Half-yearly Report

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.

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