Half-yearly Report

MEIKLES LIMITED ABRIDGED UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2014 CHAIRMAN'S REPORT The requirements for disclosure to Shareholders are set out in this report. Shareholders are invited to examine the disclosures. Group trading was generally within the control of management, with the exception of Tanganda, where despite an excellent volume of tea produced in the past season, the company suffered from a fall in international tea prices of 24%, relative to the average achieved in the previous year. Depreciation went up by 53% to $4.4 million, while occupancy costs and employee costs have increased by 11% to $10 million and 7% to $23.2 million respectively. These increases are due to the substantial Group expansion and renovation projects that have been undertaken in all divisions. The Group has not yet had an opportunity to benefit fully from these projects. The turnover for the quarter to September however has exceeded that of the quarter to June by 6%, the main drivers being TM Supermarkets that grew by 8%, hotels by 36% and Mega Mart by 21%. Stores declined by 38%, but this decline was largely expected due to rationalization undertaken by the division. Tanganda reduced by 22% relative to the previous year. TM Supermarkets have traded in two new supermarkets for part of this period, but have also ceased operating in one supermarket following a dispute with the owner of the premises. Year on year turnover for the six months, although not strictly comparable with the previous period, did increase by 3.1%, with positive contributions to growth from all divisions other than Stores. Shareholders will note that total borrowings reduced by US$6.8 million, but will also note that cash balances reduced. The reduction in cash balances was mostly due to TM Supermarkets expenditure relating to renovations and expansion. Outlook Shareholders will be pleased to learn that October turnover in TM Supermarkets relative to the previous financial year, grew by over 11% and that November is expected to exceed this rate of growth in comparison with November of the previous year. Hotels grew by 4% in October relative to the previous year. Combined Retail division turnover does not have comparative figures for the previous financial year, but Mega Mart continues to grow month on month. Tanganda is beginning to benefit following the very recent commissioning of new packing machinery and Shareholders are advised that acceptance by the International market of the first coffee crop following plantation development in recent years has been very encouraging. The Group Guard Service division continues to grow. Approvals have now been received from the Reserve Bank of Zimbabwe and the Ministry of Youth, Indigenisation and Economic Empowerment for the participation of our foreign partners in gold mining in the Matabeleland area. It is expected that agreements will be finalised in the foreseeable future with our partners, so that this division will progress as outlined to Shareholders in previous releases and reports. Shareholders will be advised of developments as they progress. Shareholder developments Shareholders are invited to revisit recent releases made public on 2 October and 14 October. These releases set out objectives for the way forward for the Group. Shareholders should note that settlement processes with the RBZ, although positive, have taken and will take longer to complete in terms of final implementation. However, the dynamics of the Group and its finances are well underway as set out in the recent releases. The Board is mindful that along with changes in the Group's structure there will be a need for additional Board appointments and for the provision of further expertise. However, the Board is aware that Shareholder participation by way of ownership of shares in the Company has remained relatively unchanged in terms of the composition of the share register. Changes in ownership of shares may tend to be more dynamic in the future and appointments, both executive and non-executive will best respond to requirements as these dynamics unfold. The Board has recognised publicly, the patience exercised by Shareholders over recent periods. It is appropriate to provide a return to Shareholders. Accordingly, the Board will declare a Dividend of 2 (two) cents per share amounting to $5.1 million out of the 31 March 2014 retained earnings. The formal declaration of the Dividend is expected to be announced during December 2014. JRT Moxon Executive Chairman 25 November 2014 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 3O SEPTEMBER 2014 Unaudited Unaudited 30 September 30 September 2014 2013 US$ 000 US$ 000 Revenue 196,254 190,291 EBITDA (1,534) 1,459 Depreciation, amortisation and impairment (4,402) (4,858) Non-trading income 6,714 44,674 Finance costs (6,330) (4,070) (Loss) / profit before tax (5,552) 37,205 Income tax credit 2,734 326 (LOSS) / PROFIT FOR THE PERIOD (2,818) 37,531 TOTAL COMPREHENSIVE (LOSS) / INCOME FOR THE PERIOD (2,818) 37,531 (loss) / profit for the period attributable to: Owners of the parent (1,976) 36,458 Non-controlling interests (842) 1,073 (2,818) 37,531 Total comprehensive (loss) / income attributable to: Owners of the parent (1,976) 36,458 Non-controlling interests (842) 1,073 (2,818) 37,531 (Loss) / earnings per share (cents) Basic (0.78) 14.37 Diluted (0.72) 13.53 Headline loss per share (cents) (1.70) (1.96) Diluted headline loss per share (cents) (1.58) (1.85) CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2014 Unaudited Audited 30 September 31 March 2014 2014 US$ 000 US$ 000 ASSETS Non-current assets Property, plant and equipment 118,755 109,624 Investment property 249 250 Investment in Mentor Africa Limited 27,657 27,657 Biological assets 34,724 30,156 Intangible assets 1,528 1,528 Other financial assets 12,574 12,760 Balances with Reserve Bank of Zimbabwe 43,738 90,861 Deferred tax 4,977 2,674 Total non-current assets 244,202 275,510 Current assets Inventories 38,949 36,631 Trade and other receivables 15,964 16,171 Other financial assets 3,797 3,551 Treasury Bills 38,431 - Cash and bank balances 6,207 22,952 Total current assets 103,348 79,305 Total assets 347,550 354,815 EQUITY AND LIABILITIES Capital and reserves Share capital 2,538 2,538 Share premium 1,316 1,316 Non-distributable reserves 12,559 12,559 Retained earnings 153,479 155,455 Equity attributable to equity holders of the parent 169,892 171,868 Non-controlling interests 13,380 14,222 Total equity 183,272 186,090 Non-current liabilities Borrowings 33,750 37,264 Deferred tax 14,062 14,519 Total non-current liabilities 47,812 51,783 Current liabilities Trade and other payables 50,106 47,293 Borrowings 66,360 69,649 Total current liabilities 116,466 116,942 Total liabilities 164,278 168,725 Total equity and liabilities 347,550 354,815 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2014 Share Share Non-distributable Retained Attributable Non Total capital premium reserves earnings to owners of controlling parent interests US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 2014 - unaudited Balance at 1 April 2,538 1,316 12,559 155,455 171,868 14,222 186,090 2014 Loss for the period - - - (1,976) (1,976) (842) (2,818) Balance at 30 2,538 1,316 12,559 153,479 169,892 13,380 183,272 September 2014 2013 - unaudited Balance at 1 April 2,538 1,316 12,559 121,028 137,441 10,990 148,431 2013 Profit for the - - 36,458 36,458 1,073 37,531 period Balance at 30 2,538 1,316 12,559 157,486 173,899 12,063 185,962 September 2013 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2014 Unaudited Unaudited 30 September 30 September 2014 2013 US$ 000 US$ 000 Cash flows from operating activities (loss) / profit before tax (5,552) 37,205 Adjustments for: - Depreciation and impairment of 4,402 2,861 property, plant and equipment - Net interest 3,282 (39,684) - Net exchange gains (21) (142) - Fair value adjustments (3,646) (778) - Loss on disposal of property, plant 168 3 and equipment * Impairment of intangible assets - 1,997 Operating cash flow before working (1,367) 1,462 capital changes (Increase) / decrease in inventories (2,317) 281 Decrease in trade and other receivables 192 5,352 Increase / (decrease) in trade and other 2,799 (4,482) payables Cash generated from operations (693) 2,613 Income taxes paid (105) (422) Net cash generated from operating (798) 2,191 activities Cash flows from investing activities Payment for property, plant and (13,763) (9,329) equipment Proceeds from disposal of property, 63 119 plant and equipment Proceeds from sale of Treasury Bills 11,418 - Payment for other investments (61) (1,403) Net expenditure on biological assets (921) (896) Investment income 457 320 Net cash used in investing activities (2,807) (11,189) Cash flows from financing activities Net (decrease) / increase in interest (6,803) 5,837 bearing borrowings Finance costs (6,330) (4,070) Net cash (used in) / generated from (13,133) 1,767 financing activities Net decrease in cash and bank balances (16,738) (7,231) Cash and bank balances at the beginning 22,952 14,198 of the period Net effect of exchange rate changes on (7) (22) cash and bank balances Cash and bank balances at the end of the 6,207 6,945 period 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 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. 2. Statement of compliance The Group's abridged unaudited financial results have been extracted from financial statements prepared in accordance with International Financial Reporting Standards and the Companies Act (Chapter 24.03) and relevant statutory instruments (SI33/99 and SI62/96). These abridged unaudited financial statements do not include all information and disclosures required to fully comply with IFRS and should be read in conjunction with the Group's annual report for the year ended 31 March 2014. 3. Accounting policies The Group's interim abridged unaudited financial statements have been prepared in accordance with IAS 34 - Interim Financial Reporting. Accounting policies and methods of computation applied in the preparation of these abridged unaudited 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 2014, with no significant impact arising from new and revised International Financial Reporting Standards (IFRSs). 4. Critical accounting judgements and key sources of estimation uncertainty The balances with the Reserve Bank of Zimbabwe and the terms of the Treasury Bills on hand are currently the subject of discussions. The outcome of these discussions will influence the final amount to be issued as Treasury Bills and the terms thereof, which may have an effect on the amounts recognised in these financial statements. 5. Segment information Unaudited Unaudited 30 September 30 September 2014 2013 US$ 000 US$ 000 Revenue Supermarkets 167,995 166,032 Hotels 8,814 7,767 Agriculture 11,135 10,916 Stores 3,773 6,499 Corporate* 4,537 (923) 196,254 190,291 EBITDA Supermarkets 3,182 4,099 Hotels 1,396 473 Agriculture (878) 340 Stores (1,957) (1,119) Corporate* (3,277) (2,334) (1,534) 1,459 The EBITDA figures are before Group management fees. Unaudited Audited 30 September 31 March 2014 2014 US$ 000 US$ 000 Segment assets Supermarkets 77,635 80,918 Hotels 50,154 50,720 Agriculture 67,837 64,817 Stores 24,979 32,587 Corporate* 126,945 125,773 347,550 354,815 Segment liabilities Supermarkets 49,108 51,880 Hotels 20,592 20,556 Agriculture 41,707 38,601 Stores 14,960 21,906 Corporate* 37,911 35,782 164,278 168,725 *Intercompany transactions and balances have been eliminated from the corporate amounts. Corporate also includes other subsidiaries that are immaterial to warrant separate disclosure. Inter-segment sales amounted to $1,673,114 (2013: $1,342,640). Unaudited Audited 30 September 31 March 2014 2014 US$ 000 US$ 000 6. Net borrowings Non-current borrowings 33,750 37,264 Current borrowings 66,360 69,649 Total borrowings 100,110 106,913 Cash and cash equivalents (6,207) (22,952) Net borrowings 93,903 83,961 Unaudited Unaudited 30 September 30 September 2014 2013 US$ 000 US$ 000 7. Depreciation, amortisation and impairment Depreciation of property plant and equipment 4,324 2,796 Impairment of property, plant and equipment 77 63 Depreciation of investment property 1 2 Impairment of intangible assets - 1,997 4,402 4,858 8. Non-trading income Net investment revenue 3,047 43,754 Fair value adjustments on biological assets 3,646 778 Net exchange gains 21 142 6,714 44,674 Net investment revenue includes $2,6 million (2013: $43.4 million) earned on the deposit at RBZ. The 2013 amount incorporates the impact of interest negotiations. 9. Other information Depreciation and impairment - property, plant and 4,402 2,861 equipment Capital expenditure 13,763 9,329 Capital commitments authorised by the Directors but 9,899 16,298 not contracted Group's share of capital commitments of joint 120 182 operation 10. Contingent liabilities There is no material financial impact arising from events that occurred since the publication of the last annual financial statements. 11. Treasury Bills The Treasury Bills were issued by the Government of Zimbabwe on 11 June 2014, with a coupon rate of 2% payable bi-annually. The Treasury Bills on hand are split equally between tenures of 4 years and 5 years. 12. Events after reporting date There have been no significant events after the reporting date at the time of issuing this report.

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