TIDMMIK
MEIKLES LIMITED
ABRIDGED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2014
CHAIRMAN'S STATEMENT
The Group released abridged unaudited financial results on 2 July 2014. We now
have pleasure in releasing the abridged audited financial results for the year
ended 31 March 2014.
FINANCE
Funds on deposit with the Reserve Bank of Zimbabwe have increased to US$90.8
million as a result of interest negotiations. We are in receipt of Treasury
Bills of US$49.6 million and have been advised by the relevant authorities that
upon completion of their required processes, Treasury Bills of similar terms to
those already in our possession will be issued for the balance. The Company has
been testing its ability to market the Bills in the local market. Efforts to
date have focused largely on local banks. Some significant success has
materialised from these efforts. Foreign banks operating in Zimbabwe have
failed so far to demonstrate an appetite for the Bills.
There has been positive interaction with local financial institutions outside
of banks. These institutions are likely to have a longer investment time frame
capacity than banks. This interaction is progressing and subject to some
revision of the terms of the Treasury Bills, success looks possible. The
Company has very recently been approached by a foreign corporate who has
expressed the opinion that foreign institutions may have an appetite for the
Treasury Bills. This approach is also to be progressed. It is too soon to
assess the merits of this possibility.
Discussions with the authorities continue on an amicable basis with a view to
ensuring that the Treasury Bills are on terms that will be acceptable in the
market. Developments suggest satisfactory progress on this initiative, which is
expected to be concluded shortly.
Shareholders and other stakeholders are invited to compare the Group's net
borrowings position to funds held on deposit with the RBZ as at the end of
March 2014 as disclosed in the financials. It will be seen that following
receipt of these funds the Group may have no net borrowings, a strong platform
for the future.
As disclosed to shareholders in previous releases, the Group will maintain its
foreign and local term borrowings and redeem them on due date in terms of
contractual obligations. As a result, the Group will have substantial excess
funds available for expansion, working capital, and an appropriate distribution
to shareholders on realisation of the RBZ deposit.
We are pleased with the progress on securing access to our funds and this
development is exciting for the entire Group. The receipt has potential to make
a substantial contribution to the Nation, both through the Group's own
activities and the corporate social responsibility programs through The Meikles
Foundation where substantial activities are underway for the benefit of the
community. In addition, our youth empowerment plan with the Ministry of Youth,
Empowerment and Indigenisation has been approved.
Trading and operations
Group
Group revenues were 1.8% below those achieved in the prior year due to lower
turnovers in the retail and agricultural sectors of our operations. Operating
costs were 1.7% ahead of those incurred in the prior year. Finance costs
increased. Borrowings increased to fund expansion and refurbishments in the
supermarkets, refurbishment of the hotels and substantial plantation
development.
TM Supermarkets
Turnover for the year was $334 million (2013: $336 million). The customer count
throughout our store footprint increased by 8% compared to the prior year. The
average cost of product to the consumer declined. EBIDTA reduced to $11.0
million (2013: $11.6 million). Margins were similar to those of the prior year.
The store portfolio increased from 49 at 31 March 2013 to 53 branches as at 31
March 2014. The company secured four new sites in prominent areas in the second
half of the year and their impact on turnover and profitability will be felt in
the ensuing financial periods. The new stores increased our trading area by 10%
to 55,000 square meters. Post the end of the financial year, five additional
new sites have been secured for development in the 2015 and 2016 financial
years, with potential of increasing the trading space by more than 18%.
The refurbishment programme is progressing as planned. As at 31 March 2014,
five branches had been fully refurbished whilst eight stores are currently
being refashioned and are at different stages of completion.
Meikles Mega Market
The division started operating in December 2013. From its single store, it
contributed just over $2 million in turnover in the period to 31 March 2014. We
achieved an average of 20% compound monthly growth in turnover from the launch
date. The store portfolio is being expanded and post the end of the financial
year, an additional store was opened whilst plans are being progressed to open
at least four new stores by the end of the 2015 financial year.
Meikles Stores
We have made progress in restructuring the departmental stores. The trading
area was significantly reduced through reallocation of the space to high growth
areas of the Group and aligned to current trading performance and outlook. The
departmental stores operated from twelve (12) sites in the 2013 financial year
and these were reduced to five (5) by 31 March 2014.
The turnover for the year was $12.5 million (2013: $18.5 million) and the
reduction was through a combination of factors including the reduced store
footprint and limited access to credit.
EBIDTA was a loss of $2.1 million (2013: loss of $1.3 million). The overhead
structure is being realigned to the reduced number of stores. There will be
minimal job losses in this process as we are able to accommodate most of the
affected staff in the growing areas of the Group and we believe the remaining
stores will be sustainable with a lean overhead structure.
The Stores are to relinquish the basement and ground floors of Greatermans in
favour of a new Pick n Pay supermarket, which is to open in October 2014 .This
development may not necessarily result in the termination of Greatermans as a
trading entity, but will result in a strong retail solution for the Group in a
good location in Harare.
Hotels
The hospitality sector continues to improve. The country's image and
perceptions have to a large extent been corrected and our commendations go to
the Government and the line Ministry for positively driving this agenda. The
country has benefited from hosting the UNWTO General Assembly in August 2013.
We witnessed increased traffic in the tourist resort areas while the city bound
travellers were limited in line with the subdued business climate.
Meikles Hotel was refurbished throughout the year as was the Victoria Falls
Hotel. The results for the year were not influenced substantially by the
refurbishments, as these were not in place for the full year. EBIDTA was $1.3
million compared to $612,000 in the prior year. The revenues for the Hotels at
$15.6 million were 5% higher than those recorded in the 2013 financial year.
The REVPARs at the Meikles Hotel and the Victoria Falls Hotel increased by 2%
and 15% respectively. We attribute this to the high quality of our product
offering following the refurbishments and the positive sentiments on the
country.
Tanganda Tea Company
EBITDA increased by 36% to $2.9 million. The revenues for the year at $22.6
million were down 6% on the prior year.
The plantation development embarked on in 2011 progressed successfully and is
nearing completion. An additional 143ha of coffee, 185ha of avocadoes, 164ha of
macadamia and 108ha of timber were added during the year. The company had
268ha, 375ha, 663ha, 2372ha and 1415ha of coffee, avocadoes, macadamia, tea and
timber plantations respectively as at 31 March 2014.
Bulk tea production increased by 30% to 9,700 tons. The fertilisation and
liming programmes undertaken in previous periods coupled with favourable
weather conditions account for the high bulk tea production. However, due to
the oversupply of tea from Kenya, the bulk tea prices declined by 8% compared
to prior year. We have continued to mechanise tea plucking and this resulted in
a decrease in the cost of production of bulk tea by 24% albeit also aided by
the increased production volumes.
Packeted tea production was at 2,044 tons, similar to the 2,093 tons produced
in the prior year as there was suppressed demand in the local market, whilst
the regional markets, particularly Zambia, showed growth. Subsequent to year
end, we have replaced our packaging machines with a state of the art high
capacity plant that will allow us to increase production at standard costs,
ensuring continuity of supply of a quality product at competitive prices. Our
Tingamira water production increased by 44% compared to prior year and water
sales volumes continue on an upward trend.
Mining
Meikles Centar Mining ("MCM") is currently in the process of acquiring a 51%
shareholding in a group of gold mines in the Matabeleland area for a
consideration of US$3 million. We await regulatory approval for the transaction
to be concluded.
MCM has purchased 75% equity in a company that owns a number of chrome claims
on the Great Dyke. Proposals have been submitted to the Ministry of Mines
related to a significant chrome related project, which include construction of
a smelter to beneficiate both lumpy and alluvial ore. The project will cost in
excess of $100 million.
The Group carried out limited exploration on an iron ore claim and the results
were positive. Further tests are required to determine the full extent and quality
of the ore reserves.
The Group looks to its strategic partners to provide finance and mining skills.
Mining is a diversification into an area of substantial growth potential in Zimbabwe.
Mentor
The value of the Group's investment in Mentor has increased by twenty percent
expressed in terms of South African rand, but is static in terms of United States
dollars.
Mentor and other financiers are involved in negotiations relating to a new project,
which is at an advanced stage, but has not yet been consummated. It is expected that
this project, if consummated successfully, will have a material impact on forward
values of the Mentor Group.
MANAGEMENT
The Group is committed to maintaining the highest standards of Corporate Governance
in all of its operations. Consequently the Group has embarked on a comprehensive
anti-corruption programme whose implementation has already commenced. Pursuant to
this programme the Group intends to introduce robust procurement systems to ensure
that goods and services procured by the Group are of the highest standard and of
the best value. In line with the anti-corruption drive the Group has put in place
number of anti-corruption initiatives which include the establishment of an
anti-corruption desk in the Chairman's office to deal specifically with cases of
reported corruption.
OUTLOOK
There are stresses in the economy, but the Group sees these as challenges that
are there to be overcome. Once the matters highlighted in this statement under
Finance have been fully achieved, placing the Group in a strong financial
position, the Group will accelerate its participation in the economy for the
benefit of all Stakeholders. Success achieved very recently in implementing a
significant part of our financial objectives provides the Group with resources
that will enable it to launch the first phase of planned initiatives, with
immediate effect. Mining, agriculture, tourism and retail are viewed as
substantial participants in the future growth and wellbeing of the economy. The
Group is focused on these four areas of endeavour.
It is believed that the full implications set out above under Finance will be
implemented in time to benefit the entirety of the second half of the forthcoming
financial year. Interest costs will reduce, but most importantly the Group will
have the financial flexibility to pursue strategies that will enhance shareholder
value. Inter Group funding and guarantees have precluded any constructive initiative
in this respect over the period since dollarization. Parts of the Group have
expanded and progressed during this period and other parts have been restrained
through a lack of resources. It is now possible to focus aggressively on excellence,
motivation and an enhancement of values. Dividend payments will also be possible
in the second half of the year. Shareholder patience over the past years is
recognized and will be rewarded.
APPRECIATION
I would like to express my appreciation to our customers who continue to support
us in this increasingly difficult environment. I would also like to thank my
fellow Board members, management and staff for the steadfast commitment and dedication.
JRT Moxon
Executive Chairman
13 August 2014
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2014
31 March 2014 31 March 2013
US$ 000 US$ 000
CONTINUING OPERATIONS
Revenue 384,308 391,328
EBITDA 7,852 9,967
Depreciation, amortisation and impairment (8,771) (4,901)
Non-trading income 48,880 9,732
Finance costs (10,462) (6,994)
Profit before tax 37,499 7,804
Income tax expense (320) (2,442)
Profit for the year from continuing operations 37,179 5,362
DISCONTINUED OPERATIONS
Profit for the period from discontinued operations - 1,173
PROFIT FOR THE YEAR 37,179 6,535
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 37,179 6,535
Profit for the year attributable to:
Owners of the parent 34,427 3,084
Non-controlling interests 2,752 3,451
37,179 6,535
Total comprehensive income attributable to:
Owners of the parent 34,427 3,084
Non-controlling interests 2,752 3,451
37,179 6,535
Earnings per share (cents)
Basic 13.56 1.21
Continuing operations 13.56 0.75
Discontinued operations - 0.46
Diluted 12.59 1.15
Continuing operations 12.59 0.71
Discontinued operations - 0.44
Headline (loss) / earnings per share - continuing operations (cents) (1.64) 0.16
Diluted headline (loss) / earnings per share - continuing operations (1.52) 0.81
(cents)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2014
31 March 2014 31 March 2013
US$ 000 US$ 000
ASSETS
Non-current assets
Property, plant and equipment 109,624 99,063
Investment property 250 254
Investment in Mentor Africa Limited 27,657 27,657
Biological assets 30,156 21,521
Intangible assets 1,528 2,204
Other financial assets 12,760 12,693
Balances with Reserve Bank of Zimbabwe 90,861 40,514
Deferred tax 2,674 1,997
Total non-current assets 275,510 205,903
Current assets
Inventories 36,631 36,708
Trade and other receivables 16,171 17,283
Other financial assets 3,551 1,405
Cash and bank balances 22,952 14,198
Total current assets 79,305 69,594
Total assets 354,815 275,497
EQUITY AND LIABILITIES
Capital and reserves
Share capital 2,538 2,538
Share premium 1,316 1,316
Non-distributable reserves 12,559 12,559
Retained earnings 155,455 121,028
Equity attributable to equity holders of the parent 171,868 137,441
Non-controlling interests 14,222 10,990
Total equity 186,090 148,431
Non-current liabilities
Borrowings 37,264 7,417
Deferred tax 14,519 14,534
Total non-current liabilities 51,783 21,951
Current liabilities
Trade and other payables 47,293 46,263
Borrowings 69,649 58,852
Total current liabilities 116,942 105,115
Total liabilities 168,725 127,066
Total equity and liabilities 354,815 275,497
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2014
Non- Retained
Share Share earnings
capital premium distributrable
reserves
US$ 000 US$ 000 US$ 000 US$ 000
2014
Balance at 1 April 2013 2,538 1,316 12,559 121,028
Profit for the year - - - 34,427
Non-controlling interests arising from - - - -
Meikles Centar Mining (Private) ltd
Non-controlling interests arising from - - - -
Kearsely Investments (Private) ltd
Balance at 31 March 2014 2,538 1,316 12,559 155,455
2013
Balance at 1 April 2012 2,538 1,316 6,233 104,626
Profit for the year - - - 3,084
Transfer on disposal of assets - - 6,326 13,318
classified as held for sale
Balance at 31 March 2013 2,538 1,316 12,559 121,028
Disposal
group Attributable Non
capital to owners of
and parent controlling Total
reserves interests
US$ 000 US$ 000 US$ 000 US$ 000
2014
Balance at 1 April 2013 - 137,441 10,990 148,431
Profit for the year - 34,427 2,752 37,179
Non-controlling interests arising - - 147 147
from Meikles Centar Mining (Private)
ltd
Non-controlling interests arising - - 333 333
from Kearsely Investments (Private)
ltd
Balance at 31 March 2014 - 171,868 14,222 186,090
2013
Balance at 1 April 2012 19,644 134,357 7,539 141,896
Profit for the year - 3,084 3,451 6,535
Transfer on disposal of assets (19,644) - - -
classified as held for sale
Balance at 31 March 2013 - 137,441 10,990 148,431
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2014
31 March 2014 31 March 2013
CONTINUING AND DISCONTINUED OPERATIONS US$ 000 US$ 000
Cash flows from operating activities
Profit before tax from continuing and discontinued operations 37,499 7,804
Adjustments for:
- Depreciation and impairment of property, plant and equipment 6,774 4,901
- Net interest (31,653) 4,750
- Net exchange (gains) / losses (207) 340
- Fair value adjustments on biological assets (6,558) (7,828)
- Loss on disposal of property, plant and equipment 77 267
Impairment of intangible assets 1,997 -
Operating cash flow before working capital changes 7,929 10,234
Decrease / (increase) in inventories 77 (42)
Decrease / (increase) in trade and other receivables 994 (2,164)
(Decrease) / increase in trade and other payables (8,415) 13,108
Cash generated from operations 585 21,136
Income taxes paid (924) (172)
Net cash (used in) / generated from operating activities (339) 20,964
Cash flows from investing activities
Payment for property, plant and equipment (17,441) (18,299)
Proceeds from disposal of property, plant and equipment 330 188
Increase in intangible assets (1,071) (2,080)
Net movement in service assets (214) (209)
Payment for other investments (1,855) (82)
Net expenditure on biological assets (2,077) (1,923)
Net outflow on disposal of subsidiary - (2,857)
Investment income 820 357
Net cash used in investing activities (21,508) (24,905)
Cash flows from financing activities
Net increase in interest bearing borrowings 40,644 14,284
Proceeds on disposal of partial interest in a subsidiary without loss of
control 147 -
Finance costs (10,462) (6,994)
Net cash generated from financing activities 30,329 7,290
Net increase in cash and bank balances 8,482 3,349
Cash and bank balances at the beginning of the year 14,198 11,284
Net effect of exchange rate changes on cash and bank balances 272 (435)
Cash and bank balances at the end of the year 22,952 14,198
NOTES TO THE ABRIDGED AUDITED FINANCIAL STATEMENTS
1. Basis of preparation
The abridged 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.
2. Statement of compliance
The Group's abridged financial results 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 results have been audited by Deloitte
& Touche, whose unqualified report is available for inspection at the
registered office of the Company.
3. Accounting policies
Accounting policies and methods of computation applied in the preparation of
these abridged audited financial statements are consistent, in all material
respects, with those used in the prior year with no significant impact arising
from new and revised International Financial Reporting Standards (IFRSs)
applicable for the year ended 31 March 2014.
4. Segment information
31 March
2014 31 March 2013
US$ 000 US$ 000
Continuing operations
Revenue
Supermarkets 333,907 335,909
Hotels 15,583 14,842
Agriculture 22,622 24,176
Departmental stores 12,462 18,489
Corporate* (266) (2,088)
384,308 391,328
EBITDA
Supermarkets 10,958 11,635
Hotels 1,269 612
Agriculture 2,915 2,143
Departmental stores (2,145) (1,339)
Corporate* (5,145) (3,084)
7,852 9,967
The EBITDA figures are before Group management
fees.
Segment assets
Supermarkets 80,179 60,943
Hotels 50,720 47,719
Agriculture 64,817 52,852
Departmental stores 32,587 37,408
Corporate* 126,512 76,575
354,815 275,497
Segment liabilities
Supermarkets 51,880 38,516
Hotels 20,556 16,421
Agriculture 38,601 29,631
Departmental stores 21,906 36,890
Corporate* 35,782 5,608
168,725 127,066
*Intercompany transactions and balances have been eliminated from the corporate
amounts. Corporate also includes other subsidiaries that are immaterial to
warrant separate disclosure.
31 March 31 March
2014 2013
US$ 000 US$ 000
Continuing operations
5. Depreciation, amortisation and impairment
Depreciation of property plant and equipment 6,495 4,781
Impairment of property, plant and equipment 275 116
Depreciation of investment property 4 4
Impairment of intangible assets 1,997 -
8,771 4,901
6. Non-trading income
Net investment revenue 42,115 2,244
Fair value adjustments on biological assets 6,558 7,828
Net exchange gains / (losses) 207 (340)
48,880 9,732
Net investment revenue includes $40.9 million earned on the
deposit at the RBZ following interest negotiations.
7. Net borrowings
Non-current borrowings 37,264 7,417
Current borrowings 69,649 58,852
Total borrowings 106,913 66,269
Cash and cash equivalents (22,952) (14,198)
Net borrowings 83,961 52,071
The increase in borrowings was applied towards retail
expansion, store and hotel refurbishment, plantation
development and working capital.
8. Other information
Depreciation and impairment - property, plant and equipment 6,774 4,901
Capital commitments authorised by the Directors but not 14,128 25,613
contracted
Group's share of capital commitments of joint operation 53 1,783
9. Subsequent events - Balances with the Reserve Bank of Zimbabwe
As at 31 March 2014, funds on deposit with the Reserve Bank of Zimbabwe had
increased to US$90.8 million as a result of interest negotiations.
Subsequent to year end, the Company was issued with Treasury Bills amounting to
US$49.6 million. The balance of the deposit owed by the Reserve Bank of
Zimbabwe is currently being dealt with by the Ministry of Finance and Economic
Development in terms of the Reserve Bank of Zimbabwe (Debt Assumption) Bill,
2014. The Ministry of Finance and Economic Development has advised that upon
completion of their required processes, Treasury Bills of similar terms to
those already in the possession of the Company will be issued.
For further information contact Onias Makamba on omakamba@meikleslimited.co.zw
or +263-4-252068/70.
END
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