ABRIDGED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2012
Shareholders were advised in November 2011 that the Group made a loss in the first six months of the year under review of $5 million after taxation. The results of the second six months have reduced this loss to $3.4 million for the year as a whole. Your board decided that the results for the year be determined on a very conservative basis with full provision for all known and anticipated costs that may have an impact on the Group financials. Most of these expenses were incurred in the second half of the year and they include compensation for loss of office, legal and professional fees, a write off of certain receivables and advances, and the impairment of property, plant and equipment. Certain provisions have been provided deliberately on a worse case basis and there may well be some recovery in the future. The sum of these exceptional expenses amounted to $6.3 million. Regrettably the Group's agricultural division suffered from a severe frost last winter and an unusual adverse weather pattern in the summer. Losses that arose and were accounted for in the second half of the year as a direct result of the adverse weather amounted to $2.9 million in direct revenue and $2.3 million loss of profit. The first half of the year saw senior management changes at both Group level and in certain of the operating companies. These changes did destabilise our operations when they occurred, but new structures have since been put in place. Furthermore, the Group has had to contend with stock write-offs and reduced margins. Finance costs were $4.3 million and $4.2 million in the first half and second half of the year respectively. These sums have been significant in their impact on Group performance, for the year under review.
The Group's successes have been substantial. Management is committed to the task of improving ongoing divisional performance, and the second half of the year has resulted in an improvement, but efforts continue to progress performance with urgency.
The Pick n Pay investment in TM Supermarkets was finally consummated, although very late in the year.
The Group's indigenisation status has been established, making it more attractive to foreign investors as we pursue future growth projects. These opportunities will be pursued together with Mentor and with other potential investors.
Group borrowings, net of the additional Pick n Pay investment, did increase, but these were largely incurred by the agricultural division where a substantial expansion project is underway.
Your board has developed a sound policy for Group funding:
* The Group will no longer use short-term local borrowings to fund medium term expansion projects. Term funding, shareholder funding, or minority shareholder funding, will be sought for these projects.
* Funding for partly owned subsidiaries or associates will only be provided
in proportion to the Group's percentage shareholding, and will be provided
with the co-operation and participation of other shareholders in these
* The Group will continue to fund its investment in Retail Store debtors from
borrowings or from the sale of the debtors book to a third party.
* The Group will retain minimal and inexpensive short-term borrowings from
local banking institutions.
Progress on the implementation of this policy is well advanced:
* The two Zimbabwe based hotels have arranged term funding from external
sources at favourable rates to fund renovations, which are now in progress.
* The Retail Store debtors are now funded on a dedicated basis. Interest received from debtors will exceed the cost of funding. * Efforts are in progress to raise dedicated funding, either term or
shareholder or a combination of both, to fund Tanganda's expansion and to
eliminate excess short-term borrowings. This funding is expected to be in
place by September 2012. Substantial interest in Tanganda is already
The Group is in negotiation with various financiers regarding the injection of significant funding. In addition, the discussions with RBZ are continuing for the freeing of funds held on deposit. These initiatives will retire all Group borrowings other than those identified above, will leave substantial credit balances with the Group's bankers, and will provide funding for expansion opportunities. The full implementation of this financial policy will result in a reduction in finance costs as well as securing a sound balance sheet structure for the Group. These factors, together with the improving performance in the divisions, and further profits from the region, will enable the resumption of dividend payments to Group shareholders. Subject to regulatory approvals, the Group has a potential project that may commence shortly. The sum involved amounts to $150 million. This amount will not be raised at Holding Company level but will be injected directly into the project itself. The project is still subject to a confidentiality constraint and shareholders will be updated when appropriate. Your board is of the opinion that the present market capitalisation of the Group fails to recognise the Group's performance, prospects for the future and the underlying asset values. These factors do restrain the Group's ability from a funding view-point, to take full advantage of opportunities that are on offer. Your board will assess these implications and will consider strategies that may be implemented to optimise the future growth of the Group.
Mentor and the Cape Grace
With effect from 1st April 2012, the Group will take up a shareholding in Mentor Africa Limited (Mentor) and will merge the Cape Grace into Mentor and the funds which were being held by Mentor on behalf of the Cape Grace will be converted into equity in Mentor. This transaction conforms with past communications to shareholders.
The respective assets are being valued and reviewed by appropriate professionals, and when complete, it is estimated that the Group will have a 35% shareholding in these regional activities.
The transaction will allow the Group to unlock further value in its foreign investments by providing access to assets, which have greater growth prospects than the Cape Grace Hotel in isolation. The Cape Grace Hotel is well run and the Group is satisfied with its performance, but it is a mature asset and its prospects for growth are limited and less than those of the Mentor assets.
Mentor has a growing and diversified portfolio of investments in South Africa, including:
* a joint venture with dnata, the fourth largest air services provider in the
world with operations at 76 airports in 38 countries and a member of the
Emirates Group, in Wings Inflight Services, an airline catering business
which provides inflight catering services to major international airlines
operating to/from South Africa, including Emirates Airline, British Airways
(international) and Singapore Airlines, on long term contracts; * an interest in the market-leading provider in South Africa of energy efficient, low wattage, high output, industrial, retail and commercial
electronic fittings and safety approved retro-fit lighting products; and
* minority interests and new opportunities in the financial services,
resources and mining sectors.
Mentor's deal-flow pipeline is strong with good upside potential. The merger of these interests will enable the Group to enhance the value of its regional assets. Group management will now be in a position to focus on growth opportunities in Zimbabwe and work with Mentor management to grow the regional investments.
The Board remains confident that the strategic investment in Mentor will produce significant high growth opportunities, similar to those which the Meikles Group derived from its previous investment in Rebhold/Mvelaphanda, in the medium to long term.
SUBSIDIARY REVIEW Tanganda
A major plantation development program is in progress. On completion Tanganda will have planted 450 hectares of avocado, 300 hectares of coffee and 700 hectares of macadamia. This project will be completed by March 2014. On maturity this project will contribute substantially to Tanganda's profits.
Management is focusing on increasing tea yields and quality. There is evidence that there is a growing demand for tea in the world and Tanganda's tea prospects remain promising.
Tanganda is enhancing and updating its manufacturing capacity of packeted teas. There is a growing demand for packeted teas in the region.
The water bottling plant was commissioned during the last quarter of the financial year and has resulted in increased production of water to 2.1 million liters (2011: 1.2 million liters). A second water plant is being explored.
The additional investment in all these activities will amount to $15 million.
Refurbishment of Meikles Hotel has commenced. The works are expected to be completed by December 2012. The Victoria Falls Hotel is also being refurbished, and work will be completed before the UNWTO conference scheduled for August 2013.
The Hospitality division has successfully negotiated a lease agreement to operate a business style hotel in Lusaka, which is fast becoming a regional hub for travel. The hotel will be part of a mixed-use retail scheme being developed close to the airport by one of Africa's leading real estate companies. This project is expected to be the first of similar hotel projects in appropriate regional destinations. Shareholders will be updated with more information at the opportune time. TM Supermarkets The capital injection of $13 million through Pick n Pay's increased shareholding in TM Supermarkets is being utilised in the branch refurbishment. The Kamfinsa branch which has been reconstructed will be reopened in the last week of June 2012 as a Pick n Pay store including the Pick n Pay clothing and liquor outlets. Refurbishment of the Borrowdale branch has started. A total of 6 branches have been earmarked for refurbishment in the new financial year and will incorporate rebranding of some stores to "Pick n Pay" on completion. These stores are located in Harare, Bulawayo, Mutare and Gweru. All these initiatives which are well supported by Pick n Pay will help in restoring TM Supermarkets to its previous market leadership position.
Thomas Meikle Stores
The stores operate from well-placed locations in most urban centers in Zimbabwe. Once further evidence of growth in the economy and in the spending power of the people becomes evident, the stores will be in a position to provide a variety of merchandise in selected and focused ranges. There has been a branding adjustment in recent months and the stores will no longer attempt to operate the full range of departments that they have had in the past. Merchandise is now being more carefully selected, with a view to securing good stock turns and controlled investment in stock. The customers will be provided with competitive values and credit will be granted where appropriate. The division currently has 44,000 credit customers. This division still has a remaining legacy issue. Certain merchandise, although saleable, can only be sold at reduced margins. The quantum of merchandise affected is greatly reduced, relative to the quantum that the division had to contend with during the past financial year.
The stores will not immediately return to their full potential, but improvements, presently underway, are making a difference.
The resolution of a number of issues amongst them the granting of the indigenisation status and the approval for the Pick n Pay investment was achieved through support from the relevant regulatory authorities to whom our appreciation is once again extended. The continued support from shareholders and staff is acknowledged and the anticipated turnaround in the coming year will be just reward for these stakeholders.
For and on behalf of the Board
JRT Moxon Chairman 1 June 2012 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2012
Audited Audited 12 months to 15 months to 31 March 2012 31 March 2011 US$ 000 US$ 000 CONTINUING OPERATIONS Revenue 354,102 330,437 Net operating costs (361,103) (336,485) Operating loss (7,001) (6,048) Investment revenue 2,011 3,593 Finance costs (8,453) (7,590) Net exchange gains / ( losses) 1,183 (229) Fair value adjustments 3,792 1,398 Reinstatement of funds earmarked for future - 11,737 investment (Loss) / profit before tax (8,468) 2,861 Income tax credit 2,544 793 (Loss) / profit for the period from continuing (5,924) 3,654 operations DISCONTINUED OPERATIONS
Profit for the period from discontinued operations 2,480 2,474
(LOSS) / PROFIT FOR THE PERIOD (3,444)
Other comprehensive (loss) / income Exchange differences on translating foreign (1,992) 1,889 operations Other comprehensive (loss) / income for the period, (1,992) 1,889 net of tax
TOTAL COMPREHENSIVE (LOSS) / PROFIT FOR THE PERIOD (5,436) 8,017
(Loss) / profit attributable to:
Owners of the parent (3,537) 6,690 Non-controlling interests 93 (562) (3,444) 6,128
Total comprehensive (loss) /profit attributable to:
Owners of the parent (5,529) 8,579 Non-controlling interests 93 (562) (5,436) 8,017 (Loss) / earnings per share Basic (loss) / earnings from continuing and (1.44)
discontinued operations (cents per share)
Basic (loss) / earnings from continuing operations (2.45) 1.72 (cents per share)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2012 Audited Audited 31 March 2012 31 March 2011 US$ 000 US$ 000 ASSETS Non-current assets Property, plant and equipment 86,122 84,280 Investment property 43 44 Biological assets 11,770 7,661 Other financial assets 18,370 16,600 Intangible assets - trademarks 124
Balances with Reserve Bank of Zimbabwe 38,627 36,825 Deferred tax 1,888 2,356 Total non-current assets 156,944 147,890 Current assets Inventories 39,633 40,713 Trade and other receivables 17,642 16,153 Other financial assets 1,085 - Cash and bank balances 8,427 3,286 66,787 60,152 Assets held for sale 37,871 41,440 Total current assets 104,658 101,592 Total assets 261,602 249,482 EQUITY AND LIABILITIES Capital and reserves Share capital 2,538 2,454 Share premium 1,316 - Non-distributable reserves 6,233 2,627 Retained earnings 105,750 111,207 Capital and reserves relating to assets 19,644 18,083 classified as held for sale Equity attributable to equity holders of the parent 135,481 134,371 Non-controlling interests 8,618 764 Total equity 144,099 135,135 Non-current liabilities Borrowings 4,786 3,749 Deferred tax 12,919 15,996 Total non-current liabilities 17,705 19,745 Current liabilities Trade and other payables 38,371 30,493 Borrowings 47,199 49,031 85,570 79,524 Liabilities relating to assets classified as held 14,228 15,078 for sale Total current liabilities 99,798 94,602 Total liabilities 117,503 114,347 Total equity and liabilities 261,602 249,482 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2012 Share Share Non-distributable Retained capital premium reserves earnings US$ 000 US$ 000 US$ 000 US$ 000 2012 Balance at 1April 2011 2,454 - 2,627 111,207 Loss for the year - - - (6,017)
Change in ownership interests - - 4,679
in a subsidiary without loss
Other comprehensive loss for - - (1,073)
- the year Issue of shares for cash 84 1,316 - -
Transfer on disinvestment of - - -
non controlling interest in a
subsidiary Balance at 31 March 2012 2,538 1,316 6,233 105,750 2011 Balance at 1 January 2010 - - 109,984 (21,325) Profit for the period - - - 4,216 Transfer within reserves and - - (109,851)
on disposal of subsidiaries Other comprehensive income for - - 856
- the period
Share capital redenomination 2,454 - (2,454)
Transfer in respect of assets - - 4,092 (4,019) classified as held for sale Dividend in specie - - - (14,524) Balance at 31 March 2011 2,454 - 2,627 111,207 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2012 Disposal Attributable Non Total group to owners of controlling capital parent interests and reserves US$ 000 US$ 000 US$ 000 US$ 000 2012 Balance at 1April 2011 18,083 134,371 764 135,135 Loss for the year 2,480 (3,537) 93 (3,444)
Change in ownership interests in - 5,407 7,593 13,000 a subsidiary without loss of
control Other comprehensive loss for the (919) (1,992) - (1,992) year Issue of shares for cash - 1,400 - 1,400
Transfer on disinvestment of non - (168) 168
- controlling interest in a subsidiary Balance at 31 March 2012 19,644 135,481 8,618 144,099 2011 Balance at 1 January 2010 51,657 140,316 1,326 141,642 Profit for the period 2,474 6,690 (562) 6,128
Transfer within reserves and on (37,008) - -
disposal of subsidiaries Other comprehensive income for 1,033 1,889 - 1,889 the period
Share capital redenomination - - -
Transfer in respect of assets (73) - -
- classified as held for sale Dividend in specie - (14,524) - (14,524) Balance at 31 March 2011 18,083 134,371 764 135,135 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2012 Audited Audited 12 months to 15 months to 31 March 31 March 2012 2011 Continuing and discontinued operations US$ 000 US$ 000 Cash flows from operating activities (Loss) / profit before tax from (5,616) 6,638 continuing and discontinued operations Adjustments for: - Depreciation and impairment 4,834 5,388 - Net interest 6,371 4,921 - Dividend received - (1,471) - Net exchange (gains) / losses (1,342) 423 - Loss on disposal of subsidiaries - 3,842 - Fair value adjustments (3,681) 1,978 - Share of profits of associates - (666) - (Profit) / loss on disposal of (69) 787 property, plant and equipment - Reinstatement of funds earmarked for - (11,737) investment Operating cash flow before working 497 10,103 capital changes Decrease / (increase) in inventories 1,196 (23,642) Increase in trade and other receivables (3,252) (71,807) Increase in trade and other payables 7,675 56,278 Cash generated from / (used in) 6,116 (29,068) operations Income taxes paid (9) (2,019) Net cash generated from /(used in) 6,107 (31,087) operating activities Cash flows from investing activities Payment for property, plant and (6,839) (11,439) equipment Proceeds from disposal of property, 1,503 1,789 plant and equipment Change in ownership interests in a 13,000 - subsidiary without loss of control Net movement in service assets (21) (65) Dividends received - 1,471 Payment for other investments (250) (152) Net expenditure on biological assets (497) (206) Net outflow on disposal of subsidiary - (16,434) Investment income 251 250 Net cash generated from / (used in) 7,147 (24,786) investing activities Cash flows from financing activities Net increase in interest bearing 6 44,017 borrowings Proceeds from issue of shares 1,400 - Finance costs (8,454) (7,601) Net cash (used in) / generated from (7,048) 36,416 financing activities Net increase / (decrease) in cash and 6,206 (19,457) bank balances Cash and bank balances at the beginning 4,785 25,509 of the period Net effect of exchange rate changes on 606 (436) cash and bank balances Translation of foreign entities (313) (831) Cash and bank balances at the end of the 11,284 4,785 period
NOTES TO THE ABRIDGED FINANCIAL STATEMENTS
1. Accounting policies
Accounting policies and methods of computation are consistent, in all material respects, with those used in the prior period with no significant impact
arising from new and revised International Financial Reporting Standards
(IFRSs) applicable for the year ended 31 March 2012. The financial information presented has been extracted from IFRS compliant financial statements.
2. Profit for the period from discontinued operations
In March 2008, a binding put and call option agreement for the sale of the Cape Grace Hotel to Mentor was entered into between Meikles, Cape Grace Hotel
Limited (BVI) and its subsidiaries which own the Cape Grace Hotel on the one hand, and Mentor on the other. In November 2008, a notice to exercise the
option for the purchase of Meikles Group's interests in the Cape Grace Group was sent from Mentor to Meikles, and receipt thereof was acknowledged by
Meikles. This resulted in a legally binding agreement for the purchase by Mentor of the Cape Grace Hotel. The consummation and implementation of this transaction was delayed as a consequence of the litigation initiated by Meikles against Mentor, which litigation has now been settled and withdrawn. Following the settlement and withdrawal of the aforementioned litigation, the sale of
Meikles Group's interest in the Cape Grace Hotel to Mentor has been concluded with effect from 1 April 2012.
Audited Audited 12 months to 15 months to 31 March 2012 31 March 2011 US$ 000 US$ 000 Revenue 16,163 21,137 Net interest - 6,519 Fees and commissions - 18,271 Other gains 619 4,712 Total income 16,782 50,639 Expenses* (13,930) (43,017) Profit before tax 2,852 7,622 Income tax (372) (1,306) Profit for the period from discontinued operations 2,480
Loss on disposal of subsidiaries -
Profit for the period from discontinued operations 2,480
(attributable to owners of the parent)
Other comprehensive income Exchange differences on translating foreign entities (919)
Other comprehensive income for the period, net of (919) 1,033 tax Total comprehensive profit for the period 1,561
*The expenses exclude depreciation expense of US$1,806,054 (2011: US$3,220,794) which has been written back in line with the requirements of IFRS
The 31 March 2011 comparatives include Kingdom Financial Holdings Limited and Cotton Printers
Cash flows from discontinued operations Net cash flows from operating activities (131)
Net cash flows from investing activities 128
Net cash flows from financing activities 801
Net cash inflows / (outflows) 798
3. Assets classified as held for sale Audited Audited Comprising 31 March 2012 31 March 2011 US$ 000 US$ 000 Assets held for sale: Cape Grace Hotel group of companies 37,871 39,977 Motor vehicles1 - 1,463 Total assets held for sale 37,871 41,440
Liabilities relating to assets held for sale: Cape Grace Hotel group of companies 14,228
Total liabilities relating to held for sale 14,228 15,078 Net assets held for sale 23,643 26,362
Equity relating to assets held for sale: Cape Grace Hotel group of companies 19,644
Total equity relating to assets classified as held 19,644 18,083 for sale
1The Group disposed of certain motor vehicles to staff effective 1 April 2011.
4. Segment information Audited Audited 12 months to 15 months to Revenue 31 March 2012 31 March 2011 US$000 US$000 Continuing operations Supermarkets 296,403 274,277 Hotels 15,397 15,893 Agriculture 19,978 22,498 Stores 24,061 19,610 Intergroup sales (1,737) (1,841) 354,102 330,437
Disposal group and discontinued operation
Hotels 16,163 21,137 16,163 21,137 EBITDA Continuing operations Supermarkets 5,976 2,404 Hotels 1,425 972 Agriculture (3,891) 1,171 Stores (874) (1,482) Corporate (5,732) (7,738) (3,096) (4,673) Disposal group Hotels 2,623 3,509 2,623 3,509 4. Segment information (continued) Audited Audited 31 March 2012 31 March 2011 US$ 000 US$ 000 Segment assets Continuing operations Supermarkets 50,523 43,860 Agriculture 43,004 37,778 Hotels 29,878 28,216 Stores 57,872 64,334 Corporate 42,454 33,855 223,731 208,043
Assets classified as held for sale
Hotels - Cape Grace Hotel 37,871 39,977 Motor vehicles to be disposed to staff - 1,463 37,871 41,440 Total assets 261,602 249,483 Segment liabilities Continuing operations Supermarkets 32,520 40,133 Agriculture 19,538 17,160 Hotels 8,720 7,081 Stores 45,317 50,234 Corporate (2,820) (15,338) 103,275 99,270 Classified as held for sale Hotels - liabilities classified as held for sale 14,228 15,078 (Cape Grace Hotel) 14,228 15,078 Total liabilities 117,503 114,348
Intercompany balances and transactions have been eliminated from the Corporate figures.
5. Supplementary information
Presented below are the segment results for the comparable 12 month periods ended 31 March.
Audited Unaudited 31 March 2012 31 March 2011 Revenue US$ 000 US$ 000 Continuing operations Supermarkets 296,403 228,947 Hotels 15,397 13,369 Agriculture 19,978 17,564 Stores 24,061 17,400 Intragroup sales (1,737) (1,841) 354,102 275,439 Disposal group Hotels 16,163 16,581 16,163 16,581 EBITDA Continuing operations Supermarkets 5,976 3,909 Hotels 1,425 1,596 Agriculture (3,891) 502 Stores (874) (15) Corporate (5,732) (4,978) (3,096) 1,014
Included in the EBITDA figures above are the following exceptional expenses: Compensation for loss of office (2,713) (400) Legal and professional fees (1,905) (1,893)
Write off of other receivables and advances (824)
Impairment of property, plant and equipment (898)
- (6,340) (2,293)
Excluding these items, the EBITDA figures would
have been as follows: Continuing operations Supermarkets 7,309 4,119 Hotels 2,376 1,652 Agriculture (1,907) 502 Stores (379) 197 Corporate (4,155) (3,163) 3,244 3,307 6. Other information 31 March 2012 31 March 2011 US$ 000 US$ 000 Continuing operations Capital expenditure for the year 6,560
Depreciation and impairment of property, plant and 4,834 4,595 equipment Borrowings net of cash and cash equivalents 43,558
Capital commitments authorised but not yet 22,814 25,795 contracted 7. Exchange rates
Statement of financial position rates
South African Rand 7.6962 6.8045 British Pound 1.6018 1.61 Average transaction rates South African Rand 7.4396 7.2488 British Pound 1.5981 1.5552
For further information contact Onias Makamba on +263-4-252068/78
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