Half-year Report

MEIKLES LD - Half-year Report

PR Newswire

London, March 21

MEIKLES LIMITED

ABRIDGED UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016

CHAIRMAN’S STATEMENT

Group Overview

The operating environment was characterised by a number of impediments, the main ones being cash shortages and delays in settlement of obligations to foreign suppliers. As a result, Group turnover for the six month’s period to 30 September was static relative to the previous period. The contribution to turnover by the different segments of the Group is set out in Note 6.

EBITDA for the period grew by US$4.6 million or 92% to US$9.6 million. The contribution to EBITDA by the different segments of the Group is set out in Note 6.

Interest payable decreased by 22% to US$4.2 million due to reduced borrowings.

Group net borrowings are detailed in Note 8. Net borrowings have decreased by approximately US$8.4 million over the six month’s period. Negotiations with lenders to extend the tenure of short term borrowings are in progress. Notable progress has been achieved to date.

Segment Commentary

TM Supermarkets trading as TM and PnP

Turnover increased by 3% and operating income expressed as a percentage of turnover increased from 19.5% to 20.7%. Growth in turnover was achieved in new and upgraded stores.

EBITDA for the period grew by 38% benefiting from improved gross profit margin, a direct benefit of new refrigeration equipment in new and upgraded branches.

In October, TM repaid in full, borrowings taken to refurbish and expand branch networks. The development at TM Borrowdale is now in the final stages. The centre will open during the first quarter of 2017. Three new sites to expand the branch network are at various stages of development.

Stores – Meikles Stores and Meikles Mega Market

The retail segment continued with the expansion plan opening three units including the flagship M-store outlet at Sam levy’s village in Borrowdale. Performance for these units has been within expectation. Barbours scooped The Confederation of Zimbabwe Retailers ‘Clothing Retailer of the Year’ award on 24 November 2016.

Improvement in procurement efficiencies occasioned by direct imports resulted in improved gross profit margins. Tightening of credit control policy resulted in improved collection rate as well as reduction in trade debtors’ arrears. The introduction of the M-store, which trades on a cash basis, bettered the cash to credit ratio from 27:73 to 39:61 thereby making the business more liquid.

Tanganda

International bulk tea export prices have firmed to average US$1.51/kg in the six month’s period to 30 September 2016 compared with average US$1.28/kg for the six months to 30 September 2015. The division, however experienced record heat and evaporation in Chipinge in September and October 2016. Meaningful rainfall covering all estates fell on the 14th of November 2016. Fertilizers and chemicals for first applications on all the crops are on hand.

The average price on macadamia nuts of US$2.80/kg was in line with prior year and the international coffee prices are firming with the AAA grade fetching between US$4.60/kg and US$5.00/kg.

The 5% export incentive will go a long way in boosting exports of packed tea into the region. The support given to exporters by the Reserve Bank of Zimbabwe is greatly appreciated.

The Rainforest Alliance (Sustainable Agriculture), International Standards Organization (ISO – on packed tea), GlobalGAP (on avocadoes) and Standards Association of Zimbabwe (SAZ on bottled spring water) are all in place making our products acceptable worldwide. In this regard, we have successfully worked, in partnership with Technoserve, for the certification by Rainforest Alliance of 187 small scale tea growers and the remainder will be certified in phase two of the project.

Hospitality

Trading during the first half of the financial year, at the two hotels in Zimbabwe reflected the contrasting trends between business and leisure travel. Occupancies and average room rate in Harare declined due to dwindling business travel, a reflection of the country’s worsening investment climate. The Victoria Falls Hotel registered a strong revenue growth on the back of a rebound in international leisure travel.

Both hotels were recognized for excellence in service and standard of product during the period under review. Meikles Hotel was voted 2016 Best City Hotel by Association of Zimbabwe Travel Agents (AZTA). Meikles Hotel has won this award consecutively for 24 years. The Victoria Falls Hotel was voted first runner up for Best Resort Hotel by AZTA.

Outlook

The Group is expected to continue to enhance its EBITDA performance. Growth associated with a number of projects underway in segments of the Group are substantial and will provide a platform for further growth in earnings.

Shareholders and stakeholders are advised that strategies will be advanced in the Group with a view to substantially reduce all borrowings during the forthcoming calendar year.

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.

Dividend

The Board has not declared an interim dividend.

JRT MoxonExecutive Chairman15 March 2017

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016

 CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE ABRIDGED UNAUDITED FINANCIAL STATEMENTS

1. Basis of preparation

The abridged unaudited financial statements are prepared from statutory records that are maintained under the historical cost basis except for biological assets (excluding bearer plants) 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 unaudited results do not include all information and disclosures required to fully compy with IFRS and should be read in conjuction with the Group’s annual report.

2. Accounting policies

Accounting policies and methods of computation applied in the preparation of these abridged unaudited financial statements are consistent, in all material respects, with those used in the prior year, except for the effect of the newly revised International Financial Reporting Standards (IFRSs) on Agriculture: Bearer Plants (Amendements to IAS 16 and IAS 41). Please refer to note 9 for more details.

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 2016, the Directors have assessed the Group’s ability to continue operating as a going concern and believe that the preparation of these unaudited financial statements on a going concern basis is still appropriate.

4. Balance with the Reserve Bank of Zimbabwe

Below is an analysis of the movement in RBZ balance during the period:

5. Treasury Bills

Below is an analysis of the movement in the Treasury Bills’ balance during the period:

The Treasury Bills have been designated as “available-for-sale” (AFS) financial assets and were initially recognised/measured at fair (market) value. The fair (market) value of the Treasury Bills on initial recognition, and at 30 September 2016, was calculated based on a yield to maturity of 17%. This yield to maturity was determined with reference to the percentage discount to the nominal value of the Treasury Bills at which the Company has been able to sell certain of the Treasury Bills in the open market during the preceding and current financial years.

Interest income on the Treasury Bills is recognised using the effective interest rate method and is included in “Investment income” in the Statement of Profit or Loss and Other Comprehensive Income.

At 30 September 2016, Treasury Bills with a nominal value of US$10.0 million were pledged as security for loans with a carrying value of US$14.1 million.

Treasury Bills issued by the Reserve Bank of Zimbabwe held at 30 September 2016:

The salient terms of the Treasury Bills held at 31 March 2016 are as follows:

6. Segment information

*Intercompany transactions and balances have been eliminated from the corporate amounts. Corporate also includes other subsidiaries that are immaterial to warrant separate disclosure.

9. Change in accounting policy for bearer plants

On 1 April 2016, the Group changed its accounting policy for bearer plants, from fair value measurement under IAS 41: Agriculture to the cost model under IAS 16: Property, Plant and Equipment. This change has been necessitated by amendments to International Financial Reporting Standards on Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41). Retrospective adjustments have been made to the financial statements with effect from 1 April 2015, the beginning of the earliest period presented, as required by the transitional provisions of Agriculture: Bearer Plants (Amendements to IAS 16 and IAS 41).

The Group has elected to measure bearer plants at their fair value at the beginning of the earliest period presented, 1 April 2015, and have used that fair value as the deemed cost of the bearer plants as at that date. There was no difference between carrying amount and fair value as at that date, and hence no adjustments were made to opening retained earnings.

The effect of the restatement to the 30 September 2015 interim period and 31 March 2016 financial year is as summarised below:

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