Abridged Audited Financial Results y/e 31 Mar 2014

MEIKLES LIMITED ABRIDGED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2014 CHAIRMAN'S STATEMENT The Group released abridged unaudited financial results on 2 July 2014. We nowhave pleasure in releasing the abridged audited financial results for the yearended 31 March 2014. FINANCE Funds on deposit with the Reserve Bank of Zimbabwe have increased to US$90.8million as a result of interest negotiations. We are in receipt of TreasuryBills of US$49.6 million and have been advised by the relevant authorities thatupon completion of their required processes, Treasury Bills of similar terms tothose already in our possession will be issued for the balance. The Company hasbeen testing its ability to market the Bills in the local market. Efforts todate have focused largely on local banks. Some significant success hasmaterialised from these efforts. Foreign banks operating in Zimbabwe havefailed so far to demonstrate an appetite for the Bills. There has been positive interaction with local financial institutions outsideof banks. These institutions are likely to have a longer investment time framecapacity than banks. This interaction is progressing and subject to somerevision of the terms of the Treasury Bills, success looks possible. TheCompany has very recently been approached by a foreign corporate who hasexpressed the opinion that foreign institutions may have an appetite for theTreasury Bills. This approach is also to be progressed. It is too soon toassess the merits of this possibility. Discussions with the authorities continue on an amicable basis with a view toensuring that the Treasury Bills are on terms that will be acceptable in themarket. Developments suggest satisfactory progress on this initiative, which isexpected to be concluded shortly. Shareholders and other stakeholders are invited to compare the Group's netborrowings position to funds held on deposit with the RBZ as at the end ofMarch 2014 as disclosed in the financials. It will be seen that followingreceipt of these funds the Group may have no net borrowings, a strong platformfor the future. As disclosed to shareholders in previous releases, the Group will maintain itsforeign and local term borrowings and redeem them on due date in terms ofcontractual obligations. As a result, the Group will have substantial excessfunds available for expansion, working capital, and an appropriate distributionto shareholders on realisation of the RBZ deposit. We are pleased with the progress on securing access to our funds and thisdevelopment is exciting for the entire Group. The receipt has potential to makea substantial contribution to the Nation, both through the Group's ownactivities and the corporate social responsibility programs through The MeiklesFoundation where substantial activities are underway for the benefit of thecommunity. In addition, our youth empowerment plan with the Ministry of Youth,Empowerment and Indigenisation has been approved. Trading and operations Group Group revenues were 1.8% below those achieved in the prior year due to lowerturnovers in the retail and agricultural sectors of our operations. Operatingcosts were 1.7% ahead of those incurred in the prior year. Finance costsincreased. Borrowings increased to fund expansion and refurbishments in thesupermarkets, refurbishment of the hotels and substantial plantationdevelopment. TM Supermarkets Turnover for the year was $334 million (2013: $336 million). The customer countthroughout our store footprint increased by 8% compared to the prior year. Theaverage cost of product to the consumer declined. EBIDTA reduced to $11.0million (2013: $11.6 million). Margins were similar to those of the prior year. The store portfolio increased from 49 at 31 March 2013 to 53 branches as at 31March 2014. The company secured four new sites in prominent areas in the secondhalf of the year and their impact on turnover and profitability will be felt inthe ensuing financial periods. The new stores increased our trading area by 10%to 55,000 square meters. Post the end of the financial year, five additionalnew sites have been secured for development in the 2015 and 2016 financialyears, with potential of increasing the trading space by more than 18%. The refurbishment programme is progressing as planned. As at 31 March 2014,five branches had been fully refurbished whilst eight stores are currentlybeing refashioned and are at different stages of completion. Meikles Mega Market The division started operating in December 2013. From its single store, itcontributed just over $2 million in turnover in the period to 31 March 2014. Weachieved an average of 20% compound monthly growth in turnover from the launchdate. The store portfolio is being expanded and post the end of the financialyear, an additional store was opened whilst plans are being progressed to openat least four new stores by the end of the 2015 financial year. Meikles Stores We have made progress in restructuring the departmental stores. The tradingarea was significantly reduced through reallocation of the space to high growthareas of the Group and aligned to current trading performance and outlook. Thedepartmental stores operated from twelve (12) sites in the 2013 financial yearand these were reduced to five (5) by 31 March 2014. The turnover for the year was $12.5 million (2013: $18.5 million) and thereduction was through a combination of factors including the reduced storefootprint and limited access to credit. EBIDTA was a loss of $2.1 million (2013: loss of $1.3 million). The overheadstructure is being realigned to the reduced number of stores. There will beminimal job losses in this process as we are able to accommodate most of theaffected staff in the growing areas of the Group and we believe the remainingstores will be sustainable with a lean overhead structure. The Stores are to relinquish the basement and ground floors of Greatermans infavour of a new Pick n Pay supermarket, which is to open in October 2014 .Thisdevelopment may not necessarily result in the termination of Greatermans as atrading entity, but will result in a strong retail solution for the Group in agood location in Harare. Hotels The hospitality sector continues to improve. The country's image andperceptions have to a large extent been corrected and our commendations go tothe Government and the line Ministry for positively driving this agenda. Thecountry has benefited from hosting the UNWTO General Assembly in August 2013.We witnessed increased traffic in the tourist resort areas while the city boundtravellers were limited in line with the subdued business climate. Meikles Hotel was refurbished throughout the year as was the Victoria FallsHotel. The results for the year were not influenced substantially by therefurbishments, as these were not in place for the full year. EBIDTA was $1.3million compared to $612,000 in the prior year. The revenues for the Hotels at$15.6 million were 5% higher than those recorded in the 2013 financial year.The REVPARs at the Meikles Hotel and the Victoria Falls Hotel increased by 2%and 15% respectively. We attribute this to the high quality of our productoffering following the refurbishments and the positive sentiments on thecountry. Tanganda Tea Company EBITDA increased by 36% to $2.9 million. The revenues for the year at $22.6million were down 6% on the prior year. The plantation development embarked on in 2011 progressed successfully and isnearing completion. An additional 143ha of coffee, 185ha of avocadoes, 164ha ofmacadamia and 108ha of timber were added during the year. The company had268ha, 375ha, 663ha, 2372ha and 1415ha of coffee, avocadoes, macadamia, tea andtimber plantations respectively as at 31 March 2014. Bulk tea production increased by 30% to 9,700 tons. The fertilisation andliming programmes undertaken in previous periods coupled with favourableweather conditions account for the high bulk tea production. However, due tothe oversupply of tea from Kenya, the bulk tea prices declined by 8% comparedto prior year. We have continued to mechanise tea plucking and this resulted ina decrease in the cost of production of bulk tea by 24% albeit also aided bythe increased production volumes. Packeted tea production was at 2,044 tons, similar to the 2,093 tons producedin the prior year as there was suppressed demand in the local market, whilstthe regional markets, particularly Zambia, showed growth. Subsequent to yearend, we have replaced our packaging machines with a state of the art highcapacity plant that will allow us to increase production at standard costs,ensuring continuity of supply of a quality product at competitive prices. OurTingamira water production increased by 44% compared to prior year and watersales volumes continue on an upward trend. Mining Meikles Centar Mining ("MCM") is currently in the process of acquiring a 51%shareholding in a group of gold mines in the Matabeleland area for aconsideration of US$3 million. We await regulatory approval for the transactionto be concluded. MCM has purchased 75% equity in a company that owns a number of chrome claimson the Great Dyke. Proposals have been submitted to the Ministry of Minesrelated to a significant chrome related project, which include construction ofa smelter to beneficiate both lumpy and alluvial ore. The project will cost inexcess of $100 million. The Group carried out limited exploration on an iron ore claim and the resultswere positive. Further tests are required to determine the full extent and qualityof the ore reserves. The Group looks to its strategic partners to provide finance and mining skills.Mining is a diversification into an area of substantial growth potential in Zimbabwe. MentorThe value of the Group's investment in Mentor has increased by twenty percentexpressed in terms of South African rand, but is static in terms of United Statesdollars. Mentor and other financiers are involved in negotiations relating to a new project,which is at an advanced stage, but has not yet been consummated. It is expected thatthis project, if consummated successfully, will have a material impact on forwardvalues of the Mentor Group. MANAGEMENT The Group is committed to maintaining the highest standards of Corporate Governancein all of its operations. Consequently the Group has embarked on a comprehensiveanti-corruption programme whose implementation has already commenced. Pursuant tothis programme the Group intends to introduce robust procurement systems to ensurethat goods and services procured by the Group are of the highest standard and ofthe best value. In line with the anti-corruption drive the Group has put in placenumber of anti-corruption initiatives which include the establishment of ananti-corruption desk in the Chairman's office to deal specifically with cases ofreported corruption. OUTLOOK There are stresses in the economy, but the Group sees these as challenges thatare there to be overcome. Once the matters highlighted in this statement underFinance have been fully achieved, placing the Group in a strong financialposition, the Group will accelerate its participation in the economy for thebenefit of all Stakeholders. Success achieved very recently in implementing asignificant part of our financial objectives provides the Group with resourcesthat will enable it to launch the first phase of planned initiatives, withimmediate effect. Mining, agriculture, tourism and retail are viewed assubstantial participants in the future growth and wellbeing of the economy. TheGroup is focused on these four areas of endeavour. It is believed that the full implications set out above under Finance will beimplemented in time to benefit the entirety of the second half of the forthcomingfinancial year. Interest costs will reduce, but most importantly the Group willhave the financial flexibility to pursue strategies that will enhance shareholdervalue. Inter Group funding and guarantees have precluded any constructive initiativein this respect over the period since dollarization. Parts of the Group haveexpanded and progressed during this period and other parts have been restrainedthrough a lack of resources. It is now possible to focus aggressively on excellence,motivation and an enhancement of values. Dividend payments will also be possiblein the second half of the year. Shareholder patience over the past years isrecognized and will be rewarded. APPRECIATION I would like to express my appreciation to our customers who continue to supportus in this increasingly difficult environment. I would also like to thank myfellow Board members, management and staff for the steadfast commitment and dedication. JRT MoxonExecutive Chairman13 August 2014 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2014 31 March 2014 31 March 2013 US$ 000 US$ 000 CONTINUING OPERATIONS Revenue 384,308 391,328 EBITDA 7,852 9,967 Depreciation, amortisation and impairment (8,771) (4,901) Non-trading income 48,880 9,732 Finance costs (10,462) (6,994) Profit before tax 37,499 7,804 Income tax expense (320) (2,442) Profit for the year from continuing operations 37,179 5,362 DISCONTINUED OPERATIONS Profit for the period from discontinued operations - 1,173 PROFIT FOR THE YEAR 37,179 6,535 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 37,179 6,535 Profit for the year attributable to: Owners of the parent 34,427 3,084 Non-controlling interests 2,752 3,451 37,179 6,535 Total comprehensive income attributable to: Owners of the parent 34,427 3,084 Non-controlling interests 2,752 3,451 37,179 6,535 Earnings per share (cents) Basic 13.56 1.21 Continuing operations 13.56 0.75 Discontinued operations - 0.46 Diluted 12.59 1.15 Continuing operations 12.59 0.71 Discontinued operations - 0.44 Headline (loss) / earnings per share - continuing operations (cents) (1.64) 0.16 Diluted headline (loss) / earnings per share - continuing operations (1.52) 0.81(cents) CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2014 31 March 2014 31 March 2013 US$ 000 US$ 000 ASSETS Non-current assets Property, plant and equipment 109,624 99,063 Investment property 250 254 Investment in Mentor Africa Limited 27,657 27,657 Biological assets 30,156 21,521 Intangible assets 1,528 2,204 Other financial assets 12,760 12,693 Balances with Reserve Bank of Zimbabwe 90,861 40,514 Deferred tax 2,674 1,997 Total non-current assets 275,510 205,903 Current assets Inventories 36,631 36,708 Trade and other receivables 16,171 17,283 Other financial assets 3,551 1,405 Cash and bank balances 22,952 14,198 Total current assets 79,305 69,594 Total assets 354,815 275,497 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 155,455 121,028 Equity attributable to equity holders of the parent 171,868 137,441 Non-controlling interests 14,222 10,990 Total equity 186,090 148,431 Non-current liabilities Borrowings 37,264 7,417 Deferred tax 14,519 14,534 Total non-current liabilities 51,783 21,951 Current liabilities Trade and other payables 47,293 46,263 Borrowings 69,649 58,852 Total current liabilities 116,942 105,115 Total liabilities 168,725 127,066 Total equity and liabilities 354,815 275,497 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2014 Non- Retained Share Share earnings capital premium distributrable reserves US$ 000 US$ 000 US$ 000 US$ 000 2014 Balance at 1 April 2013 2,538 1,316 12,559 121,028 Profit for the year - - - 34,427 Non-controlling interests arising from - - - -Meikles Centar Mining (Private) ltd Non-controlling interests arising from - - - -Kearsely Investments (Private) ltd Balance at 31 March 2014 2,538 1,316 12,559 155,455 2013 Balance at 1 April 2012 2,538 1,316 6,233 104,626 Profit for the year - - - 3,084 Transfer on disposal of assets - - 6,326 13,318classified as held for sale Balance at 31 March 2013 2,538 1,316 12,559 121,028 Disposal group Attributable Non capital to owners of and parent controlling Total reserves interests US$ 000 US$ 000 US$ 000 US$ 000 2014 Balance at 1 April 2013 - 137,441 10,990 148,431 Profit for the year - 34,427 2,752 37,179 Non-controlling interests arising - - 147 147from Meikles Centar Mining (Private)ltd Non-controlling interests arising - - 333 333from Kearsely Investments (Private)ltd Balance at 31 March 2014 - 171,868 14,222 186,090 2013 Balance at 1 April 2012 19,644 134,357 7,539 141,896 Profit for the year - 3,084 3,451 6,535 Transfer on disposal of assets (19,644) - - -classified as held for sale Balance at 31 March 2013 - 137,441 10,990 148,431 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2014 31 March 2014 31 March 2013 CONTINUING AND DISCONTINUED OPERATIONS US$ 000 US$ 000 Cash flows from operating activities Profit before tax from continuing and discontinued operations 37,499 7,804 Adjustments for: - Depreciation and impairment of property, plant and equipment 6,774 4,901 - Net interest (31,653) 4,750 - Net exchange (gains) / losses (207) 340 - Fair value adjustments on biological assets (6,558) (7,828) - Loss on disposal of property, plant and equipment 77 267 Impairment of intangible assets 1,997 - Operating cash flow before working capital changes 7,929 10,234 Decrease / (increase) in inventories 77 (42) Decrease / (increase) in trade and other receivables 994 (2,164) (Decrease) / increase in trade and other payables (8,415) 13,108 Cash generated from operations 585 21,136 Income taxes paid (924) (172) Net cash (used in) / generated from operating activities (339) 20,964 Cash flows from investing activities Payment for property, plant and equipment (17,441) (18,299) Proceeds from disposal of property, plant and equipment 330 188 Increase in intangible assets (1,071) (2,080) Net movement in service assets (214) (209) Payment for other investments (1,855) (82) Net expenditure on biological assets (2,077) (1,923) Net outflow on disposal of subsidiary - (2,857) Investment income 820 357 Net cash used in investing activities (21,508) (24,905) Cash flows from financing activities Net increase in interest bearing borrowings 40,644 14,284 Proceeds on disposal of partial interest in a subsidiary without loss ofcontrol 147 - Finance costs (10,462) (6,994) Net cash generated from financing activities 30,329 7,290 Net increase in cash and bank balances 8,482 3,349 Cash and bank balances at the beginning of the year 14,198 11,284 Net effect of exchange rate changes on cash and bank balances 272 (435) Cash and bank balances at the end of the year 22,952 14,198 NOTES TO THE ABRIDGED AUDITED FINANCIAL STATEMENTS 1. Basis of preparation The abridged financial statements are prepared from statutory records that aremaintained under the historical cost basis except for biological assets andcertain financial instruments which are measured at fair value. Historical costis generally based on the fair value of the consideration given in exchange forassets. 2. Statement of compliance The Group's abridged financial results have been extracted from financialstatements prepared in accordance with International Financial ReportingStandards and the Companies Act (Chapter 24.03) and relevant statutoryinstruments (SI33/99 and SI62/96). These results have been audited by Deloitte& Touche, whose unqualified report is available for inspection at theregistered office of the Company. 3. Accounting policies Accounting policies and methods of computation applied in the preparation ofthese abridged audited financial statements are consistent, in all materialrespects, with those used in the prior year with no significant impact arisingfrom new and revised International Financial Reporting Standards (IFRSs)applicable for the year ended 31 March 2014. 4. Segment information 31 March 2014 31 March 2013 US$ 000 US$ 000 Continuing operations Revenue Supermarkets 333,907 335,909 Hotels 15,583 14,842 Agriculture 22,622 24,176 Departmental stores 12,462 18,489 Corporate* (266) (2,088) 384,308 391,328 EBITDA Supermarkets 10,958 11,635 Hotels 1,269 612 Agriculture 2,915 2,143 Departmental stores (2,145) (1,339) Corporate* (5,145) (3,084) 7,852 9,967 The EBITDA figures are before Group managementfees. Segment assets Supermarkets 80,179 60,943 Hotels 50,720 47,719 Agriculture 64,817 52,852 Departmental stores 32,587 37,408 Corporate* 126,512 76,575 354,815 275,497 Segment liabilities Supermarkets 51,880 38,516 Hotels 20,556 16,421 Agriculture 38,601 29,631 Departmental stores 21,906 36,890 Corporate* 35,782 5,608 168,725 127,066 *Intercompany transactions and balances have been eliminated from the corporateamounts. Corporate also includes other subsidiaries that are immaterial towarrant separate disclosure. 31 March 31 March 2014 2013 US$ 000 US$ 000 Continuing operations 5. Depreciation, amortisation and impairment Depreciation of property plant and equipment 6,495 4,781 Impairment of property, plant and equipment 275 116 Depreciation of investment property 4 4 Impairment of intangible assets 1,997 - 8,771 4,901 6. Non-trading income Net investment revenue 42,115 2,244 Fair value adjustments on biological assets 6,558 7,828 Net exchange gains / (losses) 207 (340) 48,880 9,732 Net investment revenue includes $40.9 million earned on thedeposit at the RBZ following interest negotiations. 7. Net borrowings Non-current borrowings 37,264 7,417 Current borrowings 69,649 58,852 Total borrowings 106,913 66,269 Cash and cash equivalents (22,952) (14,198) Net borrowings 83,961 52,071 The increase in borrowings was applied towards retailexpansion, store and hotel refurbishment, plantationdevelopment and working capital. 8. Other information Depreciation and impairment - property, plant and equipment 6,774 4,901 Capital commitments authorised by the Directors but not 14,128 25,613contracted Group's share of capital commitments of joint operation 53 1,783 9. Subsequent events - Balances with the Reserve Bank of Zimbabwe As at 31 March 2014, funds on deposit with the Reserve Bank of Zimbabwe hadincreased to US$90.8 million as a result of interest negotiations. Subsequent to year end, the Company was issued with Treasury Bills amounting toUS$49.6 million. The balance of the deposit owed by the Reserve Bank ofZimbabwe is currently being dealt with by the Ministry of Finance and EconomicDevelopment in terms of the Reserve Bank of Zimbabwe (Debt Assumption) Bill,2014. The Ministry of Finance and Economic Development has advised that uponcompletion of their required processes, Treasury Bills of similar terms tothose already in the possession of the Company will be issued. For further information contact Onias Makamba on [email protected] +263-4-252068/70.