Meikles Regulatory News (MIK)

Meikles Ld - Reviewed Condensed Financial Statements to 30 Sept 2020

PR Newswire

London, November 26

MEIKLES LIMITED

REVIEWED CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED

30 SEPTEMBER 2020

CHAIRMAN’S STATEMENT

Operating environment

The trading environment during the period under review remained turbulent and was exacerbated by the effects of the COVID-19 pandemic. 

The effects of COVID-19 on the Group’s operations were mitigated by various measures implemented by the Government and the Group. Both Agriculture and Supermarkets segments were designated essential services and continued operating during the lockdown period albeit at reduced daily trading hours. Consequently, sales volumes declined during the period under review compared to the same period of the previous financial year. The hospitality segment’s operations were closed for the entire six months under review.

Group Financial Overview

The Group remains in a sound financial position with cash in hand substantially exceeding borrowings. The Board plans to maintain this cash positive position for the foreseeable future.

Group expansion and renovation projects completed and initiated during the period under review are estimated at ZWL 2 billion. The return on these projects will benefit the Group, partly in the current financial year and partly in the following year.

The Group strategy is based on an enhancement over time of its different segments and on a fair distribution by way of dividend to its shareholders.

Shareholders are being asked to approve a share buyback scheme at the upcoming Annual General Meeting, but implementation will be guided largely by expected receipt of funds on deposit with Government. Shareholders are advised that negotiations leading to the receipt of these funds are progressing with some traction.

Group Financial Performance

The Group fared well against the impediments brought about by the COVID-19 pandemic.

Inflation adjusted Group revenue of ZWL 11.2 billion retreated by 8% compared to the same period of the previous year due to COVID-19 induced decline in sales volumes across the Group’s operations.

In historical cost terms, Group revenue grew by 683% to ZWL 8.4 billion (Previous year: ZWL 1.1 billion) reflecting the effect of inflation driven price increases and exchange rate movement on local and export sales respectively.

Group operating profit from continuing operations for the period in inflation adjusted terms was ZWL 660.4 million (previous year: ZWL 1.1 billion).

Group operating profit for the period in historical cost terms grew by 682% to ZWL 1.7 billion from ZWL 212.3 million in the same period of previous year.

Inflation adjusted Group Profit after tax of ZWL 189 million (Previous period: ZWL 2.1 billion) was impacted adversely by the monetary loss of ZWL 1.1 billion arising from the US$ denominated bank and receivable balances.

Group Profit after tax for the six month period, amounted to ZWL 1.9 billion expressed in terms of historical cost (Previous year: ZWL 160.1 million), an increase of 1087% boosted by exchange gains. 

Group net current assets denominated in foreign currency on 30 September 2020 were US$ 18.7 million. The Group’s statement of financial position remains strong despite COVID-19 disruptions during the period under review. 

TM Supermarkets trading as TM and PnP

Revenue for the period was ZWL 10.0 billion in inflation adjusted terms (Previous period: ZWL 10.8 billion). Units sold declined by 31% during the period under review due to COVID-19 restrictions and shrinking disposable incomes. The segment lost trading days as seven branches closed for days for disinfection purposes following COVID-19 cases.

Operating profit for the period amounted to ZWL 306.1 million in inflation adjusted terms, compared to ZWL 411.7 million achieved in the previous period. 

In historical cost terms the operating profit for the period amounted to ZWL 1.1 billion up from ZWL 114.8 million in the previous period.

Despite constraints brought about by COVID-19, the segment opened a new store in Aspindale, Harare in July 2020. Work is at an advanced stage for another new branch in Harare that should be opened before the end of December 2020. The store in Hwange was closed for major renovations and will reopen before the end of December 2020 under the Pick n Pay brand.

Tanganda

Revenue of ZWL 935 million in inflation adjusted terms was 15% lower than ZWL 1.1 billion achieved during the six months ended 30 September 2019.

Operating profit in inflation adjusted terms was ZWL 402.9 million compared with ZWL 604.5 million in the previous period. In the past season all crops were affected by lack of rain and power.

Operating profit in historical cost terms was ZWL 573.6 million (previous period ZWL 95.4 million).

Bulk tea export sales of 3 282 tonnes were 11% lower than 3 669 tonnes sold in the comparative period last year. Average international bulk tea export price for the period retreated to US$1.35/kg from US$1.47/kg in the six months’ period to 30 September 2019. Bulk tea production for the period declined by 17% primarily due to adverse weather. Packed tea sales volumes grew by 14%. 

The volume of Macadamia production declined by 37% from 854 tonnes in prior year season down to 537 tonnes attributed to the drought and failure to irrigate crops due to power losses. The average price of primary grades of US$5.37 was 8% firmer than in the prior period.

The volume of avocado export sales grew by 15% to 1671 tonnes from 1 450 tonnes in the comparative period. However, due to the lockdowns in Europe that resulted in massive closure of restaurants and hotels, the avocado average selling price declined by 37% from US$1.62/kg in the half year ended 30 September 2019 down to US$1.02/kg for six months ended 30 September 2020. 

The construction of the 1.8 Mega Watt solar farm at Ratelshoek, Chipinge was completed in September 2020. The plant is now supplying power for irrigation and acting as a standby source of power for the factory, supported by diesel generators when power supply from the National grid is interrupted. During the current power outages 70% diesel savings have been realised when compared with prior year usage. Two more solar power plants are under construction at Tingamira and Jersey estates and are scheduled for completion by January 2021.

Tanganda’s contribution to foreign currency generation was recognised by Zimtrade as the segment was awarded ‘Processed Foods - exporter of the year award 2019’. 

Hospitality

The segment’s operations in Victoria Falls were affected for the entire period under review as international tourism and travel was disrupted by the COVID-19 pandemic. The hotel reopened on 1 November 2020. Our current focus is on the refurbishment roll out that is scheduled to commence at the beginning of 2021.

Operating profit in inflation adjusted terms was ZWL 33.3 million compared to the previous period of ZWL 154.2 million.

Properties

Plans to transform and reconfigure the Group’s properties have been finalised and roll out has commenced. Some of the properties will be disposed of and proceeds reinvested in strategic locations. 

Group leadership

Three independent non-executive directors were appointed to the main board on 31 July 2020 in line with the Companies and Other Business Entities Act and Zimbabwe Stock Exchange Listings Requirements. Executive management structures are being reviewed ahead of the stepping down of the Executive Chairman from the executive role to become non-executive Chairman on 31 March 2020.

OutlookThe Group is well placed to take advantage of opportunities that may arise as it has substantial resources to support its strategies. To this end, capital projects across the subsidiaries will be completed as planned.

There are strong indications that the forthcoming agricultural season will be more positive than the previous two seasons, which augurs well for Tanganda. 

The COVID-19 induced decline in volumes experienced at TM Pick n Pay appears to have eased.

Corporate Social Responsibility

The Group supported the fight against COVID-19 through its subsidiaries and the Meikles Foundation. Supermarket segment donated face masks to customers through the branch network and accelerated the distribution of food hampers as well as blankets to elderly homes and orphanages. In addition, the segment partnered with Zimbabwe Broadcasting Corporation (ZBC) to raise awareness of the COVID-19 pandemic and recommended precautionary measures targeting both urban and rural communities. Tanganda contributed to the construction of provincial and district COVID-19 isolation centres. Meikles Foundation provided food stuffs to vulnerable members of society in Epworth.

Dividend

The Company intends to declare two interim dividends and a final dividend based on profits for the year. The first interim dividend declared is ZWL 42.5 cents per share amounting to ZWL 111.0 million which is the same as the final dividend in the previous year.

Appreciation

I would like to extend my appreciation to our customers, suppliers, shareholders, and regulatory authorities for their continued support. I extend also my appreciation to my fellow Directors, and to management and staff for their dedication and commitment.

JRT Moxon

Executive Chairman

25 November 2020

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2020

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2020

HISTORICAL COST*

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

The condensed consolidated 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. The historical costs have been adjusted for the effects of applying International Accounting Standard (“IAS”) 29 – ‘Financial Reporting in Hyperinflationary Economies’ . Refer to note 2.3 for further details.

These condensed consolidated financial statements have been prepared in accordance with the International Accounting Standard (“IAS”) 34 Interim Financial Reporting and should be read in conjunction with the Group’s annual report for the full year to 31 March 2020.

These condensed consolidated financial statements have been prepared under the supervision of Thempson Muzvangwandoga CA (Z), the Group Chief Financial Officer, registered public accountant PAAB Number 2724.

2. Accounting policies

Accounting policies and methods of computation applied in the preparation of these condensed consolidated financial statements are consistent, in all material respects, with those used in the preparation of the annual report. New applicable standards and improvements which became effective in the current year have been complied with and have had no material impact on these condensed consolidated financial statements.

2.1 Functional and presentation currency

These condensed consolidated financial statements are presented in Zimbabwe dollars (ZWL), which is the Group’s functional and presentation currency. The ZWL was designated as the sole transactional, functional and reporting currency following the promulgation of Statutory Instrument 33 of 2019 dated 22 February 2019 and Statutory Instrument 142 of 2019 dated 24 June 2019.

2.2 Historical reporting*

Historical cost financial results are provided only as supplementary information. The primary financial statements are the inflation adjusted results. The auditor’s review conclusion relates only to the inflation adjusted financial results.

2.3 Hyperinflation 

On 11 October 2019, the Public Accountants and Auditors Board (“PAAB”) issued a pronouncement on the application of IAS 29. The pronouncement requires that entities operating in Zimbabwe with financial periods ending on or after 1 July 2019, prepare and present financial statements in line with the requirements of IAS 29.

The Directors have made appropriate adjustments to reflect the changes in the general purchasing power on the ZWL and for the purposes of fair presentation in accordance with IAS 29, these changes have been made on the historical cost financial information. Various assumptions have been made, with the significant assumption being the use of the consumer price indices (“CPI”), for the various years. Accordingly, the inflation adjusted condensed consolidated financial statements represent the primary financial results of the Group.

The source of the price indices used was the Reserve Bank of Zimbabwe website. Below are the indices and adjustment factors used up to 30 September 2020:

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 2020, the Directors have assessed the Group’s ability to continue operating as a going concern and believe that the preparation of these condensed consolidated financial statements on a going concern basis is still appropriate. 

The Group’s segments have put in place various measures to mitigate the adverse impact of the COVID-19 pandemic to the businesses. Apart from the hospitality segment, the rest of the Group’s segments are operating as they are classified as part of essential services. Whilst lockdown restrictions have been eased, customer spending is still to fully recover in the Group’s retail sector due to reduced disposable income. Gradual revenue growth is anticipated in the second half of the financial year.

The Victoria Falls Hotel, which closed at the end of March 2020, re-opened on the 1st of November 2020 following resumption of domestic and limited international flights after the Government of Zimbabwe eased restrictions in September 2020. However, revenue is still subdued as new cases of COVID-19 infections are on the rise in major source markets. The Cape Grace Hotel remains closed as South Africa still has stringent protocols for visitors entering the country from major tourist source markets.

Both the hospitality segment and the rest of the Group have sufficient cash resources to fund operations for a prolonged period of care and maintenance.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Segment information

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Fair value measurement (continued)

5.3 Valuation of Biological assets

Biological assets comprise of gum and wattle plantations, livestock and produce growing on the bearer plants. The present value of expected net cash flows from plantations, discounted at a current market determined pre-tax rate, was used to determine fair value of timber plantations. The fair value for livestock was determined by reference to the market price and these valuations were carried out by a professional valuer not connected to the Group. Produce growing on bearer plants is measured at fair value less costs to sell with changes recognised in profit or loss as the produce grows.

Fair values of tea bushes on plantations, macadamia nuts on plantations, coffee beans on plantations and avocado fruit on plantations is determined using Level 1 inputs on the fair value hierarchy, whilst fair values for timber plantations and livestock is determined using level 3 inputs.

6. Discontinued operations

Greatermans Stores

The group exited the departmental stores segment during the first quarter of the previous financial year. The results of the departmental stores for the current year relate to winding down costs and proceeds from disposal of assets and are disclosed as discontinued operations in the current period.

7. Subsequent events

There were no siginificant events after the reporting date.

8. External Auditor’s Review Conclusion

These condensed consolidated financial statements for the six months ended 30 September 2020 have been reviewed by Deloitte & Touche (Chartered Accountants) Zimbabwe who indicate that nothing has come to their attention that causes them to believe that these inflation adjusted condensed consolidated financial statements are not prepared, in all material respects in accordance with IAS 34 and the requirements of the Zimbabwe Stock Exchange Listings Requirements.

The auditor’s review statement is available for inspection at the Company’s registered office and on the website.

Meikles Limited Website : www.meiklesltd.com

Notice to Shareholders

Dividend declaration

Notice is hereby given that the Board of Directors declared an Interim Dividend Number 83 of ZWL 42.5 per share payable out of the profits for the current financial year. The dividend will be payable on or about 18 December 2020. Disbursements to foreign shareholders is subject to Exchange Control Approval and payment guidelines for foreign payments. The timetable for the dividend payment is as follows: -

Shareholders are encouraged to update their payment details through our transfer secretaries:

ZB Transfer Secretaries, 21 Natal Road, Belgravia, Harare Zimbabwe

PMberikwazvi@zb.co.zw

RMutakwa@zb.co.zw

By Order of the Board

T. Mpofu

Company Secretary

25 November 2020