TIDMMIK
MEIKLES LIMITED
ABRIDGED UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2016
CHAIRMAN'S STATEMENT
Group Overview
The operating environment was characterised by a number of impediments, the
main ones being cash shortages and delays in settlement of obligations to
foreign suppliers. As a result, Group turnover for the six month's period to 30
September was static relative to the previous period. The contribution to
turnover by the different segments of the Group is set out in Note 6.
EBITDA for the period grew by US$4.6 million or 92% to US$9.6 million. The
contribution to EBITDA by the different segments of the Group is set out in
Note 6.
Interest payable decreased by 22% to US$4.2 million due to reduced borrowings.
Group net borrowings are detailed in Note 8. Net borrowings have decreased by
approximately US$8.4 million over the six month's period. Negotiations with
lenders to extend the tenure of short term borrowings are in progress. Notable
progress has been achieved to date.
Segment Commentary
TM Supermarkets trading as TM and PnP
Turnover increased by 3% and operating income expressed as a percentage of
turnover increased from 19.5% to 20.7%. Growth in turnover was achieved in new
and upgraded stores.
EBITDA for the period grew by 38% benefiting from improved gross profit margin,
a direct benefit of new refrigeration equipment in new and upgraded branches.
In October, TM repaid in full, borrowings taken to refurbish and expand branch
networks. The development at TM Borrowdale is now in the final stages. The
centre will open during the first quarter of 2017. Three new sites to expand
the branch network are at various stages of development.
Stores - Meikles Stores and Meikles Mega Market
The retail segment continued with the expansion plan opening three units
including the flagship M-store outlet at Sam levy's village in Borrowdale.
Performance for these units has been within expectation. Barbours scooped The
Confederation of Zimbabwe Retailers 'Clothing Retailer of the Year' award on 24
November 2016.
Improvement in procurement efficiencies occasioned by direct imports resulted
in improved gross profit margins. Tightening of credit control policy resulted
in improved collection rate as well as reduction in trade debtors' arrears. The
introduction of the M-store, which trades on a cash basis, bettered the cash to
credit ratio from 27:73 to 39:61 thereby making the business more liquid.
Tanganda
International bulk tea export prices have firmed to average US$1.51/kg in the
six month's period to 30 September 2016 compared with average US$1.28/kg for
the six months to 30 September 2015. The division, however experienced record
heat and evaporation in Chipinge in September and October 2016. Meaningful
rainfall covering all estates fell on the 14th of November 2016. Fertilizers
and chemicals for first applications on all the crops are on hand.
The average price on macadamia nuts of US$2.80/kg was in line with prior year
and the international coffee prices are firming with the AAA grade fetching
between US$4.60/kg and US$5.00/kg.
The 5% export incentive will go a long way in boosting exports of packed tea
into the region. The support given to exporters by the Reserve Bank of Zimbabwe
is greatly appreciated.
The Rainforest Alliance (Sustainable Agriculture), International Standards
Organization (ISO - on packed tea), GlobalGAP (on avocadoes) and Standards
Association of Zimbabwe (SAZ on bottled spring water) are all in place making
our products acceptable worldwide. In this regard, we have successfully worked,
in partnership with Technoserve, for the certification by Rainforest Alliance
of 187 small scale tea growers and the remainder will be certified in phase two
of the project.
Hospitality
Trading during the first half of the financial year, at the two hotels in
Zimbabwe reflected the contrasting trends between business and leisure travel.
Occupancies and average room rate in Harare declined due to dwindling business
travel, a reflection of the country's worsening investment climate. The
Victoria Falls Hotel registered a strong revenue growth on the back of a
rebound in international leisure travel.
Both hotels were recognized for excellence in service and standard of product
during the period under review. Meikles Hotel was voted 2016 Best City Hotel by
Association of Zimbabwe Travel Agents (AZTA). Meikles Hotel has won this award
consecutively for 24 years. The Victoria Falls Hotel was voted first runner up
for Best Resort Hotel by AZTA.
Outlook
The Group is expected to continue to enhance its EBITDA performance. Growth
associated with a number of projects underway in segments of the Group are
substantial and will provide a platform for further growth in earnings.
Shareholders and stakeholders are advised that strategies will be advanced in
the Group with a view to substantially reduce all borrowings during the
forthcoming calendar year.
Appreciation
I would like to extend my appreciation to our customers, suppliers,
shareholders and regulatory authorities for their continued support. I would
also like to extend my appreciation to my fellow Directors, and to management
and staff for their dedication and commitment.
Dividend
The Board has not declared an interim dividend.
JRT Moxon
Executive Chairman
15 March 2017
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 SEPTEMBER 2016
Restated
30 Sep 2016 30 Sep 2015
US$ 000 US$ 000
Revenue 225,898 225,690
Net operating costs (222,341) (225,551)
Operating profit 3,557 139
Investment income 725 1,783
Finance costs (4,227) (5,446)
Net exchange gains / (losses) 7 (177)
Loss recognised on discounting Treasury Bills (774) (7,700)
Fair value adjustments on biological assets 3 39
Loss before tax (709) (11,362)
Income tax expense (749) (254)
Loss for the period (1,458) (11,616)
Other comprehensive income, net of tax
Items that may be reclassified subsequently to
profit or loss:
Reclassification adjustment relating to
available-for-sale financial assets disposed of in 617 -
the current year
Fair value gain on available-for-sale financial - 10,722
assets
Other comprehensive income for the period, net of 617 10,722
tax
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD (841) (894)
(Loss) / profit for the year attributable to:
Owners of the parent (3,655) (12,988)
Non-controlling interests 2,197 1,372
(1,458) (11,616)
Total comprehensive (loss) / income attributable to:
Owners of the parent (3,038) (2,266)
Non-controlling interests 2,197 1,372
(841) (894)
Loss per share (cents)
Basic (1.44) (5.12)
Diluted (1.34) (4.75)
Headline loss per share (cents) (1.12) (2.61)
Diluted headline loss per share (cents) (1.04) (2.42)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2016
Restated
30 Sep 2016 31 March
2016
US$ 000 US$ 000
ASSETS
Non-current assets
Property, plant and equipment 170,785 170,454
Investment property 248 248
Investment in Mentor Africa Limited 20,046 20,046
Biological assets 1,083 1,227
Intangible assets 124 124
Other financial assets 11,939 12,004
Deferred tax 5,395 3,480
Total non-current assets 209,620 207,583
Current assets
Treasury Bills 9,690 11,106
Inventories 33,947 33,391
Trade and other receivables 12,532 14,611
Other financial assets 3,938 3,493
Cash and bank balances 12,547 10,494
Total current assets 72,654 73,095
Total assets 282,274 280,678
EQUITY AND LIABILITIES
Capital and reserves
Share capital 2,538 2,538
Share premium 1,316 1,316
Other reserves 12,035 11,418
Retained earnings 86,441 90,096
Equity attributable to equity holders of the parent 102,330 105,368
Non-controlling interests 24,429 21,182
Total equity 126,759 126,550
Non-current liabilities
Borrowings 6,387 11,063
Deferred tax 16,727 15,465
Total non-current liabilities 23,114 26,528
Current liabilities
Trade and other payables 67,158 60,700
Borrowings 65,243 66,900
Total current liabilities 132,401 127,600
Total liabilities 155,515 154,128
Total equity and liabilities 282,274 280,678
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 SEPTEMBER 2016
Share Share Other Retained
capital premium reserves earnings
US$ US$ US$ US$
000 000 000 000
2016
Balance at 1 April 2016 (as previously 2,538 1,316 11,418 93,222
stated)
Prior year adjustment (change in accounting - - - (3,126)
policy)
Balance at 1 April 2016 (restated) 2,538 1,316 11,418 90,096
(Loss) / profit for the period - - - (3,655)
Other comprehensive income for the period - - 617 -
Non-controlling interests arising from Mopani - - - -
Property Development (Private) Limited
Balance at 30 September 2016 2,538 1,316 12,035 86,441
2015 - Restated
Balance at 1 April 2015 2,538 1,316 87 115,934
(Loss) / profit for the period - - - (12,988)
Other comprehensive income for the period - - 10,722 -
Non-controlling interests arising from Mopani - - - -
Property Development (Private) Limited
Balance at 30 September 2015 2,538 1,316 10,809 102,946
Attributable Non Total
to owners controlling
of parent interests
US$ 000 US$ 000 US$ 000
2016
Balance at 1 April 2016 (as previously stated) 108,494 21,182 129,676
Prior year adjustment (change in accounting policy) (3,126) - (3,126)
Balance at 1 April 2016 (restated) 105,368 21,182 126,550
(Loss) / profit for the period (3,655) 2,197 (1,458)
Other comprehensive income for the period 617 - 617
Non-controlling interests arising from Mopani - 1,050 1,050
Property Development (Private) Limited
Balance at 30 September 2016 102,330 24,429 126,759
2015 - Restated
Balance at 1 April 2015 119,875 17,281 137,156
(Loss) / profit for the period (12,988) 1,372 (11,616)
Other comprehensive income for the period 10,722 - 10,722
Non-controlling interests arising from Mopani - 57 57
Property Development (Private) Limited
Balance at 30 September 2015 117,609 18,710 136,319
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 SEPTEMBER 2016
Restated
30 Sep 2016 30 Sep 2015
US$ 000 US$ 000
Cash flows from operating activities
Loss before tax (709) (11,362)
Adjustments for:
- Depreciation and impairment of property, plant 5,998 4,851
and equipment and investment property
- Net interest 3,502 3,663
- Net exchange (gains) / losses (7) 177
- Fair value adjustments on biological assets (3) (39)
* Loss recognised on discounting Treasury Bills 774 7,700
- Loss on disposal of property, plant and equipment 99 23
Operating cash flow before working capital changes 9,654 5,013
Increase in inventories (557) (1,277)
Decrease in trade and other receivables 2,139 6,654
Increase / (decrease) in trade and other payables 5,850 (417)
Cash generated from operations 17,086 9,973
Income taxes paid (794) (86)
Net cash generated from operating activities 16,292 9,887
Cash flows from investing activities
Payment for property, plant and equipment (6,317) (5,384)
Proceeds from disposal of property, plant and 33 30
equipment
Proceeds from sale of Treasury Bills and coupon 1,950 22,951
interest
Net movement in service assets 27 -
Net movement in other investments (378) 61
Net expenditure on biological assets (23) (30)
Investment income 33 297
Net cash (used in) / generated from investing (4,675) 17,925
activities
Cash flows from financing activities
Net decrease in interest bearing borrowings (6,333) (15,106)
Proceeds on disposal of partial interest in a 1,050 57
subsidiary without loss of control
Finance costs (4,227) (5,446)
Net cash used in financing activities (9,510) (20,495)
Net increase in cash and bank balances 2,107 7,317
Cash and bank balances at the beginning of the year 10,494 8,883
Net effect of exchange rate changes on cash and (54) (12)
bank balances
Cash and bank balances at the end of the period 12,547 16,188
NOTES TO THE ABRIDGED UNAUDITED FINANCIAL STATEMENTS
1. Basis of preparation
The abridged unaudited financial statements are prepared from statutory records
that are maintained under the historical cost basis except for biological
assets (excluding bearer plants) and certain financial instruments which are
measured at fair value. Historical cost is generally based on the fair value of
the consideration given in exchange for assets. These abridged unaudited
results do not include all information and disclosures required to fully compy
with IFRS and should be read in conjuction with the Group's annual report.
2. Accounting policies
Accounting policies and methods of computation applied in the preparation of
these abridged unaudited financial statements are consistent, in all material
respects, with those used in the prior year, except for the effect of the newly
revised International Financial Reporting Standards (IFRSs) on Agriculture:
Bearer Plants (Amendements to IAS 16 and IAS 41). Please refer to note 9 for
more details.
3. Going concern
The Directors assess the ability of the Group to continue in operational
existence in the foreseeable future at each reporting date. As at 30 September
2016, the Directors have assessed the Group's ability to continue operating as
a going concern and believe that the preparation of these unaudited financial
statements on a going concern basis is still appropriate.
4. Balance with the Reserve Bank of Zimbabwe
Below is an analysis of the movement in RBZ balance during the period:
Group and Group and
Company Company
30 Sep 2016 31 March
2016
US$ 000 US$ 000
Balance at the beginning of the period - 7,229
Treasury Bills received - (6,500)
Compensation on Treasury Bills issued in lieu of - 1,500
amount due in cash
Interest uplift on Treasury Bills reissued - (2,229)
Balance at the end of the period - -
5. Treasury Bills
Below is an analysis of the movement in the Treasury Bills' balance during the
period:
Group and Group and Group and Group and
Company Company Company Company
30 Sep 2016 30 Sep 2016 31 March 31 March
2016 2016
US$ 000 US$ 000 US$ 000 US$ 000
Fair Fair
(Market) Nominal (Market) Nominal
value value value value
Balance at the beginning of 11,106 12,247 22,942 35,414
the period
Treasury Bills received - - 5,769 6,500
during the period
Gain on replacement of - - 8,320 2,229
Treasury Bills
Interest for the period 690 266 2,396 940
Coupon interest received (300) (300) (330) (330)
Treasury Bills disposed (1,806) (1,969) (27,991) (32,506)
during the period
Balance at the end of the 9,690 10,244 11,106 12,247
period
Analysis of balance
Treasury bills on hand at 8,276 10,012 9,889 11,964
end of period
Accrued interest 1,414 232 1,217 283
Balance at the end of the 9,690 10,244 11,106 12,247
period
The Treasury Bills have been designated as "available-for-sale" (AFS) financial
assets and were initially recognised/measured at fair (market) value. The fair
(market) value of the Treasury Bills on initial recognition, and at 30
September 2016, was calculated based on a yield to maturity of 17%. This yield
to maturity was determined with reference to the percentage discount to the
nominal value of the Treasury Bills at which the Company has been able to sell
certain of the Treasury Bills in the open market during the preceding and
current financial years.
Interest income on the Treasury Bills is recognised using the effective
interest rate method and is included in "Investment income" in the Statement of
Profit or Loss and Other Comprehensive Income.
At 30 September 2016, Treasury Bills with a nominal value of US$10.0 million
were pledged as security for loans with a carrying value of US$14.1 million.
Treasury Bills issued by the Reserve Bank of Zimbabwe held at 30 September
2016:
Group and Group and
Company Company
30 Sep 2016 31 March
2016
US$ 000 US$ 000
At fair (market) value
Treasury Bills maturing on 10 April 2017 with a 9,690 11,106
coupon rate of 5%
9,690 11,106
The salient terms of the Treasury Bills held at 31 March 2016 are as follows:
Treasury Bill number ZTB73120150410Z
Issue date 10/04/2015
Redemption date 10/04/2017
Nominal value - including accrued interest (US$ 000) 10,244
Coupon 5.0%
Coupon payment dates 10 April and 10
October
Fair value - including accrued interest (US$ 000) 9,690
6. Segment information
Restated
30 Sep 2016 30 Sep 2015
US$ 000 US$ 000
Revenue
Supermarkets 202,029 196,731
Hotels 7,688 8,267
Agriculture 10,223 11,193
Departmental stores 2,572 3,103
Wholesaling 4,107 7,230
Corporate* (721) (834)
225,898 225,690
EBITDA
Supermarkets 9,577 6,963
Hotels 1,140 1,189
Agriculture 1,444 (292)
Departmental stores (467) (570)
Wholesaling (1,158) (874)
Corporate* (982) (1,425)
9,554 4,991
The EBITDA figures are before Group management fees.
Restated
30 Sep 2016 31 March
2016
US$ 000 US$ 000
Segment assets
Supermarkets 91,886 88,113
Hotels 47,368 47,557
Agriculture 72,081 73,825
Departmental stores 31,609 30,015
Wholesaling 4,086 4,268
Corporate* 35,244 36,900
282,274 280,678
Segment liabilities
Supermarkets 44,935 46,716
Hotels 23,083 22,887
Agriculture 32,287 32,429
Departmental stores 17,871 16,984
Wholesaling 7,006 6,049
Corporate* 30,333 29,063
155,515 154,128
*Intercompany transactions and balances have been eliminated from the corporate
amounts. Corporate also includes other subsidiaries that are immaterial to
warrant separate disclosure.
Restated
30 Sep 2016 30 Sep 2015
US$ 000 US$ 000
7. Other information
Depreciation of property, plant and equipment 5,361 4,728
Impairment of property, plant and equipment 637 123
Capital commitments authorised by the Directors but not 13,466 11,880
contracted for
Group's share of capital commitments of joint operations 2,641 -
30 Sep 2016 31 March
2016
US$ 000 US$ 000
8. Net borrowings
Non-current borrowings 6,387 11,063
Current borrowings 65,243 66,900
Total borrowings 71,630 77,963
Cash and cash equivalents (12,547) (10,494)
Net borrowings 59,083 67,469
Comprising:
Secured 62,909 68,454
Unsecured 8,721 9,509
71,630 77,963
9. Change in accounting policy for bearer plants
On 1 April 2016, the Group changed its accounting policy for bearer plants,
from fair value measurement under IAS 41: Agriculture to the cost model under
IAS 16: Property, Plant and Equipment. This change has been necessitated by
amendments to International Financial Reporting Standards on Agriculture:
Bearer Plants (Amendments to IAS 16 and IAS 41). Retrospective adjustments have
been made to the financial statements with effect from 1 April 2015, the
beginning of the earliest period presented, as required by the transitional
provisions of Agriculture: Bearer Plants (Amendements to IAS 16 and IAS 41).
The Group has elected to measure bearer plants at their fair value at the
beginning of the earliest period presented, 1 April 2015, and have used that
fair value as the deemed cost of the bearer plants as at that date. There was
no difference between carrying amount and fair value as at that date, and hence
no adjustments were made to opening retained earnings.
The effect of the restatement to the 30 September 2015 interim period and 31
March 2016 financial year is as summarised below:
Effect on
30 Sep 2015
US$ 000
Increase in net operating costs (310)
Decrease in fair value adjustments on biological assets (618)
Decrease in deferred tax expense 119
Decrease in profit (809)
Decrease in basic loss per share (0.32)
Decrease in diluted loss per share (0.29)
Decrease in headline loss per share (0.32)
Decrease in diluted headline loss per share (0.29)
Effect on
31 March
2016
US$ 000
Increase in property, plant and equipment 41,021
Decrease in biological assets (44,718)
Decrease in deferred tax liability 571
Decrease in equity (3,126)
Effect on opening retained earnings (1 April 2015) -
Website : www.meiklesinvestor.com
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