Results for the 6 months ended 30 Sept 2018

MEIKLES LIMITED

ABRIDGED UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

CHAIRMAN’S STATEMENT

Group Financial Review

Group revenue for the half year ended 30 September 2018 grew by 30% to US$330.8 million from US$254.0 million in the comparable period. The contribution to revenue by the different segments of the Group is set out in Note 4.

Earnings before interest, tax, depreciation and amortisation “EBITDA” for the period rose by 107% to US$31.5 million from the previous year’s result of US$15.2 million. The contribution to EBITDA by the different segments of the Group is set out in Note 4.

Profit after tax grew by 464% to US$15.3 million from US$2.7 million achieved the previous year.  Profit after tax for the six month period ended 30 September 2018 had surpassed the result for the full financial year ended 31 March 2018 of US$7.7 million by 99%.

Progress is being made in raising long term finance. On completion, short term loans and overdue current liabilities will be paid off.

Segment Commentary

TM Supermarkets trading as TM and PnP

Revenue for the period amounted to US$305.6 million, a growth of 32% from US$232.0 million in the previous year. The rise in revenue was underpinned by a considerable growth in the number of units sold.

EBITDA for the period grew by 65% to US$21.8 million. Profit after tax grew by 106% to US$13.9 million from US$6.7 million in the previous year.

Refurbishment works are in progress at five branches with completion expected before the commencement of the festive season.

Tanganda

Revenue grew by 21% to US$15.7 million from US$12.9 million achieved during the six months ended 30 September 2017. Average international bulk tea export price for the period was US$1.68/kg compared to US$1.65/kg in the six months period to 30 September 2017. Bulk tea production of 3 886 tonnes grew by 26% from 3 077 tonnes produced in the comparative prior year period.

The volume of Macadamia nuts sales grew by 70% to 374 tonnes. Average price of US$4.82/kg was 16% above US$4.14/kg realised in the previous period.  Avocadoes’ results will be reflected in the second half of the year.

EBITDA for six months ended 30 September 2018 grew by 181% to US$8.4 million from US$3.0 million generated during the comparable period. Profit after tax grew to US$5.6 million from US$0.6 million in the previous year.

Hospitality

Revenue grew by 19% to US$10.3 million from US$8.7 million achieved during same period last year. At Meikles Hotel revenue per available room “RevPAR” rose by 35% underpinned by growth of both room occupancy and average room rate. The Victoria Falls Hotel RevPAR grew to US$198 from US$188 achieved the previous year.

EBITDA grew by 60% to US$3.4 million from US$2.1 million in the previous year. Profit after tax from continuing operations for the six month’s period was US$1.4 million, a growth of 175% above the previous year.

Refurbishment works at The Victoria Falls Hotel will commence during the last quarter of our financial year.

Meikles Stores

Meikles Mega Market operations closed during the period under review due to working capital constraints. EBITDA for the period was a loss of US$1.2 million compared with a loss of US$1.8 million in the previous year. Funding arrangements for working capital requirements are being secured and new store models are being developed.

Amount owed by Government

The Company reaffirms the position as set out in the 2018 Annual Report.  There are expectations that final written agreements on this matter will be concluded very shortly.

Outlook

The trend of greatly increased profit earned in the first six months of the current financial year has continued into the first period of the second six months.

Dividend

In view of the profit for the six month’s period ended 30 September 2018 and the ongoing restructuring of short term loans, the board declared an interim dividend of US$0.012 per share payable either as scrip or cash. The total dividend will amount to approximately US$3.1 million. A full dividend announcement will be published separately in due course.

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.

JRT Moxon

Executive Chairman

13 November 2018

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
		Unaudited	Unaudited	Audited
		30 Sep 2018	30 Sep 2017	31 March 2018
		US$ 000	US$ 000	US$ 000
CONTINUING OPERATIONS
Revenue		330,830	253,989	534,930
Net operating costs		(305,881)	(245,151)	(508,197)
Operating profit		24,949	8,838	26,733
Investment income		20	34	271
Finance costs		(4,412)	(3,440)	(8,640)
Net exchange gains / (losses)		1,163	(37)	(468)
Loss recognised on discounting Treasury Bills		-	(6)	(6)
Fair value adjustments on biological assets		78	-	1,336
Profit before tax		21,798	5,389	19,226
Income tax expense		(6,466)	(2,672)	(11,533)
Profit for the period from continuing operations		15,332	2,717	7,693
DISCONTINUED OPERATION
Profit for the period from discontinued operation		-	554	501
Profit for the period		15,332	3,271	8,194
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 the current period		-	47	47
Other comprehensive income for the period, net of tax		-	47	47
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		15,332	3,318	8,241
Profit for the period attributable to:
Owners of the parent		8,520	(41)	(829)
Non-controlling interests		6,812	3,312	9,023
		15,332	3,271	8,194
Total comprehensive income is attributable to:
Owners of the parent		8,520	6	(782)
Non-controlling interests		6,812	3,312	9,023
		15,332	3,318	8,241
Earnings / (loss) per share (cents)
Basic		3.33	(0.02)	(0.32)
Diluted		3.12	(0.01)	(0.31)
Headline earnings / loss per share (cents)		3.46	(0.29)	0.08
Diluted headline earnings / loss per share (cents)		3.24	(0.27)	0.08

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2018

		Unaudited	Unaudited	Audited
		30 Sep 2018	30 Sep 2017	31 March 2018
		US$ 000	US$ 000	US$ 000
ASSETS
Non-current assets
Property, plant and equipment		183,094	173,253	175,267
Investment property		237	241	239
Investment in Mentor Africa Limited		20,046	20,046	20,046
Biological assets		1,407	1,262	1,299
Intangible assets		124	124	124
Other financial assets		11,803	11,823	11,815
Deferred tax		264	3,859	121
Total non-current assets		216,975	210,608	208,911
Current assets
Inventories		47,324	30,710	43,870
Trade and other receivables		15,679	16,639	17,341
Biological assets – produce on bearer plants		2,482	1,195	2,810
Other financial assets		3,346	3,419	3,383
Cash and bank balances		54,845	27,552	34,175
Total current assets		123,676	79,515	101,579
Total assets		340,651	290,123	310,490
EQUITY AND LIABILITIES
Capital and reserves
Share capital		2,562	2,538	2,562
Share premium		1,469	1,316	1,469
Other reserves		12,559	12,559	12,559
Retained earnings		91,374	83,642	82,854
Equity attributable to equity holders of the parent		107,963	100,055	99,444
Non-controlling interests		42,786	30,188	36,241
Total  equity		150,750	130,243	135,685
Non-current liabilities
Borrowings		13,455	15,446	17,309
Deferred tax		21,311	18,551	19,189
Total non-current liabilities		34,766	33,997	36,498
Current liabilities
Trade and other payables		98,318	75,067	82,334
Borrowings		56,817	50,816	55,973
Total current liabilities		155,135	125,883	138,307
Total liabilities		189,901	159,880	174,805
Total equity and liabilities		340,651	290,123	310,490

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

	Share capital	Share premium	Other reserves	Retained earnings	Attributable  to owners of parent	Non-controlling interests	Total
	US$ 000	US$ 000	US$ 000	US$ 000	US$ 000	US$ 000	US$ 000
2018 - Unaudited
Balance at 1 April 2018	2,562	1,469	12,559	82,854	99,444	36,241	135,685
(Loss) / profit for the period	-	-	-	8,520	8,520	6,812	15,332
Other comprehensive income for the period	-	-	-	-	-	-	-
Non-controlling interests arising from Mopani Property Development (Private) Limited	-	-	-	-	-	(267)	(267)
Balance at 30 September 2018	2,562	1,469	12,559	91,374	107,964	42,786	150,750
2017 - Unaudited
Balance at 1 April 2017	2,538	1,316	12,512	83,683	100,049	28,591	128,640
(Loss) / profit for the period	-	-	-	(41)	(41)	3,312	3,271
Other comprehensive income for the period	-	-	47	-	47	-	47
Non-controlling interests arising from Mopani Property Development (Private) Limited	-				-	(1,715)	(1,715)
Balance at 30 September 2017	2,538	1,316	12,559	83,642	100,055	30,188	130,243

CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
		Unaudited	Unaudited	Audited
		30 Sep 2018	30 Sep 2017	31 March 2018
CONTINUING AND DISCONTINUED OPERATIONS		US$ 000	US$ 000	US$ 000
Cash flows from operating activities
Profit before tax		21,798	5,943	19,226
Adjustments for:
- Depreciation and impairment of property, plant and equipment and investment property		6,571	6,658	13,311
- Net interest		4,391	3,399	8,415
- Dividend income		-	-	(53)
- Net exchange (gains) / losses		(1,163)	37	468
- Profit on disposal of subsidiary		-	(768)	(768)
- Fair value adjustments on biological assets		(78)	-	(1,336)
- Loss recognised on discounting Treasury Bills		-	6	6
- Loss on disposal of property, plant and equipment		83	176	1,545
Operating cash flow before working capital changes		31,602	15,451	41,368
(Increase)/decrease in inventories		(3,454)	3,757	(9,403)
Decrease / (increase) in trade and other receivables		1,647	(2,963)	(3,627)
Increase in trade and other payables		15,347	4,289	11,895
Cash generated from operations		45,142	20,534	40,233
Income taxes paid		(3,848)	(1,567)	(6,447)
Net cash generated from operating activities		41,294	18,967	33,786
Cash flows from investing activities
Payment for property, plant and equipment		(14,612)	(7,465)	(17,717)
Proceeds from disposal of property, plant and equipment		160	117	350
Proceeds from sale of Treasury Bills and coupon interest		-	3,075	3,075
Net movement in service assets		(26)	(73)	(89)
Net movement in other  investments		52	816	847
Net movement in biological assets		298	557	241
Net cash inflow on disposal of subsidiary		-	1,060	1,060
Investment income		18	12	208
Net cash used in investing activities		(14,110)	(1,901)	(12,025)
Cash flows from financing activities
Net (decrease) / increase in interest bearing borrowings		(3,010)	45	7,064
Non-controlling interests arising from Mopani Property Development (Private)                     Limited		(267)	-	519
Finance costs		(4,412)	(3,444)	(8,640)
Dividend paid – minority shareholders		-	(1,715)	(1,715)
Net cash used in financing activities		(7,689)	(5,114)	(2,772)
Net increase in cash and bank balances		19,495	11,952	18,989
Cash and bank balances at the beginning of the period		34,175	15,637	15,637
Net effect of exchange rate changes on cash and bank balances		1,175	(37)	(451)
Cash and bank balances at the end of the period		54,845	27,552	34,175

NOTES TO THE ABRIDGED UNAUDITED FINANCIAL RESULTS

1. Basis of preparation

The abridged unaudited financial results 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. These abridged financial results are presented in United States of America dollars (US$), which is the Group’s functional currency. In the current environment the determination of functional currency is a significant judgement area. These abridged unaudited financial results do not fully comply with IFRS and should be read in conjunction with the Group’s annual report for the full year to 31 March 2018.

2. Accounting policies

Accounting policies and methods of computation applied in the preparation of these abridged unaudited financial results are consistent, in all material respects, with those used in the prior year. The effects of IFRS 9 and IFRS 15, effective in the current year shall be included in the full year results to 31 March 2019

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 2018, the Directors have assessed the Group’s ability to continue operating as a going concern and believe that the preparation of these unaudited financial results on a going concern basis is still appropriate.

4. Segment information

	Unaudited	Unaudited	Audited
	30 Sep 2018	30 Sep 2017	31 March 2018
	US$ 000	US$ 000	US$ 000
Revenue
Supermarkets	305,557	231,973	487,822
Agriculture	15,667	12,927	28,847
Hotels	10,343	8,685	17,646
Departmental stores	415	1,040	1,881
Wholesaling	-	89	224
Corporate*	(1,152)	(725)	(1,490)
	330,830	253,989	534,930
EBITDA
Supermarkets	21,767	13,229	34,514
Agriculture	8,387	2,980	10,289
Hotels	3,363	2,101	4,063
Departmental stores	(1,188)	(825)	(2,218)
Wholesaling	-	(948)	(1,998)
Corporate*	(811)	(1,277)	(3,570)
	31,518	15,260	41,080
Segment assets
Supermarkets	154,656	108,937	126,701
Agriculture	89,283	76,451	85,582
Hotels	46,917	46,467	46,966
Departmental stores	22,598	26,473	23,446
Wholesaling	-	4,988	1,071
Corporate*	27,197	26,807	26,724
	340,651	290,123	310,490
Segment liabilities
Supermarkets	70,493	50,479	56,148
Agriculture	30,778	29,557	32,779
Hotels	22,020	22,263	23,515
Departmental stores	28,631	18,108	18,999
Wholesaling	-	10,237	10,032
Corporate*	37,979	29,236	33,332
	189,901	159,880	174,805

*Intercompany transactions and balances have been eliminated from the corporate amounts. Corporate also includes other subsidiaries that are immaterial to warrant separate disclosure. The EBITDA figures are before Group management fees.

NOTES TO THE ABRIDGED UNAUDITED FINANCIAL RESULTS

	Unaudited	Unaudited	Audited
	30 Sep 2018	30 Sep 2017	31 March 2018
5. Other information	US$ 000	US$ 000	US$ 000
Capital commitments authorised but not contracted for	8,971	3,000	23,583
Group’s share of capital commitments of joint operation	3,000	3,000	3,000
6. Net borrowings
Non-current borrowings	13,455	15,446	17,309
Current borrowings	56,817	50,816	55,973
Total borrowings	70,272	66,262	73,282
Cash and cash equivalents	(54,845)	(27,552)	(34,175)
Net borrowings	15,427	38,710	39,107
Comprising:
Secured	64,627	55,453	57,505
Unsecured	5,645	10,809	15,777
	70,272	66,262	73,282

The weighted average cost of borrowings for the period was 13.86% per annum (31 March 2018: 13.39% per annum).

• US$1.8 million (31 March 2018: US$1.8 million) worth of borrowings are secured by inventories.
• US$4.2 million (31 March 2018: US$4.1 million) worth of borrowings are secured by receivables.
• US$19.3 million (31 March 2018: US$22.2 million) worth of borrowings are secured by a negative pledge over assets.
• US$6.3 million (31 March 2018: US$27.8 million) worth of borrowings are secured by mortgage bonds over freehold land and buildings with a carrying amount of US$43.4 million (31 March 2018: US$45.6 million).

The Group has issued cross company guarantees worth US$53.1 million (31 March 2018: US$42.1 million) for Group borrowing facilities.

6.2   Breach of loan covenants

During the current period, the Group was in default on some of its loan covenants with financial institutions. Details of loans in default as at 30 September 2018 are as follows:

• S$17.1 million (31 March 2018: US$16.1 million) secured borrowing, carrying interest at 12% p.a. The loan is currently on overdraft and fundraising activities to mobillise long term finance to expunge all short term loans are underway.
• US$2.5 million (31 March 2018: US$2.4 million) secured borrowing, carrying interest at 11% p.a. The loan expired on 30 September 2018.
• US$2.8 million (31 March 2018: US$3.7 million) unsecured borrowing, carrying interest at 11% p.a. The loan expired on 31 May 2018.
• US$10.6 million (31 March 2018: US$9.4 million) unsecured borrowing, carrying interest at 24% p.a. The loan expired on 30 June 2018.
• Loan instalments and interest amounting to US$1.3 million (31 March 2018: US$1.1 million) were in arrears as at 30 September 2018 for a loan of US$1.7 million (31 March 2018: US$2.7 million) expiring on 31 January 2019.
• Loan instalments amounting to US$180,000 (31 March 2018: US$373,000) were in arrears as at 30 September 2018 for a loan of US$4.0 million (31 March 2018: US$4.7 million) expiring on 31 July 2021.
• US$4.9 million (31 March 2018: US$4.6 million) unsecured borrowing, carrying interest at 18% p.a. The loan expired on 31 October 2017 and is now subject of litigation.
• US$468,500 (31 March 2018: US$432,678) unsecured borrowing, carrying interest at 15% p.a. The loan expired on 23 July 2017 and is now subject of litigation.

Meikles Limited Website : http://www.meiklesltd.com/