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Meikles Africa Ld (MIK)

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Wednesday 03 September, 2008

Meikles Africa Ld

Interim Results

RNS Number : 5845C
Meikles Africa Ld
03 September 2008
 







Chairman's Statement for Half Year ended 30 June 2008


The six months period to 30 June 2008 continued to be extremely difficult with conditions creating an environment where the prosperity and survival of some local operations were dependant on the overall strength and structure of Kingdom Meikles balance sheet and cash flows. The Group's financial services, foreign assets and operations together with export earnings were key to revenue generation and maintaining real values in uncertain Zimbabwean trading conditions. The terms of the Kingdom Meikles US$31m deposit with the Reserve Bank of Zimbabwe (RBZ) were successfully re-negotiated with effect from 1 January 2008 further strengthening the Group's asset base. We are grateful to the RBZ Governor and his team for the resolution of this substantive matter.

The Group has focused on the preservation of capital being mindful that investment in assets must provide returns to continue future trading cycles. Exports of bulk tea, textile product, foreign exchange trading in the financial services group and the performance of the hotels, from a foreign currency earnings perspective, were all satisfactory, given the local constraints to produce goods and services at the added value level.

The financial services businesses have had to contend with a volatile trading environment, so maintaining a very strong balance sheet structure and profit generation requires a shift to an earnings flow aside from net interest income. This policy has proved successful, but as is the case in all forms of business in Zimbabwe at present, strategies are short term and have to be flexible to contend with the changing environment.

The merger between the former Meikles Africa Limited Group, Kingdom Financial Holdings Limited, Tanganda Tea Company Limited and Cotton Printers (Private) Limited was effective from 31 December 2007. From a statutory financial statements presentation point of view the comparatives in the Group income statement refer to the former Meikles Africa Group. However, for information purposes an indicative segmental income statement has been presented.

Any comment on financial information is based on the inflation adjusted financial statements.


Group subsidiary/divisional reports for 6 months to 30 June 2008


Kingdom Financial Holdings Ltd

  • Operating profits increased by 367% to $678 quadrillion.

  • Group cash inflows amounted to $141 quadrillion.

  • Interest and non-interest income contributed 4% and 96%, respectively.

  • Net interest margin was 53% compared to the prior year of 46%.

  • Cost to income ratio came down marginally to 14% from 15%.

  • A modern Point of Sale system was successfully rolled out within our Kingdom Meikles local till points in retail and hotel subsidiaries and the Kingdom Bank merchant clientele. 


Meikles Africa Hotels

  • Operating profits increased by 8.6% to $29 quadrillion.

  • Group room occupancy increased by 8% to 42%.

  • In US dollar terms, revenue per available room was flat for Zimbabwe operations, but increased by 17% at the Cape Grace.

  • Refashioning budgeted at US$8 million for Cape Grace has progressed and is on target for completion by the start of the fourth quarter busy season.

  • Maintenance of Zimbabwe operations is at a level to ensure Leading Hotels of the World standards are satisfied and a phased refashioning of the Victoria Falls Hotel has commenced. 


Tanganda Tea Company Ltd

  • Operating profits increased by 514% to $92 quadrillion.

  • Tea production was 4 089 tonnes, 12% down on prior year. Shortage of labour and irregular weather patterns were the main constraints.

  • Exports of bulk tea, at 2 962 tonnes were 2% down on prior year.

  • Approved US$1,6 million foreign loan facilities will ensure the mechanisation project advances with plucking machines being a priority to increase production capacity given the shortage of labour.

  • World tea prices remain constant.


Retail

  • Operating loss reduced from $79 quadrillion to $59 quadrillion.

  • Suppliers are driving harder for cash terms.

  • Product availability was constrained by low manufacturing output and available cash flows for local and imported goods.

  • There was focus on optimising retail space with available stock.

  • Key retail sites have been retained and retail systems were improved.  

  • Frequent electricity outages resulted in increased costs.

  • Margins are under pressure because of cost of supply.

  • Introduction of Kingdom Bank Point Of Sale devices has been successful.

  • One new TM branch has been completed and two are still under construction. Openings are determinant on sufficient stock availability.

  • Zimbabwe industry capacity utilisation continues to fall and business closures continue to be a reality reducing supplies to our retail units. 


Cotton Printers (Pvt) Ltd

  • Operating profit increased by 69% to $2 quadrillion.

  • Production of yarn for export has been constrained by erratic lint supply and low plant utilisation. 

  • A maintenance programme is in place. Funding is from offshore facilities and increases in production volumes should occur by the fourth quarter.

  • The local market for bed linen has been confined to small volumes to the hospitality industry.


Financial Institutions Capitalisation 

On 4 July 2008 the RBZ issued a circular requiring that financial institutions increase their capital levels to new prescribed limits. The new capital levels are United States dollar linked and financial institutions are required to re-adjust their capital levels using the prevailing inter-bank exchange rate. The Group banking subsidiaries affected are Kingdom Bank Limited, The Discount Company of Zimbabwe (Private) Limited and Kingdom Asset Management (Private) Limited and the total amount required in order to capitalise the three entities to the statutory level is US$22.5 million. The Group has utilised the United States dollar funds it has on deposit with the RBZ to capitalise the entities concerned, which has resulted in all of them attaining the capital levels required prior to the deadline of 30 August 2008. The fact that the capital levels are actually denominated in United States dollars has the added advantage that the Group will avoid having to inject Zimbabwe dollars every time the inter-bank exchange rate changes.


Directorships

On 1 April 2008 Mr T. Nyambirai resigned as a director of the company in order for him to pursue other business interests. His contribution during his brief tenure on the board is appreciated. Mr D. Mboweni was appointed a Director with effect from 28 August 2008.


Outlook

The merged Group continues to take advantage of synergies and resources across its business entities and the diversity of the Group with its solid asset base provides the strength to manage the current difficult environment. Our operating divisions strive to trade within agreed policy parameters and continue to contribute to operating profit. All our businesses in Zimbabwe are attempting to manage the ravages of chronic hyper-inflation and erosion of capital accentuated by a lack of foreign currency, declining public utilities, the shortage of product at either raw material or manufactured level and pricing that must ensure adequate cash flow, despite imposed pricing controls. Loss of skills in certain operating divisions is also of concern.

Kingdom Meikles continues to examine opportunities aligned to all of its businesses in the region. Alliances established so far are expected to consolidate during the second half of the year, in pursuance of the strategic focus the Group has to leverage off the strength of the balance sheet and potential investor interest. Those at a more advanced stage include a joint regional expansion programme with Pick 'n Pay and utilisation of hospitality assets to expand potential foreign investment opportunities.

The RBZ has agreed to restore the fungibility of Kingdom Meikles shares on the London Stock Exchange. This should facilitate the Group's fund raising efforts for new projects which have been identified in the region and, at the opportune time, in Zimbabwe. 


Social Responsibility

The Group continues to be mindful of the plight of the aged and other vulnerable persons in Zimbabwe. Shortages and non-availability of basic commodities and services have compounded the hardships endured by those who have least. In an effort to assist in the welfare of our country's orphans, vulnerable children and senior citizens the Group contributes to homes and institutions across Zimbabwe.



Conclusion

I would like to thank my fellow Directors for their contributions during the period and pay particular tribute to all management and staff who have performed admirably under testing circumstances.


J. R. T. MOXON

CHAIRMAN




  UNAUDITED RESULTS FOR THE 6 MONTHS TO 30 JUNE 2008


SALIENT FEATURES

References are to inflation adjusted information

 Revenue

 $350 quadrillion


Operating profit 

$726 quadrillion


Attributable profit

Increased to $2,581 quadrillion


Cash generated and funds available

Funds generated from operations were $788 quadrillion 

Funds on hand amount to $2,573 quadrillion



References are to historical information

 Revenue

 $121 quadrillion


Operating profit 

 $568 quadrillion


Attributable profit

Increased to $2,991 quadrillion


Cash generated and funds available

Funds generated from operations were $333 quadrillion 

Funds on hand amount to $2,573 quadrillion




  UNAUDITED CONSOLIDATED INCOME STATEMENT 

For the 6 months to 30 June 2008



INFLATION ADJUSTED

HISTORICAL COST






(all amounts in billions of dollars)  

6 months to

6 months to

6 months to

6 months to


  30 June 2008

 30 June 2007

30 June 2008

30 June 2007











Revenue and net interest income

350,210,124

443,574,359

120,501,077

1,627

Operating profit / (loss) before monetary adjustment and exchange gains


726,478,236


(66,615,213)


568,024,125


388

Net monetary (loss) gain from operating activities  

(290,131,619)

87,886,908

-

-

Exchange gains on net current assets

759,067,759

17,692,109

523,161,889

46

Operating profit 

1,195,414,376

38,963,804

1,091,186,014

434

Investment income

60,349,066

13,297,254

10,125,243

34

Finance costs

(6,217,678)

(3,944,101)

(1,003,522)

(11)

Net exchange gains on foreign funds

1,793,290,724

82,375,358

2,339,644,554

2,531

Increase in value of quoted investment

(33)

10,141,973

457

117

Net monetary gain from financing activities

50,871,006

96,236,055

-

-

Biological assets impairment

(11,141,372)

-

-

-

Share of profits / (losses) of associates

272,948

5,070,987

(49,261)

9

Profit  before taxation

3,082,839,037

242,141,330

3,439,903,485

3,114






Income tax expense

(502,242,751)

(37,782,227)

(448,198,963)

(372)






Profit for the period

2,580,596,286

204,359,103

2,991,704,522

2,742

Attributable to:





Equity holders of the parent

2,581,109,298

207,176,318

2,991,349,954

2,691

Minority interest

(513,012)

(2,817,215)

354,568

51


2,580,596,286

204,359,103

2,991,704,522

2,742






Basic earnings per share ($) 

10,633,766,540

1,265,919,500

12,323,893,868

16,446

IIMR Headline earnings per share ($) 

10,679,667,250

1,265,919,500

12,324,103,773

16,443

Weighted average number of shares

242,727,663

163,656,787

242,727,663

163,656,787


  UNAUDITED CONSOLIDATED BALANCE SHEET 

At 30 June 2008



INFLATION ADJUSTED


HISTORICAL COST








(all amounts in billions of dollars)  

At

Audited at


At


Audited at


  30 June 

 2008

31 December

 2007


  30 June

 2008


31 December 

2007








ASSETS







Property, plant and equipment







Banking

419,078,606

69,927,302


2,935,415


107,297

Non-banking

588,887,411

458,291,540


424,297,982


13,645

Investment property - banking

14,352,000

10,547,760


14,352,000


3,542

Biological assets

1,571,518

12,572,739


1,571,518


4,222

Investment in associates -banking

72,133,749

63,876,187


10,225,559


6,231

Other financial assets and investments

1,149,772,794

322,620,901


1,148,010,949


108,245

Goodwill

1,749,522,360

1,749,522,602


613,686


613,686

Other intangibles

259,010

259,078


476


87

Current assets - banking







Balances with banks and cash

832,429,666

430,555,279


832,429,666


144,583

Financial assets at fair value through profit and loss

238,138,761

116,349,953


238,138,761


39,071

Advances and other accounts

397,278,664

49,948,498


397,278,664


16,773

Available for sale

214,122,466

21,997,827


212,638,750


6,805

Customers' liability for acceptances

6,467,758

202,498


6,467,758


68

Current assets - non banking

1,955,905,316

689,916,422


1,899,899,462


224,011

Total assets

7,639,920,079

3,996,588,586


5,188,860,646


1,288,266








EQUITY AND LIABILITIES







Attributable to equity holders of the parent

5,637,014,204

3,029,827,708


3,375,634,036


983,295

Minority interest

6,376,913

6,887,908


354,853


285

Deferred tax







Banking

268,303,160

31,134,058


198,210,718


11,480

Non-banking

351,721,579

110,962,913


241,458,270


18,592

Other non-current liabilities

266,824,025

156,897,187


266,824,025


52,687

Current liabilities - banking







Financial liabilities at fair value through profit and loss

11,992,226

61,056,105


11,992,226


20,503

Customer deposits

897,321,001

414,617,500


897,321,001


139,231

Acceptances

6,467,758

202,498


6,467,758


68

Other current liabilities

70,790,206

44,338,114


70,790,206


14,889

Current liabilities - non banking

123,109,007

140,664,595


119,807,553


47,236

Total equity and liabilities

7,639,920,079

3,996,588,586


5,188,860,646


1,288,266











  UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 6 months to 30 June 2008













INFLATION ADJUSTED


HISTORICAL COST










(all amounts in billions of dollars)  


6 months to


6 months to


months to


6 months to



30 June 2008



30 June 2007



30 June 2008



30 June 2007


Profit for the period attributable to parent


2,581,109,298


207,176,318


2,991,349,954


2,691

Share premium on issue of shares


3,469,565


-


596,339


-

Share issue expenses


(13,445,941)


-


(853)


-

Translation of foreign entities


(95,677,499)


(3,660,174)


235,777,138


355

Share of reserves of associates


-


225,377


-


2

Fair value adjustment on available for sale securities


131,733,601


-


146,928,674


-

Share based payments


1,703,311


-


1,703,311


-

Dividend - current year interim


(1,703,822)


-


(1,703,822)


-

Dividend - prior year final


-


(5,665,320)


-


(27)

Attributable to equity holders of parent


2,607,188,513


198,076,201


3,374,650,741


3,021

Minorities


(513,012)


(2,817,215)


354,568


51

Shareholders' equity at the beginning of the period


3,036,715,616


132,575,349


983,580


28

Shareholders' equity at the end of the period


5,643,391,117


327,834,335


3,375,988,889


3,100
















  UNAUDITED CONSOLIDATED CASH FLOW STATEMENT

For the 6 months to 30 June 2008




INFLATION ADJUSTED

HISTORICAL COST







(all amounts in billions of dollars)  


6 months to

6 months to

6 months to

6 months to



30 June 2008

30 June 2007

30 June 2008

30 June 2007  







Cash flows from operating activities






Profit before taxation


3,082,839,037

242,141,330

3,439,903,485

3,114

Adjustments for:






  Non-operating cash flow


(54,131,388)

(51,960,578)

(9,121,721)

(110)

  Non-cash items


(2,268,934,553)

(77,870,102)

(2,875,681,315)

(2,600)

Operating cash flow before working capital changes


759,773,096

112,310,650

555,100,449

404

Working capital changes


47,292,430

32,886,086

(214,550,964)

52

Cash generated from operations


807,065,526

145,196,736

340,549,485

456

Income taxes paid


(19,093,095)

(43,502,082)

(7,805,507)

(6)

Net cash generated from operating activities


787,972,431

101,694,653

332,743,978

450







Net cash used in investing activities


(870,716,981)

(20,910,473)

(80,252,606)

(29)







Net cash generated from / (used in) financing activities


3,831,941

(64,079,075)

25,381,761

(63)







Net (decrease) increase in cash and cash equivalents


(78,912,609)

16,705,106

277,873,133

358







Cash and cash equivalents at the beginning of the period


1,010,443,354

883,191,568

339,313

17







Net effect of exchange rate changes on cash and cash equivalents


2,898,282,741

16,632,213

3,320,677,749

1,969







Translation of foreign entity


(1,256,908,166)

60,997,372

(1,025,984,875)

41







Cash and cash equivalents at the end of the period


2,572,905,320

977,526,258

2,572,905,320

2,385



































  UNAUDITED SEGMENT INFORMATION



   INFLATION ADJUSTED

  HISTORICAL COST






(all amounts in billions of dollars)

6 months to

6 months to

6 months to

6 months to


30 June 2008

30 June 2007


30 June 2008

30 June 2007

Revenue





Banking

29,252,466

-

15,038,196

-

Hotels

115,686,992

79,316,633

32,127,783

232

Retail

101,181,178

364,257,726

17,915,656

1,395

Agriculture

100,683,165

-

54,610,875

-

Textiles

3,406,323

-

808,567

-

 

350,210,124

443,574,359

120,501,077

1,627

Operating profit / (loss) before monetary adjustment and exchange gains





Banking

678,330,494

-

511,424,579

-

Hotels

29,146,479

26,827,368

3,798,290

57

Retail

(59,036,296)

(79,598,624)

471,583

352

Agriculture

92,092,175

-

58,698,374

-

Corporate and other

(14,054,616)

(13,843,957)

(6,368,701)

(21)

 

726,478,236

(66,615,213)

568,024,125

388

Segment assets

   





Banking

2,194,001,670

-

1,714,466,573

-

Hotels

725,637,742

99,685,564

655,167,800

1,127

Retail

68,253,393

44,528,700

23,749,198

1,090

Agriculture

150,428,963

-

102,566,548

-

Corporate and other

4,501,598,311

2,580,312,072

2,692,910,527

2,616

 

7,639,920,079

2,724,526,336

5,188,860,646

4,833



SUPPLEMENTARY INFORMATION





INFLATION ADJUSTED


HISTORICAL COST

(all amounts in billions of dollars)  

6 months to

6 months to


6 months to

6 months to


30 June 2008

30 June 2007


30 June 2008

30 June 2007













Capital expenditure

411,669,734

715,087


84,334,141

77

Capital commitments authorised but not yet contracted for


685,147,345


35,271,528



685,147,345


313

Depreciation

19,507,949

10,806,910


2,817,193

16

Commitment to capitalise Kingdom Financial Holdings Limited Group


1,130,512,500


-



1,130,512,500


-

Interest bearing borrowings

94,351,944

16,452,534


94,351,944

146

  Below is segment information for the six months ended 30 June 2008 assuming the Group was in existence from 1 January 2007.

INDICATIVE SEGMENT INFORMATION







INFLATION ADJUSTED

INFLATION ADJUSTED

HISTORICAL COST

HISTORICAL COST

(all amounts in billions of dollars)

6 months to

6 months to

6 months to

6 months to


30 June 2008


30 June 2007


30 June 2008

30 June 2007

Revenue





Banking

29,252,466

57,321,320

15,038,196

200

Hotels

115,686,992

79,316,633

32,127,783

232

Retail

101,181,178

364,257,726

17,915,656

1,395

Agriculture

100,683,165

51,611,374

54,610,875

183

Textiles

3,406,323

3,487,063

808,567

95

 

350,210,124

555,994,116

120,501,077

2,105

Operating profit / (loss) before monetary adjustment and exchange gains





Banking

678,330,494

145,276,889

511,424,579

645

Hotels

29,146,479

26,827,368

3,798,290

57

Retail

(59,036,296)

(79,598,624)

471,583

352

Agriculture

92,092,175

14,987,582

58,698,374

188

Corporate and other

(14,054,616)

(12,458,024)

(6,368,701)

57

 

726,478,236

95,035,191

568,024,125

1,299


Accounting policies


Accounting policies are consistent with those used in the previous year.


Note to inflation adjusted financial statements


The consumer price indices used to restate the financial statements at 30 June 2008 are as follows:



30 June 2007

94,204,140.4

31 December 2007

3,564,825,238.9

30 June 2008

10,615,731,618,730.9


For further information contact: 


Zimbabwe        Nigel Chanakira or Bryan Thorn +263-4-252068/78


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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