23rd Nov 2012 07:00
MEIKLES LIMITED
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
CHAIRMAN'S STATEMENT GROUP REVIEW
Shareholders are advised that the Group made a profit before taxation in the first six months under review of $1.02 million. This profit compares with a loss for the first six months in the previous period of $7.04 million, an improvement of $8.06 million.
The profit after taxation from continuing operations was $767,000, which compares to a loss of $5.58 million in the first six months of the previous year.
Inclusive of the profit from discontinued operations, the profit of $767,000 compares with a loss of $5 million in the first 6 months of the previous year.
The momentum of improvement in the current financial year will accelerate into the second half and October 2012 has already demonstrated a positive trend.
Shareholders were advised at the Annual General Meeting held on 15 August 2012that there was an error in TM Supermarkets (Pvt) Limited financials dating backto the period ended 31 March 2011. Shareholders were correctly advised thatthis error would have no impact on the results for the year ended 31 March 2012and the current financial year. TM Supermarkets and the Group results for theperiod ended 31 March 2011 have been restated to take account of the priorperiod error. Shareholders were advised, in the 31 March 2012 Chairman's statement, that theresults for the year ended 31 March 2012 were determined on a very conservativebasis with full provision for known and anticipated costs that may have animpact on the Group financials. The Group continues to determine its results ona very conservative basis and in the current financial year no furtherprovision has been necessary, but neither have any potential savings from theprevious period been added back to profit.
Your board has continued to pursue the policy for Group funding as was set out in the previous Chairman's statement with one exception. In the previous Chairman's statement Tanganda was expected to be recapitalised by September 2012. Despite substantial interest in Tanganda, which interest has grown in recent months, your board has decided not to pursue any additional equity funding in this financial year.
There appears to be a change in the balance of World supply and demand for teawhich will favour the producer. This advantage will not be limited to the shortterm and Tanganda will benefit as a result. This fact, together withanticipated normal rainfalls for the coming season, will result in asubstantial rise in Tanganda's profitability. These factors make it difficult to value Tanganda at present. In addition, anynew partner in Tanganda will bring a long term involvement into the Company andwe believe that it is appropriate to form such a relationship when theprevailing uncertainties have settled. In the meantime capital development willbe funded from term funding from external lenders in compliance with grouppolicy. The refurbishment program in TM Supermarkets will accelerate markedly in thenew financial year fuelled by the resounding success of the launch of Kamfinsaand the anticipated success of the Westgate, Chinhoyi and Hwange developmentswhich are underway in the current financial year. Forward planning suggeststhat TM Supermarkets will require further funding to achieve these objectives.This requirement is being addressed by your board in accordance with the Groupfunding policy.
Negotiations are in progress for major developments in our hotels division.Shareholders are aware of the proposed development in Lusaka which has beendelayed for various reasons but we believe that this development may commencein 2013. In addition we are focused on opportunities in Victoria Falls, Harareand within the region. In this context we are in discussion with a largeinternational hotel group, who will partner us in these new developments.Shareholders will be advised of further progress at the opportune time. Shareholders have been advised that we have been making continuous efforts toaccess our funds on deposit with the Reserve Bank of Zimbabwe which now amountto approximately $40 million. We are aware that the Reserve Bank intends toaccommodate us and we await confirmation of what form the refund of this sumwill take and the timing thereof. Access to these funds will complete ourGroup funding objectives as previously disclosed to shareholders. Meikles Resources
Shareholders will recall that reference was made in the Chairman's Review in the Annual report for the year ended 31 March 2012 regarding a new but undisclosed business opportunity that would require substantial funding if successful.
Shareholders are now advised of developments relating to the progress of a new subsidiary in the Group called Meikles Resources (Private) Limited.
This indigenous company, which is presently wholly owned by Meikles Limited, has an objective to focus on the development of mining and resource opportunities in Zimbabwe.
Meikles Resources will seek to combine local and international skills andfinancial resources within the framework of its indigenous status. MeiklesResources will comply with accepted international mining standards and ethics.This entity will capitalise on the long standing reputation and history of theGroup in Zimbabwe and will apply the Group's customary high standards to theimplementation and operation of this division for the benefit of allstakeholders. Meikles Resources has commenced exploratory mining operations on oneopportunity and will start full mining operations as soon as the full extent ofthe resource has been established. Shareholders will be provided with detailsas these operations progress. In addition, discussions will take place onfurther resource opportunities. Shareholders are advised that profits from Meikles Resources are expected toexceed those anticipated for the entire Group as presently constituted over thecoming years and will therefore be of material significance. Management
The Group has three new subsidiary managing directors and a fourth in an acting capacity, all of whom have been appointed in the last eighteen months. Your board is confident that the new incumbents will contribute unique and fresh skills into a developing and exciting Group.
The substantial expansion in agricultural, hotels and mining within Zimbabweand the Region, makes it imperative that the Group positions itself toeffectively navigate planned growth and to harness the full potential of theabundant opportunities that lie ahead. In this context the Group intends tosecure a suitable resource adequately equipped to assist in this pursuit. The Group intends to bolster the structure of its retail and other consumeractivities with the appointment of an experienced retail and consumer businessexecutive. This will add considerable support to the two retail managingdirectors and will complement the input received from our partners in theseentities. This appointment will serve to exploit the energies and synergiescontained within the retail footprint where we have a substantial presence inZimbabwe and which offers opportunity for aggressive growth using internalefficiencies more effectively.
TM Supermarkets are pleased to announce the appointment of David Mills to the position of Managing Director with effect from Wednesday, 21 November 2012. Dave Mills is well known in the industry and we welcome him back to TM Supermarkets and the Group.
OPERATIONS TangandaTea Company The Tanganda Estates consist of five tea estates producing on 2 600 hectares,four large tea factories, an office complex in Mutare which manufactures packedtea for local and regional consumption and several schools and clinics. An extensive diversification program is under way and will be completed in 2014and involves the establishment of 700 hectares of macadamias, 500 hectares ofavocados and 300 hectares of new coffee plantations. Tanganda developed104 hectares and 64 hectares of avocados and macadamia respectively during thefirst half of the year. This brings the total hectarage under new plantationsto 139 hectares of avocados, 209 hectares of macadamia and 123 hectares ofcoffee. This expansion program is the largest of its type ever implemented ina relatively short period in Zimbabwe. In the current financial year, the winter rainfall has been 56% on average lessthan that recorded in the previous year and adverse relative to normalexpectations. In addition to low rainfall we have had to contend with frostdamage. The new summer season has begun positively and we shall produce a goodcrop for the year as a whole, if the rains continue.
Our quality initiatives are paying off in terms of improved quality teas and prices.
We continue to make every effort to reduce overheads which had risen to unsustainable levels in the years post dollarisation. We are pleased to have secured reliable electricity supplies from ZESA and this has reduced the operating costs negatively impacted by generator power.
We have substantial forward commitments on the estates for further mechanization including tractors, a bulldozer, trucks and irrigation equipment.
We plan a second water bottling plant to enable us to meet a very significant growth in demand for Tingamira water bottled at our natural spring in Chipinge.
We intend to update our Mutare factory with new tea packaging machinery and a new fleet of delivery trucks to enhance our distribution of packed tea.
The Hotel Group
The exciting and extensive renovations at Meikles Hotel will be completed early next year. We will see the launch of refashioned d©cor, state of the art bathrooms, new lifts, air conditioning, and a prestigious Club facility together with advanced guest IT services to attract the business travellers.
Our room occupancies, based on available rooms for the first half of the year were better than those for the first six months of the previous year. In October 2012, occupancies based on available rooms were 64% which compares favourably to what we believe the general market is achieving.
Our average room rates and REVPAR are believed to be better than the market.
We continue to be pleased by the superior standard of our food and beverage offerings.
Renovation of the Victoria Falls Hotel has commenced and is to be completedduring the course of 2013. In the meantime room occupancy in the first half ofthe year shows an improvement over the previous year and October 2012 postedoccupancy of 70% and the positive trend continues. The average room rate showsa useful improvement as does REVPAR. Our room occupancies are believed to bewell above average in the market as is our average room rate and REVPAR. Thefood and beverage offerings are substantially improved this year. Properties
Your board is aware that it has substantial financial interest in dominant properties throughout the Country. A focus is to be directed on how best to utilize these properties for both own and commercial use, but with an objective of enhancing shareholder value.
Mentor Africa
In the current period, the Group took up a 35% shareholding in Mentor. The Mentor results will be accounted for in the second half of the current financial year and thereafter will be accounted for in every reporting period.
In the context of Mentor, the Group is substantially involved in the affairs ofthe Cape Grace Hotel which is part of the Group together with other Mentorassets. Shareholders will be pleased to know that full cooperation between ourhotels and Cape Grace continues and that the Cape Grace is performing well.There is substantial expectation in the performance and value attributed toother Mentor assets and therefore to the Group. The Mentor/Cape Grace transaction yielded a financial profit of $1.1 millionwhich has been recognised in the statement of comprehensive income. This profitis net of intangible assets, in the form of goodwill and depreciation, with acombined value of $9.9 million. TM Supermarkets
TM Supermarkets will focus on improving its merchandise mix to provide an improved offering to the public at competitive pricing but at the same time focusing on an improvement in gross profit percentage which although better than the previous year is still below our expectation. The larger and refurbished branches with their larger range of merchandise are achieving useful gross profits. There will be a further focus on improvement in product identification and sourcing.
Management has identified areas of potential cost reduction, which will make asignificant difference to the bottom line going forward. Cost control is anongoing focus and this will accelerate in future months as will a focus on
thereduction in shrinkage. We have disclosed our objective to refurbish our supermarkets. This objectivewill be implemented on a National basis over as short a period as is practical.We also anticipate that there will be new supermarkets opened over a plannedperiod. TM Department Stores Your board believes that there will be greater spending power in urban areas asthe disposable income of Zimbabwean consumers improves. This is a fast growingtrend in many parts of Africa according to various reports where theopportunity is described as a potential, untouched, gold mine. This will likelyoccur at a slower pace, in Zimbabwe, than the rest of Africa, in the shortterm. Once the potential is harnessed our retail dominance will enhanceshareholder value.
In the mean time we are focusing our efforts on rationalizing our footprint with reduced risk in the short term in the form of lower stocks and trade debtors with an improved turnaround in both.
In addition, overheads are being effectively managed downwards. We are anticipating an improved performance for the year as a whole, relative to the previous year with reduced risk to shareholders.
It is possible that the stores will seek a retail partner when the environment is conducive.
Directorate
In September 2012, the Board was advised of the sad passing of Mr Michael Wilson, a former Director of the Company. The Board would like to extend its sincere condolences to his family.
JRT MoxonChairman21 November 2012
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
6 months 6 months to to 30 30 September September 2012 2011 US$ 000 US$ 000 CONTINUING OPERATIONS Revenue 189,491 165,591 Cost of sales* (149,490) (130,843) Gross profit 40,001 34,748 Other income 2,292 2,004 Employee costs (20,204) (20,363) Occupancy costs (8,975) (7,625) Other operating costs* (13,103) (11,717) Operating loss 11 (2,953) Investment revenue 1,130 1,220 Finance costs* (3,241) (3,562) Net exchange losses (183) (1,745)
Profit on disposal of subsidiaries 1,173
- Fair value adjustments 2,126 - Profit / (loss) before tax 1,016 (7,040) Income tax (249) 1,463 Profit /(loss) for the period from continuing operations 767 (5,577)
Profit for the period from discontinued operations -
580
PROFIT / (LOSS) FOR THE PERIOD 767 (4,997) Other comprehensive loss Exchange differences on translating foreign operations -
(2,612)
Other comprehensive loss for the period, net of tax - (2,612) TOTAL COMPREHENSIVE PROFIT / (LOSS) FOR THE PERIOD 767 (7,609)
(Loss) / profit attributable to:
Owners of the parent (666) (5,349) Non-controlling interests 1,433 352 767 (4,997)
Total comprehensive (loss) / profit attributable to:
Owners of the parent (666) (7,961) Non-controlling interests 1,433 352 767 (7,609) Loss per share (cents)
Basic and diluted loss from continuing and discontinued
operations (cents per share) (0.26) (2.18) Basic and diluted loss from continuing operations (cents (0.26) (2.42)per share)
Basic and diluted headline loss from continuing and discontinued operations (cents per share)
(0.71) (2.19)
* Prior year comparatives have been reclassified to conform to the presentation at 31 March 2012 and 30 September 2012. Refer to note 5 for details.
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2012 Unaudited Audited 30 September 31 March 2012 2012 US$ 000 US$ 000 ASSETS Restated* Non-current assets Property, plant and equipment 92,134 86,122 Investment property 256 43 Biological assets 14,692 11,770 Other financial assets 12,855 18,370 Investment in associate 27,657 -
Intangible assets - trademarks 124
124
Balances with Reserve Bank of Zimbabwe 39,562 38,627 Deferred tax 2,176 1,888
Exploration and evaluation costs 1,640
- Total non-current assets 191,096 156,944 Current assets Inventories 41,479 36,546 Trade and other receivables 15,638 17,642 Other financial assets 1,264 1,085 Cash and bank balances 8,388 8,427 66,769 63,700 Assets held for sale - 37,871 Total current assets 66,769 101,571 Total assets 257,865 258,515 EQUITY AND LIABILITIES Capital and reserves Share capital 2,538 2,538 Share premium 1,316 1,316 Non-distributable reserves 12,559 6,233 Retained earnings 117,233 104,581 Capital and reserves relating to assets classified as - 19,644held for sale Equity attributable to equity holders of the parent 133,646 134,312 Non-controlling interests 8,928 7,495 Total equity 142,574 141,807 Non-current liabilities Borrowings 8,698 4,786 Deferred tax 12,501 12,124 Total non-current liabilities 21,199 16,910 Current liabilities Trade and other payables 45,666 38,371 Short term borrowings 48,426 47,199 94,092 85,570 Liabilities relating to assets classified as held for - 14,228sale Total current liabilities 94,092 99,798 Total liabilities 115,291 116,708 Total equity and liabilities 257,865 258,515
* Refer to note 4 for details of the restatement.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
Share Share Non-distributable Disposal capital premium reserves Retained group earnings capital and reserves US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 30 September 2012 Balance at the beginning of 2,538 1,316 104,581 the period 6,233 19,644 Loss for the period - - - (666) - Transfer on sale of disposal group - - 6,326 13,318 (19,644) Balance at the end of the period 2,538 1,316 12,559 117,233 - 30 September 2011 Balance at the beginning of the period as previously stated 2,454 - 2,627 111,207 18,083 Prior period adjustment* - - - (1,719) - Balance at the beginning of the period restated 2,454 - 2,627 109,488 18,083 Loss for the period - - - (5,929) 580 Other comprehensive income for the period - - (1,236) - (1,376) Transfer on disinvestment of non-controlling interest in a subsidiary - - - (168) - Balance at the end of the period 2,454 - 1,391 103,391 17,287 Non Attributable to controlling owners of parent interests Total US$ 000 US$ 000 US$ 000 30 September 2012 Balance at the beginning of the period 134,312 7,445 141,807 Loss for the period (666) 1,433 767
Transfer on sale of disposal group - -
-
Balance at the end of the period 133,646 8,928 142,574 30 September 2011
Balance at the beginning of the period
as previously stated 134,371 764 135,135 Prior period adjustment* (1,719) (573) (2,292)
Balance at the beginning of the period
restated 132,652 191 132,843 Loss for the period (5,349) 352 (4,997)
Other comprehensive income for the period (2,612) - (2,612) Transfer on disinvestment of non-controlling interest in a subsidiary (168) 168 - Balance at the end of the period 124,523 711 125,234
* Refer to note 4 for details of the restatement.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
30 September 30 September 2012 2011 US$ 000 US$ 000
CONTINUING AND DISCONTINUED OPERATIONS
Cash flows from operating activities Profit / (loss) before tax from continuing and 1,016
(6,460)discontinued operations Adjustments for - Depreciation expense 2,267 1,905 - Net interest 2,111 2,998 - Net exchange losses 183 1,550
Profit on disposal of subsidiaries (1,173)
- - Fair value adjustments (2,126) (1)
-Loss / (profit) on disposal of property, plant and 40
(23)equipment
Operating cash flow before working capital changes 2,318
(31) Increase in inventories (5,070) (626)
Increase in trade and other receivables (405)
(1,583)
Increase in trade and other payables 12,408
6,383
Cash generated from operations 9,251
4,143 Income taxes paid (127) (73)
Net cash generated from operating activities 9,124
4,070
Cash flows from investing activities Payment for property, plant and equipment (8,500)
(3,426)
Proceeds from disposal of property, plant and equipment 69
1,356
Exploration and evaluation costs (1,640)
-
Net movement in service assets (102)
(55)
Payment for other investments (90)
(259)
Plantation development expenditure (794)
(227) Investment income 180 151
Net cash used in investing activities (10,877)
(2,460)
Cash flows from financing activities Proceeds from interest bearing borrowings 5,138
4,537 Finance costs (3,241) (4,252)
Net cash generated from financing activities 1,897
285
Net increase in cash and bank balances 144
1,895
Cash and bank balances at the beginning of the period 8,427
4,785
Net effect of exchange rate changes on cash and bank (183)
237balances
Translation of foreign entity -
(529)
Cash and bank balances at the end of the period 8,388
6,388
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies The Group's interim condensed consolidated financial statements have beenprepared in accordance with IAS 34 - Interim Financial Reporting. The Groupadopted IFRS 6 - Exploration and Evaluation of Mineral Resources to account forexploration and evaluation costs. All other accounting policies and methods ofcomputation applied in the preparation of these condensed financial statementsare consistent, in all material respects, with those applied in the preparationof the Group's annual financial statements for the year ended 31 March 2012with no significant impact arising from new and revised International FinancialReporting Standards (IFRS). 2. Discontinued operations
The sale of the Cape Grace Hotel to Mentor was concluded on 1 April 2012 as reported in the annual report for the year ended 31 March 2012. The Cape Grace Hotel results are disclosed as "discontinued operations" in the prior period.
2.1 Profit for the period from discontinued operations Unaudited Unaudited 30 30 September September 2012 2011 US$ 000 US$ 000 Revenue - 6,753 Other gains - 220 Total income - 6,973 Expenses - (6,393) Profit before tax - 580 Income tax - -
Profit for the period from discontinued operations (attributable to owners of the parent)
- 580 Other comprehensive loss
Exchange differences on translating foreign entities -
(1,376)
Other comprehensive loss for the period, net of tax -
(1,376)
Total comprehensive loss for the period -
(796)
Cash flows from discontinued operations Net cash flows from operating activities -
145
Net cash flows from investing activities -
(138)
Net cash flows from financing activities -
78 Net cash flows - 85 Assets held for sale Unaudited Audited 30 September 31 March 2012 2012 US$ 000 US$ 000 Assets held for sale Cape Grace Hotel group of companies - 40,280 Total assets held for sale - 40,280
Liabilities relating to assets held for sale Cape Grace Hotel group of companies -
20,636
Total liabilities held for sale - 20,636 Net assets held for sale - 19,644
Equity relating to assets held for sale Cape Grace Hotel group of companies -
19,644
Total equity relating to assets classified as held - 19,644for sale 3. Segment information Unaudited Unaudited 30 30 September September 2012 2011 US$ 000 US$ 000 Revenue Continuing operations Supermarkets 163,769 136,595 Hotels 7,710 7,922 Agriculture 10,597 9,126 Stores 8,558 12,190 Intra-group sales (1,143) (242) 189,491 165,591 Discontinued operations
Cape Grace Hotel group of companies
- 6,753 - 6,753 EBITDA Continuing operations Supermarkets 5,211 3,460 Hotels 448 30 Agriculture (1,810) (2,488) Stores (568) (456) Corporate* (1,454) (1,776) 1,827 (1,230) Discontinued operations
Cape Grace Hotel group of companies
- 351 - 351
Included in the continuing operations prior period EBITDA figures above are the
following exceptional expenses:
Compensation for loss of office
- (1,363) Legal and professional fees - (570)
Impairment of property, plant and equipment
- (47) - (1,980)
Excluding these items, the prior period EBITDA figures would have been as
follows: Continuing operations Supermarkets 5,211 3,679 Hotels 448 665 Agriculture (1,810) (2,042) Stores (568) (176) Corporate (1,454) (1,376) 1,827 750 Unaudited Audited 30 September 31 March 2012 2012 US$ 000 US$ 000 Segment assets Continuing operations Supermarkets 55,760 47,436 Hotels 44,217 29,878 Agriculture 43,111 43,004 Stores 57,835 57,872 Corporate* 56,942 42,454 257,865 220,644
Assets classified as held for sale Cape Grace Hotel group of companies
- 37,871 - 37,871 257,865 258,515 Segment liabilities Continuing operations Supermarkets 37,540 31,725 Hotels 12,385 8,720 Agriculture 24,861 19,538 Stores 47,493 45,317 Corporate* (6,988) (2,820) 115,291 102,480
Liabilities classified as held for sale Cape Grace Hotel group of companies
- 14,228 - 14,228 115,291 116,708 *Intercompany transactions and balances have been eliminated from the corporateamounts. Corporate also includes other non-trading subsidiaries that are notallocated to a reportable segment. 4. Restatement During the period, the Group identified an error in the trading inventoryvaluation at TM Supermarkets (Private) Limited, carried forward from the 31March 2011 financial year. The error had the effect of overstating inventory,retained earnings, non-controlling interests and deferred tax liability forthe financial periods ended 31 March 2011 and 31 March 2012.The effect of this restatement on the Group financial statements is summarisedbelow. As previously As stated restated Restatement 31 March 31 March 31 March 2011 2011 2011 US$ 000 US$ 000 US$ 000
Effect on statement of financial position
Inventory 40,713 37,626 3,087 Retained earnings 111,207 109,488 1,719 Non-controlling interests 764 191 573 Deferred tax liability 15,996 15,201 795 3,087
Effect on statement of comprehensive
income Cost of sales (256,124) (259,211) (3,087) Income tax credit 793 1,588 795 Decrease in profit for the period from (2,292)continuing operations As previously As stated restated Restatement 31 March 31 March 31 March 2012 2012 2012 US$ 000 US$ 000 US$ 000
Effect on statement of financial position
Inventory 39,633 36,546 3,087 Retained earnings 105,750 104,581 1,169 Non-controlling interests 8,618 7,495 1,123 Deferred tax liability 12,919 12,124 795 3,087
The restatement has no impact on the loss for the six months ended 30 September 2011 and for the year ended 31 March 2012.
5. Prior period comparatives Selling and distribution expenses of US$1,367,393 previously included in costof sales for the period ended 30 September 2011 are now disclosed as part ofother operating costs. Depreciation of US$419,987 previously included in otheroperating costs for the period ended 30 September 2011 has been reclassified tocost of sales. Finance costs of US$691,000 in respect of borrowings used to finance the Storesdebt book has been offset against the interest received on the debt book. Thenet interest income is disclosed in other income. 6. Other information 30 September 30 September 2012 2011 US$ 000 US$ 000 Continuing operations Depreciation - property, plant and equipment 2,267
1,905
Capital commitments authorised by the Directors but 14,221 22,369not contracted For further information contact Onias Makamba on [email protected] +263-4-252068/70.
Related Shares:
Meikles