RNS No 6673u
MEIKLES AFRICA LIMITED
16th November 1998
MEIKLES AFRICA LIMITED
Interim Results for the six months ended 30 September 1998
Meikles Africa Limited, the Zimbabwe-based hotel and retail
group, which floated on the Zimbabwe and London Stock
Exchanges in 1996, announces a significant increase in half
year profits.
* Turnover up 39% to Z$1701m (*#33.7m)
* Group operating profit up 64% to Z$164m (*#3.2m)
* Net exchange gains of Z$768m (*#15.2m)
* Victoria Falls Hotel performing well, following recent
acquisition
(*The sterling figures represent only a convenience
translation at the Z$:# exchange rate of Z$50.48 to #1
applying at close of business on 28 November 1998.)
John Moxon, Chairman, said:
'Due to the poor economic environment in Zimbabwe, trading
conditions have not been easy in the last six months. However,
we have achieved excellent results with major revenue and
profit increases as a result of our close attention to costs
and operational efficiency. The Victoria Falls Hotel
acquisition is already showing its worth with a strong
performance to date.'
Enquiries:
Meikles Africa Limited Tel: +263 4 730 611
John Moxon, Chairman
Charles Golding, Finance Director
College Hill Tel: +44 171 457 2020
Mark Garraway / Nicholas Williams
CHAIRMAN'S STATEMENT
Introduction
We are pleased to be able to report a robust performance for
the half year which includes the acquisition of a 50% share of
the Victoria Falls Hotel operations, despite the problems of
the economy impacting on the consumer spending and confidence
generally. Turnover at $1701 million, including the Group's
share of two months operations of the Victoria Falls Hotel,
shows an overall increase of 39%, with a growth of 64% in
operating profits to $164 million. Turnover on comparable
activities was 36% up on the same period in the previous year,
and operating profits were up 45%. The trend in the last few
months has shown a marked upturn in turnover due to rising
inflation and the fall of the Zimbabwe dollar.
Expenses have been contained within budget. Productivity and
stockturns continue to improve through management effort.
Headline earnings per share at 552c (previous year 86c)
include unrealised exchange gains.
The Board has recommended an interim dividend of forty cents
based on a cover of one times earnings, excluding exchange
gains.
Hotels
The acquisition of a 50% share in the business of the Victoria
Falls Hotel was a strategic investment in a hard currency
earning business which complements the Meikles Hotel and
affords management and guest synergies. The acquisition was
made using borrowed funds rather than our US dollars in view
of the current pressure on the Zimbabwe currency. Since then,
in US dollar terms, the purchase price has more than halved,
fully justifying management's decision.
The effective date of the agreement was 1st April 1998,
however we only became actively involved in management from 1
August 1998. Accordingly interest expense less our share of
profits, from the effective date to 31 July 1998 has been
included as part of the cost of acquisition of $377million.
The Victoria Falls Hotel is performing well. Our share of
turnover and operating profits for the two months to 30
September 1998 amounts to $33 million and $19 million
respectively. Tourism arrivals are reflected in good
occupancy levels. Application has been made for Victoria
Falls Hotel to become a member of the Leading Hotels of the
World, so that it will be marketed worldwide through their
global distribution system. The ISO 9002 quality standards
programme is now being implemented, and this will enhance the
hotel's product, service and efficiency. The partnership
management structure has settled down well, and negotiations
are in progress to purchase the Victoria Falls real estate.
Meikles Hotel room occupancy for the six months is below the
same period last year, due to the drop in business arrivals.
However, the average room rate has grown substantially over
the same period, due primarily to the depreciation of the
Zimbabwe dollar. This growth was particularly strong in the
last two months. Total sales of Z$122 million have grown by
32% with a rising trend and the operating profit by 31% to
Z$49 million over the comparable period of the previous year.
The International ISO9002 quality standards certification has
been renewed, and the South Wing refurbishment of 187 suites
and bedrooms will be completed by December 1998.
TM Supermarkets
At Z$1251 million, TM Supermarkets has achieved an increase in
turnover of 39% indicating real growth following the recent
refurbishment and expansion. This has resulted in an
operating profit growth of 50% to $73 million. These
favourable trends have accelerated in recent months.
Two new stores will be opened early in 1999, bringing the
total number of units to 49. Negotiations continue to secure
several prime sites which have been identified.
TM has recently introduced several products under the TM Supa
Saver housebrand which has enjoyed tremendous consumer support
that has been far greater then our expectations or that of our
suppliers. A 'Buy Zimbabwe' campaign has been mounted to run
from now through the Christmas season.
Retail and Leisure
Sales in the Retail and Leisure Division, which comprises the
Department Stores, the Clicks/Diskom chain and the Food
Franchises were up 28% over the same period last year to $300
million, whilst operating profits of Z$28 million increased by
74%.
The Department Stores experienced sluggish trading conditions
in the first quarter with a marked improvement towards the end
of the second quarter as consumers made significant purchases
in advance of price increases, particularly in large
appliances and furniture. The stores are well stocked with
imported merchandise at competitive prices. An intensive
performance improvement programme has seen an increase in
efficiency and improved stockturns. The programme is expected
to produce significant returns in the years to come.
Stringent credit control has continued to keep the bad debts
within acceptable parameters.
One new Clicks store was opened in Chinhoyi and the
introduction of the Clicks Club Credit facility in September
has been enthusiastically received by customers. Year on year
percentage sales growth is the highest in the entire group at
present. The merchandise in Diskom was rationalised which has
resulted in improved gross profits and reduced expenses.
Costs in the Franchise Food Chain have been substantially
reduced during the period and constant menu revision has
resulted in a progressive gain in turnover, despite a large
increase in competing outlets. Sales also show a steady
improvement as a result of an aggressive promotions programme
including live entertainment in the evenings which has proved
to be very popular in selected Bulldogs Pubs.
Outlook
The group is well aware of the risks related to the 'Year
2000' problem. A formal programme driven at director level,
continually monitors our exposure and addresses any issues as
they arise.
The Group will maintain some borrowings in Zimbabwe and keep
its United States dollar investment, presently US$44 million,
intact while the Zimbabwe dollar exchange rate remains weak.
The Group continues to look for opportunities to invest the
United States dollars in activities which have a United States
dollar related earning capacity. It is significant that the
Zimbabwe dollar equivalent of our United States dollar
investment, together with our quoted investment, represents
over 60% of our total market capitalisation.
On the assumption that there will be a good rainy season, high
inflation in the medium term, and a weak exchange rate, the
rising trend in turnover on comparable activities should
continue to grow in line with the Group's experience in recent
months. This growth together with our share of the profit
arising from the investment in the Victoria Falls Hotel, will
have a favourable impact on group profitability.
J R T MOXON
Chairman
DIVIDEND ANNOUNCEMENT
On the 11 November 1998, the Board approved an interim
dividend Number 58 of 40 cents per share on 152 895 305 shares
payable to members registered in the books of the company at
the close of business on 4 December 1998. The Transfer Books
and Register of Members will be closed from 5 December 1998 to
13 December 1998. Dividend cheques will be mailed to
shareholders on or about 14 December 1998. The dividends
payable to non-resident shareholders will be paid in
accordance with Exchange Control Regulations. Shareholders'
withholding tax will be deducted where applicable.
By order of the Board
A. P. Lane-Mitchell
Company Secretary
11 November 1998
Meikles Africa Limited
Financial Highlights
6 months 6 months 12 Months
to 30 to 30 to
September September 31 March
1998 1997 1998
Group turnover (Z$m) 1,701 1,227 2,826
Group operating profit (Z$m) 164 100 250
Headlines earnings per share 552 86 245
share (Zcents)
Operating cashflow per share 112 40 126
(Zcents)
Dividend proposed (Zcents) 40 30 65
Dividend cover (times)* 1.2 1.5 1.7
Capital expenditure (Z$m) 75 62 169
* excluding exchange gains
The unaudited results of Meilkes Africa Group of companies in
respect of the six months ended 30th September 1998 are as
follows:
Consolidated Income Statement
for the six months ended 30 September 1998
Unaudited Unaudited Audited
(Restated) (Restated)
6 months to 6 months to Year ended
30 September 30 September 31 March
1998 1997 1998
Z$000 Z$000 Z$000
Turnover 1,701,119 1,227,126 2,826,344
Gross profit 448,887 302,065 692,738
Operating expenses (285,234) (202,400) (442,564)
Operating profit 163,653 99,665 250,174
Net exchange gains 767,968 59,217 203,841
Net interest (expense) / (19,812) 16,588 27,041
income
Profit before taxation 911,809 175,470 481,056
Taxation (59,101) (37,130) (86,676)
Profit after taxation 852,708 138,340 394,380
Minority interest (12,064) (8,412) (22,412)
Net profit attributable
to shareholders 840,644 129,928 371,968
Dividends (61,158) (45,869) (99,382)
Transferred to retained 779,486 84,059 272,586
earnings
Earnings per share - 550 85 243
basic (cents)
IIMR Headline earnings
per share (cents) 552 86 245
Consolidated Balance Sheet
as at 30 September 1998
Unaudited Unaudited Audited
(Restated) (Restated)
30 September 30 September 31 March
1998 1997 1998
Z$000 Z$000 Z$000
ASSETS
Non-current assets 1,137,423 603,716 732,837
Current assets 2,410,383 1,225,906 1,466,266
Total assets 3,547,806 1,829,622 2,199,103
EQUITY AND LIABILITIES
Capital and reserves 2,128,711 1,160,698 1,349,225
Deferred tax 169,179 111,450 132,705
Minority interest 12,815 14,929 9,799
Non-current liabilities 654,885 105,290 139,986
Current liabilities 582,216 437,255 567,388
Total equity and 3,547,806 1,829,622 2,199,103
liabilities
Consolidated Cashflow Statement
for the six months ended 30 September 1998
Unaudited Unaudited Audited
30 September 30 September 31 March
1998 1997 1998
Z$000 Z$000 Z$000
Cash flows from operating
activities
Profit before taxation 911,809 175,470 481,056
Adjustment for non-cash (717,819) (52,013) (184,058)
items
Operating cash flow before
working capital changes 193,990 123,457 296,998
Utilised in working (22,136) (62,630) (104,324)
capital changes
Operating cash flow 171,854 60,827 192,674
Income tax paid (10,149) (899) (24,511)
Net cash from operating 161,705 59,928 168,163
activities
Net cash used in (488,833) (64,931) (198,019)
investing activities
Net cash from / (used in)
financing activities 381,773 (118,660) (139,678)
Net effect of exchange
rate changes on cash 767,968 59,217 203,841
and cash equivalents
Net increase / (decrease)
in cash and cash 822,613 (64,446) 34,307
equivalents
Cash and cash equivalents
at 31 March 1998 821,257 786,950 786,950
Cash and cash equivalents
at 30 September 1998 1,643,870 722,504 821,257
Accounting policies
The accounting policies are the same as those used in
preparing the 31 March 1998 Financial Statements, except in
relation to deferred taxation, which has been changed to
comply with revised International Accounting Standard 12, on
income taxes.
In prior years, deferred tax was provided for on the partial
basis but the group now provides deferred tax on the
comprehensive basis. The effect of this change is an increase
in the tax charge for the current and prior six month period
by $36,474,000 and $15,299,000 respectively and the year to 31
March 1998 by $36,553,994. Retained earnings and minority
interest at 31 March 1998 have been reduced by $126,431,899
and $6,273,192 respectively.
The Group's accounting policies comply in all respects with
International Accounting Standards.
END
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