Interim Management Statement

meikles limited INTERIM MANAGEMENT REPORT RELEASED ON 17 FEBRUARY 2014 This Interim Management Statement is issued by Meikles Limited in accordancewith the UK Listing Authority's Disclosure and Transparency Rules. Unlessstated otherwise, key trends and figures highlighted below refer to the ninemonths ended 31 December 2013 and the corresponding period in the previousfinancial year. Operating environment Zimbabwe is on the verge of entering a deflationary period as year on yearinflation was 0.33% as at 31 December 2013, particularly with regard tofoodstuffs. Aggregate demand continues to fall as the liquidity situation hasremained constrained. The cost of funding has gone up due to shortage of fundson the local money market. The country's GDP target of 3.4% for 2013 may nothave been achieved due to a myriad of economic challenges. However, theagricultural output for 2013/2014 season may benefit from above averagerainfall which has been received in most parts of Zimbabwe. According torecently released publication, "Mining in Africa Country Investment Guide"which was compiled by Singapore-based Global Business Reports, Zimbabwe thoughrisky, has an estimated 30% of the world's diamond reserves, as well assubstantial deposits of gold, platinum group metals and coal. These have notbeen fully exploited and therefore offer significant opportunities to promoteeconomic growth in Zimbabwe. Funds held on deposit at the Reserve Bank of Zimbabwe (RBZ) The company has continued engaging the Reserve Bank of Zimbabwe and the parentministry of Finance and Economic Development with respect to the recovery offunds held by the Bank on deposit. In December 2013 legal action was institutedagainst both the RBZ and the Ministry of Finance and Economic Development tosecure the repayment of the deposit held by the RBZ. There are individuals whorecognize the need to facilitate a solution to this issue to enable the Groupto access these funds which are due. The Group is appreciative of theseproactive efforts. However, there are also individuals who are frustrating aresolution to this issue. Their motivation is uncertain but their efforts areplacing the Group and its stakeholders at risk. The legal action has been takenin an attempt to hasten and secure a resolution. The sum claimed as at 31December 2013 amounted to approximately US$89 million. The receipt of thesefunds is critical to the well being of the Group and all its stakeholders Mining The Group has progressed its involvement in the mining sector. The first goldproject has been identified and implementation is being finalised. A chromeopportunity has been concluded and is awaiting regulatory approvals. The Groupis working very closely with our partner, Centar, and has a vision to become asignificant player in the mining sector. Retail operations Consumer demand has been receding. Trading in our supermarkets, particularly ingroceries, has been subdued in the first nine months of our financial year.However turnover in fruit and vegetables, takeaways, butcheries and liquor hasshown useful growth. The turnover in TM Supermarkets (TM) was 1% above that ofthe comparative period in 2012. Sales and operating margins though comparableto historical levels are under pressure due to lack of spending power byconsumers but have benefited from the growth in the service areas. In spite ofthe challenges being faced by the economy, TM is continuing with its branchrefurbishment programme and the opening of new stores. As previously reported,the funds for this programme are in place. The exciting new low pricing, fast moving consumer goods retail offering underMeikles Mega Market (MMM) has been well received by the consumers. The firststore opened its doors in December 2013 and the daily turnovers reflect a verysatisfactory trend. Consumers have found favour with this new model due to itsvalue offering. Accordingly there are plans to roll out MMM in the key citiesof Zimbabwe progressively by the third quarter of the next financial year. The departmental stores have been badly affected by the challenges in theeconomy. Turnover for the nine months was 32% below that earned in thecomparative period and aggravated by the closure of three branches during thecourse of the year 2013. Cash constraints on the procurement of suitablemerchandise have also negatively impacted these results. Cash constraints arecausing the future merchandising model to be streamlined and the number ofdepartments and trading space to be reduced. Overall operating costs havereduced by 18% and the remaining branches should be profitable once the humanresource overhead is also rationalised. Agro operations The rains have been good thus far. The plantation development has progressedwell with 351 hectares being put under new crops in the last nine months. Thus,as at 31 December 2013 the hectarage under coffee, avocadoes and macadamia was229ha, 318ha and 62 ha respectively. The target remains for the company to have300ha, 500ha and 750ha under coffee, avocadoes and macadamia by March 2015. Weare proud of the work that has been done on the estates and all stakeholdersstand to benefit. The actual production of bulk tea to 31 December 2013 was 42% ahead of the sameperiod in the previous financial year. The bulk tea production for the yearending 31 March 2014 will surpass the output of 7,500 tons achieved in theprevious financial year. The favourable weather conditions coupled with astuteestate management accounts for the improved bulk tea production. The tea pricesare now stable and comparable to the averages achieved in the year ended 31March 2013, although short term volatilities were encountered in the secondquarter of our financial year due to a significant increase in tea productionby East African producers. The new tea packaging plant has started arriving and will be installed andbrought into production by the first quarter of the coming financial year. Theplant will boost production and reduce packeted tea production costs, allowingthe company to adequately supply the local and regional markets. Hospitality The positive sentiment created by the hosting of the United Nations WorldTourism Organisation's (UNWTO) general assembly in August 2013 has led to anincrease in tourist arrivals in Zimbabwe. Its been reported by the ZimbabweTourism Authority that an increase of 12% in tourist arrivals was recorded inthe first half of 2013. This trend is likely to have been sustained in thesecond half of the year. The holiday resort of Victoria Falls has enjoyed good occupancy rates post thehosting of the UNWTO and our hotel, jointly managed with African Sun, hasbenefited substantially. The Average Daily Rate (ADR) has improved by 17% andRevpar (revenue per available room) has gone up by 12% for the period ended 31December 2013 when compared to the same period in 2012. The Meikles Hotel hasachieved a 2% growth in its ADR and Revpar compared to the same period in 2012.The refurbishments at both hotels have been well received by our guests and thecompany will reap the rewards of an improved product offering going forward.The Cape Grace Hotel is performing well and is achieving higher occupanciesthan those of recent years. In consequence its performance will surpass that ofthe previous financial year. Conclusion The Group operations are constantly reviewed and adapted to a changingenvironment beset by numerous challenges among them low liquidity, high cost ofdebt, poor access to capital markets and diminishing consumer demand. TheGroup's position necessitates access to the funds currently held on depositwith the RBZ. These funds are urgently required to move the Group forward. END Issued on 17 February 2014 Notes: 1. The financial information on which this statement is based has not beenreviewed and reported on by the Group's auditors. 2. Please note that matters highlighted above may contain forward lookingstatements which are subject to various risks and uncertainties and otherfactors, including, but not limited to: - business conditions. -political environment -market related risks. • A number of these factors are beyond the Group's control. • These factors may cause the group's actual future results, performance orachievements to differ from those expressed or implied. • Any forward looking statements made are based on the knowledge of the Groupas at 17 February 2014.