Abridged Audited Financial Results for the y/e ...
MEIKLES LIMITED
ABRIDGED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2012
CHAIRMAN'S STATEMENT
GROUP REVIEW
Shareholders were advised in November 2011 that the Group made a loss in the
first six months of the year under review of $5 million after taxation. The
results of the second six months have reduced this loss to $3.4 million for the
year as a whole.
Your board decided that the results for the year be determined on a very
conservative basis with full provision for all known and anticipated costs that
may have an impact on the Group financials. Most of these expenses were
incurred in the second half of the year and they include compensation for loss
of office, legal and professional fees, a write off of certain receivables and
advances, and the impairment of property, plant and equipment. Certain
provisions have been provided deliberately on a worse case basis and there may
well be some recovery in the future. The sum of these exceptional expenses
amounted to $6.3 million.
Regrettably the Group's agricultural division suffered from a severe frost last
winter and an unusual adverse weather pattern in the summer. Losses that arose
and were accounted for in the second half of the year as a direct result of the
adverse weather amounted to $2.9 million in direct revenue and $2.3 million
loss of profit.
The first half of the year saw senior management changes at both Group level
and in certain of the operating companies. These changes did destabilise our
operations when they occurred, but new structures have since been put in place.
Furthermore, the Group has had to contend with stock write-offs and reduced
margins.
Finance costs were $4.3 million and $4.2 million in the first half and second
half of the year respectively. These sums have been significant in their impact
on Group performance, for the year under review.
The Group's successes have been substantial. Management is committed to the
task of improving ongoing divisional performance, and the second half of the
year has resulted in an improvement, but efforts continue to progress
performance with urgency.
The Pick n Pay investment in TM Supermarkets was finally consummated, although
very late in the year.
The Group's indigenisation status has been established, making it more
attractive to foreign investors as we pursue future growth projects. These
opportunities will be pursued together with Mentor and with other potential
investors.
Group borrowings, net of the additional Pick n Pay investment, did increase,
but these were largely incurred by the agricultural division where a
substantial expansion project is underway.
Your board has developed a sound policy for Group funding:
* The Group will no longer use short-term local borrowings to fund medium
term expansion projects. Term funding, shareholder funding, or minority
shareholder funding, will be sought for these projects.
* Funding for partly owned subsidiaries or associates will only be provided
in proportion to the Group's percentage shareholding, and will be provided
with the co-operation and participation of other shareholders in these
companies.
* The Group will continue to fund its investment in Retail Store debtors from
borrowings or from the sale of the debtors book to a third party.
* The Group will retain minimal and inexpensive short-term borrowings from
local banking institutions.
Progress on the implementation of this policy is well advanced:
* The two Zimbabwe based hotels have arranged term funding from external
sources at favourable rates to fund renovations, which are now in progress.
* The Retail Store debtors are now funded on a dedicated basis. Interest
received from debtors will exceed the cost of funding.
* Efforts are in progress to raise dedicated funding, either term or
shareholder or a combination of both, to fund Tanganda's expansion and to
eliminate excess short-term borrowings. This funding is expected to be in
place by September 2012. Substantial interest in Tanganda is already
evident.
The Group is in negotiation with various financiers regarding the injection of
significant funding. In addition, the discussions with RBZ are continuing for
the freeing of funds held on deposit. These initiatives will retire all Group
borrowings other than those identified above, will leave substantial credit
balances with the Group's bankers, and will provide funding for expansion
opportunities.
The full implementation of this financial policy will result in a reduction in
finance costs as well as securing a sound balance sheet structure for the
Group. These factors, together with the improving performance in the divisions,
and further profits from the region, will enable the resumption of dividend
payments to Group shareholders.
Subject to regulatory approvals, the Group has a potential project that may
commence shortly. The sum involved amounts to $150 million. This amount will
not be raised at Holding Company level but will be injected directly into the
project itself. The project is still subject to a confidentiality constraint
and shareholders will be updated when appropriate.
Your board is of the opinion that the present market capitalisation of the
Group fails to recognise the Group's performance, prospects for the future and
the underlying asset values. These factors do restrain the Group's ability from
a funding view-point, to take full advantage of opportunities that are on
offer. Your board will assess these implications and will consider strategies
that may be implemented to optimise the future growth of the Group.
Mentor and the Cape Grace
With effect from 1st April 2012, the Group will take up a shareholding in
Mentor Africa Limited (Mentor) and will merge the Cape Grace into Mentor and
the funds which were being held by Mentor on behalf of the Cape Grace will be
converted into equity in Mentor. This transaction conforms with past
communications to shareholders.
The respective assets are being valued and reviewed by appropriate
professionals, and when complete, it is estimated that the Group will have a
35% shareholding in these regional activities.
The transaction will allow the Group to unlock further value in its foreign
investments by providing access to assets, which have greater growth prospects
than the Cape Grace Hotel in isolation. The Cape Grace Hotel is well run and
the Group is satisfied with its performance, but it is a mature asset and its
prospects for growth are limited and less than those of the Mentor assets.
Mentor has a growing and diversified portfolio of investments in South Africa,
including:
* a joint venture with dnata, the fourth largest air services provider in the
world with operations at 76 airports in 38 countries and a member of the
Emirates Group, in Wings Inflight Services, an airline catering business
which provides inflight catering services to major international airlines
operating to/from South Africa, including Emirates Airline, British Airways
(international) and Singapore Airlines, on long term contracts;
* an interest in the market-leading provider in South Africa of energy
efficient, low wattage, high output, industrial, retail and commercial
electronic fittings and safety approved retro-fit lighting products; and
* minority interests and new opportunities in the financial services,
resources and mining sectors.
Mentor's deal-flow pipeline is strong with good upside potential. The merger of
these interests will enable the Group to enhance the value of its regional
assets. Group management will now be in a position to focus on growth
opportunities in Zimbabwe and work with Mentor management to grow the regional
investments.
The Board remains confident that the strategic investment in Mentor will
produce significant high growth opportunities, similar to those which the
Meikles Group derived from its previous investment in Rebhold/Mvelaphanda, in
the medium to long term.
SUBSIDIARY REVIEW
Tanganda
A major plantation development program is in progress. On completion Tanganda
will have planted 450 hectares of avocado, 300 hectares of coffee and 700
hectares of macadamia. This project will be completed by March 2014. On
maturity this project will contribute substantially to Tanganda's profits.
Management is focusing on increasing tea yields and quality. There is evidence
that there is a growing demand for tea in the world and Tanganda's tea
prospects remain promising.
Tanganda is enhancing and updating its manufacturing capacity of packeted teas.
There is a growing demand for packeted teas in the region.
The water bottling plant was commissioned during the last quarter of the
financial year and has resulted in increased production of water to 2.1 million
liters (2011: 1.2 million liters). A second water plant is being explored.
The additional investment in all these activities will amount to $15 million.
Hotels
Refurbishment of Meikles Hotel has commenced. The works are expected to be
completed by December 2012. The Victoria Falls Hotel is also being refurbished,
and work will be completed before the UNWTO conference scheduled for August
2013.
The Hospitality division has successfully negotiated a lease agreement to
operate a business style hotel in Lusaka, which is fast becoming a regional hub
for travel. The hotel will be part of a mixed-use retail scheme being developed
close to the airport by one of Africa's leading real estate companies. This
project is expected to be the first of similar hotel projects in appropriate
regional destinations. Shareholders will be updated with more information at
the opportune time.
TM Supermarkets
The capital injection of $13 million through Pick n Pay's increased
shareholding in TM Supermarkets is being utilised in the branch refurbishment.
The Kamfinsa branch which has been reconstructed will be reopened in the last
week of June 2012 as a Pick n Pay store including the Pick n Pay clothing and
liquor outlets. Refurbishment of the Borrowdale branch has started. A total of
6 branches have been earmarked for refurbishment in the new financial year and
will incorporate rebranding of some stores to "Pick n Pay" on completion. These
stores are located in Harare, Bulawayo, Mutare and Gweru. All these initiatives
which are well supported by Pick n Pay will help in restoring TM Supermarkets
to its previous market leadership position.
Thomas Meikle Stores
The stores operate from well-placed locations in most urban centers in
Zimbabwe. Once further evidence of growth in the economy and in the spending
power of the people becomes evident, the stores will be in a position to
provide a variety of merchandise in selected and focused ranges. There has been
a branding adjustment in recent months and the stores will no longer attempt to
operate the full range of departments that they have had in the past.
Merchandise is now being more carefully selected, with a view to securing good
stock turns and controlled investment in stock. The customers will be provided
with competitive values and credit will be granted where appropriate. The
division currently has 44,000 credit customers.
This division still has a remaining legacy issue. Certain merchandise, although
saleable, can only be sold at reduced margins. The quantum of merchandise
affected is greatly reduced, relative to the quantum that the division had to
contend with during the past financial year.
The stores will not immediately return to their full potential, but
improvements, presently underway, are making a difference.
Acknowledgments
The resolution of a number of issues amongst them the granting of the
indigenisation status and the approval for the Pick n Pay investment was
achieved through support from the relevant regulatory authorities to whom our
appreciation is once again extended. The continued support from shareholders
and staff is acknowledged and the anticipated turnaround in the coming year
will be just reward for these stakeholders.
For and on behalf of the Board
JRT Moxon
Chairman
1 June 2012
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2012
Audited Audited
12 months to 15 months
to
31 March 2012 31 March
2011
US$ 000 US$ 000
CONTINUING OPERATIONS
Revenue 354,102 330,437
Net operating costs (361,103) (336,485)
Operating loss (7,001) (6,048)
Investment revenue 2,011 3,593
Finance costs (8,453) (7,590)
Net exchange gains / ( losses) 1,183 (229)
Fair value adjustments 3,792 1,398
Reinstatement of funds earmarked for future - 11,737
investment
(Loss) / profit before tax (8,468) 2,861
Income tax credit 2,544 793
(Loss) / profit for the period from continuing (5,924) 3,654
operations
DISCONTINUED OPERATIONS
Profit for the period from discontinued operations 2,480 2,474
(LOSS) / PROFIT FOR THE PERIOD (3,444) 6,128
Other comprehensive (loss) / income
Exchange differences on translating foreign (1,992) 1,889
operations
Other comprehensive (loss) / income for the period, (1,992) 1,889
net of tax
TOTAL COMPREHENSIVE (LOSS) / PROFIT FOR THE PERIOD (5,436) 8,017
(Loss) / profit attributable to:
Owners of the parent (3,537) 6,690
Non-controlling interests 93 (562)
(3,444) 6,128
Total comprehensive (loss) /profit attributable to:
Owners of the parent (5,529) 8,579
Non-controlling interests 93 (562)
(5,436) 8,017
(Loss) / earnings per share
Basic (loss) / earnings from continuing and (1.44) 2.73
discontinued operations (cents per share)
Basic (loss) / earnings from continuing operations (2.45) 1.72
(cents per share)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2012
Audited Audited
31 March 2012 31 March
2011
US$ 000 US$ 000
ASSETS
Non-current assets
Property, plant and equipment 86,122 84,280
Investment property 43 44
Biological assets 11,770 7,661
Other financial assets 18,370 16,600
Intangible assets - trademarks 124 124
Balances with Reserve Bank of Zimbabwe 38,627 36,825
Deferred tax 1,888 2,356
Total non-current assets 156,944 147,890
Current assets
Inventories 39,633 40,713
Trade and other receivables 17,642 16,153
Other financial assets 1,085 -
Cash and bank balances 8,427 3,286
66,787 60,152
Assets held for sale 37,871 41,440
Total current assets 104,658 101,592
Total assets 261,602 249,482
EQUITY AND LIABILITIES
Capital and reserves
Share capital 2,538 2,454
Share premium 1,316 -
Non-distributable reserves 6,233 2,627
Retained earnings 105,750 111,207
Capital and reserves relating to assets 19,644 18,083
classified as held for sale
Equity attributable to equity holders of the parent 135,481 134,371
Non-controlling interests 8,618 764
Total equity 144,099 135,135
Non-current liabilities
Borrowings 4,786 3,749
Deferred tax 12,919 15,996
Total non-current liabilities 17,705 19,745
Current liabilities
Trade and other payables 38,371 30,493
Borrowings 47,199 49,031
85,570 79,524
Liabilities relating to assets classified as held 14,228 15,078
for sale
Total current liabilities 99,798 94,602
Total liabilities 117,503 114,347
Total equity and liabilities 261,602 249,482
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2012
Share Share Non-distributable Retained
capital premium reserves earnings
US$ 000 US$ 000 US$ 000 US$ 000
2012
Balance at 1April 2011 2,454 - 2,627 111,207
Loss for the year - - - (6,017)
Change in ownership interests - - 4,679 728
in a subsidiary without loss
of control
Other comprehensive loss for - - (1,073) -
the year
Issue of shares for cash 84 1,316 - -
Transfer on disinvestment of - - - (168)
non controlling interest in a
subsidiary
Balance at 31 March 2012 2,538 1,316 6,233 105,750
2011
Balance at 1 January 2010 - - 109,984 (21,325)
Profit for the period - - - 4,216
Transfer within reserves and - - (109,851) 146,859
on disposal of subsidiaries
Other comprehensive income for - - 856 -
the period
Share capital redenomination 2,454 - (2,454) -
Transfer in respect of assets - - 4,092 (4,019)
classified as held for sale
Dividend in specie - - - (14,524)
Balance at 31 March 2011 2,454 - 2,627 111,207
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2012
Disposal Attributable Non Total
group to owners of controlling
capital parent interests
and
reserves
US$ 000 US$ 000 US$ 000 US$ 000
2012
Balance at 1April 2011 18,083 134,371 764 135,135
Loss for the year 2,480 (3,537) 93 (3,444)
Change in ownership interests in - 5,407 7,593 13,000
a subsidiary without loss of
control
Other comprehensive loss for the (919) (1,992) - (1,992)
year
Issue of shares for cash - 1,400 - 1,400
Transfer on disinvestment of non - (168) 168 -
controlling interest in a
subsidiary
Balance at 31 March 2012 19,644 135,481 8,618 144,099
2011
Balance at 1 January 2010 51,657 140,316 1,326 141,642
Profit for the period 2,474 6,690 (562) 6,128
Transfer within reserves and on (37,008) - - -
disposal of subsidiaries
Other comprehensive income for 1,033 1,889 - 1,889
the period
Share capital redenomination - - - -
Transfer in respect of assets (73) - - -
classified as held for sale
Dividend in specie - (14,524) - (14,524)
Balance at 31 March 2011 18,083 134,371 764 135,135
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2012 Audited Audited
12 months to 15 months
to
31 March 31 March
2012 2011
Continuing and discontinued operations US$ 000 US$ 000
Cash flows from operating activities
(Loss) / profit before tax from (5,616) 6,638
continuing and discontinued operations
Adjustments for:
- Depreciation and impairment 4,834 5,388
- Net interest 6,371 4,921
- Dividend received - (1,471)
- Net exchange (gains) / losses (1,342) 423
- Loss on disposal of subsidiaries - 3,842
- Fair value adjustments (3,681) 1,978
- Share of profits of associates - (666)
- (Profit) / loss on disposal of (69) 787
property, plant and equipment
- Reinstatement of funds earmarked for - (11,737)
investment
Operating cash flow before working 497 10,103
capital changes
Decrease / (increase) in inventories 1,196 (23,642)
Increase in trade and other receivables (3,252) (71,807)
Increase in trade and other payables 7,675 56,278
Cash generated from / (used in) 6,116 (29,068)
operations
Income taxes paid (9) (2,019)
Net cash generated from /(used in) 6,107 (31,087)
operating activities
Cash flows from investing activities
Payment for property, plant and (6,839) (11,439)
equipment
Proceeds from disposal of property, 1,503 1,789
plant and equipment
Change in ownership interests in a 13,000 -
subsidiary without loss of control
Net movement in service assets (21) (65)
Dividends received - 1,471
Payment for other investments (250) (152)
Net expenditure on biological assets (497) (206)
Net outflow on disposal of subsidiary - (16,434)
Investment income 251 250
Net cash generated from / (used in) 7,147 (24,786)
investing activities
Cash flows from financing activities
Net increase in interest bearing 6 44,017
borrowings
Proceeds from issue of shares 1,400 -
Finance costs (8,454) (7,601)
Net cash (used in) / generated from (7,048) 36,416
financing activities
Net increase / (decrease) in cash and 6,206 (19,457)
bank balances
Cash and bank balances at the beginning 4,785 25,509
of the period
Net effect of exchange rate changes on 606 (436)
cash and bank balances
Translation of foreign entities (313) (831)
Cash and bank balances at the end of the 11,284 4,785
period
NOTES TO THE ABRIDGED FINANCIAL STATEMENTS
1. Accounting policies
Accounting policies and methods of computation are consistent, in all material
respects, with those used in the prior period with no significant impact
arising from new and revised International Financial Reporting Standards
(IFRSs) applicable for the year ended 31 March 2012. The financial information
presented has been extracted from IFRS compliant financial statements.
2. Profit for the period from discontinued operations
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. Following
the settlement and withdrawal of the aforementioned litigation, the sale of
Meikles Group's interest in the Cape Grace Hotel to Mentor has been concluded
with effect from 1 April 2012.
Audited Audited
12 months to 15 months
to
31 March 2012 31 March
2011
US$ 000 US$ 000
Revenue 16,163 21,137
Net interest - 6,519
Fees and commissions - 18,271
Other gains 619 4,712
Total income 16,782 50,639
Expenses* (13,930) (43,017)
Profit before tax 2,852 7,622
Income tax (372) (1,306)
Profit for the period from discontinued operations 2,480 6,316
Loss on disposal of subsidiaries - (3,842)
Profit for the period from discontinued operations 2,480 2,474
(attributable to owners of the parent)
Other comprehensive income
Exchange differences on translating foreign entities (919) 1,033
Other comprehensive income for the period, net of (919) 1,033
tax
Total comprehensive profit for the period 1,561 3,507
*The expenses exclude depreciation expense of
US$1,806,054 (2011: US$3,220,794) which has been
written back in line with the requirements of IFRS
5.
The 31 March 2011 comparatives include Kingdom
Financial Holdings Limited and Cotton Printers
(Private) Limited.
Cash flows from discontinued operations
Net cash flows from operating activities (131) (3,502)
Net cash flows from investing activities 128 305
Net cash flows from financing activities 801 (614)
Net cash inflows / (outflows) 798 (3,811)
3. Assets classified as held for sale
Audited Audited
Comprising 31 March 2012 31 March
2011
US$ 000 US$ 000
Assets held for sale:
Cape Grace Hotel group of companies 37,871 39,977
Motor vehicles1 - 1,463
Total assets held for sale 37,871 41,440
Liabilities relating to assets held for sale:
Cape Grace Hotel group of companies 14,228 15,078
Total liabilities relating to held for sale 14,228 15,078
Net assets held for sale 23,643 26,362
Equity relating to assets held for sale:
Cape Grace Hotel group of companies 19,644 18,083
Total equity relating to assets classified as held 19,644 18,083
for sale
1The Group disposed of certain motor vehicles to
staff effective 1 April 2011.
4. Segment information Audited Audited
12 months to 15 months to
Revenue 31 March 2012 31 March
2011
US$000 US$000
Continuing operations
Supermarkets 296,403 274,277
Hotels 15,397 15,893
Agriculture 19,978 22,498
Stores 24,061 19,610
Intergroup sales (1,737) (1,841)
354,102 330,437
Disposal group and discontinued operation
Hotels 16,163 21,137
16,163 21,137
EBITDA
Continuing operations
Supermarkets 5,976 2,404
Hotels 1,425 972
Agriculture (3,891) 1,171
Stores (874) (1,482)
Corporate (5,732) (7,738)
(3,096) (4,673)
Disposal group
Hotels 2,623 3,509
2,623 3,509
4. Segment information (continued) Audited Audited
31 March 2012 31 March
2011
US$ 000 US$ 000
Segment assets
Continuing operations
Supermarkets 50,523 43,860
Agriculture 43,004 37,778
Hotels 29,878 28,216
Stores 57,872 64,334
Corporate 42,454 33,855
223,731 208,043
Assets classified as held for sale
Hotels - Cape Grace Hotel 37,871 39,977
Motor vehicles to be disposed to staff - 1,463
37,871 41,440
Total assets 261,602 249,483
Segment liabilities
Continuing operations
Supermarkets 32,520 40,133
Agriculture 19,538 17,160
Hotels 8,720 7,081
Stores 45,317 50,234
Corporate (2,820) (15,338)
103,275 99,270
Classified as held for sale
Hotels - liabilities classified as held for sale 14,228 15,078
(Cape Grace Hotel)
14,228 15,078
Total liabilities 117,503 114,348
Intercompany balances and transactions have been
eliminated from the Corporate figures.
5. Supplementary information
Presented below are the segment results for the comparable 12
month periods ended 31 March.
Audited Unaudited
31 March 2012 31 March
2011
Revenue US$ 000 US$ 000
Continuing operations
Supermarkets 296,403 228,947
Hotels 15,397 13,369
Agriculture 19,978 17,564
Stores 24,061 17,400
Intragroup sales (1,737) (1,841)
354,102 275,439
Disposal group
Hotels 16,163 16,581
16,163 16,581
EBITDA
Continuing operations
Supermarkets 5,976 3,909
Hotels 1,425 1,596
Agriculture (3,891) 502
Stores (874) (15)
Corporate (5,732) (4,978)
(3,096) 1,014
Included in the EBITDA figures above are the
following exceptional expenses:
Compensation for loss of office (2,713) (400)
Legal and professional fees (1,905) (1,893)
Write off of other receivables and advances (824) -
Impairment of property, plant and equipment (898) -
(6,340) (2,293)
Excluding these items, the EBITDA figures would
have been as follows:
Continuing operations
Supermarkets 7,309 4,119
Hotels 2,376 1,652
Agriculture (1,907) 502
Stores (379) 197
Corporate (4,155) (3,163)
3,244 3,307
6. Other information
31 March 2012 31 March
2011
US$ 000 US$ 000
Continuing operations
Capital expenditure for the year 6,560 10,022
Depreciation and impairment of property, plant and 4,834 4,595
equipment
Borrowings net of cash and cash equivalents 43,558 49,494
Capital commitments authorised but not yet 22,814 25,795
contracted
7. Exchange rates
Statement of financial position rates
South African Rand 7.6962 6.8045
British Pound 1.6018 1.61
Average transaction rates
South African Rand 7.4396 7.2488
British Pound 1.5981 1.5552
For further information contact Onias Makamba on +263-4-252068/78
or omakamba@meikleslimited.co.zw
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