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    MIK   ZW0009012114

MEIKLES LIMITED

(MIK)
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Meikles : Ld - Abridged Financial Results for the y/e 31 Mar 2020

08/24/2020 | 06:22am EDT

MEIKLES LIMITED

ABRIDGED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2020

CHAIRMAN’S STATEMENT

It gives me pleasure to present the Chairman’s Statement for the financial year ended 31 March 2020.

FINANCIAL OVERVIEW

The Group did not anticipate the advent of COVID-19. The impact of the virus has affected the latter part of the financial year under review. It is apparent that the continued impact of the virus will affect the world and Zimbabwe for an unpredictable period into the Group’s new financial year.

The Group restructured its finances in recognition of stresses in the local environment. It is fortunate that the structural adjustments will also enable the Group to withstand damages caused by the virus.

The Group decided sometime ago to ensure that it remains in a position to fund capital expansion projects, replacement requirements, provide working capital and be in a position to continue paying dividends to shareholders, without placing adverse pressure on Group resources.

Shareholders are advised that the Group financial restructuring has been successfully implemented. The Group is in a net cash in hand position, but in the process of achieving this position most Group bank borrowings were repaid within the year under review and subsequent to the year-end, the remaining out of term bank borrowings have been repaid. This position has been achieved from normal operating cash flows and puts the Group in an unsurpassed financial position since the dollarisation in 2009. The sale of the Harare based hotel has increased the Group’s total current assets which are substantially more than current liabilities.

FINANCIAL REPORTING

There were two developments during the financial year under review with significant impact to financial reporting: -

IAS 29 - Financial Reporting in Hyperinflationary economies

The Public Accountants and Auditors Board (PAAB) issued a pronouncement in October 2019 indicating that factors and conditions to apply International Accounting Standard (IAS) 29 - Financial Reporting in Hyperinflationary Economies had been met in Zimbabwe. In accordance with IAS 29, historical cost financial information has been restated for changes in general purchasing power of the Zimbabwean Dollar (ZWL). Accordingly, the inflation adjusted financial statements represent the primary financial statements of the Group. The historical cost financial statements have been provided as supplementary information. 

Adoption of IFRS 16 - Leases

The Group adopted International Financial Reporting Standard (IFRS) 16 for the first time on 1 April 2019. The impact of the adoption of IFRS 16 is set out in note 8 of these abridged financial results.

GROUP FINANCIAL PERFORMANCE

 
The Group delivered strong financial results in a tough operating environment with several impediments. Commentary on financial performance is based on inflation adjusted figures.

Group revenue for continuing operations grew by 6% from ZWL 8.3 billion in 2019 to ZWL 8.8 billion in the year under review.

Profit for the year grew from ZWL 320.6 million in prior year to ZWL 1.4 billion. Growth in Profit for the year was boosted by ZWL 118.7 million profit on disposal of Meikles Hotel.

Total comprehensive income for the year was ZWL 1.1 billion (2019: ZWL 561.4 million), of which ZWL 790.8 million was attributable to the owners of the parent with the remaining balance of ZWL 340.7 million being for minority shareholders.

Segmental contributions to the Group’s financial performance is set out in note 5 of these abridged financial results.. 

REVIEW OF OPERATIONS

Supermarkets - trading as TM Pick n Pay

Revenue increased by 2% over the previous year in inflation adjusted terms. Sales volume declined by 22% due to diminishing customer disposable income over the period.

Profit after tax grew to ZWL 674.8 million from a loss of ZWL 21 million in the previous year. Profit growth was achieved through a focussed approach to margin and operating expenditure control.

The profit after tax was after deducting exchange losses of ZWL 380.6 million. These exchange losses arose from foreign currency denominated liabilities (legacy debt) accumulated prior to introduction of local currency on 22 February 2019. Going forward, there will be no exchange losses as legacy debt exposure has now been eliminated. 

Legacy debt reduced to US$ 2.23 million at 31 March 2020 from US$ 13.3 million at the beginning of the financial year.  The payment of legacy debt was funded from internally generated funds. After year-end, US$ 0.6 million was paid, leaving the outstanding balance at US$ 1.63 million. In addition, ZWL 1.63 million was remitted to the Reserve Bank of Zimbabwe (RBZ) to complete all processes according to the RBZ’s guidelines on blocked funds or “legacy debt” contained in Exchange Control Directive RU28 dated 21 February 2019 and Exchange Control Circular No.8 of 24 July 2019. Accordingly, it is anticipated the RBZ will issue an instrument that will settle US$ 1.63 million without further costs to the segment.

The segment invested ZWL 386.6 million in seven (7) store upgrades and construction of an upmarket mall in Marondera.

The clearance of foreign currency denominated liabilities has well positioned the segment for accelerated store upgrades, branch network expansion, commencement of dividend payment to shareholders and a boost on the working capital front.  

Agriculture

Profit after tax was ZWL 157.2 million (2019: ZWL 332 million).

The hailstorm of January 2019, Cyclone Idai in March 2019 as well as very dry and hot September to November 2019 period affected our tea production and ensuing season’s macadamia crop. The Company’s annual made tea production of 8 319 tonnes (2019: 10 171 tonnes) was reflective of these adverse weather conditions.

International tea prices weakened by 14% from US$ 1.64 per kilogram in prior year to US$ 1.44 per kilogram in the year ended 31 March 2020 due to increased supply of tea by Kenya which has not been matched by corresponding world demand.

The much-needed RBZ authority to increase promotional spend in South Africa has been secured. This will help to support market penetration efforts to grow packed tea exports.

Export earnings from macadamia nuts, avocadoes and coffee grew by 78% from US$ 4.5 million in prior year to US$ 8 million in the year ended 31 March 2020. As a percentage of total exports, these three crops contributed 43% up from 25% in the prior year. Contribution of the high value crops to the Company’s export earnings is expected to rise to 60% by March 2022 as the bulk of them reach maturity. In volume terms, macadamia and avocado export sales grew by 129% and 39% respectively.

To mitigate the inefficiencies caused by power shortages in the country, the Company has embarked on a 7.5 Mega Watt solar project covering all estates and Mutare factory. Phases 1 to 3 of the project covering Ratelshoek, Tingamira and Jersey estates are already under implementation. Ratelshoek’s 1.8 Mega Watt solar plant is expected to be completed by September 2020. Tingamira’s 1.6 Mega Watt and Jersey’s 2.0 Mega Watt plants are expected to be completed by December 2020. By end of December 2020 we will have implemented 72% of the project. This project is expected to result in an efficient and integrated power supply system that will give impetus to the growth and maturity of our high value crops and efficient crop processing.

Hospitality

Profit after tax from continuing operations increased to ZWL 184.7 million in the current year from ZWL 72.5 million in the previous year.

The disposal of Meikles Hotel was completed at the end of February 2020 and control was transferred to the buyer in March 2020. The financial results of the hotel for the period up to the date of disposal as well as the profit on disposal are included under discontinued operations.

The refurbishment of The Victoria Falls Hotel was due to commence in April 2020 but has been disrupted by the outbreak of the COVID-19 pandemic. The hotel closed in March 2020 when international travel and tourism stopped as countries implemented travel restrictions and lockdowns to contain the spread of the corona virus.

Properties

Plans to renovate and upgrade the Group’s property portfolio are at an advanced stage and the roll out is anticipated to commence during the second half of the forthcoming financial year. Several tenants have expressed interest to lease the properties which had been left vacant following the closure of the Group’s departmental stores.

Security Services

Meikles Guard Services fared well during the financial year and was not disrupted by loss of contract when the departmental stores closed. The segment secured additional contracts from third parties during the year.

MEIKLES FOUNDATION

During the year under review, Meikles Foundation played its part in providing much needed help to disadvantaged members of society. Further details on the Foundation’s activities are provided in the Annual Report.

CORPORATE SUSTAINABILITY

With the growing call for sustainability following the COVID-19 pandemic, the Group made a strategic decision to realign existing practices with consistent sustainability values across the Group. In doing so, the Group opted to adopt the Global Reporting Initiatives (GRI) Standards as a catalyst and business strategy for re-engineering our value chains for long term business success and sustainable decision making into the future. Sustainability will be the cornerstone for maintaining the Meikles legacy created over a century. Our sustainability strategy will now anchor how our brands compete and deliver value to our customers and stakeholders in our markets. The Group will calibrate practices across all subsidiaries for the successful implementation of the strategy.

DIVIDEND


In view of the Group’s financial results for the year ended 31 March 2020, the Board has declared a final dividend of 42.5 ZWL cents per share, bringing the total dividend for the year to 60 ZWL cents. The final dividend will amount to ZWL 111 million. A full dividend announcement will be published separately in due course. 

DIRECTORATE

The Board welcomed, Ms Cathrine Chitiyo, Mr Stewart Cranswick and Mr Simon Hammond as Independent Non-Executive Directors of the Company as part of the steps to comply with the requirements of the Companies and Other Business Entities Act (Chapter 24:31) and Statutory Instrument (SI) 134 of 2019 (Zimbabwe Stock Exchange Listings Requirements).

STRATEGY AND OUTLOOK

The financial strategy set out under Financial Overview in this report will continue to be applied during the forthcoming year. The Group is well placed to support its long-term objectives. 

Despite the absence of income from Hospitality together with its continuing cost commitments, the Group’s profit performance to date for the new financial year is ahead of expectations, but there are uncertainties going forward in terms of risk.

The COVID-19 impact is causing supermarkets to close for periods to facilitate disinfection whenever a case of the disease is identified. The cost of such closures is significant but necessary. Nevertheless, the Group is to continue with its expansion and renovation plans with a focus on both Tanganda and Supermarkets.

The Victoria Falls Hotel is closed and is on care and maintenance basis. Fortunately, the hotel has working capital resources which will enable it to maintain its financial independence well into the next calendar year. Shareholders are advised that the Cape Grace hotel is in the same position

APPRECIATION

I would like to extend my appreciation to our customers as well as suppliers for their continued support and to our shareholders, stakeholders and regulatory authorities for their assistance and guidance. I would also like to extend my thanks and appreciation to fellow Board members, management and staff for their dedication and commitment.

JRT Moxon

Executive Chairman

19 August 2020

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2020
INFLATION ADJUSTED HISTORICAL COST*
31 March
2020
31 March
2019
31 March
2020
31 March
2019
CONTINUING OPERATIONS ZWL 000 ZWL 000 ZWL 000 ZWL 000
Revenue 8,835,523 8,285,324 4,201,837 790,828
Net operating costs (8,325,514) (7,157,752) (3,513,677) (698,600)
Operating profit 510,009 1,127,572 688,160 92,228
Investment income 4,944 802 3,807 43
Finance costs (75,119) (90,921) (38,156) (8,432)
Net exchange gains / (losses) 29,861 (47,604) 111,784 (6,413)
Fair value adjustments on biological assets 90,312 49,171 183,515 9,433
Net monetary gain / (loss) 1,174,469 (688,815) - -
Profit before tax 1,734,476 350,205 949,110 86,859
Income tax expense (459,521) (153,900) (230,413) (16,845)
Profit for the year from continuing operations 1,274,955 196,305 718,697 70,014
DISCONTINUED OPERATIONS
Profit / (loss) for the year from discontinued operations 118,718 124,248 307,969 (4,056)
PROFIT FOR THE YEAR 1,393,673 320,553 1,026,666 65,958
Other comprehensive (loss) / income, net of tax
Items that will not be reclassified subsequently to profit or loss:
   Fair value loss on investments in equity instruments designated as at FVTOCI (249,651) (74,536) (249,651) (9,600)
Items that may be reclassified subsequently to profit or loss:
    Exchange rate and monetary adjustments on translation of foreign operations (12,608) 315,355 606,925 61,970
Other comprehensive (loss) / income for the year, net of tax (262,259) 240,819 357,274 52,370
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,131,414 561,372 1,383,940 118,328
Profit / (loss) for the year attributable to:
     Owners of the parent 1,053,010 325,054 907,868 53,827
     Non-controlling interests 340,663 (4,501) 118,798 12,131
1,393,673 320,553 1,026,666 65,958
Total comprehensive income / (loss) attributable to:
     Owners of the parent 790,751 565,873 1,265,142 106,197
     Non-controlling interests 340,663 (4,501) 118,798 12,131
1,131,414 561,372 1,383,940 118,328
Earnings per share in cents
Basic earnings per share - continuing and discontinued operations 403.35 126.76 347.76 20.99
Basic earnings per share - continuing operations 357.88 78.31 229.79 22.57
Diluted earnings per share - continuing and discontinued operations 378.39 118.78 326.24 19.67
Diluted earnings per share - continuing operations 335.73 73.38 215.57 21.15
Headline earnings per share - continuing and discontinued operations 377.25 127.93 221.12 21.43
Headline earnings per share - continuing operations 360.18 79.48 229.63 23.01
Diluted headline earning per share - continuing and discontinued operations 353.90 119.87 207.44 20.09
Diluted headline earnings per share - continuing operations 337.89 74.47 215.43 21.57

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2020

INFLATION ADJUSTED HISTORICAL COST*
31 Mar 2020 31 Mar 2019 31 Mar 2020 31 Mar 2019
ZWL 000 ZWL 000 ZWL 000 ZWL 000
ASSETS
Non-current assets
Property, plant and equipment 2,441,525 2,162,976 403,617 172,267
Investment property 2,938 2,980 231 236
Right of use assets 399,412 - 75,885 -
Investment in Mentor Africa (Pty) Limited 171,813 394,236 171,813 50,778
Biological assets 22,503 22,547 22,503 2,905
Intangible assets 1,570 1,570 124 124
Other financial assets 264,369 304,590 263,440 31,847
Deferred tax 69 50,845 20,637 9,111
Total non-current assets 3,304,199 2,939,744 958,250 267,268
Current assets
Inventories 775,296 824,382 565,008 100,163
Trade and other receivables 622,101 316,583 606,212 40,471
Biological assets – produce on bearer plants 187,052 86,785 187,052 11,178
Other financial assets 3,543 354 3,543 9
Cash and bank balances 262,469 256,255 262,469 33,006
1,850,461 1,484,359 1,624,284 184,827
Assets held for sale 388 380,983 9 30,032
Total current assets 1,850,849 1,865,342 1,624,293 214,859
Total assets      5,155,048 4,805,086 2,582,543 482,127
EQUITY AND LIABILITIES
Capital and reserves
Share capital 32,854 32,854 2,611 2,611
Share premium 40,997 40,997 3,925 3,925
Other reserves (34,362) 564,409 395,603 64,929
Retained earnings 2,735,739 1,428,204 1,020,252 131,914
Equity attributable to equity holders of the parent 2,775,228 2,066,464 1,422,391 203,379
Non-controlling interests 835,177 461,908 177,063 48,999
Total equity 3,610,405 2,528,372 1,599,454 252,378
Non-current liabilities
Borrowings 29,314 95,063 29,314 12,244
Deferred tax 649,576 596,360 88,022 25,617
Lease liabilities 91,527 - 91,527 -
Total non-current liabilities 770,417 691,423 208,863 37,861
Current liabilities
Trade and other payables 736,775 1,185,296 736,775 140,368
Borrowings 30,788 399,995 30,788 51,520
Lease liabilities 6,663 - 6,663 -
Total current liabilities 774,226 1,585,291 774,226 191,888
Total liabilities 1,544,643 2,276,714 983,089 229,749
Total equity and liabilities 5,155,048 4,805,086 2,582,543 482,127

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2020

INFLATION ADJUSTED

Share
capital
Share
premium
Other reserves
Investments revaluation

Retained earnings
 ZWL
000
 ZWL
000
 ZWL
000 
ZWL
000 
ZWL
000
2020
Balance at 1 April 2019 32,854 40,997 638,945 (74,536) 1,428,204
Profit for the year - - - - 1,053,010
Transfer from non-distributable reserves - - (336,512) - 336,512
Other comprehensive income / (loss) for the year - - (12,608) (249,651) -
Dividend paid – ordinary shareholders - - - - (81,987)
Non-controlling interests arising from Mopani Property Development (Private) Limited -
-
-
-

-
Balance at 31 March 2020 32,854 40,997 289,825 (324,187) 2,735,739
2019
Balance at 1 April 2018 as restated 32,406 18,582 323,590 - 1,128,057
Profit / (loss) for the year - - - - 325,054
Issue of shares – scrip dividend 448 22,415 - - -
Dividend paid – ordinary shareholders - - - - (24,907)
Other comprehensive income / (loss) for the year - - 315,355 (74,536)
Non-controlling interests arising from Mopani Property Development (Private) Limited -
-
-
-
-
Balance at 31 March 2019 32,854 40,997 638,945 (74,536) 1,428,204

   

Attributable to owners of parent Non-controlling
interests
Total
 ZWL
000
 ZWL
000
 ZWL
000 
2020
Balance at 1 April 2019 2,066,464 461,908 2,528,372
Profit for the year 1,053,010 340,663 1,393,673
Transfer from non-distributable reserves - - -
Other comprehensive income / (loss) for the year (262,259) - (262,259)
Dividend paid – ordinary shareholders (81,987) - (81,987)
Non-controlling interests arising from Mopani Property Development (Private) Limited - 32,606 32,606
Balance at 31 March 2020 2,775,228 835,177 3,610,405
2019
Balance at 1 April 2018 as restated 1,502,635 458,484 1,961,119
Profit / (loss) for the year 325,054 (4,501) 320,553
Issue of shares – scrip dividend 22,863 - 22,863
Dividend paid – ordinary shareholders (24,907) - (24,907)
Other comprehensive income / (loss) for the year 240,819 - 240,819
Non-controlling interests arising from Mopani Property Development (Private) Limited
-
7,925 7,925
Balance at 31 March 2019 2,066,464 461,908 2,528,372

   

HISTORICAL COST*

Share
capital
Share
premium
Other reserves
Investments revaluation

Retained earnings
 ZWL
000
 ZWL
000
 ZWL
000 
ZWL
000 
ZWL
000
2020
Balance at 1 April 2019 2,611 3,925 74,529 (9,600) 131,914
Profit for the year - - - - 907,868
Transfer from non-distributable reserves - - (26,600) - 26,600
Other comprehensive income / (loss) for the year - - 606,925 (249,651) -
Dividend paid – ordinary shareholders - - - - (46,130)
Non-controlling interests arising from Mopani Property Development (Private) Limited -
-
-
-

-
Balance at 31 March 2020 2,611 3,925 654,854 (259,251) 1,020,252
2019
Balance at 1 April 2018 as restated 2,562 1,469 12,559 - 81,160
Profit / (loss) for the year - - - - 53,827
Issue of shares – scrip dividend 49 2,456 - - -
Dividend paid – ordinary shareholders - - 61,970 (9,600) -
Other comprehensive income / (loss) for the year - - - - (3,073)
Non-controlling interests arising from Mopani Property Development (Private) Limited -
-
-
-

-
Balance at 31 March 2019 2,611 3,925 74,529 (9,600) 131,914

   

Attributable to owners of parent Non-controlling
interests
Total
 ZWL
000
 ZWL
000
 ZWL
000 
2020
Balance at 1 April 2019 203,379 48,999 252,378
Profit for the year 907,868 118,798 1,026,666
Transfer from non-distributable reserves - - -
Other comprehensive income / (loss) for the year 357,274 - 357,274
Dividend paid – ordinary shareholders (46,130) - (46,130)
Non-controlling interests arising from Mopani Property Development (Private) Limited - 9,266 9,266
Balance at 31 March 2020 1,422,391 177,063 1,599,454
2019
Balance at 1 April 2018 as restated 97,750 36,241 133,991
Profit / (loss) for the year 53,827 12,131 65,958
Issue of shares – scrip dividend 2,505 - 2,505
Dividend paid – ordinary shareholders 52,370 - 52,370
Other comprehensive income / (loss) for the year (3,073) - (3,073)
Non-controlling interests arising from Mopani Property Development (Private) Limited - 627 627
Balance at 31 March 2019 203,379 48,999 252,378

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







 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2020

INFLATION ADJUSTED HISTORICAL COST*
31 March 2020 31 March 2019 31 March 2020 31 March 2019
 ZWL 000   ZWL 000   ZWL 000   ZWL 000 
Cash flows from operating activities
Profit / (loss) before tax – continuing operations 1,734,476 350,205 949,110 86,859
                      – discontinued operations 147,633 127,620 336,884 (4,231)
1,882,109 477,825 1,285,994 82,628
Adjustments for:
- Depreciation and impairment of property, plant and equipment; investment property and right-of-use assets 231,255 155,987 36,266 14,376
- Net interest 74,379 97,114 35,621 8,591
- Net exchange (gains) / losses (20,038) 52,425 (108,886) 7,031
- Fair value adjustments on biological assets (90,312) (49,171) (183,515) (9,433)
  • Reversal of impairment of other financial assets
(3,324) - (3,324) -
- (Profit) / loss on disposal of property, plant and equipment – continuing operations (3,033) 241 (2,731) 42
- (Profit) / loss on disposal of property, plant and equipment – discontinued operations (74,157) 420 (330,192) 17
Operating cash flow before working capital changes 1,996,879 734,841 729,233 103,252
Decrease / (increase) in inventories 49,086 (4,781) (464,845) (56,293)
Increase in trade and other receivables (98,874) (64,668) (359,102) (11,522)
(Decrease) / increase in trade and other payables (717,365) (42,562) 301,070 34,088
Cash generated from operations 1,229,726 622,830 206,356 69,525
Income taxes paid (271,271) (148,807) (62,905) (18,038)
Net cash generated from operating activities 958,455 474,023 143,451 51,487
Cash flows from investing activities
Payment for property, plant and equipment (492,592) (182,057)
(258,175)
(41,870)
Proceeds from disposal of property, plant and equipment 464,845 3,256 364,749 355
Net movement in service assets (497) 429 (141) 51
Net movement in other investments 3,551 83 3,352 11
Net movement on biological assets (9,911) (10,977) (11,957) (541)
Investment income 1,414 796 276 43
Net cash (used in) / generated from investing activities (33,190) (188,470) 98,104 (41,951)
Cash flows from financing activities
Net decrease in interest bearing borrowings (434,956) (432,018) (3,662) (9,518)
Non-controlling interests arising from Mopani Property Development (Private) Limited 32,606 7,925 9,266 627
Finance costs (79,326) (97,928) (39,429) (8,635)
Lease payments 11,206 - 11,206 -
Dividend paid – ordinary shareholders (46,724) (2,046) (16,743) (568)
Net cash used in financing activities (517,194) (524,067) (39,362) (18,094)
Net increase / (decrease) in cash and bank balances 408,071 (238,514) 202,193 (8,558)
Cash and bank balances at the beginning of the year 256,255 432,348 33,006 34,175
Translation of foreign entity (71,084) 110,657 4,617 1,646
Net effect of exchange rate changes on cash and bank balances (66,196) 117,487 22,653 5,743
Effects of inflation adjustments (264,577) (165,723) - -
Cash and bank balances at the end of the year 262,469 256,255 262,469 33,006

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

NOTES TO THE ABRIDGED AUDITED FINANCIAL RESULTS

1. Basis of preparation

The abridged audited financial results 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 2.2 for further details.

2. Accounting policies

Accounting policies and methods of computation applied in the preparation of these abridged financial results are consistent, in all material respects, with those used in the prior year. New applicable standards and improvements which became effective in the current year have been complied with.

2.1 Functional and presentation currency

On 22 February 2019, the Company and its subsidiaries changed their functional currency from the US$ to the RTGS$ following the promulgation of Statutory Instrument 33 of 2019 (SI 33/19). SI 33/19 prescribed exchange rates and treatment of foreign currency transactions which conflicted with IAS 21 - “The Effects of Changes in Foreign Exchange Rates”.

The Group opted to comply with SI 33/19 in translating foreign currency denominated transactions conducted from October 2018 to 22 February 2019. The decision to comply with SI 33/19 restricted full compliance with IAS 21. The Group’s deviation from IAS 21 was not intentional but was necessitated by the requirement to comply with laws and regulations within Zimbabwe. In the current year, the Group has appropriately accounted for foreign currency transactions. However, the comparative statement of profit or loss and other comprehensive income and statement of cash flows have USD transactions between the period 1 October 2018 and 22 February 2019 which were translated at a rate of US$1: ZWL1.

2.2 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 financial statements represent the primary financial statements of the Group. The historical cost financial results are provided as supplementary information and as a result the auditors have not expressed an opinion on them.

The source of the price indices used was the Reserve Bank of Zimbabwe website. Below are the indices and adjustment factors used up to 31 March 2020:


Indices
Adjustment Factor
CPI as at 31 March 2020 810.40 1.00
CPI as at 31 March 2019 104.38 7.76
CPI as at 1 October 2018 (for opening balances) 64.06 12.65
Average CPI 2020 382.91
Average CPI 2019 77.18

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

The Group’s segments have put in place various measures to mitigate the adverse impact of 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. Their trading performance for three months to June 2020 is not significantly different from the period prior to outbreak of the pandemic. The hospitality segment closed at the end of March 2020 and its date of reopening remains uncertain. Both the hospitality segment and the Group have cash resources to fund operations for a prolonged period of care and maintenance.

4. Audit opinion

These abridged financial results should be read in conjunction with the complete set of financial statements for the year ended 31 March 2020, which have been audited by Deloitte & Touche Chartered Accountants (Zimbabwe) in accordance with International Standards on Auditing. The auditors issued a qualified opinion on the financial statements for the carryover effects of non-compliance with IAS 21 –‘The Effects of Changes in Foreign Exchange Rates’ from the prior year. The audit report includes a section on Key Audit Matters. The Key Audit Matters are on valuation of investment in Mentor Africa (Pty) Limited and valuation of biological assets. The auditor’s report is available for inspection at the Company’s registered address. The Engagement Partner responsible for the audit was Charity Mtwazi.

5. Segment information

INFLATION ADJUSTED HISTORICAL COST
31 Mar 2020 31 Mar 2019 31 Mar 2020 31 Mar 2019
ZWL 000 ZWL 000 ZWL 000 ZWL 000
Revenue – continuing operations
Supermarkets 7,954,179 7,827,634 3,819,565 747,338
Agriculture 719,593 389,051 321,456 37,015
Hotels 198,899 96,722 79,263 9,101
Corporate* (37,148) (28,083) (18,447) (2,626)
8,835,523 8,285,324 4,201,837 790,828
Profit after tax – continuing operations
Supermarkets 674,849 (21,047) 240,262 24,788
Agriculture 157,159 332,016 387,011 40,428
Hotels 184,747 72,544 125,417 9,280
Corporate* 258,200 (187,208) (33,993) (4,482)
1,274,955 196,305 718,697 70,014
Segment assets
Supermarkets 2,550,143 2,042,532 938,668 204,081
Agriculture 1,396,472 1,247,548 635,265 120,763
Hotels 686,453 629,818 547,585 54,930
Corporate* 521,980 885,188 461,025 102,353
5,155,048 4,805,086 2,582,543 482,127
Segment liabilities
Supermarkets 963,254 1,163,097 593,171 108,112
Agriculture 296,449 292,586 172,704 33,385
Hotels 148,805 227,540 143,733 26,761
Corporate* 136,135 593,491 73,481 61,491
1,544,643 2,276,714 983,089 229,749

*Included in the corporate revenue amount is an adjustment of ZWL62.3 million (2019: ZWL55.5 million); (Historical cost ZWL30 million (2019: ZWL5.2 million) against revenue in respect of inter-segment sales. Inter-company balances have been eliminated in the corporate amounts. Corporate also includes other operating segments that are immaterial to warrant separate disclosure.

5.1 Discontinued operations

Meikles Hotel

The Group disposed of Meikles Hotel as a going concern. The disposal included the property, plant and equipment and transfer of employees. The disposal was effected on the 1st of March 2020, on which date control of the hotel passed. The summary of the profit / (loss) position from the discontinued operation and details of assets and liabilities disposed of are as set out below.

Greatermans Stores

The group exited the departmental stores segment during the first quarter of the financial year. The results of the departmental stores for the current year are disclosed as discontinued operations. The summary of the profit / (loss) position from the discontinued operation and details of assets and liabilities disposed of are as set out below.

The prior year comparative financial information from discontinued operations has been re-presented to include the operations classified as discontinued in the current period.

5.1 Discontinued operations (continued)

INFLATION ADJUSTED HISTORICAL COST
31 Mar 2020 31 Mar 2019 31 Mar 2020 31 Mar 2019
ZWL 000 ZWL 000 ZWL 000 ZWL 000
Profit / (loss) for the period from discontinued operations
Revenue 225,566 160,540 91,550 15,377
Net operating costs (187,222) (200,213) (83,978) (19,339)
Other operating income 6,601 10,089 3,290 563
Operating profit / (loss) 44,945 (29,584) 10,862 (3,399)
Investment income 2 12 1 1
Interest expense (4,206) (7,007) (1,273) (198)
Exchange gains (9,823) (4,821) (2,898) (618)
Profit / (loss) on disposal of property, plant and equipment 74,157 (420) 330,192 (17)
Net monetary adjustment 42,558 169,440 -
Profit / (loss) before tax 147,633 127,620 336,884 (4,231)
Taxation (28,915) (3,372) (28,915) 175
Profit / (loss) for the year from discontinued operations 118,718 124,248 307,969 (4,056)
Cash flows from discontinued operations
Net cash outflows from operating activities (504,675) (136,644) (364,449) (10,020)
Net cash flows from investing activities 547,387 104,127 359,274 2
Net cash flows from financing activities (71,335) 39,849 12,901 12,050
Net cash flows from discontinued operations (28,623) 7,332 7,726 2,032
Analysis of assets disposed of INFLATION ADJUSTED HISTORICAL COST
31 Mar 2020 31 Mar 2020
ZWL 000 ZWL 000
Non-current assets
Property, plant and equipment (385,401) (31,546)
Net assets disposed of (385,401) (31,546)
Proceeds on disposal 459,558 361,738
Profit on disposal of operation 74,157 330,192

NOTES TO THE ABRIDGED UNAUDITED FINANCIAL RESULTS

INFLATION ADJUSTED HISTORICAL COST
31 Mar 2020 31 Mar 2019 31 Mar 2020 31 Mar 2019
6. Other information ZWL 000 ZWL 000 ZWL 000 ZWL 000
Capital commitments authorised but not contracted for 1,339,413 922,167 1,339,413 118,836
Group’s share of capital commitments of joint operation 110,245 94,602 110,245 12,191
7. Net borrowings
Non-current borrowings 29,314 95,063 29,314 12,244
Current borrowings 30,788 399,995 30,788 51,520
Total borrowings 60,102 495,058 60,102 63,764
Cash and cash equivalents (262,469) (256,255) (262,469) (33,006)
Net (cash) / borrowings (202,367) 238,803 (202,367) 30,758
Comprising:
Secured 41,937 452,981 41,937 56,622
Unsecured 18,165 42,077 18,165 7,142
60,102 495,058 60,102 63,764
7.1 Breach of loan covenants

During the course of the current year, the Group was in default on some of its loan covenants with lenders. These defaults were carried over prior years. Subsequent to year end all past due loans were expunged.

8. Implementation of IFRS 16

The Group has applied the new IFRS 16 that is effective for the current year. The Group used the modified retrospective approach, with no adjustment to equity and no restatement of the comparative information. IFRS 16 allows for the recognition of right of use asset and lease liability and the impact of the adoption of IFRS 16 on the Group’s consolidated financial statements is set out below:

8.1 Right of use assets

INFLATION ADJUSTED HISTORICAL COST
31 Mar 2020 31 Mar 2019 31 Mar 2020 31 Mar 2019
ZWL 000 ZWL 000 ZWL 000 ZWL 000
Opening carrying value - - - -
Additions 424,059 - 86,984 -
Depreciation (24,647) - (11,099) -
Closing carrying value 399,412 - 75,885 -
Comprising
Cost 424,059 - 86,984 -
Accumulated depreciation (24,647) - (11,099) -
399,412 - 75,885 -

The Group’s leases include leases of offices, retail stores and residential property in Zimbabwe.

8.2       Lease liabilities

INFLATION ADJUSTED HISTORICAL COST
31 Mar 2020 31 Mar 2019 31 Mar 2020 31 Mar 2019
ZWL 000 ZWL 000 ZWL 000 ZWL 000
Opening balance - - - -
Additions 86,984 - 86,984 -
Interest expense 28,630 - 28,630 -
Rental payments (17,424) - (17,424) -
98,190 - 98,190 -
Less current portion (6,663) - (6,663) -
Non-current portion 91,527 - 91,527 -
Maturity profile
On demand 6,663 - 6,663 -
Between one and two years 6,446 - 6,446 -
Between two and three years 6,830 - 6,830 -
Between three and four years 8,899 - 8,899 -
Between four and five years 7,388 - 7,388 -
After five years 61,964 - 61,964 -
98,190 - 98,190 -

Meikles Limited Website: www.meiklesltd.com


© PRNewswire 2020
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