Final Results

Meikles Ld - Final Results

PR Newswire

London, September 28

MEIKLES LIMITED

ABRIDGED AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018

CHAIRMAN’S STATEMENT

It gives me pleasure to present the Chairman’s Report for the financial year ended 31 March 2018.

FINANCIAL OVERVIEW

The abridged financial statements are now audited. The Company has decided not to account for sums due from the Government of Zimbabwe in the year under review. The history of this matter speaks to the unilateral acquisition of Meikles Limited funds by the Reserve Bank of Zimbabwe in 1998.

Government has committed itself to pay the amount due to the Company and the sums will be included in the financial statements when the final receipt is confirmed. The settlement will include an agreement on interest to be paid to the Company and will provide for payment to be made progressively in tranches. It is believed the total payment will be received by the end of March 2019. The receipt of funds from Government will be material to the future direction of the entire Group.

GROUP FINANCIAL RESULTS

The Group performed well during the year under review.

Due to the late release of the audited financial results for reasons explained to Shareholders, it is considered appropriate to provide Shareholders with information on Group performance for the first four months in the financial year to 31 March 2019. This information is included in the section of this report headed “Outlook”.

Group earnings before interest, taxation, depreciation and amortisation (“EBITDA”) have grown from US$12.2 million in the financial year to 31 March 2016 to US$24.8 million in the financial year to 31 March 2017 to US$41.1 million in the year under review.

Revenue has grown from US$453.6 million in 2016 to US$457.6 million in 2017 to US$534.9 million in the year under review.

Segmental contributions to Revenue and EBITDA are set out in Note 5.

Profit before taxation has grown by 225 percent to US$19.2 million (2017 US$5.9 million).

REVIEW OF OPERATIONS

Supermarkets - trading as TM and Pick n Pay

EBITDA grew by 45 percent to US$34.5 million. The segment traded in 55 stores. In the forthcoming financial year, the segment plans to open a number of new stores and there will be further upgrades of existing stores. Consistent growth is anticipated in the coming year.

The segment has no borrowings and has the resources to implement future growth.

Agriculture

EBITDA grew to US$10.3 million from US$6.1 million in the previous year.

The quantum of tea harvested on the Tanganda Estates was an all-time record on a calculated comparative basis. Selling prices for tea, avocados and macadamias were greater than in the previous year.

The avocado and macadamia areas planted over the last years are significant in size, but remain largely immature. Although volumes of both crops were significantly greater in the year under review than in the previous year, the process to maturity on the existing plantations will take another three years.

Once maturity is reached, production in these areas will exceed current production levels by a very significant tonnage. Sales and profit contribution are expected to grow over the next three years to a level where the historic dependence on tea, both in bulk and in packeted form, will be diminished, not in terms of a reducing tea performance, which is expected to continue to grow in contribution, but by enhanced overall performance following the impact of the new agricultural products.

Tanganda invested in certification by Rainforest Alliance of 706 small scale tea growers. This development will benefit small scale farmers with improved revenues. The development will assist in the conservation of biodiversity and natural resources for the benefit of both present and future generations.

Hospitality

EBITDA increased to US$4.1 million in the current year from US$1.8 million in the previous year.

Sales and profits include the entire results of Meikles Hotel and only 50 percent of The Victoria Falls Hotel, where the segment is in equal partnership with a third party.

A refurbishment programme for The Victoria Falls Hotel will commence before the end of 2018. However, of greater significance a project to enlarge the hotel with additional accommodation is currently in the initial stages of planning, and implementation is to be expedited.

Both hotels are benefiting from a growth in occupancy during the first months of the new financial year.

Retail and properties

The EBITDA loss in retail at US$4.2 million was almost identical to the loss of US$ 4.1 million in the previous year.

This segment was badly affected throughout the year by the absence of funds due to the Group from Government, a position which is still prevalent in the early months of the new financial year. All Mega Market and M stores have been permanently closed, partly in the latter months of the year under review and partly in the early months of the new financial year.

Management has successfully reduced expenditures, so going forward losses are reducing.

With the knowledge that funding is to be forthcoming, the segment will focus on a retail offering that is compatible with the forward requirements of a smaller but more specialised retail offering.

The commercial real estate properties owned by the Group are very well located in the major city centres. These buildings are currently being analysed for redevelopment along a similar concept to that achieved at Village Walk, Borrowdale. It is anticipated that these projects, when completed will generate substantial rental revenue for the Group, together with growth in capital values.

Financial Services

In order to focus on the activities of our main segments, the financial services operation was sold at a profit during the year under review.

Security Services

Meikles Guard Services continue to provide guard services to both Group companies and to certain third parties. It is anticipated that further third party contracts will be secured.

MEIKLES FOUNDATION

The Meikles Foundation continued to focus its attention and energy helping the under privileged and disadvantaged. The Foundation has worked closely with both Roundtable and TM Pick n Pay in efforts to raise funds, supply food, blankets, clothing and medication to the needy. An annual fund raising golf championship partnering TM Pick n Pay resulted in funding to the Rainbow Children’s Home, KidzCan Zimbabwe, Cleveland Dam residents feeding programme, Island Hospice and Healthcare and the Arcadia Baptist Church feeding programme. In recognition of World Water Day, the Meikles Foundation, in collaboration with the Embassy of Italy, was part of an initiative to raise awareness of the importance of sustainable water consumption and management.

The Meikles Foundation was involved in the renovation and completion of a space at the Thomas Meikle Property, Robert Mugabe Road in Harare, for a dance hub run by Afrikera Arts Space who provide an internationally recognised three year diploma in all forms of dance and basic business studies. The Thomas Meikle Library at National Gallery remains a project close to the heart of the Foundation.

The strategy of the Meikles Foundation is to partner like-minded organisations who are prepared to work and achieve their project goals and to source funding both locally and internationally for all projects.

OUTLOOK

Financial performance for the first four months of the financial year to 31 March 2019 have resulted in a growth in turnover of 27 percent to US$213.2 million (previous year US$168.2 million), an improvement in EBITDA of 113 percent to US$20.4 million (previous year US$9.6 million) and an increase in profit before taxation to US$14.1 million (previous year US$3.0 million).

Overall borrowings net of cash and bank balances as at 31 July 2018 were US$21.1 million (31 March 2018 US$39.1 million).

Negotiations are in progress with a banking institution to convert present short term borrowings to medium term loans. This will result in a rationalisation of our relationships with banking institutions. The process is expected to be completed by the end of December 2018.

With anticipated receipt of funds from Government, the Group will be in a position of financial strength. However, the Company may in addition seek funding from further cash generating opportunities, which will become be available in the future months.

DIVIDEND

The Board resolved not to declare a dividend for the year.

APPRECIATION

I would like to extend my appreciation to our customers for their continued support and to our shareholders and regulatory authorities for their support and guidance. I would also like to extend my thanks and appreciation to fellow Board members, management and staff for their dedication and commitment.

JRT Moxon

Executive Chairman

27 September 2018

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2018

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2018

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2018

NOTES TO THE ABRIDGED AUDITED FINANCIAL STATEMENTS

1. Basis of preparation

The abridged audited 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. These abridged financial statements are presented in United States of America dollars (US$), which is the Group’s functional currency. In the current environment the determination of functional currency is a significant judgement area. The country’s Accounting Profession reviewed the requirements of the accounting standards and concluded that the US$ was still the appropriate functional currency. 

2. Statement of compliance

The Group’s abridged audited financial statements 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 set of financial results should be read in conjunction with the complete set of financial statements for the year ended 31 March 2018, which have been audited by Deloitte & Touche Chartered Accountants (Zimbabwe) and an unmodified audit opinion issued thereon. The auditors have included a section on key audit matters. The key audit matters were on material uncertainty related to going concern and contingent assets and liabilities. The auditor’s report is available for inspection at the Company’s registered address.

3. Accounting policies

Accounting policies and methods of computation applied in the preparation of these abridged financial statements are consistent, in all material respects, with those used in the prior year.

4. 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 31 March 2018, the Directors have assessed the Group’s ability to continue operating as a going concern and believe that the preparation of these financial statements on a going concern basis is still appropriate. 

5. Segment information

NOTES TO THE ABRIDGED AUDITED FINANCIAL STATEMENTS (continued)

7.2 Breach of loan covenants

During the current year, the Group was in default on some of its loan covenants with financial institutions. Details of loans in default as at 31 March 2018 are as follows:

US$4.6 million (2017: US$3.9 million) unsecured borrowing, carrying interest at 18% p.a. The loan expired on 31 October 2017 and is now subject of litigation. The loan is from a Government related financial institution.

US$432,678 (2017: US$3.6 million) unsecured borrowing, carrying interest at 15% p.a. The loan expired on 23 July 2017 and is now subject of litigation. The loan is from a Government related financial institution.

US$16.1 million (2017: US$14.7 million) partially secured borrowing, carrying interest at 12% p.a. The loan is currently on overdraft and negotiations to extend the tenure are underway.

Loan instalments and interest amounting to US$1.1 million were in arrears as at 31 March 2018 for a loan of US$2.1 million (2017: US$2.7 million) expiring on 31 January 2019.

Loan instalments and interest amounting to US$673,000 were in arrears as at 31 March 2018 for a loan of US$3.4 million (2017: US$nil) expiring on 31 May 2018. Loan instalments amounting to US$373,000 were in arrears for a loan of US$4.7 million (2017: US$5.9 million) expiring on 31 July 2021.

Interest payments amounting to US$151,000 were in arrears as at 31 March 2018 for a loan of US$3.2 million (2017: US$0.9 million) expiring on 31 December 2019.

NOTES TO THE ABRIDGED AUDITED FINANCIAL STATEMENTS (continued)

8. Discontinued operation

On 31 August 2017, the Company signed an agreement to dispose of Tuscarora Investments (Private) Limited (trading as Meikles Financial Services), which carried out the Group’s financial services operations to Veritran (Private) Limited. Proceeds received were used in financing working capital requirements of the Group. The proceeds of sale exceeded the carrying amount of the related net assets and, accordingly, no impairment losses were recognised. The disposal of the financial services operations is consistent with the Group’s long-term policy to focus its activities on its main segments, namely retail, agriculture, hospitality and security services. The results of the discontinued operation included in profit for the period are as set out below. The comparative profit and cash flows from discontinued operation have been re-presented to include the operation classified as discontinued in the current period.

Meikles Limited Website : www.meiklesltd.com