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 Moxon
Executive Chairman
15 March 2017
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
FOR THE SIX MONTHS
ENDED 30 SEPTEMBER 2016 |
|
|
|
|
|
|
Restated |
|
|
30 Sep
2016 |
30 Sep
2015 |
|
|
US$
000 |
US$
000 |
|
|
|
|
Revenue |
|
225,898 |
225,690 |
Net operating
costs |
|
(222,341) |
(225,551) |
|
|
|
|
Operating
profit |
|
3,557 |
139 |
Investment income |
|
725 |
1,783 |
Finance costs |
|
(4,227) |
(5,446) |
Net exchange gains /
(losses) |
|
7 |
(177) |
Loss recognised on
discounting Treasury Bills |
|
(774) |
(7,700) |
Fair value adjustments
on biological assets |
|
3 |
39 |
Loss before
tax |
|
(709) |
(11,362) |
Income tax
expense |
|
(749) |
(254) |
Loss for the
period |
|
(1,458) |
(11,616) |
|
|
|
|
Other comprehensive
income, net of tax |
|
|
|
Items that may be
reclassified subsequently to profit or loss: |
|
|
|
Reclassification
adjustment relating to available-for-sale financial assets disposed
of in the current year |
|
617 |
- |
Fair value gain on available-for-sale financial assets |
|
- |
10,722 |
Other comprehensive
income for the period, net of tax |
|
617 |
10,722 |
|
|
|
|
TOTAL COMPREHENSIVE
LOSS FOR THE PERIOD |
|
(841) |
(894) |
|
|
|
|
(Loss) / profit for
the year attributable to: |
|
|
|
Owners of the parent |
|
(3,655) |
(12,988) |
Non-controlling interests |
|
2,197 |
1,372 |
|
|
(1,458) |
(11,616) |
Total comprehensive
(loss) / income attributable to: |
|
|
|
Owners of the parent |
|
(3,038) |
(2,266) |
Non-controlling interests |
|
2,197 |
1,372 |
|
|
(841) |
(894) |
Loss per share
(cents) |
|
|
|
Basic |
|
(1.44) |
(5.12) |
|
|
|
|
Diluted |
|
(1.34) |
(4.75) |
|
|
|
|
Headline loss per
share (cents) |
|
(1.12) |
(2.61) |
|
|
|
|
Diluted headline
loss per share (cents) |
|
(1.04) |
(2.42) |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER
2016 |
|
|
|
|
|
|
Restated |
|
|
30 Sep
2016 |
31 March
2016 |
|
|
US$
000 |
US$
000 |
ASSETS |
|
|
|
Non-current
assets |
|
|
|
Property, plant and
equipment |
|
170,785 |
170,454 |
Investment
property |
|
248 |
248 |
Investment in Mentor
Africa Limited |
|
20,046 |
20,046 |
Biological assets |
|
1,083 |
1,227 |
Intangible assets |
|
124 |
124 |
Other financial
assets |
|
11,939 |
12,004 |
Deferred tax |
|
5,395 |
3,480 |
Total non-current
assets |
|
209,620 |
207,583 |
|
|
|
|
Current
assets |
|
|
|
Treasury Bills |
|
9,690 |
11,106 |
Inventories |
|
33,947 |
33,391 |
Trade and other
receivables |
|
12,532 |
14,611 |
Other financial
assets |
|
3,938 |
3,493 |
Cash and bank
balances |
|
12,547 |
10,494 |
Total current
assets |
|
72,654 |
73,095 |
|
|
|
|
Total
assets |
|
282,274 |
280,678 |
|
|
|
|
EQUITY AND
LIABILITIES |
|
|
|
Capital and
reserves |
|
|
|
Share capital |
|
2,538 |
2,538 |
Share premium |
|
1,316 |
1,316 |
Other reserves |
|
12,035 |
11,418 |
Retained earnings |
|
86,441 |
90,096 |
Equity attributable to
equity holders of the parent |
|
102,330 |
105,368 |
Non-controlling
interests |
|
24,429 |
21,182 |
Total equity |
|
126,759 |
126,550 |
|
|
|
|
Non-current
liabilities |
|
|
|
Borrowings |
|
6,387 |
11,063 |
Deferred tax |
|
16,727 |
15,465 |
Total non-current
liabilities |
|
23,114 |
26,528 |
|
|
|
|
Current
liabilities |
|
|
|
Trade and other
payables |
|
67,158 |
60,700 |
Borrowings |
|
65,243 |
66,900 |
Total current
liabilities |
|
132,401 |
127,600 |
|
|
|
|
Total liabilities |
|
155,515 |
154,128 |
|
|
|
|
Total equity and
liabilities |
|
282,274 |
280,678 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016
|
Share
capital |
Share
premium |
Other
reserves |
Retained
earnings |
|
US$
000 |
US$
000 |
US$
000 |
US$
000 |
2016 |
|
|
|
|
Balance at 1 April 2016 (as
previously stated) |
2,538 |
1,316 |
11,418 |
93,222 |
Prior year adjustment (change in
accounting policy) |
- |
- |
- |
(3,126) |
Balance at 1 April 2016
(restated) |
2,538 |
1,316 |
11,418 |
90,096 |
(Loss) / profit for the period |
- |
- |
- |
(3,655) |
Other comprehensive income for the
period |
- |
- |
617 |
- |
Non-controlling interests arising
from Mopani Property Development (Private) Limited |
- |
- |
- |
- |
Balance at 30 September 2016 |
2,538 |
1,316 |
12,035 |
86,441 |
2015 – Restated |
|
|
|
|
Balance at 1 April 2015 |
2,538 |
1,316 |
87 |
115,934 |
(Loss) / profit for the period |
- |
- |
- |
(12,988) |
Other comprehensive income for the
period |
- |
- |
10,722 |
- |
Non-controlling interests arising
from Mopani Property Development (Private) Limited |
- |
- |
- |
- |
Balance at 30 September 2015 |
2,538 |
1,316 |
10,809 |
102,946 |
|
|
|
|
|
|
Attributable
to owners
of parent |
Non
controlling
interests |
Total |
|
US$
000 |
US$
000 |
US$
000 |
2016 |
|
|
|
Balance at 1 April 2016 (as
previously stated) |
108,494 |
21,182 |
129,676 |
Prior year adjustment (change in
accounting policy) |
(3,126) |
- |
(3,126) |
Balance at 1 April 2016
(restated) |
105,368 |
21,182 |
126,550 |
(Loss) / profit for the period |
(3,655) |
2,197 |
(1,458) |
Other comprehensive income for the
period |
617 |
- |
617 |
Non-controlling interests arising
from Mopani Property Development (Private) Limited |
- |
1,050 |
1,050 |
Balance at 30 September 2016 |
102,330 |
24,429 |
126,759 |
2015 – Restated |
|
|
|
Balance at 1 April 2015 |
119,875 |
17,281 |
137,156 |
(Loss) / profit for the period |
(12,988) |
1,372 |
(11,616) |
Other comprehensive income for the
period |
10,722 |
- |
10,722 |
Non-controlling interests arising
from Mopani Property Development (Private) Limited |
- |
57 |
57 |
Balance at 30 September 2015 |
117,609 |
18,710 |
136,319 |
|
|
|
|
CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER
2016 |
|
|
|
|
|
|
|
|
|
Restated |
|
|
30 Sep
2016 |
30 Sep
2015 |
|
|
US$ 000 |
US$
000 |
|
|
|
|
Cash flows from
operating activities |
|
|
|
Loss before tax |
|
(709) |
(11,362) |
Adjustments for: |
|
|
|
- Depreciation and
impairment of property, plant and equipment and investment
property |
|
5,998 |
4,851 |
- Net interest |
|
3,502 |
3,663 |
- Net exchange (gains)
/ losses |
|
(7) |
177 |
- Fair value
adjustments on biological assets |
|
(3) |
(39) |
- Loss recognised on discounting Treasury Bills
|
|
774 |
7,700 |
- Loss on disposal of
property, plant and equipment |
|
99 |
23 |
Operating cash flow
before working capital changes |
|
9,654 |
5,013 |
|
|
|
|
Increase in
inventories |
|
(557) |
(1,277) |
Decrease in trade and
other receivables |
|
2,139 |
6,654 |
Increase / (decrease)
in trade and other payables |
|
5,850 |
(417) |
Cash generated from
operations |
|
17,086 |
9,973 |
Income taxes paid |
|
(794) |
(86) |
Net cash generated
from operating activities |
|
16,292 |
9,887 |
|
|
|
|
Cash flows from
investing activities |
|
|
|
Payment for property,
plant and equipment |
|
(6,317) |
(5,384) |
Proceeds from disposal
of property, plant and equipment |
|
33 |
30 |
Proceeds from sale of
Treasury Bills and coupon interest |
|
1,950 |
22,951 |
Net movement in
service assets |
|
27 |
- |
Net movement in
other investments |
|
(378) |
61 |
Net expenditure on
biological assets |
|
(23) |
(30) |
Investment income |
|
33 |
297 |
Net cash (used in)
/ generated from investing activities |
|
(4,675) |
17,925 |
|
|
|
|
Cash flows from
financing activities |
|
|
|
Net decrease in
interest bearing borrowings |
|
(6,333) |
(15,106) |
Proceeds on disposal
of partial interest in a subsidiary without loss of control |
|
1,050 |
57 |
Finance costs |
|
(4,227) |
(5,446) |
Net cash used in
financing activities |
|
(9,510) |
(20,495) |
|
|
|
|
Net increase in cash
and bank balances |
|
2,107 |
7,317 |
Cash and bank balances
at the beginning of the year |
|
10,494 |
8,883 |
Net effect of exchange
rate changes on cash and bank balances |
|
(54) |
(12) |
Cash and bank
balances at the end of the period |
|
12,547 |
16,188 |
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:
|
|
Group
and Company |
Group and
Company |
|
|
30 Sep
2016 |
31 March
2016 |
|
|
US$
000 |
US$
000 |
|
|
|
|
Balance at the
beginning of the period |
|
- |
7,229 |
Treasury Bills
received |
|
- |
(6,500) |
Compensation on
Treasury Bills issued in lieu of amount due in cash |
|
- |
1,500 |
Interest uplift on
Treasury Bills reissued |
|
- |
(2,229) |
Balance at the end of
the period |
|
- |
- |
5. Treasury Bills
Below is an analysis of the movement in the Treasury Bills’
balance during the period:
|
|
Group
and Company |
Group
and Company |
Group and
Company |
Group and
Company |
|
|
30 Sep
2016 |
30 Sep
2016 |
31 March
2016 |
31 March
2016 |
|
|
US$
000 |
US$
000 |
US$
000 |
US$
000 |
|
|
Fair
(Market) value |
Nominal value |
Fair
(Market)
value |
Nominal
value |
Balance at the
beginning of the period |
|
11,106 |
12,247 |
22,942 |
35,414 |
Treasury Bills
received during the period |
|
- |
- |
5,769 |
6,500 |
Gain on replacement of
Treasury Bills |
|
- |
- |
8,320 |
2,229 |
Interest for the
period |
|
690 |
266 |
2,396 |
940 |
Coupon interest
received |
|
(300) |
(300) |
(330) |
(330) |
Treasury Bills
disposed during the period |
|
(1,806) |
(1,969) |
(27,991) |
(32,506) |
Balance at the end of
the period |
|
9,690 |
10,244 |
11,106 |
12,247 |
|
|
|
|
|
|
Analysis of
balance |
|
|
|
|
|
Treasury bills on hand
at end of period |
|
8,276 |
10,012 |
9,889 |
11,964 |
Accrued interest |
|
1,414 |
232 |
1,217 |
283 |
Balance at the end of
the period |
|
9,690 |
10,244 |
11,106 |
12,247 |
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$14.1 million.
Treasury Bills issued by the Reserve Bank of Zimbabwe held at 30
September 2016:
|
|
Group and
Company |
Group and Company |
|
|
30 Sep 2016 |
31 March 2016 |
|
|
US$ 000 |
US$ 000 |
At fair (market) value |
|
|
|
Treasury Bills maturing on 10 April
2017 with a coupon rate of 5% |
|
9,690 |
11,106 |
|
|
9,690 |
11,106 |
The salient terms of the Treasury Bills held at 31 March 2016 are as follows:
Treasury Bill number |
|
ZTB73120150410Z |
Issue date |
|
10/04/2015 |
Redemption date |
|
10/04/2017 |
Nominal value - including accrued
interest (US$ 000) |
|
10,244 |
Coupon |
|
5.0% |
Coupon payment dates |
|
10 April and 10
October |
Fair value - including accrued
interest (US$ 000) |
|
9,690 |
6. Segment information
|
|
Restated |
|
30 Sep
2016 |
30 Sep
2015 |
|
US$
000 |
US$
000 |
Revenue |
|
|
Supermarkets |
202,029 |
196,731 |
Hotels |
7,688 |
8,267 |
Agriculture |
10,223 |
11,193 |
Departmental
stores |
2,572 |
3,103 |
Wholesaling |
4,107 |
7,230 |
Corporate* |
(721) |
(834) |
|
225,898 |
225,690 |
EBITDA |
|
|
Supermarkets |
9,577 |
6,963 |
Hotels |
1,140 |
1,189 |
Agriculture |
1,444 |
(292) |
Departmental
stores |
(467) |
(570) |
Wholesaling |
(1,158) |
(874) |
Corporate* |
(982) |
(1,425) |
|
9,554 |
4,991 |
The EBITDA figures are
before Group management fees. |
|
|
|
|
|
|
|
Restated |
|
30 Sep
2016 |
31 March
2016 |
|
US$
000 |
US$
000 |
Segment
assets |
|
|
Supermarkets |
91,886 |
88,113 |
Hotels |
47,368 |
47,557 |
Agriculture |
72,081 |
73,825 |
Departmental
stores |
31,609 |
30,015 |
Wholesaling |
4,086 |
4,268 |
Corporate* |
35,244 |
36,900 |
|
282,274 |
280,678 |
Segment
liabilities |
|
|
Supermarkets |
44,935 |
46,716 |
Hotels |
23,083 |
22,887 |
Agriculture |
32,287 |
32,429 |
Departmental
stores |
17,871 |
16,984 |
Wholesaling |
7,006 |
6,049 |
Corporate* |
30,333 |
29,063 |
|
155,515 |
154,128 |
*Intercompany transactions and balances have been eliminated
from the corporate amounts. Corporate also includes other
subsidiaries that are immaterial to warrant separate
disclosure.
|
|
Restated |
|
30 Sep 2016 |
30 Sep 2015 |
|
US$ 000 |
US$ 000 |
7. Other information |
|
|
Depreciation of property, plant and
equipment |
5,361 |
4,728 |
Impairment of property, plant and
equipment |
637 |
123 |
Capital commitments authorised by
the Directors but not contracted for |
13,466 |
11,880 |
Group’s share of capital commitments
of joint operations |
2,641 |
- |
|
|
|
|
30 Sep 2016 |
31 March 2016 |
|
US$ 000 |
US$ 000 |
8. Net borrowings |
|
|
Non-current borrowings |
6,387 |
11,063 |
Current borrowings |
65,243 |
66,900 |
Total borrowings |
71,630 |
77,963 |
Cash and cash equivalents |
(12,547) |
(10,494) |
Net borrowings |
59,083 |
67,469 |
|
|
|
Comprising: |
|
|
Secured |
62,909 |
68,454 |
Unsecured |
8,721 |
9,509 |
|
71,630 |
77,963 |
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:
|
|
Effect on |
|
|
30 Sep 2015 |
|
|
US$ 000 |
|
|
|
Increase in net operating costs |
|
(310) |
Decrease in fair value adjustments
on biological assets |
|
(618) |
Decrease in deferred tax
expense |
|
119 |
Decrease in profit |
|
(809) |
|
|
|
Decrease in basic loss per
share |
|
(0.32) |
Decrease in diluted loss per
share |
|
(0.29) |
Decrease in headline loss per
share |
|
(0.32) |
Decrease in diluted headline loss
per share |
|
(0.29) |
|
|
|
|
|
Effect on |
|
|
31 March 2016 |
|
|
US$ 000 |
|
|
|
Increase in property, plant and
equipment |
|
41,021 |
Decrease in biological assets |
|
(44,718) |
Decrease in deferred tax
liability |
|
571 |
Decrease in equity |
|
(3,126) |
|
|
|
Effect on opening retained earnings
(1 April 2015) |
|
- |
|
|
|
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