25th Mar 2008 08:00
Meikles Africa Ld25 March 2008 AUDITED RESULTS FOR THE 9 MONTHS TO 31 DECEMBER 2007 SALIENT FEATURES References are to historical information Net turnover $43,1 trillion Operating profit $11,9 trillion Attributable profit Increased to $246,4 trillion Cash generated and funds available Funds generated from operations were $16,4 trillion Funds on hand amount to $339,3 trillion References are to inflation adjusted information Net turnover $275,1 trillion Operating profit $9,5 trillion Attributable loss $4,7 trillion Cash generated and funds available Funds generated from operations were $50,4 trillion Funds on hand amount to $339,3 trillion OVERVIEW With the merger of Meikles Africa, Kingdom Financial Holdings (KFHL), TangandaTea Company (TTC) and Cotton Printers (CP) having been satisfactorily concluded,the year-end of the Group has changed to 31 December and the published resultsreflect the status of the Kingdom Meikles Africa (KMAL) Group at 31 December2007, being the effective date of the merger. The Group income statementtherefore presents the results for the former Meikles Africa Group while thebalance sheet reflects the position of the merged Group taking into accountshares issued to the shareholders of KFHL, TTC and CP. However for informationpurposes an indicative segmental income statement has been presented whichreflects results for 2007 as if the merger had been in place for the twelvemonths. The KMAL Group has significant foreign operations and realises export proceedsfrom local operations accounting for the required disclosure which fairlypresents value to all stakeholders. Accordingly funds from operations ofentities that generate foreign currency are translated at a fair investmentrate. This policy is consistent with that applied in the previous year. The nine month period under review has seen an economy where official inflation,interest rates and foreign exchange rates have not maintained relativeconsistency and therefore reflects anomalies when measuring performance. Inaddition, since July 2007, when new pricing mechanisms were introduced, allbusinesses have operated under extremely difficult conditions. Supply of stock,pricing and terms of trade have put pressure on margins and cash generation toreplace stock, when available. Dialogue continues with authorities to promotepricing mechanisms which will result in sustainability for stakeholders. Performance of the former Meikles Africa Group has therefore been supported byforeign operations and the quality of foreign assets, reflecting the strength ofthe Group's ability to withstand the volatility of the local environment. Othersectors of Kingdom Meikles Africa bring to the Group contributions to thebalance sheet that reflect strength from Kingdom Financial Holdings, a solidinfrastructural base from Tanganda Tea Company and facilities at Cotton Printerswhich, when utilised to better capacity, will provide increased foreign currencyinflows. Plans are progressing to enhance synergies, energise operations andcreate opportunities which leverage off the strength of the Group. Mainfeatures of the operations incorporated in the income statement for the periodto 31 December 2007 are as follows. (Reference to comparatives is for the ninemonth period to 31 December 2006.) HotelsIn inflation adjusted terms turnover increased by 1729% to $107 trillion andoperating profit increased to $23 trillion.• All units achieved occupancy growth which was an overall increase of 28%for the period;• Leading Hotels of the World recently visited Meikles and Victoria FallsHotel and both achieved pleasing results;• Stock procurement has been managed under difficult conditions;• Upgrade of the Victoria Falls in public areas and facilities is nearingcompletion;• The refashioning of the Cape Grace will commence shortly and will spreadover two financial periods;• A major maintenance programme at Meikles has commenced in anticipation ofan upturn in business;• Overheads have been controlled although there have been instances whereutility costs have increased faster than revenue; RetailIn inflation adjusted terms turnover increased by 41% to $169 trillion and therewas an operating loss of $11 trillion.• Retail increase in turnover has been less than inflation because of volumedecrease and pricing;• Procurement of stock to appropriate levels has been extremely difficultbecause of pricing and availability;• Margins have not kept pace with inflation thereby inhibiting cash flowgeneration;• Some success was achieved in the securing of BACOSSI funding;• Recapitalisation is planned provided the protection of stock values can beassured;• Three new TM projects are at an advanced stage of completion;• Department Stores credit sales through Meikles Financial Services ceased inJuly;• Plans are advancing for a greater ratio of quality food, confectionery andproduce in the department stores;• A regional presence using franchise options is being pursued;• Toll manufacturing and assembly are to be investigated with a view to ensuring better supply and enhanced differentiation; Corporate Exchange gains reflect the uplift in foreign funds in Zimbabwe dollar terms withthe inflation adjusted financial statements showing the position after takinginto account movement in the CPI index. The merger The merger transaction saw the issue of seventy eight million shares to theshareholders of Kingdom Financial Holdings (excluding Meikles Africa), TangandaTea Company and Cotton Printers. The price was $8,5 million a share, being theMeikles Africa share price at 31 December 2007. The issue value was compared tothe net assets of the acquired companies resulting in goodwill of $614 trillionin historic terms. Outlook The merged Group is taking advantage of synergies and resources across theentities in areas of treasury, foreign currency utilisation, toll manufacturingand property letting. Strategies are being formalised that leverage off thestrength of the Group balance sheet. These will focus on capital preservationand financial growth in the case of Kingdom Financial Holdings; refurbishing andupgrade of the hotels division; increasing tea production through mechanisationand expansion of agricultural activities; recapitalising the retail division andrevising procurement plans; refurbishing textile machinery to increasethroughput especially for yarn exports. Where product and capacity exist, theGroup will focus on export earnings growth. External investments will continueto develop where opportunities arise but in the meantime the Group is launchingcapital raising programmes which will provide inflows for local working capitaland provide funds for regional expansion. We have realised our investment inMvelaphanda favourably. Kingdom Meikles Africa has entered into an optionagreement, which might include an exchange of assets, to invest in MentorAfrica, a new Pan regional, sub Saharan investment company, subject to allregulatory approvals. Mentor Africa is headed by Mr. Stephen Levenberg and Mr.Brett Till former Chief Executive Officer and Financial Director, respectively,of Mvelaphanda. The post Mvelaphanda investment potentials will see the Groupexpanding into the sub Saharan region in areas which might include naturalresources, telecommunications and hospitality. These plans are expected tomaterialise within the current financial year. Social responsibility The Group continues to be mindful of the plight of the aged and other vulnerablegroups. Shortages and non-availability of basic commodities and services havecompounded the hardships endured by those who have least. In an effort toassist in the welfare of our country's senior citizens the Group contributes tohomes and institutions across Zimbabwe. J. R. T. MOXONCHAIRMAN Dividend announcement The Board has resolved to pass a final dividend for the period ended 31 December2007 but will consider declaring an interim dividend for the 2008 financial yearin the near future. By order of the Board A.P. LANE-MITCHELLSECRETARY 20 March 2008 AUDITED CONSOLIDATED INCOME STATEMENTFor the 9 months to 31 December 2007 INFLATION ADJUSTED HISTORICAL COST (all amounts in billions of dollars) 9 months to 12 months to 9 months to 12 months to 31 December 31 March 31 December 31 March 2007 2007 2007 2007 Revenue 275,110 210,156 43,108 357Operating (loss) / profit before monetaryadjustment and exchange gains (20,947) (9,269) 6,932 80Net monetary gain from operating activities 19,130 24,844 - -Exchange gains on net current assets 11,277 10,748 4,943 47 Operating profit 9,460 26,323 11,875 127Investment income 13,958 6,686 1,832 15Finance costs (1,463) (2,564) (471) (5)Net exchange gains on foreign funds 15,278 186,947 253,362 1,018(Decrease) / increase in value of quoted investment (16,316) 29,241 4 148Net monetary (loss) / gain from financing activities (43,805) 17,849 - -Share of profit of associates 16,355 2,239 8,978 7(Loss) / profit before taxation (6,533) 266,721 275,580 1,310 Income tax credit / (expense) 726 (35,779) (28,928) (169) (Loss) / profit for the period (5,807) 230,942 246,652 1,141Attributable to:Equity holders of the parent (4,668) 229,073 246,376 1,132Minority interest (1,139) 1,869 276 9 (5,807) 230,942 246,652 1,141 Basic (loss) / earnings per share ($) (28,461) 1,399,716 1,502,184 6,917IIMR Headline (loss) / earnings per share ($) (35,443) 1,399,160 1,501,928 6,911Weighted average number of shares 164,011,873 163,656,787 164,011,873 163,656,787 AUDITED CONSOLIDATED BALANCE SHEETAt 31 December 2007 INFLATION ADJUSTED HISTORICAL COST (all amounts in billions of dollars) At At At At 31 December 31 March 31 December 31 March 2007 2007 2007 2007 ASSETSProperty, plant & equipment 177,379 99,825 120,942 372Investment property 3,542 - 3,542 -Biological assets 4,222 - 4,222 -Investment in associates 21,450 8,509 6,231 9Financial assets - non-banking 108,338 106,329 108,245 483Goodwill 587,500 5,476 613,686 -Other intangible assets 87 - 87 -Current assets banking Balances with banks and cash 144,583 - 144,583 - Financial assets at fair value through profit and loss 39,071 - 39,071 - Advances and other accounts 16,773 - 16,773 - Available for sale 7,387 - 6,805 - Acceptances 68 - 68 -Current assets non-banking 231,678 237,484 224,011 1,057Total assets 1,342,078 457,623 1,288,266 1,921 EQUITY AND LIABILITIESAttributable to equity holders of the parent 1,017,434 305,547 983,295 1,266Minority interest 2,313 3,452 285 9Deferred tax 47,717 30,172 30,072 107Other non-current liabilities 52,687 36,215 52,687 165Current liabilities banking Financial liabilities at fair value through profit and loss 20,503 - 20,503 - Customer deposits 139,231 - 139,231 - Acceptances 68 - 68 - Other current liabilities 14,889 - 14,889 -Current liabilities non- banking 47,236 82,237 47,236 374Total equity and liabilities 1,342,078 457,623 1,288,266 1,921 AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the 9 months to 31 December 2007 INFLATION ADJUSTED HISTORICAL COST (all amounts in billions of dollars) 9 months to 12 months to 9 months to 12 months to 31 31 March 31 December 31 March December 2007 2007 2007 2007 (Loss) / profit for the period (4,668) 229,073 246,376 1,132Share premium on issue of shares 664,683 - 663,979 -Share issue expenses (5,221) - (5,220) -Share based payments 4,515 - 4,515 -Translation of foreign entity 45,913 26,503 66,702 128Share of reserves of associate 8,543 1,388 5,704 2Dividend - prior year final (1,878) (1,068) (27) -Dividend - current year interim - (1,035) - (1)Attributable to equity holders of parent 711,887 254,861 982,029 1,261Minorities (1,139) 1,303 276 8Shareholders' equity at the beginning of the period 308,999 52,835 1,275 6Shareholders' equity at the end of the 9 months period 1,019,747 308,999 983,580 1,275 AUDITED CONSOLIDATED CASH FLOW STATEMENTFor the 9 months to 31 December 2007 INFLATION ADJUSTED HISTORICAL COST (all amounts in billions of dollars) 9 months to 12 months to 9 months to 12 months to 31 December 31 March 31 December 31 March 2007 2007 2007 2007 Cash flows from operating activities(Loss) / profit before taxation (6,533) 266,721 275,580 1,310Adjustments for: Non-operating cash flow (55,309) (204,113) (259,708) (1,083) Non-cash items 100,622 (17,463) (7,552) (143)Operating cash flow before working capital changes 38,780 45,145 8,320 84Working capital changes 11,586 1,058 8,120 3Cash generated from operations 50,366 46,203 16,440 87Income taxes paid (5,136) (3,687) (60) (5)Net cash generated from operating activities 45,230 42,516 16,380 82 Net cash generated from / (used in) investing activities 172,542 (2,273) 143,493 (7) Net cash used in financing activities (16,382) (5,354) (28,534) - Net increase in cash and cash equivalents 201,390 34,889 131,339 75 Cash and cash equivalents at the beginning of the period 180,096 21,802 819 4 Net effect of exchange rate changes on cash and cash equivalents (1,626) 124,844 253,102 734Translation of foreign entity (40,547) (1,439) (45,947) 6 Cash and cash equivalents at the end of the 9 months period 339,313 180,096 339,313 819 AUDITED SEGMENT INFORMATION INFLATION ADJUSTED HISTORICAL COST (all amounts in billions of dollars) 9 months to 12 months to 9 months to 12 months to 31 December 31 March 30 December 31 March 2007 2007 2007 2007RevenueRetail 168,561 175,157 20,869 73Hotels 106,549 34,999 22,239 284 275,110 210,156 43,108 357Operating (loss) / profit aftermonetary adjustment and exchangegainsRetail (10,874) 10,521 2,627 60Hotels 23,378 12,984 9,781 52Corporate (3,044) 2,818 (533) 15 9,460 26,323 11,875 127Segment assetsRetail 33,475 65,680 15,985 229Hotels 149,531 126,450 136,442 545Banking 267,832 - 230,718 -Agriculture 24,756 - 22,588 -Corporate & Other 866,484 265,493 882,533 1,147 1,342,078 457,623 1,288,266 1,921 SUPPLEMENTARY INFORMATION INFLATION ADJUSTED HISTORICAL COST(all amounts in billions of dollars) 9 months to 12 months to 9 months to 12 months to 31 December 31 March 31 December 31 March 2007 2007 2007 2007 Capital expenditure 6,618 7,894 2,789 23Capital commitments authorised but not yetcontracted for 136,362 85,760 136,362 390Depreciation 7,727 4,435 1,431 5Market value of investments - Associate - Kingdom Financial Holdings Limited - 20,822 - 95 - Investment - Mvelaphanda Group - 32,528 - 148Borrowings 17,854 16,723 17,854 76 The information below is segment information for the period ended 31 December2007 assuming the merger had been effective from 1 January 2007 INDICATIVE SEGMENT INFORMATION INFLATION ADJUSTED HISTORICAL COST(all amounts in billions of dollars) 12 months to 12 months to 31 December 2007 31 December 2007RevenueBanking 85,700 12,120Retail 224,451 21,060Hotels 135,722 22,308Agriculture 28,055 1,405Textiles 485 23 474,413 56,916Operating profit / (loss) aftermonetary adjustment and exchangegainsBanking 55,645 31,025Retail (3,220) 2,673Hotels 27,866 9,831Agriculture 1,060 4,972Textiles (223) 116 81,128 48,617 Accounting policies Accounting policies are consistent with those used in the previous year. Note to inflation adjusted financial statements The consumer price indices used to restate the financial statements at 31December 2007 are as follows: 31 March 2006 765,209.431 March 2007 16,221,182.231 December 2007 3,564,825,238.9 For further information contact: Zimbabwe Bryan Thorn +263-4-252068/78 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Meikles