MEIKLES LIMITED
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
CHAIRMAN'S STATEMENT
GROUP REVIEW
Shareholders are advised that the Group made a profit before
taxation in the first six months under review of $1.02 million. This profit compares with a loss
for the first six months in the previous period of $7.04 million, an improvement of $8.06 million.
The profit after taxation from continuing operations was
$767,000, which compares to a loss of
$5.58 million in the first six months
of the previous year.
Inclusive of the profit from discontinued operations, the profit
of $767,000 compares with a loss of
$5 million in the first 6 months of
the previous year.
The momentum of improvement in the current financial year will
accelerate into the second half and October
2012 has already demonstrated a positive trend.
Shareholders were advised at the Annual General Meeting held on 15 August 2012
that there was an error in TM Supermarkets (Pvt) Limited financials dating back
to the period ended 31 March 2011. Shareholders were correctly advised that
this error would have no impact on the results for the year ended 31 March 2012
and the current financial year. TM Supermarkets and the Group results for the
period ended 31 March 2011 have been restated to take account of the prior
period error.
Shareholders were advised, in the 31 March 2012 Chairman's statement, that the
results for the year ended 31 March 2012 were determined on a very conservative
basis with full provision for known and anticipated costs that may have an
impact on the Group financials. The Group continues to determine its results on
a very conservative basis and in the current financial year no further
provision has been necessary, but neither have any potential savings from the
previous period been added back to profit.
Your board has continued to pursue the policy for Group funding
as was set out in the previous Chairman's statement with one
exception. In the previous Chairman's statement Tanganda was
expected to be recapitalised by September
2012. Despite substantial interest in Tanganda, which
interest has grown in recent months, your board has decided not to
pursue any additional equity funding in this financial year.
There appears to be a change in the balance of World supply and demand for tea
which will favour the producer. This advantage will not be limited to the short
term and Tanganda will benefit as a result. This fact, together with
anticipated normal rainfalls for the coming season, will result in a
substantial rise in Tanganda's profitability.
These factors make it difficult to value Tanganda at present. In addition, any
new partner in Tanganda will bring a long term involvement into the Company and
we believe that it is appropriate to form such a relationship when the
prevailing uncertainties have settled. In the meantime capital development will
be funded from term funding from external lenders in compliance with group
policy.
The refurbishment program in TM Supermarkets will accelerate markedly in the
new financial year fuelled by the resounding success of the launch of Kamfinsa
and the anticipated success of the Westgate, Chinhoyi and Hwange developments
which are underway in the current financial year. Forward planning suggests
that TM Supermarkets will require further funding to achieve these objectives.
This requirement is being addressed by your board in accordance with the Group
funding policy.
Negotiations are in progress for major developments in our hotels division.
Shareholders are aware of the proposed development in Lusaka which has been
delayed for various reasons but we believe that this development may commence
in 2013. In addition we are focused on opportunities in Victoria Falls, Harare
and within the region. In this context we are in discussion with a large
international hotel group, who will partner us in these new developments.
Shareholders will be advised of further progress at the opportune time.
Shareholders have been advised that we have been making continuous efforts to
access our funds on deposit with the Reserve Bank of Zimbabwe which now amount
to approximately $40 million. We are aware that the Reserve Bank intends to
accommodate us and we await confirmation of what form the refund of this sum
will take and the timing thereof. Access to these funds will complete our
Group funding objectives as previously disclosed to shareholders.
Meikles Resources
Shareholders will recall that reference was made in the
Chairman's Review in the Annual report for the year ended
31 March 2012 regarding a new but
undisclosed business opportunity that would require substantial
funding if successful.
Shareholders are now advised of developments relating to the
progress of a new subsidiary in the Group called Meikles Resources
(Private) Limited.
This indigenous company, which is presently wholly owned by
Meikles Limited, has an objective to focus on the development of
mining and resource opportunities in Zimbabwe.
Meikles Resources will seek to combine local and international skills and
financial resources within the framework of its indigenous status. Meikles
Resources will comply with accepted international mining standards and ethics.
This entity will capitalise on the long standing reputation and history of the
Group in Zimbabwe and will apply the Group's customary high standards to the
implementation and operation of this division for the benefit of all
stakeholders.
Meikles Resources has commenced exploratory mining operations on one
opportunity and will start full mining operations as soon as the full extent of
the resource has been established. Shareholders will be provided with details
as these operations progress. In addition, discussions will take place on
further resource opportunities.
Shareholders are advised that profits from Meikles Resources are expected to
exceed those anticipated for the entire Group as presently constituted over the
coming years and will therefore be of material significance.
Management
The Group has three new subsidiary managing directors and a
fourth in an acting capacity, all of whom have been appointed in
the last eighteen months. Your board is confident that the new
incumbents will contribute unique and fresh skills into a
developing and exciting Group.
The substantial expansion in agricultural, hotels and mining within Zimbabwe
and the Region, makes it imperative that the Group positions itself to
effectively navigate planned growth and to harness the full potential of the
abundant opportunities that lie ahead. In this context the Group intends to
secure a suitable resource adequately equipped to assist in this pursuit.
The Group intends to bolster the structure of its retail and other consumer
activities with the appointment of an experienced retail and consumer business
executive. This will add considerable support to the two retail managing
directors and will complement the input received from our partners in these
entities. This appointment will serve to exploit the energies and synergies
contained within the retail footprint where we have a substantial presence in
Zimbabwe and which offers opportunity for aggressive growth using internal
efficiencies more effectively.
TM Supermarkets are pleased to announce the appointment of
David Mills to the position of
Managing Director with effect from Wednesday, 21 November 2012. Dave
Mills is well known in the industry and we welcome him back
to TM Supermarkets and the Group.
OPERATIONS
TangandaTea Company
The Tanganda Estates consist of five tea estates producing on 2 600 hectares,
four large tea factories, an office complex in Mutare which manufactures packed
tea for local and regional consumption and several schools and clinics.
An extensive diversification program is under way and will be completed in 2014
and involves the establishment of 700 hectares of macadamias, 500 hectares of
avocados and 300 hectares of new coffee plantations. Tanganda developed
104 hectares and 64 hectares of avocados and macadamia respectively during the
first half of the year. This brings the total hectarage under new plantations
to 139 hectares of avocados, 209 hectares of macadamia and 123 hectares of
coffee. This expansion program is the largest of its type ever implemented in
a relatively short period in Zimbabwe.
In the current financial year, the winter rainfall has been 56% on average less
than that recorded in the previous year and adverse relative to normal
expectations. In addition to low rainfall we have had to contend with frost
damage. The new summer season has begun positively and we shall produce a good
crop for the year as a whole, if the rains continue.
Our quality initiatives are paying off in terms of improved
quality teas and prices.
We continue to make every effort to reduce overheads which had
risen to unsustainable levels in the years post dollarisation. We
are pleased to have secured reliable electricity supplies from ZESA
and this has reduced the operating costs negatively impacted by
generator power.
We have substantial forward commitments on the estates for
further mechanization including tractors, a bulldozer, trucks and
irrigation equipment.
We plan a second water bottling plant to enable us to meet a
very significant growth in demand for Tingamira water bottled at
our natural spring in Chipinge.
We intend to update our Mutare factory with new tea packaging
machinery and a new fleet of delivery trucks to enhance our
distribution of packed tea.
The Hotel Group
The exciting and extensive renovations at Meikles Hotel will be
completed early next year. We will see the launch of refashioned
décor, state of the art bathrooms, new lifts, air conditioning, and
a prestigious Club facility together with advanced guest IT
services to attract the business travellers.
Our room occupancies, based on available rooms for the first
half of the year were better than those for the first six months of
the previous year. In October 2012,
occupancies based on available rooms were 64% which compares
favourably to what we believe the general market is achieving.
Our average room rates and REVPAR are believed to be better than
the market.
We continue to be pleased by the superior standard of our food
and beverage offerings.
Renovation of the Victoria Falls Hotel has commenced and is to be completed
during the course of 2013. In the meantime room occupancy in the first half of
the year shows an improvement over the previous year and October 2012 posted
occupancy of 70% and the positive trend continues. The average room rate shows
a useful improvement as does REVPAR. Our room occupancies are believed to be
well above average in the market as is our average room rate and REVPAR. The
food and beverage offerings are substantially improved this year.
Properties
Your board is aware that it has substantial financial interest
in dominant properties throughout the Country. A focus is to be
directed on how best to utilize these properties for both own and
commercial use, but with an objective of enhancing shareholder
value.
Mentor Africa
In the current period, the Group took up a 35% shareholding in
Mentor. The Mentor results will be accounted for in the second half
of the current financial year and thereafter will be accounted for
in every reporting period.
In the context of Mentor, the Group is substantially involved in the affairs of
the Cape Grace Hotel which is part of the Group together with other Mentor
assets. Shareholders will be pleased to know that full cooperation between our
hotels and Cape Grace continues and that the Cape Grace is performing well.
There is substantial expectation in the performance and value attributed to
other Mentor assets and therefore to the Group.
The Mentor/Cape Grace transaction yielded a financial profit of $1.1 million
which has been recognised in the statement of comprehensive income. This profit
is net of intangible assets, in the form of goodwill and depreciation, with a
combined value of $9.9 million.
TM Supermarkets
TM Supermarkets will focus on improving its merchandise mix to
provide an improved offering to the public at competitive pricing
but at the same time focusing on an improvement in gross profit
percentage which although better than the previous year is still
below our expectation. The larger and refurbished branches with
their larger range of merchandise are achieving useful gross
profits. There will be a further focus on improvement in product
identification and sourcing.
Management has identified areas of potential cost reduction, which will make a
significant difference to the bottom line going forward. Cost control is an
ongoing focus and this will accelerate in future months as will a focus on
the
reduction in shrinkage.
We have disclosed our objective to refurbish our supermarkets. This objective
will be implemented on a National basis over as short a period as is practical.
We also anticipate that there will be new supermarkets opened over a planned
period.
TM Department Stores
Your board believes that there will be greater spending power in urban areas as
the disposable income of Zimbabwean consumers improves. This is a fast growing
trend in many parts of Africa according to various reports where the
opportunity is described as a potential, untouched, gold mine. This will likely
occur at a slower pace, in Zimbabwe, than the rest of Africa, in the short
term. Once the potential is harnessed our retail dominance will enhance
shareholder value.
In the mean time we are focusing our efforts on rationalizing
our footprint with reduced risk in the short term in the form of
lower stocks and trade debtors with an improved turnaround in
both.
In addition, overheads are being effectively managed downwards.
We are anticipating an improved performance for the year as a
whole, relative to the previous year with reduced risk to
shareholders.
It is possible that the stores will seek a retail partner when
the environment is conducive.
Directorate
In September 2012, the Board was
advised of the sad passing of Mr Michael
Wilson, a former Director of the Company. The Board would
like to extend its sincere condolences to his family.
JRT Moxon
Chairman
21 November 2012
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 SEPTEMBER
2012
6 months 6 months
to to
30 30
September September
2012 2011
US$ 000 US$ 000
CONTINUING OPERATIONS
Revenue 189,491 165,591
Cost of sales* (149,490) (130,843)
Gross profit 40,001 34,748
Other income 2,292 2,004
Employee costs (20,204) (20,363)
Occupancy costs (8,975) (7,625)
Other operating costs* (13,103) (11,717)
Operating loss 11 (2,953)
Investment revenue 1,130 1,220
Finance costs* (3,241) (3,562)
Net exchange losses (183) (1,745)
Profit on disposal of subsidiaries 1,173
-
Fair value adjustments 2,126 -
Profit / (loss) before tax 1,016 (7,040)
Income tax (249) 1,463
Profit /(loss) for the period from continuing operations 767 (5,577)
Profit for the period from discontinued operations -
580
PROFIT / (LOSS) FOR THE PERIOD 767 (4,997)
Other comprehensive loss
Exchange differences on translating foreign operations -
(2,612)
Other comprehensive loss for the period, net of tax - (2,612)
TOTAL COMPREHENSIVE PROFIT / (LOSS) FOR THE PERIOD 767 (7,609)
(Loss) / profit attributable to:
Owners of the parent (666) (5,349)
Non-controlling interests 1,433 352
767 (4,997)
Total comprehensive (loss) / profit attributable to:
Owners of the parent (666) (7,961)
Non-controlling interests 1,433 352
767 (7,609)
Loss per share (cents)
Basic and diluted loss from continuing and discontinued
operations (cents per share)
(0.26) (2.18)
Basic and diluted loss from continuing operations (cents (0.26) (2.42)
per share)
Basic and diluted headline loss from continuing and
discontinued operations (cents per share)
(0.71) (2.19)
* Prior year comparatives have been reclassified to conform to
the presentation at 31 March 2012 and
30 September 2012. Refer to note 5
for details.
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2012
Unaudited Audited
30 September 31 March
2012 2012
US$ 000 US$ 000
ASSETS Restated*
Non-current assets
Property, plant and equipment 92,134 86,122
Investment property 256 43
Biological assets 14,692 11,770
Other financial assets 12,855 18,370
Investment in associate 27,657 -
Intangible assets - trademarks 124
124
Balances with Reserve Bank of Zimbabwe 39,562 38,627
Deferred tax 2,176 1,888
Exploration and evaluation costs 1,640
-
Total non-current assets 191,096 156,944
Current assets
Inventories 41,479 36,546
Trade and other receivables 15,638 17,642
Other financial assets 1,264 1,085
Cash and bank balances 8,388 8,427
66,769 63,700
Assets held for sale - 37,871
Total current assets 66,769 101,571
Total assets 257,865 258,515
EQUITY AND LIABILITIES
Capital and reserves
Share capital 2,538 2,538
Share premium 1,316 1,316
Non-distributable reserves 12,559 6,233
Retained earnings 117,233 104,581
Capital and reserves relating to assets classified as - 19,644
held for sale
Equity attributable to equity holders of the parent 133,646 134,312
Non-controlling interests 8,928 7,495
Total equity 142,574 141,807
Non-current liabilities
Borrowings 8,698 4,786
Deferred tax 12,501 12,124
Total non-current liabilities 21,199 16,910
Current liabilities
Trade and other payables 45,666 38,371
Short term borrowings 48,426 47,199
94,092 85,570
Liabilities relating to assets classified as held for - 14,228
sale
Total current liabilities 94,092 99,798
Total liabilities 115,291 116,708
Total equity and liabilities 257,865 258,515
* Refer to note 4 for details of the restatement.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 SEPTEMBER
2012
Share Share Non-distributable Disposal
capital premium reserves Retained group
earnings capital
and
reserves
US$ 000 US$ 000 US$ 000 US$ 000 US$ 000
30 September 2012
Balance at the beginning of 2,538 1,316 104,581
the period 6,233 19,644
Loss for the period - - - (666) -
Transfer on sale of
disposal group - - 6,326 13,318 (19,644)
Balance at the end of the
period 2,538 1,316 12,559 117,233 -
30 September 2011
Balance at the beginning of
the period as previously
stated 2,454 - 2,627 111,207 18,083
Prior period adjustment* - - - (1,719) -
Balance at the beginning of
the period restated 2,454 - 2,627 109,488 18,083
Loss for the period - - - (5,929) 580
Other comprehensive income
for the period - - (1,236) - (1,376)
Transfer on disinvestment
of non-controlling
interest in a subsidiary - - - (168) -
Balance at the end of the
period 2,454 - 1,391 103,391 17,287
Non
Attributable to controlling
owners of parent interests Total
US$ 000 US$ 000 US$ 000
30 September 2012
Balance at the beginning of the period 134,312 7,445 141,807
Loss for the period (666) 1,433 767
Transfer on sale of disposal group - -
-
Balance at the end of the period 133,646 8,928 142,574
30 September 2011
Balance at the beginning of the period
as previously stated 134,371 764 135,135
Prior period adjustment* (1,719) (573) (2,292)
Balance at the beginning of the period
restated 132,652 191 132,843
Loss for the period (5,349) 352 (4,997)
Other comprehensive income for the
period (2,612) - (2,612)
Transfer on disinvestment of
non-controlling interest in a
subsidiary (168) 168 -
Balance at the end of the period 124,523 711 125,234
* Refer to note 4 for details of the restatement.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER
2012
30 September 30 September
2012 2011
US$ 000 US$ 000
CONTINUING AND DISCONTINUED OPERATIONS
Cash flows from operating activities
Profit / (loss) before tax from continuing and 1,016
(6,460)
discontinued operations
Adjustments for
- Depreciation expense 2,267 1,905
- Net interest 2,111 2,998
- Net exchange losses 183 1,550
Profit on disposal of subsidiaries (1,173)
-
- Fair value adjustments (2,126) (1)
-Loss / (profit) on disposal of property, plant and 40
(23)
equipment
Operating cash flow before working capital changes 2,318
(31)
Increase in inventories (5,070) (626)
Increase in trade and other receivables (405)
(1,583)
Increase in trade and other payables 12,408
6,383
Cash generated from operations 9,251
4,143
Income taxes paid (127) (73)
Net cash generated from operating activities 9,124
4,070
Cash flows from investing activities
Payment for property, plant and equipment (8,500)
(3,426)
Proceeds from disposal of property, plant and equipment 69
1,356
Exploration and evaluation costs (1,640)
-
Net movement in service assets (102)
(55)
Payment for other investments (90)
(259)
Plantation development expenditure (794)
(227)
Investment income 180 151
Net cash used in investing activities (10,877)
(2,460)
Cash flows from financing activities
Proceeds from interest bearing borrowings 5,138
4,537
Finance costs (3,241) (4,252)
Net cash generated from financing activities 1,897
285
Net increase in cash and bank balances 144
1,895
Cash and bank balances at the beginning of the period 8,427
4,785
Net effect of exchange rate changes on cash and bank (183)
237
balances
Translation of foreign entity -
(529)
Cash and bank balances at the end of the period 8,388
6,388
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
The Group's interim condensed consolidated financial statements have been
prepared in accordance with IAS 34 - Interim Financial Reporting. The Group
adopted IFRS 6 - Exploration and Evaluation of Mineral Resources to account for
exploration and evaluation costs. All other accounting policies and methods of
computation applied in the preparation of these condensed financial statements
are consistent, in all material respects, with those applied in the preparation
of the Group's annual financial statements for the year ended 31 March 2012
with no significant impact arising from new and revised International Financial
Reporting Standards (IFRS).
2. Discontinued operations
The sale of the Cape Grace Hotel to Mentor was concluded on
1 April 2012 as reported in the
annual report for the year ended 31 March
2012. The Cape Grace Hotel results are disclosed as
"discontinued operations" in the prior period.
2.1 Profit for the period from discontinued operations
Unaudited Unaudited
30 30
September September
2012 2011
US$ 000 US$ 000
Revenue - 6,753
Other gains - 220
Total income - 6,973
Expenses - (6,393)
Profit before tax - 580
Income tax - -
Profit for the period from discontinued operations
(attributable to owners of the parent)
- 580
Other comprehensive loss
Exchange differences on translating foreign entities -
(1,376)
Other comprehensive loss for the period, net of tax -
(1,376)
Total comprehensive loss for the period -
(796)
Cash flows from discontinued operations
Net cash flows from operating activities -
145
Net cash flows from investing activities -
(138)
Net cash flows from financing activities -
78
Net cash flows - 85
Assets held for sale
Unaudited Audited
30 September 31 March
2012 2012
US$ 000 US$ 000
Assets held for sale
Cape Grace Hotel group of companies - 40,280
Total assets held for sale - 40,280
Liabilities relating to assets held for sale
Cape Grace Hotel group of companies -
20,636
Total liabilities held for sale - 20,636
Net assets held for sale - 19,644
Equity relating to assets held for sale
Cape Grace Hotel group of companies -
19,644
Total equity relating to assets classified as held - 19,644
for sale
3. Segment information
Unaudited Unaudited
30 30
September September
2012 2011
US$ 000 US$ 000
Revenue
Continuing operations
Supermarkets 163,769 136,595
Hotels 7,710 7,922
Agriculture 10,597 9,126
Stores 8,558 12,190
Intra-group sales (1,143) (242)
189,491 165,591
Discontinued operations
Cape Grace Hotel group of companies
- 6,753
- 6,753
EBITDA
Continuing operations
Supermarkets 5,211 3,460
Hotels 448 30
Agriculture (1,810) (2,488)
Stores (568) (456)
Corporate* (1,454) (1,776)
1,827 (1,230)
Discontinued operations
Cape Grace Hotel group of companies
- 351
- 351
Included in the continuing operations prior period EBITDA
figures above are the
following exceptional expenses:
Compensation for loss of office
- (1,363)
Legal and professional fees - (570)
Impairment of property, plant and equipment
- (47)
- (1,980)
Excluding these items, the prior period EBITDA figures would have been as
follows:
Continuing operations
Supermarkets 5,211 3,679
Hotels 448 665
Agriculture (1,810) (2,042)
Stores (568) (176)
Corporate (1,454) (1,376)
1,827 750
Unaudited Audited
30 September 31 March
2012 2012
US$ 000 US$ 000
Segment assets
Continuing operations
Supermarkets 55,760 47,436
Hotels 44,217 29,878
Agriculture 43,111 43,004
Stores 57,835 57,872
Corporate* 56,942 42,454
257,865 220,644
Assets classified as held for sale
Cape Grace Hotel group of companies
- 37,871
- 37,871
257,865 258,515
Segment liabilities
Continuing operations
Supermarkets 37,540 31,725
Hotels 12,385 8,720
Agriculture 24,861 19,538
Stores 47,493 45,317
Corporate* (6,988) (2,820)
115,291 102,480
Liabilities classified as held for sale
Cape Grace Hotel group of companies
- 14,228
- 14,228
115,291 116,708
*Intercompany transactions and balances have been eliminated from the corporate
amounts. Corporate also includes other non-trading subsidiaries that are not
allocated to a reportable segment.
4. Restatement
During the period, the Group identified an error in the trading inventory
valuation at TM Supermarkets (Private) Limited, carried forward from the 31
March 2011 financial year. The error had the effect of overstating inventory,
retained earnings, non-controlling interests and deferred tax liability for
the financial periods ended 31 March 2011 and 31 March 2012.
The effect of this restatement on the Group financial statements is summarised
below.
As previously As
stated restated Restatement
31 March 31 March 31 March
2011 2011 2011
US$ 000 US$ 000 US$ 000
Effect on statement of financial position
Inventory 40,713 37,626 3,087
Retained earnings 111,207 109,488 1,719
Non-controlling interests 764 191 573
Deferred tax liability 15,996 15,201 795
3,087
Effect on statement of comprehensive
income
Cost of sales (256,124) (259,211) (3,087)
Income tax credit 793 1,588 795
Decrease in profit for the period from (2,292)
continuing operations
As previously As
stated restated Restatement
31 March 31 March 31 March
2012 2012 2012
US$ 000 US$ 000 US$ 000
Effect on statement of financial position
Inventory 39,633 36,546 3,087
Retained earnings 105,750 104,581 1,169
Non-controlling interests 8,618 7,495 1,123
Deferred tax liability 12,919 12,124 795
3,087
The restatement has no impact on the loss for the six months
ended 30 September 2011 and for the
year ended 31 March 2012.
5. Prior period comparatives
Selling and distribution expenses of US$1,367,393 previously included in cost
of sales for the period ended 30 September 2011 are now disclosed as part of
other operating costs. Depreciation of US$419,987 previously included in other
operating costs for the period ended 30 September 2011 has been reclassified to
cost of sales.
Finance costs of US$691,000 in respect of borrowings used to finance the Stores
debt book has been offset against the interest received on the debt book. The
net interest income is disclosed in other income.
6. Other information
30 September 30 September
2012 2011
US$ 000 US$ 000
Continuing operations
Depreciation - property, plant and equipment 2,267
1,905
Capital commitments authorised by the Directors but 14,221 22,369
not contracted
For further information contact Onias Makamba on omakamba@meikleslimited.co.zw
or +263-4-252068/70.