 26,362
Equity relating to assets held for sale
Cape Grace Hotel group of companies 17,287 18,083
Total equity relating to assets classified as 17,287 18,083
held for sale
3. Segment information
30 September 30 September
2011 2010
US$ 000 US$ 000
Revenue
Continuing operations
Supermarkets 136,595 100,169
Agriculture 9,126 7,908
Hotels 7,922 6,337
Stores 12,190 5,673
Intra-group sales (242) (768)
165,591 119,319
Disposal group
Banking - 20,513
Hotels - Cape Grace Hotel group of companies 6,753 7,039
6,753 27,552
(Loss) / earnings before interest, taxes,
depreciation and amortisation
Continuing operations
Supermarkets 3,460 2,126
Agriculture (2,276) (164)
Hotels 988 720
Stores 234 (579)
Corporate* (1,776) 486
630 2,589
Disposal group
Banking - 1,708
Hotels - Cape Grace Hotel group of companies 351 673
351 2,381
* Intercompany transactions have been eliminated from the
Corporate amounts.
30 September 31 March 2011
2011
US$ 000 US$ 000
Segment assets
Continuing operations
Supermarkets 48,419 43,860
Agriculture 36,933 37,778
Hotels 27,341 28,743
Stores 61,747 63,567
Corporate* 39,058 34,092
213,498 208,040
Assets classified as held for sale
Hotels - Cape Grace Hotel group of companies 35,957 39,977
Motor vehicles - 1,463
35,957 41,440
249,455 249,480
Segment liabilities
Continuing operations
Supermarkets 42,483 39,303
Agriculture 18,274 16,465
Hotels 8,973 7,081
Stores 30,465 28,748
Corporate* 8,563 7,673
108,758 99,270
Liabilities classified as held for sale
Hotels - Cape Grace Hotel group of companies 13,174 15,078
13,174 15,078
121,932 114,348
Intercompany balances have not been included in the segment assets and
liabilities.
4. Supplementary information
Continuing operations
Capital commitments authorised but not contracted 21,445 25,795
5. Exchange rates
30 September 31 March 2011
2011
Statement of financial position exchange rates
South African rand 7.9866 6.8045
British pound 1.5552 1.6100
For further information contact Onias Makamba on omakamba@meikleslimited.co.zw
or +263-4-252068/70.
END
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