Meikles March 2011

ANNUAL REPORT 2011
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CONTENTS
Chairmans Statement........................................................................................................................................................... 2 Directorate and Corporate Governance............................................................................................................................ 6 Report of the Directors....................................................................................................................................................... 7 Directors Responsibility and Conclusion......................................................................................................................... 9 Report of the Independent Auditors.................................................................................................................................10 Consolidated Statement of Comprehensive Income..................................................................................................... 11 Consolidated Statement of Financial Position................................................................................................................ 12 Company Statement of Financial Position...................................................................................................................... 13 Consolidated Statement of Changes in Equity.............................................................................................................. 14 Company Statement of Changes in Equity.................................................................................................................... 15 Consolidated Statement of Cash Flows........................................................................................................................... 16 Notes to the Financial Statements.....................................................................................................................................17 Key Performance Measures................................................................................................................................................62 Shareholder Information.................................................................................................................................................... 63 Group Structure....................................................................................................................................................................64 Tax Issues and Share Prices................................................................................................................................................65 Notice of Meeting............................................................................................................................................................... 66 Form of Proxy......................................................................................................................................................................67 Notes to Proxy......................................................................................................................................................................68 Corporate Information...................................................................................................................................................... 69
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C H A I R M A N ' S S TAT E M E N T
OPERATING ENVIRONMENT The economy has continued to stabilise following dollarisation in February 2009, albeit at a slow pace. Annual inflation declined to 2.7% in March 2011 from 3.2% in December 2010. The inflation outlook remains positive although negative changes are to be expected due to volatilities in fuel and electricity prices and movement in exchange rates, particularly the South African rand against the US dollar. The liquidity situation has remained dire due to limited foreign direct investments and multilateral support from the Breton Woods institutions and or the donor community. Borrowings have become the most common form of funding due to lack of liquidity and confidence in capital markets. As a result of the low liquidity and high demand for loans, interest rates remained relatively high during the period January 2010 to 31 March 2011 with negative implications on productivity and performance across all sectors of the economy. GROUP REVIEW During the past year, we committed to the implementation of measures required to move beyond the substantial challenges that we experienced in 2008 and 2009. I am happy to report to shareholders that the unpleasant litigation initiated by the previous Board of Directors against persons and entities related to the major shareholders in the Company and against Mentor Africa Limited (Mentor) has been settled. We have now entered a new era of cooperation with the parties to the litigation. Mentor currently holds funds on behalf of the Cape Grace Group to the equivalent value of US$ 4.5 million. These funds will comprise equity in Mentor which has a thriving business in South Africa. It is anticipated that this investment will produce significant returns for the Group. The Board anticipates that the Group's investment in Mentor will produce significant opportunities similar to those that the Group achieved from its prior investment in Mvelephanda/Rebhold. The Mvelephanda shares were realised for the Meikles Group at a significant profit. This profit was utilised to discharge obligations of the Cape Grace entities to the South African Revenue Service and Nedbank when the Cape Grace financing structure was unbundled, ensuring the financial survival of the Cape Grace Hotel, which was under risk at the time. In March 2008, a put and call option agreement for the sale of the Cape Grace Hotel was entered into between Meikles Limited ( Company), 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 the Meikle Group's interests in the Cape Grace Group was received from Mentor. This transaction has not yet been consummated as a consequence of the litigation that was initiated by the previous Board against Mentor, which has now been withdrawn. The Cape Grace Hotel remains an asset for disposal by the Cape Grace Group to Mentor. As a result of the restoration of a positive business relationship between the Company, its major shareholders, and Mentor, it is anticipated that a deal beneficial to the Group will be consummated with whatever adjustments may be necessary. Proceeds from the sale are also to be invested in Mentor. This investment will be the foundation of a strong regional growth objective for the Group. In response to the litigation brought against the major shareholder entities by the Company and BVI in late 2008, the major shareholder entities filed a substantial answering affidavit in which they put up a complete defence. The previous Board and BVI were unable to file replying affidavits because the major shareholder entities' defences were meritorious. As a result, the Company and BVI had no alternative but to withdraw the litigation against the major shareholder entities. As a consequence of the litigation initiated by the previous Board, certain provisions were made in the Group financial statements for the year ended 31 December 2008. The outcome of the litigation has allowed a recoverable sum denominated in South African rand to the equivalent of US$11,7 million to be reinstated in the current financials. Now that the issues with the major shareholder entities have been resolved and no further claims will be made against them, it is known that the principals of the Company's major shareholders will use their influence and business connections productively to procure investment opportunities for the Group that will provide opportunities for growth, as was planned prior to the dispute. Shareholders are once again reminded of the substantial profit arising from the Mvelaphanda shareholding, and the same skills are now once again available to the Group. For the fifteen months period to 31 March 2011, the Group recorded a comprehensive income of US$ 8.0 million (12 month period ended 31 December 2009: loss of $2.7 million). This outturn includes the loss on the disposal of Kingdom and Cotton Printers to the tune of US$3.8 million. The discontinued operations achieved a profit after tax of
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US$2.5 million (12 month period ended 31 December 2009: a loss of US$908 000). On comparative twelve month periods, the operating companies achieved a good growth in turnover and gross margin. The Group continues to review systems, structures and processes to optimum levels. Together with the right sizing of the operating companies, these efforts will bear fruit in the coming year. The commentary below is based on the results for the comparable twelve month periods ended 31 March 2011 and 31 March 2010. TM SUPERMARKETS (TM) The Company achieved an EBITDA of US$3.9 million (2010: loss of US$5.9 million). Turnover was up 42% on the comparative period and gross margin improved by 23%. Some non performing branches were closed while new branches were opened in more sustainable areas. The much awaited Pick 'n Pay deal is still to be approved by the regulatory authorities. This has seriously hindered our ability to re-capitalise TM. However, we are progressing with alternative funding which will enable us to revamp stores and will ensure adequate levels of working capital. Potential new sites have been identified for three key stores and details of these will be disclosed at the opportune time. The Kamfinsa branch is currently undergoing major refurbishment. Pick 'n Pay Clothing will be introduced to TM in the coming months which will enhance the range and value offered. Point of sale tills have been installed in all branches and this is now providing us with the tools to effectively manage branch performance and profitability. This subsidiary will be a major contributor to the Group going forward and both shareholders in TM are committed to ensuring that the company has a strong capital base. HOTELS The Hotels recorded an EBITDA of US$3.2 million (2010: US$2.3 million). Of this amount, US$1.5 million (2010: loss of US$400 000) was from Zimbabwe operations, while EBITDA of US$1.7 million (2010: US$2.7 million) was from the Cape Grace Hotel. Occupancy levels in 2011 were 43%, 45% and 66% (2010: 30%, 29%, 57%) for Meikles Hotel, the Victoria Falls Hotel and Cape Grace Hotel respectively. Occupancies to date have shown further growth reflecting the strong interest in Zimbabwe as both a tourist and business destination. Funding is in place for the first phase of the refurbishment of Meikles Hotel and this will begin in the next two months. Further funding is being sought for the complete refurbishment of the hotel. Scope of work for a refurbishment of the Victoria Falls Hotel has been completed and we are engaged with our partner to finalise this project and to seek medium term to long term funding for its completion. We are actively exploring new opportunities both in Zimbabwe and in the region. The regional opportunities are being explored in conjunction with Mentor. TANGANDA TEA COMPANY LIMITED (TANGANDA) Tanganda achieved an EBITDA of US$502 000 (2010: US$1.6 million). Bulk tea production was 8 602 tonnes (2010 : 8 498 tonnes) due to reduced winter rains and late summer rains. The production of bulk tea remains a challenge given high power and labour costs. To counter an inability to irrigate sufficiently due to constant power outages, we have participated in a pre-paid power arrangement with the Zimbabwe Electricity Supply Authority and the result has been extremely positive. Our mineral water plant financed by PTA Bank will be commissioned in due course and production levels are expected to increase. We continue to drive sales of beverage teas and water to the local and regional markets and the benefit of these efforts will be felt in the coming year. We are increasing our hectarage of macadamias and are embarking on a substantial development of avocados, and this will also be included in our outgrowers' programmes. Increased planting has started and the benefits of this will be felt in the medium to long term.
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Tanganda continues to receive approaches from interested parties, who wish to engage with us in the creation of further growth opportunities. This will result in a more substantial agro industrial company. It is envisaged that the Group will introduce additional investors in Tanganda which will facilitate substantial growth in this important entity. THOMAS MEIKLE STORES The department stores achieved an EBITDA loss of US$15 000 (2010: loss of US$3.6 million).Turnover grew from US$6 million to US$17 million in 2011. Funding challenges are still prevalent but progress is being made in securing medium term lower cost finance. Non performing stores will be closed, resulting in reduced overheads and reduced finance levels required for stock holdings. We are pursuing franchise relationships with major retailers in the region to enhance our offerings. INDIGENISATION The Group has constructively engaged with the Ministry of Youth Development, Indigenisation and Empowerment on the Group's indigenisation status. A proposed Employee Share Ownership Trust has been submitted to the Ministry and we are waiting for a favourable response. Shareholders will be asked to approve this proposal at the forthcoming Annual General Meeting. The Group will as a result possess the required indigenisation status. This status has always been the Group's objective. This was the original concept following the merger with Kingdom Financial Holdings Limited. RE-CAPITALISATION The Board is cognisant of the fact that current levels of borrowing are greater than they should be in the medium term. The Group has engaged with numerous interested parties who have indicated a strong interest in participating in medium to long term debt, at lesser cost, than current borrowings. The resolution of the shareholder issues and approval of our indigenisation plan by the Ministry of Youth Development, Indigenisation and Empowerment will enable us to engage actively with these parties and new more sustainable financing will be obtained during the coming year. The Group is also to engage with potential investors at subsidiary level for the sale of equity to inject fresh capital into the business and to fund expansion. We shall maintain a controlling interest in all subsidiaries. Interest has been expressed by potential investors, now that the damage caused during 2008 and 2009 has been put behind us. We are actively engaging the Reserve Bank of Zimbabwe for the recovery of our deposit totalling US$37 million. LIQUIDATION OF COTTON PRINTERS (PRIVATE) LIMITED (CP) The final order for the liquidation of CP was issued on 10 May 2010. With it came the liquidation process which, for all intents and purposes, was concluded on 17 May 2011. All approved creditors were paid 100% of their dues from the proceeds of the asset disposals. At the conclusion of the liquidation, plant and equipment remained unsold. These assets are still available for sale to prospective investors. DE-MERGER OF KINGDOM FINANCIAL HOLDINGS LIMITED (KFHL) The shareholders approved the terms of the de-merger of KFHL from Meikles Limited (Group) on 13 October 2010. The terms included conditions precedent such as High Court approval of the reduction of KFHL's share capital by US$22.5 million and also approval of the de-merger by the Minister of Youth Development, Indigenisation and Empowerment. The High Court approval for the capital reduction was secured on 14 December 2010 while the approval by the Minister of Youth Development Indigenisation and Empowerment was obtained on 11 February 2011. The demerger through the distribution of KFHL's shares to the Company's shareholders was finalised on 18 February 2011.
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CHANGE IN FINANCIAL YEAR END As previously announced, Meikles Limited changed its financial year end from 31 December to 31 March. Accordingly, the Group has published fifteen months results for the period to 31 March 2011. THE WAY FORWARD Recent years have presented our Group with some of the strongest challenges in our history. We are taking the actions required to put Meikles in a good position to operate as a strong, expanding company and an important source of strength in the Zimbabwean economy. Challenges remain, but we have a strong conviction that we have the right strategies in place to ensure that Meikles will now be able to deliver superior value to all of our stakeholders on a sustained basis. We have been assured that our brand has a very strong appeal in both Zimbabwe and the region and potential opportunities are now coming our way. We are proud of the role that our Group has played in our society, and we are determined to take the actions required to ensure that Meikles is a consistent source of strength for all our stakeholders and for Zimbabwe. The past three years have been destructive in the initial periods and then defensive in the more recent period. We are now in a position to move forward with real intent. APPRECIATION The past year was certainly eventful and challenging particularly the issues to do with the widely reported shareholder dispute. The resolution of these matters could not have been achieved without the support and guidance of the regulatory authorities, shareholders and fellow Board members. Management and staff have worked under extremely difficult conditions and their efforts to support the Group through a difficult period are much appreciated. Our appreciation is extended to Messrs Meiring and Mills who have resigned from the Board and left the Group. We wish them well in their future endeavours. Finally, I wish to express our special appreciation to Farai Rwodzi. Farai became a director and Chairman of the Company at a time when the shareholder dispute was very much present with a daily impact on the Group's affairs. Farai played a substantial role in moving the Group from its then restraints to the present. Farai fought very hard for us all and his efforts in this regard will always be remembered with gratitude. He is now to focus on his own interests and we wish him every success in this regard.
J. R. T. MOXON EXECUTIVE CHAIRMAN 7 July 2011
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D I R E C T O R AT E A N D C O R P O R AT E G O V E R N A N C E
DIRECTORATE F. Rwodzi * J.R.T. Moxon B. J. Beaumont * O. Makamba R. Chidembo * B. Chimhini T.B. Cameron * R.H. Meiring A.C. Mills K. Ncube M.L. Wood
Non-executive Director (resigned 15 June 2011) Executive - Chairman (appointed 16 June 2011) Group Chief Executive Officer Executive Director Finance and Administration (appointed 1 February 2010) Non-executive Director Executive Director Executive Director Executive Director (retired 8 April 2011) Executive Director (resigned 15 June 2011) Non-executive Director Executive (appointed 5 July 2010)
Member of the Audit Committee * Member of the Remuneration Committee The directorate is referred to in this annual report as the Board and as Directors. Company refers to Meikles Limited. CORPORATE GOVERNANCE On page 9 the Directors have acknowledged their responsibility and conclusion on the presentation of the financial statements. The structure of the Board and its standing committees is as follows: The Board At 31 March 2011, the Board consisted of the Chairman, seven executive and two non-executive Directors, and met at least quarterly during the period. The key matters reserved for the decision of the Board are the Group strategy, acquisition and divestment policy, approval of the Group budget and major capital projects, and general treasury and risk management policies. Members will be asked to confirm the appointment of Messrs. M.L. Wood and J.R.T. Moxon to the Board by ordinary resolution at the next Annual General Meeting. Messrs. B.J. Beaumont, K. Ncube and R. Chidembo retire by rotation in terms of the Articles of Association, and being eligible, offer themselves for re-election. Mr. R.H. Meiring retired from the Board effective 8 April 2011. Messrs. F Rwodzi and A.C. Mills resigned from the Board effective 15 June 2011. Mr. F. Rwodzi was chairman of the Board at the time of his resignation. Subsidiaries The Group operates a decentralised subsidiary. Each significant subsidiary has a formal operating board with a clear definition of responsibility, and operates within well-defined policies. There is comprehensive financial reporting with actual results reported monthly against budget and prior year. The Audit Committee The Audit Committee is chaired by Mr. R. Chidembo. The Group Chief Executive Officer, the Executive Director Finance and Administration, internal and external auditors attend these meetings by invitation. The Audit Committee reviews the Group's interim and annual financial statements before submission to the Board for approval. Its objectives are to ensure that the Board is advised on all matters relating to corporate governance and the creation and maintenance of effective financial controls, as well as advising the Board and management on measures which ensure that respect for both regulatory issues and internal financial control is demonstrated and stimulated. Accordingly, it reviews the effectiveness of the internal audit function, its programmes and reports, and also reviews all reports from the external auditors on accounting and internal control matters, and monitors action taken where necessary. The Audit Committee also recommends the appointment and reviews fees of external auditors. The Remuneration Committee The Remuneration Committee was reconstituted in April 2011. The terms of reference of the Remuneration Committee are to determine the Group's policy on the remuneration of executive Directors and senior executives.
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R E P O RT O F T H E D I R E C T O R S
Your Directors have pleasure in presenting their report and the audited financial statements of the Group for the period ended 31 March 2011. Meikles Limited changed its financial year end from 31 December to 31 March. Accordingly, the Group has published 15 months results for the period to 31 March 2011. The comparatives are for the 12 months ended 31 December 2009. Principal activities The main activities of the Group are those of agriculture, hotels and retail trading. Retail trading includes department stores, supermarkets and convenience stores. Kingdom Financial Holdings Limited, the banking operations, were demerged from the Group effective 31 October 2010. Refer to note 14 for further details. Cotton Printers (Private) Limited, the textile manufacturing subsidiary, was liquidated during the year 2010. Assets held for sale The Cape Grace Hotel operations in South Africa have been maintained as non-current assets held for sale. Details are disclosed in note 14. Period's results The results for the 15 months ended 31 March 2011 are set out in the attached financial statements and are commented on under the Chairman's statement on pages 2 to 5. The Board declared a dividend in specie of two (2) KFHL shares for every share held in Meikles Limited to accomplish the demerger of KFHL from the Group. Refer to note 31.1. Share capital The nominal value of the Company's shares was redenominated at the last Annual General Meeting to US$0.01 per share. Details of the authorised and issued share capital are set out in note 26 to the financial statements. Directors and their interests The names of the Directors of the Company during the relevant periods are set out under the Directorate and Corporate Governance section. As provided by the Companies' Act (Chapter 24:03), the Directors are bound to declare at any time during the year, in writing, whether they have any interest in any contract of significance with the Company or any of its subsidiaries and associates. The Goup purchased wrapping material worth US$ 1.3 million from Polyfoil Zimbabwe (Private) Limited, a company in which Mr. B.J. Beaumont has a significant interest. No other Director confirmed having, during or at the end of the period, any material interest in any contract of significance in relation to the Group's businesses. Executive Directors have employment contracts with the Company or its subsidiaries. The direct and indirect beneficial interests of the Directors in the shares of the Company are given in note 26 to the financial statements. Substantial shareholdings According to information received by the Directors, the following were the only shareholders beneficially holding, directly or indirectly at 31 March 2011, in excess of 5% of the issued share capital of the Company:
Shareholder EW Capital Holdings (Private) Limited* JRTM Investments (Private) Limited ASH Investments (Private) Limited FPS Investments (Private) Limited ACM Investments (Private) Limited APWM Investments (Private) Limited Old Mutual Assurance Company Zimbabwe Limited L.E.S Nominees (Private) Limited
No. of shares 25,899,448 21,337,915 21,115,769 20,980,949 20,961,256 20,958,030 16,423,885 12,801,157
% 10.56 8.70 8.61 8.55 8.54 8.54 6.69 5.22
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R E P O RT O F T H E D I R E C T O R S
*EW Capital Holdings (Private) Limited distributed its entire shareholding in the Company as a dividend in specie to EW Capital Holdings (Private) Limited shareholders on 13 May 2011. Auditors Messrs. Deloitte & Touche offer themselves for re-election as auditors for the year ending 31 March 2012 and shareholders will be asked to reappoint them, and to approve their fees for the period ended 31 March 2011.
J.R.T. Moxon Executive Chairman Harare, 7 July 2011
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DIRECTORS' RESPONSIBILITY AND CONCLUSION
The Directors of the Company are responsible for the maintenance of adequate accounting records, and the preparation of financial statements for each financial period, that give a true and fair view of the state of affairs of the Company and the Group at the end of the financial period, and of the results and cash flows for that period. They are also required to select appropriate accounting policies, to safeguard the assets of the Company and the Group and to make reasonable and prudent judgements and estimates. Accounting policies, which follow International Financial Reporting Standards (IFRS), have been consistently applied, where practicable. Critical judgmental areas are disclosed in note 4 to the financial statements. The Directors are also responsible for the systems of internal control. These are designed to provide reasonable but not absolute assurance as to the reliability of the financial statements, and to safeguard, verify and maintain accountability of assets, and to prevent and detect material misstatements and losses. The systems are implemented and monitored by suitably trained personnel with an appropriate segregation of authority and duties. Nothing has come to the attention of the Directors to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the period under review. The financial statements have been prepared in accordance with the accounting policies set out in the accounting policy notes. The Directors have reviewed the Group's budgets and cash flow forecasts for the year to 31 March 2012 and, in light of this review and the current financial position, they are satisfied that the Group has or has access to adequate resources to continue in operational existence for the foreseeable future. However, the Directors believe that under the current economic environment a continuous assessment of the ability of the Group to continue to operate as a going concern will need to be performed.
J.R.T. Moxon Executive Chairman Harare, 7 July 2011
B. J. Beaumont Group Chief Executive Officer Harare, 7 July 2011
P O Box 267 Harare Zimbabwe
Deloitte & Touche Kenilworth Gardens 1 Kenilworth Road Highlands Harare Tel: Fax: +263 (0)4 746248/54 +263 (0)4 746271/5 +263 (0)4 746255 www.deloitte.com
TO THE MEMBERS OF MEIKLES LIMITED REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying Group and Company financial statements for Meikles Limited, which comprise the consolidated and separate statements of financial position as at 31 March 2011, the consolidated statement of comprehensive income, the consolidated and separate statements of changes in equity and the consolidated statement of cash flows for the fifteen month period then ended, and a summary of significant accounting policies and other explanatory notes set out on pages 11 to 61. Directors' responsibility for the financial statements The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the Companies Act (Chapter 24:03) and relevant statutory instruments (SI 33/99 and SI 62/96). This responsibility includes; designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the consolidated and separate financial position of Meikles Limited as at 31 March 2011, and of its consolidated financial performance and its consolidated cash flows for the fifteen month period then ended in accordance with International Financial Reporting Standards. Report on other legal and regulatory requirements In our opinion, the financial statements have, in all material respects, been properly prepared in compliance with the disclosure requirements of the Companies Act (Chapter 24:03) and the relevant statutory instruments (SI 33/99 and SI 62/96).
Deloitte & Touche Chartered Accountants (Zimbabwe) Harare 7 July 2011
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C O N S O L I D AT E D S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E
FOR THE PERIOD ENDED 31 MARCH 2011 15 months to 31 March 2011 US$ 330,437,331 (257,658,238) 72,779,093 4,177,687 (38,544,663) (15,941,464) (28,518,141) (6,047,488) 3,592,710 (7,590,331) (228,825) 1,394,398 11,737,013 2,857,477 793,382 3,650,859 2,474,066 6,124,925 1,888,711 1,888,711 8,013,636 6,687,285 (562,360) 6,124,925 8,575,996 (562,360) 8,013,636 16 16 2.73 1.72 Restated 12 months to 31 December 2009 US$ 148,838,120 (119,005,212) 29,832,908 2,571,464 (16,723,178) (9,191,833) (16,929,922) (10,440,561) 695,685 (425,048) 145,428 2,081,234 (7,943,262) 5,288,669 (2,654,593) (908,040) (3,562,633) 3,376,261 (1,641,125) (903,852) 831,284 (2,731,349) (2,856,610) (706,023) (3,562,633) (2,025,326) (706,023) (2,731,349) (1.16) (0.79)
Notes CONTINUING OPERATIONS Revenue Cost of sales Gross profit Other trading income Employee costs Occupancy costs Other operating costs Operating loss Investment revenue Finance costs Net exchange (losses) / gains Fair value adjustments Reinstatement of funds earmarked for investment Profit / (loss) before tax Income tax credit Profit / (loss) for the period from continuing operations Discontinued operations Profit / (loss) for the period from discontinued operations PROFIT/ (LOSS) FOR THE PERIOD Other comprehensive income Exchange differences on translating foreign operations Impairment of property Movement in other reserves Other comprehensive income for the period, net of tax TOTAL COMPREHENSIVE PROFIT / (LOSS) FOR THE PERIOD Profit / (loss) attributable to: Owners of the parent Non-controlling interests Total comprehensive profit / ( loss) attributable to: Owners of the parent Non-controlling interests Earnings / (loss) per share in cents Basic earnings / (loss) from continuing and discontinued operations Basic earnings/ (loss) from continuing operations 5
7 8 9 10 11 12 21 13
14
The 2009 figures have been restated for reasons detailed in note 32.
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C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N
AS AT 31 MARCH 2011
Unaudited Restated Restated 31 March 2011 31 December 2009 1 January 2009 Notes US$ US$ US$
ASSETS Non-current assets Property, plant and equipment Investment property Biological assets Investments in associates Other financial assets and investments Intangible assets - trademarks Balances with Reserve Bank of Zimbabwe Deferred tax Total non-current assets Current assets Inventories Trade and other receivables Other financial assets Cash and bank balances Assets held for sale or distribution Total current assets Total assets EQUITY AND LIABILITIES Capital and reserves Share capital Non-distributable reserves Retained earnings / (accumulated losses) Capital and reserves relating to assets classified as held for sale or distribution Equity attributable to equity holders of the parent Non-controlling interests Total equity Non-current liabilities Borrowings Deferred tax Total non-current liabilities Current liabilities Trade and other payables Customer deposits Current tax liabilities Short term borrowings Liabilities relating to assets classified as held for sale or distribution Total current liabilities Total liabilities Total equity and liabilities 26 2,453,747 2,626,681 111,204,769 18,083,232 134,368,429 763,422 135,131,851 3,749,569 15,996,723 19,746,292 30,003,922 487,727 49,031,109 79,522,758 15,078,333 94,601,091 114,347,383 249,479,234 1 109,983,720 (21,325,383) 51,658,125 140,316,463 1,325,782 141,642,245 845,173 15,346,508 16,191,681 22,888,135 414,152 6,985,213 30,287,500 88,628,469 118,915,969 135,107,650 276,749,895 1 150,941,736 (19,221,260) 10,621,312 142,341,789 2,031,805 144,373,594 212,184 24,318,471 24,530,655 5,244,016 17,029,804 117,890 769,330 23,161,040 12,490,405 35,651,445 60,182,100 204,555,694 17 18 19 20 21 22 13 84,278,008 44,036 7,661,157 16,600,101 124,141 36,824,671 2,355,680 147,887,794 40,712,631 16,152,929 3,285,599 60,151,159 41,440,281 101,591,440 249,479,234 80,530,695 72,046 6,310,560 4,554,984 291,363 12,541,825 104,301,473 17,115,270 7,333,889 24,198 2,536,106 27,009,463 145,438,959 172,448,422 276,749,895 94,371,296 394,000 4,999,548 1,025,929 4,449,894 268,573 35,003,091 140,512,331 5,063,570 10,128,432 787,605 16,488,848 32,468,455 31,574,908 64,043,363 204,555,694
24 25 21 22 15
15
27 13
28 29 13 27 15
J.R.T. Moxon 7 July 2011
B. J. Beaumont 7 July 2011
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C O M PA N Y S TAT E M E N T O F F I N A N C I A L P O S I T I O N
AS AT 31 MARCH 2011 Notes ASSETS Non-current assets Property, plant and equipment Investments in subsidiaries Other financial assets Balances with Reserve Bank of Zimbabwe Total non-current assets Current assets Inventories Other receivables Cash and bank balances Assets held for sale or distribution Total current assets Total assets EQUITY AND LIABILITIES Capital and reserves Share capital Non-distributable reserves Retained earnings/ (accumulated losses) Total equity Non-current liabilities Deferred tax Current liabilities Trade and other payables Short term borrowings Total liabilities Total equity and liabilities 17 21 21 22 Unaudited 31 March 2011 31 December 2009 1 January 2009 US$ US$ US$ 201,197 74,129,078 373,181 36,824,671 111,528,127 8,653 30,431,635 381,817 30,822,105 11,814 30,833,919 142,362,046 82,125,148 180,391 82,305,539 8,185,398 8,185,398 34,660,464 42,845,862 125,151,401 123,974,684 140,728 124,115,412 6,365,757 6,365,757 6,365,757 130,481,169
24 25 22 15
26
2,453,747 30,303,613 98,631,052 131,388,412 2,796,179 1,626,777 6,550,678 8,177,455 142,362,046
1 103,757,359 (6,007,023) 97,750,337 4,106,257 23,294,807 23,294,807 125,151,401
1 103,757,359 103,757,360 4,106,257 22,617,552 22,617,552 130,481,169
13 28 27
J.R.T. Moxon 7 July 2011
B. J. Beaumont 7 July 2011
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C O N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y
FOR THE PERIOD ENDED 31 MARCH 2011 Nondistributable reserves US$ Group (Accumulated losses) / Disposal Attributable Non retained group capital to owners controlling earnings and reserves of parent interests US$ US$ US$ US$
Share capital US$ 2011 Balance at the beginning of the period - restated 1 Profit for the period Transfer within reserves and on disposal of subsidiaries Other comprehensive income for the period Share capital redenomination 2,453,746 Transfer in respect of assets classified as held for sale Dividend in specie (note 31) Balance at the end of the period 2,453,747 2009 Balance at the beginning of the year as previously stated - unaudited Adjustment to nursery stocks Write down of other receivables Restatement of certain plant and equipment As restated Loss for the year - restated Other comprehensive income for the year Transfer in respect of assets classified as held for sale or distribution Balance at the end of the year
Total US$
109,983,720 (109,850,773) 855,472 (2,453,746) 4,092,008 2,626,681
(21,325,383) 4,213,219 146,859,490 (4,018,527) (14,524,030) 111,204,769
51,658,125 2,474,066 (37,008,717) 1,033,239 (73,481) 18,083,232
140,316,463 6,687,285 1,888,711 (14,524,030) 134,368,429
1,325,782 141,642,245 (562,360) 6,124,925 1,888,711 -
- (14,524,030) 763,422 135,131,851
1 1 1
148,118,994 (502,196) (152,007) 3,476,945 150,941,736 773,591 (41,731,607) 109,983,720
(19,221,260) (19,221,260) (1,948,570) (155,553) (21,325,383)
10,621,312 10,621,312 (908,040) 57,693 41,887,160 51,658,125
139,519,047 (502,196) (152,007) 3,476,945 142,341,789 (2,856,610) 831,284 140,316,463
2,031,805 141,550,852 (502,196) (152,007) - 3,476,945 2,031,805 144,373,594 (706,023) (3,562,633) 831,284
1,325,782 141,642,245
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C O M PA N Y S TAT E M E N T O F C H A N G E S I N E Q U I T Y
FOR THE PERIOD ENDED 31 MARCH 2011
Company Non distributable (Accumulated losses) / Share capital reserves retained earnings US$ US$ US$ 2011 Balance at the beginning of the period Profit for the period Transfer from non-distributable reserves Share capital redenomination Dividend in specie (note 31) Balance at the end of the period 2009 Balance at the beginning of the year Loss for the year Balance at the end of the year 1 2,453,746 2,453,747 103,757,359 (71,000,000) (2,453,746) 30,303,613
Total US$
(6,007,023) 97,750,337 48,162,106 48,162,106 71,000,000 (14,524,030) (14,524,030) 98,631,053 131,388,413
1 1
103,757,359 103,757,359
- 103,757,360 (6,007,023) (6,007,023) (6,007,023) 97,750,337
15
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C O N S O L I D AT E D S TAT E M E N T O F C A S H F L O W S
FOR THE PERIOD ENDED 31 MARCH 2011 Continuing and discontinued operations Cash flows from operating activities Profit/ (loss) before tax from continuing and discontinued operations Adjustments for: - Depreciation expense and impairment - Net interest - Dividend received - Net exchange gains - Loss on disposal of subsidiaries - Fair value adjustments - Share of profits of associates - Loss on disposal of property, plant and equipment - Reinstatement of funds earmarked for investment Operating cash flow before working capital changes Increase in inventories Increase in trade and other receivables Increase in trade and other payables and financial liabilities Cash (used in) / generated from operations Income taxes paid Net cash (used in) / generated from operating activities Cash flows from investing activities Payment for property, plant and equipment Proceeds from disposal of property, plant and equipment Net movement in service assets Dividends received (Payment for) / proceeds from sale of investments Expenditure on biological assets Net outflow on disposal of subsidiary Development expenditure Investment income Net cash used in investing activities Cash flows from financing activities Proceeds from interest bearing borrowings Finance costs Net cash generated from financing activities Net (decrease) / increase in cash and bank balances Cash and bank balances at the beginning of the period Net effect of exchange rate changes on cash and bank balances Translation of foreign entity Cash and bank balances at the end of the period (note 22) The 2009 figures have been restated for reasons detailed in note 32. 31 March 2011 US$ 6,637,964 5,388,114 4,921,007 (1,470,742) 422,743 3,842,146 1,977,980 (666,038) 787,289 (11,737,013) 10,103,450 (23,641,946) (71,806,512) 56,277,836 (29,067,172) (2,019,495) (31,086,667) (11,439,443) 1,788,716 (65,325) 1,470,742 (151,620) (205,636) (16,433,887) 249,853 (24,786,600) 44,017,194 (7,600,557) 36,416,637 (19,456,630) 25,508,890 (436,011) (831,723) 4,784,526 Restated 31 December 2009 US$ (9,511,707) 4,457,620 (1,032,285) (100,972) (3,146,077) (1,355,561) 61,612 (10,627,370) (12,353,587) (43,259,155) 72,455,998 6,215,886 (168,610) 6,047,276 (5,386,464) 118,247 (51,632) 454,768 378,067 (229,973) (22,783) 31,496 (4,708,274) 7,767,865 (771,776) 6,996,089 8,335,091 16,556,006 71,992 545,801 25,508,890
16
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N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
1.
General information Meikles Limited, formerly Kingdom Meikles Limited (the "Company"), is a limited company incorporated in Zimbabwe and is listed on the Zimbabwe and London Stock Exchanges. The address of the Company's registered office and principal place of business are disclosed on page 69. The principal activities of the Company and its subsidiaries (the Group) are described in note 21.2. The Group changed its year-end from 31 December to 31 March. As a result, these financial statements are for a 15 month period while the comparatives are for a 12 month period. The financial statements are presented in United States of America dollars (US$).
2.
Basis of preparation The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements are prepared from statutory records that are maintained under the historical cost convention as modified by the revaluation of property, plant, equipment, biological assets and financial instruments which are measured at fair value in the opening statement of financial position.
2.1
Transition to IFRS The Group is resuming presentation of IFRS financial statements after the Group issued financial statements in the prior reporting period ended 31 December 2009 which could not include an explicit and unreserved statement of compliance with IFRS due to the effects of severe hyperinflation. As discussed in note 2.5, the Group has early adopted the amendments to IFRS 1 and is therefore applying that standard in returning to compliance with IFRSs. The Group's functional currency for the period before 1 January 2009, the Zimbabwe dollar (ZW$) was subject to severe hyperinflation because it had both the following characteristics: a reliable general price index was not available to all entities with transactions and balances in ZW$ because the Zimbabwe Central Statistical office did not release the consumer price indices from 1 August 2008, while the existence of market distortions made measurement of inflation by alternative means unreliable; and exchangeability between the ZW$ and a relatively stable foreign currency did not exist. The Group's functional currency ceased to be subject to severe hyperinflation from 1 January 2009 when the Group changed its functional currency from ZW$ to US$.
2.2
Exemption for fair value as deemed cost The Group elected to measure certain items of property, plant and equipment, biological assets, bank balances and cash, inventories, other financial assets, other financial liabilities and trade and other payables at fair value and to use the fair values as the deemed cost of those assets and liabilities in the opening statement of financial position as at 1 January 2009. Comparative financial information The financial statements comprise three statements of financial position, and two statements of comprehensive income, two statements of changes in equity and two statements of cash flows as a result of the retrospective application of the amendments to IFRS 1. The comparative statements of comprehensive income, changes in equity and cash flows are for twelve months. Reconciliation to previous basis of preparation The Group's financial statements for the prior period ended 31 December 2009 claimed compliance with IFRS, except certain of the requirements of IAS 1 Presentation of Financial Statements, IAS 21 The Effects of Changes in Foreign Exchange Rates, and IAS 29 Financial Reporting in Hyperinflationary Economies. Certain prior year errors were identified during the period and a reconciliation of the amounts previously stated in the 31 December 2009 financial statements and the comparative amounts as presented in this report is given in note 32. Application of new and revised International Financial Reporting Standards (IFRSs) New and revised IFRSs affecting amounts reported in the current period and/or prior years The following new and revised IFRSs have been applied in the current period and have affected the amounts reported in these financial statements. Details of other new and revised IFRSs applied in these financial statements that have had no material effect on the financial statements are set out in section 2.5.2.
2.3
2.4
2.5 2.5.1
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2.5.1
New and revised IFRSs affecting amounts reported in the current period and/or prior years (continued) New and revised IFRSs affecting presentation and disclosure only Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards Additional Exemptions for First-time Adopters The Group decided to early adopt the Amendments to IFRS1 - Severe hyperinflation and removal of fixed dates for first time adopters, as well as the related consequential amendments to other IFRSs, because the amendment provides an additional exemption within IFRS 1 for the entities which were subject to severe hyperinflation. Refer to note 2.1 where the transition to IFRS is discussed in more detail. The amendments to IFRS 1 provide first time adopters with the same transition provisions as included in the amendments to IFRS 7. The amendment is effective for annual periods beginning on or after 1 July 2010 with early adoption permitted. Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (as part of Improvements to IFRSs issued in 2009) The amendments to IFRS 5 clarify that the disclosure requirements in IFRSs other than IFRS 5 do not apply to non-current assets (or disposal groups) classified as held for sale or discontinued operations unless those IFRSs require (i) specific disclosures in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations, or (ii) disclosures about measurement of assets and liabilities within a disposal group that are not within the scope of the measurement requirement of IFRS 5 and the disclosures are not already provided in the consolidated financial statements. Disclosures in these consolidated financial statements reflect the above clarification. Amendments to IAS 7 Statement of Cash Flows (as part of Improvements to IFRSs issued in 2009) The amendments to IAS 7 specify that only expenditures that result in a recognised asset in the statement of financial position can be classified as investing activities in the statement of cash flows. The application of the amendments to IAS 7 has resulted in a change in the presentation of cash outflows in respect of development costs that do not meet the criteria in IAS 38 Intangible Assets for capitalisation as part of an internally generated intangible asset. This change has had no impact on current and prior years' disclosures. The amendments to IFRS 7 clarify the required level of disclosures about credit risk and collateral held and provide relief from disclosures previously required regarding renegotiated loans. The Group has applied the amendments in advance of their effective date (annual periods beginning on or after 1 January 2011). The amendments have been applied retrospectively. The amendments to IAS 1 clarify that an entity may choose to present the required analysis of items of other comprehensive income either in the statement of changes in equity or in the notes to the financial statements. The Group has applied the amendments in advance of their effective date (annual periods beginning on or after 1 January 2011). The amendments have been applied retrospectively.
Amendments to IFRS 7 Financial Instruments: Disclosures (as part of Improvements to IFRSs issued in 2010)
Amendments to IAS 1 Presentation of Financial Statements (as part of Improvements to IFRSs issued in 2010)
New and revised IFRSs affecting the reported financial performance and/or financial position IFRIC 17 Distributions of Non-cash Assets to Owners The Interpretation provides guidance on the appropriate accounting treatment when an entity distributes assets other than cash as dividends to its shareholders. The guidance was applied to the dividend in specie distributed to shareholders on the demerger of Kingdom Financial Holdings Limited. Details are disclosed in note 31.
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2.5.2
New and revised IFRSs applied with no material effect on the consolidated financial statements The following new and revised IFRSs have also been adopted in these consolidated financial statements. The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior periods but may affect the accounting for future transactions or arrangements. Amendments to IFRS 2 Share-based Payment - Group Cash-settled Share-based Payment Transactions The amendments clarify the scope of IFRS 2, as well as the accounting for group cash-settled share-based payment transactions in the separate (or individual) financial statements of an entity receiving the goods or services when another group entity or shareholder has the obligation to settle the award. The amendments allow a choice on a transaction-by-transaction basis for the measurement of non-controlling interests at the date of acquisition (previously referred to as 'minority' interests) either at fair value or at the non-controlling interests' share of recognised identifiable net assets of the acquiree. change the recognition and subsequent accounting requirements for contingent consideration. require the recognition of a settlement gain or loss when the business combination in effect settles a pre-existing relationship between the Group and the acquiree. require acquisition-related costs to be accounted for separately from the business combination, generally leading to those costs being recognised as an expense in profit or loss as incurred. The amendments clarify that all the assets and liabilities of a subsidiary should be classified as held for sale when the Group is committed to a sale plan involving loss of control of that subsidiary, regardless of whether the Group will retain a non-controlling interest in the subsidiary after the sale. The amendments to IAS 1 clarify that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or noncurrent. This amendment has had no effect on the amounts reported because the Group has not issued instruments of this nature. Amendments to IAS 27 (revised 2008) Consolidated and Separate Financial Statements The amendments clarify that changes in ownership interests in subsidiaries that do not result in loss of control should be dealt with in equity, with no impact on goodwill or profit or loss. Where control is lost the Group derecognises all assets, liabilities and non-controlling interests at their carrying amounts and recognises the fair value of the consideration received. Any retained interest in the former subsidiary is recognised at its fair value at the date control is lost and the resultant difference is recognised as a gain or loss in profit or loss. When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the revised Standard requires the Group to derecognise all assets, liabilities and non-controlling interests at their carrying amount and to recognise the fair value of the consideration received. Any retained interest in the former subsidiary is recognised at its fair value at the date control is lost. The resulting difference is recognised as a gain or loss in profit or loss. These changes in accounting policies have been applied prospectively from 1 January 2010 in accordance with the relevant transitional provisions.
Amendments to IFRS 3 (revised 2008) Business Combinations
Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (as part of Improvements to IFRSs issued in 2008)
Amendments to IAS 1 Presentation of Financial Statements (as part of Improvements to IFRSs issued in 2009)
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2.5.2
New and revised IFRSs applied with no material effect on the consolidated financial statements (continued) IAS 28 (revised in 2008) Investments in The principle adopted under IAS 27 (revised 2008) (see above) that a Associates loss of control is recognised as a disposal and re-acquisition of any retained interest at fair value is extended by consequential amendments to IAS 28. Therefore, when significant influence over an associate is lost, the investor measures any investment retained in the former associate at fair value, with any consequential gain or loss recognised in profit or loss. As part of Improvements to IFRSs issued in 2010, IAS 28(2008) has been amended to clarify that the amendments to IAS 28 regarding transactions where the investor loses significant influence over an associate should be applied prospectively.
Amendments to IAS 39 Financial Instruments: The amendments provide clarification on two aspects of hedge Recognition and Measurement - Eligible Hedged accounting: identifying inflation as a hedged risk or portion, or hedging with options. Items IFRIC 18 Transfers of Assets from Customers The Interpretation addresses the accounting by recipients for transfers of property, plant and equipment from 'customers' and concludes that when the item of property, plant and equipment transferred meets the definition of an asset from the perspective of the recipient, the recipient should recognise the asset at its fair value on the date of the transfer, with the credit being recognised as revenue in accordance with IAS 18 Revenue. Except for the amendments to IFRS 5, IAS 1 and IAS 7 described earlier in section 2.1, the application of Improvements to IFRSs issued in 2009 has not had any material effect on amounts reported in the consolidated financial statements.
Improvements to IFRSs issued in 2009
2.5.3 New and revised IFRSs in issue but not yet effective The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective: Amendments to IFRS 7 IFRS 9 (as amended in 2010) Financial Instruments IAS 24 Related Party Disclosures (as revised in 2009) Amendments to IAS 32 Amendments to IFRIC 14 IFRIC 19 Improvements to IFRSs issued in 2010 Disclosures - Transfers of Financial Assets - effective for annual periods beginning on or after 1 July 2011. Effective for annual periods beginning on or after 1 January 2013. Effective for annual periods beginning on or after 1 January 2013. Classification of Rights Issues - effective for annual periods beginning on or after 1 February 2010. Prepayments of a Minimum Funding Requirements- effective for annual periods beginning on or after 1 January 2011. Extinguishing Financial Liabilities with Equity Instruments- effective for annual periods beginning on or after 1 July 2010. Except for the amendments to IFRS 3(2008), IFRS 7, IAS 1 and IAS 28 described earlier in section 2.5 - effective for annual periods beginning on or after 1 July 2010 and 1 January 2011, as appropriate.
The Directors cannot quantify the impact that the adoption of these standards and interpretations in future periods will have on the financial statements of the Group.
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3. 3.1
Significant accounting policies Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.
3.2
Business combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that: deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively; liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any noncontrolling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets
21
A n n u a l R e p o r t 2 0 1 1
3.2
Business combinations (continued) acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any noncontrolling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the noncontrolling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of noncontrolling interests are measured at fair value or, when applicable, on the basis specified in another IFRS.
3.3
Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see 3.2 above) less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cashgenerating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated statement of comprehensive income. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. The Group's policy for goodwill arising on the acquisition of an associate is described at 3.4 below.
3.4
Investments in associates An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, an investment in an associate is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the associate. When the Group's share of losses of an associate exceeds the Group's interest in that associate (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss. The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group's investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.
22
A n n u a l R e p o r t 2 0 1 1
3.4
Investments in associates (continued) When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognised in the Group' consolidated financial statements only to the extent of interests in the associate that are not related to the Group. Interests in joint ventures A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control (i.e. when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control). When a group entity undertakes its activities under joint venture arrangements directly, the Group's share of jointly controlled assets and any liabilities incurred jointly with other venturers are recognised in the financial statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group's share of the output of jointly controlled assets, and its share of joint venture expenses, are recognised when it is probable that the economic benefits associated with the transactions will flow to/from the Group and their amount can be measured reliably. Joint venture arrangements that involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using proportionate consolidation, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. The Group's share of the assets, liabilities, income and expenses of jointly controlled entities is combined with the equivalent items in the consolidated financial statements on a line-by-line basis. Any goodwill arising on the acquisition of the Group's interest in a jointly controlled entity is accounted for in accordance with the Group's accounting policy for goodwill arising in a business combination (see 3.2 and 3.3 above). When a group entity transacts with its jointly controlled entity, profits and losses resulting from the transactions with the jointly controlled entity are recognised in the Group' consolidated financial statements only to the extent of interests in the jointly controlled entity that are not related to the Group.
3.5
3.6
Non-current assets held for sale or distribution Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale or distribution transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell or distribute.
3.7 3.7.1
Revenue recognition Sale of goods and services provided Revenue is measured at the fair value of the consideration received or receivable. The revenue is reduced for estimated customer returns, rebates and other similar allowances. Revenue from the sale of goods is recognised when all the following conditions are satisfied: the Group has transferred to the buyer the significant risks and rewards of ownership of the goods; the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the Group; and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Specifically, revenue from the sale of goods is recognised when goods are delivered and legal title is passed.
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A n n u a l R e p o r t 2 0 1 1
3.7.2
Dividend and interest income Dividend from investments is recognised when the shareholders' right to receive payment has been established, provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.
3.7.3 3.8.
Rental income The Group's policy for recognition of revenue from operating leases is described in policy note 3.8.1. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
3.8.1
The Group as lessor Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group's net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group's net investment outstanding in respect of the leases. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
3.8.2
The Group as lessee Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group's general policy on borrowing costs (see 3.10 below). Contingent rentals are recognised as expenses in the periods in which they are incurred. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
24
A n n u a l R e p o r t 2 0 1 1
3.9
Foreign currencies In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for: exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; exchange differences on transactions entered into in order to hedge certain foreign currency risks; and exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated into US$ using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate). On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or disposal involving loss of significant influence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the owners of the Company are reclassified to profit or loss. In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are re-attributed to noncontrolling interests and are not recognised in profit or loss. For all other partial disposals (i.e. reductions in the Group's ownership interest in associates or jointly controlled entities that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss. Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in equity.
3.10
Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
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3.11
Retirement benefit costs The Group operates a Defined Contribution Plan for all eligible employees. The scheme is funded by payments from employees and by the Group Companies, and the assets are held in various funds under the authority of the Trustees. The Group's contributions are recognised as an expense in the year to which they relate. The Group also participates in the National Social Security Authority Scheme (NSSA). Payments made to NSSA are dealt with as payments to defined contribution plans where the Group's obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan. Contributions to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.
3.12
Taxation Income tax expense represents the sum of the tax currently payable and deferred tax.
3.12.1
Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary difference. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to the statement of comprehensive income, in which case the deferred tax is also dealt with in equity, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or in determining the excess of the acquirer's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities over the cost of the business combination. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
3.12.2
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3.12.3
Current and deferred tax for the period Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
3.13
Property, plant and equipment Property, plant and equipment are stated at cost or deemed cost less accumulated depreciation and accumulated impairment losses. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down to its recoverable amount. Interest costs on borrowings to finance property expenditure during the course of construction are capitalised. Improvements to buildings are recognised whilst repairs and renewals are charged to the profit and loss when the expenditure is incurred. Gains and losses on the disposal of assets are determined by reference to their carrying amount and are taken into account in determining operating profit. Leased assets under a finance lease are initially measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Where parts of an item of property or equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.
3.13.1
Depreciation Freehold land is not depreciated. Depreciation on property, plant and equipment other than land and capital work in progress is calculated on a straight line basis so as to write off the assets over their estimated useful lives to their anticipated residual values. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
3.14
Investment property Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties are measured at cost or deemed cost, including transaction costs. An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.
3.15 3.15.1
Intangible assets Trademarks These comprise of trademarks, brand names and product development costs which are valued at cost. These have an indefinite useful life and are therefore not amortised. The useful lives of intangible assets are reviewed at the end of each reporting period to determine whether events and circumstances continue to support an indefinite useful life assessment for these assets.
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3.15.2
Intangible assets acquired in a business combination Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Derecognition of intangible assets An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised. Impairment of tangible and intangible assets excluding goodwill At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cashgenerating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cashgenerating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
3.15.2
3.16
3.17
Biological assets The Group's biological assets comprise tea, macadamia, avocado, coffee and timber plantations and livestock. Tea, macadamia, avocado, coffee and timber plantations as well as other crops are stated at their fair value less point of sale costs. Where there are no market - determined prices for the plantations or produce to determine the fair value, the present value of expected net cash flows from plantations, discounted at a current market determined pre-tax rate, is used to determine fair value. Livestock is measured at fair value. Fair value is determined by reference to the market price and these valuations are carried out by professional valuers. The tea bushes have indefinite useful lives and are therefore, not depreciated. The useful lives of tea bushes are reviewed at the end of each reporting period to determine whether events and circumstances continue to support an indefinite useful life assessment for these bushes.
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3.18
Inventories Inventories are stated at the lower of cost and net realisable value. Historical cost is calculated as follows: Retail merchandise is valued at selling price less an appropriate percentage to reduce the value to approximate cost, due allowance having been made for redundant, obsolete and spoiled inventories. The inventories are then assessed for impairment based on the net realisable value. Consumables are valued at the lower of cost and net realisable value on a first-in-first-out basis. Goods in transit are valued at actual cost. All teas in bulk form, being agricultural produce, are valued at net realisable value less costs to sale. Realisable value represents the plantation producer prices since realised or estimated to be realised by the Group after taking account of expected selling and distribution expenses. The cost in relation to manufactured goods for resale includes the cost of teas (as disclosed above), the cost of packaging materials, direct labour and an appropriate proportion of factory overhead expenses.
3.19
Advance crop expenditure This reflects the policy of deferring certain costs, incurred on subsequent seasonal yields, to the statement of financial position for offset against revenues realised in matching periods.
3.20
Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
3.20.1
Restructurings A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity. Contingent liabilities acquired in a business combination Contingent liabilities acquired in a business combination are initially measured at fair value at the acquisition date. At the end of subsequent reporting periods, such contingent liabilities are measured at the higher of the amount that would be recognised in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation recognised in accordance with IAS 18 Revenue. Financial instruments Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
3.20.2
3.21
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3.22
Financial assets Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' (FVTPL), 'held-to-maturity' investments, 'available-for-sale' (AFS) financial assets and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
3.22.1
Effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.
3.22.2
Financial assets at FVTPL Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL. A financial asset is classified as held for trading if: it has been acquired principally for the purpose of selling it in the near term; or on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or it is a derivative that is not designated and effective as a hedging instrument. A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if: such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL. Financial assets at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the 'other gains and losses' line item in the consolidated statement of comprehensive income.
3.22.3
Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Group has the positive intent and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method less any impairment. Available-for-sale financial assets (AFS financial assets) AFS financial assets are non-derivatives that are either designated as AFS or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss. Changes in the carrying amount of AFS monetary financial assets relating to changes in foreign currency rates (see below), interest income calculated using the effective interest method and dividends on AFS equity investments are recognised in profit or loss. Other changes in the carrying amount of AFS financial assets are recognised in other comprehensive income. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in other comprehensive income is reclassified to profit or loss.
3.22.4
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3.22.4
Available-for-sale financial assets (AFS financial assets) (continued) Dividends on AFS equity instruments are recognised in profit or loss when the Group's right to receive the dividends is established. The fair value of AFS monetary financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate prevailing at the end of the reporting period. The foreign exchange gains and losses that are recognised in profit or loss are determined based on the amortised cost of the monetary asset. Other foreign exchange gains and losses are recognised in other comprehensive income. AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment losses at the end of each reporting period.
3.22.5
Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including trade and other receivables, bank balances and cash, and others) are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
3.22.6
Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. For AFS equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. For all other financial assets, objective evidence of impairment could include: significant financial difficulty of the issuer or counterparty; or breach of contract, such as a default or delinquency in interest or principal payments; or it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or the disappearance of an active market for that financial asset because of financial difficulties. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit periods, as well as observable changes in national or local economic conditions that correlate with default on receivables. For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate. For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period. For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying
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3.22.6
Impairment of financial assets (continued) amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income . In respect of AFS debt securities, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.
3.22.7
Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss. On derecognition of a financial asset other than in its entirety (e.g. when the Group retains an option to repurchase part of a transferred asset or retains a residual interest that does not result in the retention of substantially all the risks and rewards of ownership and the Group retains control), the Group allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.
3.23 3.23.1
Financial liabilities and equity instruments Classification as debt or equity Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. Repurchase of the Company's own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments. Financial liabilities Financial liabilities are classified as either financial liabilities 'at FVTPL' or 'other financial liabilities'.
3.23.2
3.23.3
3.23.3.1 Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if: it has been acquired principally for the purpose of repurchasing it in the near term; or on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or it is a derivative that is not designated and effective as a hedging instrument.
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3.23.3.1 Financial liabilities at FVTPL (continued) A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if: such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL. Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the 'other gains and losses' line item in the consolidated statement of comprehensive income. 3.23.3.2 Other financial liabilities Other financial liabilities (including borrowings) are subsequently measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition. 3.23.3.3 Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument. Financial guarantee contracts issued by the Group are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of: the amount of the obligation under the contract, as determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with the revenue recognition policies. 3.23.3.4 Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. 3.24 Dividends payable Dividends on ordinary shares are recognised in the statement of changes in equity in the period in which they are declared. 4. Critical accounting judgements and key sources of estimation uncertainty The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. The following are the critical judgements, apart from those involving estimations, that the Directors have made in the process of applying the entity's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
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4.1
Classification of the Cape Grace Hotel as held for sale The Cape Grace Hotel operations in South Africa have been maintained as a non-current asset held for sale. Further details are disclosed in note 14. 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 2011, the Directors have assessed the Group's ability to continue operating as a going concern and believe that the preparation of these financial statements on a going concern basis is still appropriate. Useful lives and residual values of property, plant and equipment As described in note 3.13 above, the Group reviews the estimated useful lives and residual values of property, plant and equipment at the end of each reporting period. During the period, the Directors engaged independent professional valuers to reassess the carrying amounts of certain property, plant and equipment for the stores and agriculture segments. The property, plant and equipment carrying amounts were out of line with similar items in the other group entities. The financial effect of this reassessment, assuming the assets are held until the end of their estimated useful lives, is to increase the consolidated plant and equipment carrying amounts and the consolidated depreciation expense in the current financial year and for the next 3 years, by the following amounts: Depreciation expense US$ 2009 2011 2012 2013 862,866 862,866 862,866 696,530 Carrying amount US$ 3,857,888 2,995,022 2,132,156 1,435,626
4.2
4.3
The remaining useful lives and residual values were reassessed based on business trends, technological developments, asset conditions and management's future plans. The useful lives and residual values so determined involved the exercise of significant levels of judgement based on data that was not readily observable. 4.4 Biological assets valuation Tea, macadamia and timber plantations are stated at their fair value less point of sale costs. The present value of expected net cash flows from plantations, discounted at a current market determined pre-tax rate of 12%, was used to determine fair value. The pre tax rate is the average cost of borrowing for the loans with the longest tenure of 5 years for the agricultural segment. Funds earmarked for investment Certain provisions were made in the financial statements for the year ended 31 December 2008, at the instigation of the previous Board of Directors. The resolution of the boardroom and shareholder disputes has allowed the Group a recoverable sum of US$11,737,013 denominated in South African rand to be reinstated in the current financials. The timing of future cash flows or gains arising from this investment is yet to be determined. Refer to note 21. Balances with the Reserve Bank of Zimbabwe The deposit with the Reserve Bank of Zimbabwe (RBZ) arose from proceeds arising from the Initial Public Offer undertaken by the Company. These funds were raised in international markets. The Company has not had access to these funds in cash and the timing of future cash flows is uncertain. These amounts are required to assist with the recapitalisation of the Group. The Directors are engaging the RBZ with a view to the establishment of an agreed drawdown on these funds. Refer to note 22. Revenue Revenue comprises the invoiced value of sales excluding value added tax and trade discounts in respect of operations. See note 6 for a detailed breakdown by operating segment.
4.5
4.6
5.
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6. Segment information For purposes of resource allocation and assessment of segment performance, the Group is organised into segments based on their operational activities and geographical location. The operating segments comprise hotels, retail and agriculture operations. The retail segment consists of the supermarkets on the one part and the department and convenience stores on the other and these two are evaluated independently. The Group is organised into two geographical segments, Zimbabwe operations and non Zimbabwe operations. The Kingdom Financial Holdings Limited banking operations were demerged from the Group in the current period and the Cape Grace Hotel operations in South Africa are held for disposal.
6.1 Segment revenue and result 31 March 2011 Continuing operations Revenue Operating profit / (loss) Investment revenue Finance costs Net exchange (losses) / gains Fair value adjustments Reinstatement of funds earmarked for investment (note 21) Income tax credit / (expense) (Loss) / profit for the year 31 December 2009 Continuing operations Revenue Operating (loss) / profit Investment revenue Finance (costs) / income Net exchange (losses) / gains Fair value adjustments Income tax credit / (expense) (Loss) / profit for the year Supermarkets US$ 274,277,230 1,507,416 18,747 (2,035,220) (239,627) 281,201 (467,483) Hotels US$ 15,893,206 210,811 1,504 (1,860) 19,421 178,449 408,325 Agriculture US$ 22,498,476 (101,510) 71,435 (988,433) 1,542,545 (730,664) (206,627) Stores US$ 19,609,707 (3,022,013) 926,668 (3,513,422) (19,788) 1,618,768 (4,009,787) Corporate* US$ (1,841,288) (4,642,192) 2,574,356 (1,051,396) 11,169 (148,147) 11,737,013 (554,372) 7,926,431 Group US$ 330,437,331 (6,047,488) 3,592,710 (7,590,331) (228,825) 1,394,398 11,737,013 793,382 3,650,859
123,549,306 (2,799,734) 16,317 (152,905) 965,250 (1,971,072)
8,277,370 (584,779) 1,242 (12,161) (40,264) 1,417,455 781,493
12,925,401 967,279 4,884 (322,572) 2,116,946 (65,663) 2,700,874
4,086,043 (3,550,874) 3,269 (111,481) (7,421) 1,174,308 (2,492,199)
(4,472,453) 669,973 174,071 193,113 (35,712) 1,797,319 (1,673,689)
148,838,120 (10,440,561) 695,685 (425,048 145,428 2,081,234 5,288,669 (2,654,593)
*The adjustment of US$1,847,288 against revenue which appears under corporate is in respect of intra-group sales.
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6.2
Segment assets and liabilities Continuing and discontinued operations

31 March 2011 Segment assets continuing operations Segment assets discontinued operations Consolidated segment assets Segment liabilities continuing operations Segment liabilities discontinued operations Consolidated segment liabilities Capital expenditure - continuing operations Capital expenditure - discontinued operations Depreciation and impairment continuing operations Depreciation and impairment discontinued operations 31 December 2009 restated Segment assets continuing operations Segment assets discontinued operations Consolidated segment assets Segment liabilities continuing operations Segment liabilities discontinued operations Consolidated segment liabilities Capital expenditure - continuing operations Capital expenditure - discontinued operations Depreciation and impairment continuing operations Depreciation and impairment discontinued operations 1 January 2009 unaudited and restated Segment assets continuing operations Segment assets discontinued operations Consolidated segment assets Segment liabilities continuing operations Segment liabilities discontinued operations Consolidated segment liabilities Hotels Supermarkets US$ US$ 28,216,356 43,860,203 40,332,079 571,219 68,548,435 44,431,422 Stores US$ 64,333,525 183,999 64,517,524 Banking Agriculture Corporate* US$ US$ US$ 37,778,493 341,170 38,119,663 33,850,376 11,814 33,862,190 Group US$ 208,038,953 41,440,281 249,479,234
(7,080,837) (40,133,298) (50,234,041) (23,794,860) (30,875,697) (40,133,298) (50,234,041) 449,840 508,174 (760,860) (2,429,318) 6,294,578 (897,424) 2,191,888 (1,540,055) -
(17,160,449) 15,339,575 (99,269,050)
8,716,527 (15,078,333) - (17,160,449) 24,056,102 (114,347,383) 909,056 1,069,198 16,709 (124,832) 3,220,794 10,022,213 1,417,230 (4,595,672) -
- (1,272,501) (791,476) -
29,283,147 36,847,922 66,131,069
23,034,173 23,034,173
28,920,859 28,920,859 (5,424,688)
- 32,744,400 104,093,663 104,093,663 32,744,400 - (10,265,874)
17,328,357 4,497,374 21,825,731 9,247,352
131,310,936 145,438,959 276,749,895 (46,479,181)
( 22,304,925) (17,731,046) (16,363,112) (38,668,037) (17,731,046) 867,362 527,428 (545,035) (1,672,290) 1,698,295 (667,732) -
- (70,623,993) (5,424,688) (70,623,993) (10,265,874) 23,043 (863,106) 213,790 (419,180) 2,054,547 (924,591) -
(1,641,364) (88,628,469) 7,605,988 (135,107,650) 1,999 (29,722) 2,091,470 4,643,247 743,217 (3,030,186) -
29,745,874 28,037,302 57,783,176
35,014,508 35,014,508
38,628,103 38,628,103
58,446,768 27,008,348 (15,862,815) 950,000 2,587,606 59,396,768 27,008,348 (13,275,209) 30,186,497 30,186,497
172,980,786 31,574,908 204,555,694 (47,691,695) (12,490,405) (60,182,100)
(42,310,338) (2,278,232) (12,490,405) (54,800,743) (2,278,232)
(5,591,826) ( 21,281,356) (6,416,440) (5,591,826) (21,281,356) (6,416,440)
*Inter-company balances and transactions have been eliminated from the corporate amounts. Corporate also includes other operating segments that are not allocated to a reportable segment. The accounting policies of the reportable segments are the same as the Group's accounting policies disclosed under significant accounting policies.
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6.3
Geographical segments 31 March 2011 Continuing operations Revenue Operating (loss) / profit Segment assets Segment liabilities NonZimbabwe Zimbabwe US$ US$ 330,437,331 (6,057,570) 192,075,007 (99,200,162) 10,082 15,963,946 (68,888) 31 December 2009 1 January 2009 Unaudited NonZimbabwe US$ -
NonZimbabwe Zimbabwe Zimbabwe US$ US$ US$ 148,838,120 -
(10,386,424) (54,137) 115,497,245 15,813,691 157,207,516 15,773,270 (46,425,359) ( 53,822) (19,259,069) (28,432,626)
Non-Zimbabwe assets and liabilities from continuing operations are predominantly intra-group balances. Group 31 March 2011 US$ 7 Other income Continuing operations Trading income Interest received on Stores debt book Rental income Hotels ancillary services Agricultural ancillary activities Commission income Supplier rebates Non trading income Sundry income 8 Employee costs Continuing operations Wages and salaries Social security costs Retirement benefits - defined contribution plan Included in employee costs is Directors remuneration of: - fees for services as Directors - other services - pension costs 9 Occupancy costs Continuing operations Occupancy costs include: - operating lease rentals for property - depreciation on buildings (note 17) Group 31 December 2009 US$
1,784,236 680,237 644,554 1,038,902 173,363 4,321,292 721,448 5,042,740 (32,856,048) (1,658,388) (4,030,227) (38,544,663) (25,530) (1,910,262) (193,427)
124,674 285,252 616,785 1,087,260 2,113,971 457,493 2,571,464 (15,654,193) (333,739) (735,246) (16,723,178) (45,067) (768,116) (22,398)
(5,938,846) (893,568)
(3,441,018) (542,189)
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A n n u a l R e p o r t 2 0 1 1
Group 31 March 2011 US$ 10 Other operating costs Continuing operations Included in other operating costs are the following: Auditors remuneration - current year fee - prior year under provision Depreciation of property, plant and equipment (note 17) Impairment of property, plant and equipment (note 17) Write off of biological assets (note 19) Loss on disposal of property, plant and equipment Write off of trademarks Loss on disposal of biological assets Investment revenue Continuing operations Interest on bank deposits Dividends from equity investments Other investment revenue Included in interest on bank deposits is US$ 1,784,236 (2009:US$581,573 earned on funds held at the Reserve Bank of Zimbabwe. Refer to notes 4.6 and 22 for further details. 12 Finance costs Continuing operations Interest payable: Long term borrowings Overdrafts and short term borrowings Other finance costs
Group 31 December 2009 US$
(522,151) (58,700) (3,702,104) (111,787) (183,934) (167,222) (540,368)
(405,210) (2,487,997) (1,410,455) (77,615) (76,836) -
11
1,827,319 1,470,742 294,649 3,592,710
575,592 120,093 695,685
(7,332,757) (159,201) (98,373) (7,590,331)
(102,057) (275,156) (47,835) (425,048)
The weighted average capitalisation rate on funds borrowed was 18.9% per annum (2009: 29.09% per annum).
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A n n u a l R e p o r t 2 0 1 1
13. 13.1
Income tax Income tax recognised in profit/(loss) for the period 31 March 2011 US$ Tax credit comprises the following: Current tax (expense) / credit in respect of the current period Deferred tax credit relating to the origination and reversal of temporary differences Withholding tax on investment revenue Capital gains tax arising on demerger of KFHL Total tax credit relating to continuing operations The credit for the period can be reconciled to the accounting profit/(loss) as follows: Profit/( loss) before tax from continuing operations Income tax calculated at 25.75% (2009: 30.9%) Effect of revenue that is exempt from income tax Effect of expenses that are not deductible in determining taxable profit Effect of change in tax rate* Effect of previously unrecognised and unused tax losses Effect of revenue taxed at other rates Capital gains tax arising on demerger of KFHL Income tax credit recognised in profit/(loss) for the period (184,325) 1,739,305 (36,574) 1,518,406 (725,024) 793,382 Group Restated 31 December 2009 US$ 53,325 5,236,247 (903) 5,288,669 5,288,669
2,857,477 (735,800) 3,371,157 (360,693) (1,147,201) 417,693 (26,750) 1,518,406 (725,024) 793,382
(7,943,262) 2,454,468 801,451 1,985,755 46,995 5,288,699 5,288,669
The income tax rate used for the 2011 reconciliation above is the corporate tax rate of 25.75% (31 December 2009: 30.9%) payable by corporate entities in Zimbabwe. The deferred tax rate used for 2011 is the corporate tax rate of 25.75%. The principal rate for the taxable foreign operation is 29% (31 December 2009: 29%). *Tanganda Tea Company Limited was taxed at 20% for the year ended 31 December 2009 due to some export incentives. The incentives were repealed in the current period resulting in the tax rate of 25.75%. 13.2 Income tax recognised in other comprehensive income Group 31 March 2011 US$ Deferred tax Arising on income and expenses recognised in other comprehensive income: Translation of foreign operations Revaluation of available for sale financial assets Provisions Property revaluations Other movements Total income tax recognised in other comprehensive income Restated 31 December 2009 US$
188,631 188,631
193,659 (272,390) (12,378) 1,123,875 1,239,135 2,271,901
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A n n u a l R e p o r t 2 0 1 1
13.3
Current tax liabilities Group 31 March 2011 US$ Current tax liabilities Value added tax Income tax payable 487,727 487,727 31 December 2009 US$ 403,096 11,056 414,152 Unaudited 1 January 2009 US$ 11,041 106,849 117,890
13.4
Deferred tax balances Group Beginning Recognised Disposed Recognised of the in profit with in period or loss subsidiaries other comprehensive income US$ US$ US$ US$ The deferred tax balance is attributable to the following items: Current period: Assessed losses (4,363,523) Property, plant and equipment 16,233,891 Biological assets 749,825 Exchange differences 559,740 Provisions 331,165 Receivables and prepayments 49,412 Other 213,520 Deferred capital gains tax on land 157,211 13,931,241 Prior year: Assessed losses Property, plant and equipment Property, plant and equipment prior year adjustment Biological assets Biological assets prior year adjustment Available for sale financial assets Exchange differences Provisions Receivables and prepayments Other Deferred capital gains tax on land 20,483,718 917,357 (272,390) 754,080 199,777 4,080 245,259 22,331,881 End of the period US$
(3,140,578) (146,196) 1,664,410 666 304,487 121,893 (435,030) 74,392 (1,555,956) (4,363,523) (2,741,622) (384,330) (712,646) 545,114 (681) 119,010 45,332 1,452,655 (88,048) (6,128,739)
1,512,202 (2,367,306) (325,267) 221,510 (958,861) -
3,233 3,233 (1,123,875) 272,390 (193,659) 12,378 (1,239,135) (2,271,901)
(5,991,899) 13,720,389 2,414,235 238,372 635,652 171,305 231,603 11,419,657 (4,363,523) 16,618,221 (384,330) 204,711 545,114 559,740 331,165 49,412 213,520 157,211 13,931,241
40
A n n u a l R e p o r t 2 0 1 1
13.4
Deferred tax balances (continued) Group Restated Unaudited 31 March 2011 31 December 2009 1 January 2009 US$ US$ US$ Comprising: Deferred tax asset - continuing operations Deferred tax liability - continuing operations Deferred tax asset - disposal group (note 15) Deferred tax liability - disposal group (note 15) The deferred tax credit is recognised in the profit /(loss) for the period as follows: Deferred tax credit as above Directly associated with assets held for sale disposal group (2,355,680) 15,996,723 (2,221,386) 11,419,657 15,346,508 (2,370,901) 955,634 13,931,241 24,318,471 (1,986,590) 22,331,881
(1,555,956) (183,349) (1,739,305)
(6,128,739) 892,492 (5,236,247) Company
Unaudited 31 March 2011 31 December 2009 1 January 2009 US$ US$ US$ Assessed loss Plant and equipment Prepayments Unrealised exchange gains Deferred capital gains tax on unlisted investments (322,230) 35,493 24,504 182,935 (79,298) 2,875,477 2,796,179 4,106,257 4,106,257 4,106,257 4,106,257
14.
Discontinued operations Demerger of Kingdom Financial Holdings Limited (KFHL) from the Group. Following the 13 October 2010 EGM of the Company and subsequent court and regulatory approvals, KFHL was demerged from the Group effective 31 October 2010. Details of the assets and liabilities disposed of, and the calculation of the loss on disposal, are disclosed in note 31. Voluntary liquidation of Cotton Printers (Private) Limited Cotton Printers was liquidated during 2010. The company had encountered significant viability problems pre and post dollarisation resulting in it applying for voluntary liquidation in October 2009. The order for final liquidation was granted on 10 May 2010. Cotton Printers did not trade during the period ended 31 March 2011. Details of the assets and liabilities disposed of, and the calculation of the loss on disposal, are disclosed in note 31. Cape Grace Hotel operations in South Africa 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. Mentor stands ready to comply with its obligation to purchase the Cape Grace Hotel as a result of the binding agreement referred to aforesaid, and is ready to consummate such transaction and deliver the proceeds of the sale against the delivery of the Cape Grace Hotel in compliance with the agreement.
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A n n u a l R e p o r t 2 0 1 1
14.
Discontinued operations (continued) Profit / (loss) for the year from discontinued operations: 31 March 2011 31 December 2009 US$ US$ Revenue Net interest Fees and commissions Other gains Total income Expenses* Profit / (loss) before tax Income tax Profit / (loss) for the year from discontinued operations Loss on disposal of subsidiaries Profit / (loss) for the year from discontinued operations (attributable to owners of the parent) Other comprehensive income Exchange differences on translating foreign entities Losses on property revaluations Movement in other reserves Other comprehensive income for the period, net of tax Total comprehensive profit / (loss) for the period *The expenses exclude depreciation expense of US$3,220,794 (2009: US$2,091,470) which has been written back in line with the requirements of IFRS 5. Cash flows from discontinued operations Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities Net cash (outflows) / inflows (3,501,547) 304,735 (613,708) (3,810,520) 6,301,615 619,241 132,296 7,053,152 21,137,436 6,518,823 18,271,363 4,711,984 50,639,606 (43,016,973) 7,622,633 (1,306,421) 6,316,212 (3,842,146) 2,474,066 1,033,239 1,033,239 3,507,305 13,856,206 6,287,976 5,281,660 6,225,105 31,650,947 (33,219,392) (1,568,445) 660,405 (908,040) (908,040) 1,696,818 (1,641,125) 2,000 57,693 (850,347)
15.
Assets held for sale or distribution 31 March 2011 US$ Assets Property, plant and equipment Investment property Other financial assets and investments Investments in associates Balances at the RBZ Deferred taxation Goodwill Inventories Trade and other receivables Other cash and bank balances Balances owed by Group entities Total assets held for sale or distribution before Group elimination Group balances elimination Total assets held for sale or distribution 27,793,954 4,293,626 2,221,386 4,092,008 535,333 1,005,047 1,498,927 1,900,705 43,340,986 (1,900,705) 41,440,281 Group Restated 31 December 2009 US$ 37,988,372 186,900 8,427,883 2,498,655 24,163,308 2,370,901 4,092,008 624,312 42,113,836 22,972,784 3,796,101 149,235,060 (3,796,101) 145,438,959 Unaudited 1 January 2009 US$ 21,389,918 950,000 729,381 1,025,929 1,986,590 4,092,008 322,414 1,011,510 67,158 1,440,165 33,015,073 (1,440,165) 31,574,908
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A n n u a l R e p o r t 2 0 1 1
15.
Assets held for sale or distribution (continued) 31 March 2011 US$ Liabilities Borrowings Trade and other payables Deferred tax liabilities Other financial liabilities Customer deposits Balances owed to Group entities Liabilities relating to assets held for sale before Group elimination Group balances elimination Total liabilities relating to assets held for sale or distribution Net assets held for sale or distribution Capital and reserves relating to assets held for sale or distribution Comprising Assets held for sale: Cape Grace Hotel group of companies Cotton Printers (Private) Limited Motor vehicles1 Assets held for distribution to members: Kingdom Financial Holdings Limited Total assets held for sale or distribution Liabilities relating to assets held for sale: Cape Grace Hotel group of companies Cotton Printers (Private) Limited Liabilities relating to assets held for distribution to members: Kingdom Financial Holdings Limited Total liabilities relating to assets held for sale or distribution Net assets held for sale or for distribution Equity relating to assets held for sale: Cape Grace Hotel group of companies Cotton Printers (Private) Limited Equity relating to assets held for distribution to members: Kingdom Financial Holdings Limited Total equity relating to assets classified as held for sale or distribution 2,572,656 1,976,816 10,528,861 8,716,527 23,794,860 (8,716,527) 15,078,333 26,361,948 18,083,232 Group Restated 31 December 2009 US$ 3,875,878 39,994,943 955,634 8,982,286 34,819,728 8,933,154 97,561,623 (8,933,154) 88,628,469 56,810,490 140,316,463 Unaudited 1 January 2009 US$ 3,028,334 2,866,130 6,595,941 6,365,750 18,856,155 (6,365,750) 12,490,405 19,084,503 10,621,312
39,977,389 1,462,892 41,440,281 15,078,333 15,078,333 26,361,948 18,083,232 18,083,232
36,847,922 4,497,374 104,093,663 145,438,959 16,363,112 1,641,364 70,623,993 88,628,469 56,810,490 14,231,541 2,766,220 34,660,364 51,658,125
28,037,302 2,587,606 950,000 31,574,908 12,490,405 12,490,405 19,084,503 10,621,312 10,621,312
Company 31 March 2011 31 December 2009 US$ US$ 34,660,364 100 11,814 11,814 34,660,464 1 The Group intends to dispose of certain motor vehicles to staff and anticipates that the disposal will be completed by 31 July 2011. 2 Refer to note 14 for details. Assets held for distribution to members Kingdom Financial Holdings Limited2 Assets held for sale Cotton Printers (Private) Limited2 Motor vehicles1
43
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16.
Earnings / (loss) per share Basic earnings / (loss) per share: The earnings / ( loss) and weighted average number of ordinary shares used in the calculation of basic earnings / (loss) per share are as follows: Group Restated 31 March 2011 31 December 2009 US$ US$ Profit/(loss) for the year attributable to owners of the parent used in the calculation of total basic earnings/(loss) per share Less: Profit/(loss) for the year from discontinued operations used in the calculation of basic earnings/(loss) per share from discontinued operations Profit/(loss) used in the calculation of basic earning/(loss) per share from continuing and discontinued operations Weighted average number of ordinary shares Basic earnings/(loss)from continuing and discontinued operations (cents per share) Basic earnings/(loss) continuing operations (cents per share) There were no dilutive potential ordinary shares at the reporting date. The Board declared a dividend in specie for the demerger of KFHL from the Group. Refer to note 31.1 for details. 4,213,219 2,474,066 6,687,285 245,374,791 2.73 1.72 (1,948,570) (908,040) (2,856,610) 245,374,791 (1.16) (0.79)
17.
Property, plant and equipment Group Land and Leasehold Furniture and Motor Work in buildings improvements equipment vehicles progress US$ US$ US$ US$ US$ At 31 March 2011 Opening carrying value Transfer from investment property Additions replacement Service assets adjustment Disposals cost Disposals accumulated depreciation Depreciation expense Transfer to assets held for sale (see note 15) Closing carrying value At cost or deemed cost Accumulated depreciation Accumulated impairment Carrying value at 31 March 2011 63,715,669 27,046 2,137,450 (932) 23 (893,568) 64,985,688 68,009,708 (1,613,565) (1,410,455) 64,985,688 477,524 781,578 (69,186) 1,189,916 1,377,983 (188,067) 1,189,916 12,888,741 3,345,157 Total US$
103,604 80,530,695
27,046 6,791,532 415,257 (103,604) 10,022,213 65,325 65,325 (260,359) (239,455) - (500,746) 69,472 122,544 (2,401,486) (1,231,432) - (1,462,892) 17,153,225 949,179 21,351,011 1,863,573 (4,197,786) (914,394) 17,153,225 949,179 192,039 - (4,595,672) - (1,462,892) - 84,278,008 - 92,602,275 - (6,913,812) - (1,410,455) 84,278,008
44
A n n u a l R e p o r t 2 0 1 1
17.
Property, plant and equipment (continued) Land and buildings US$ At 31 December 2009 Opening carrying value (unaudited) Prior period adjustment (note 32) Opening carrying value - restated Transferred to assets held for sale Impairment Additions expansion Additions replacement Service assets adjustment Disposals cost Disposals accumulated depreciation Depreciation expense Closing carrying value At cost or deemed cost Accumulated depreciation Accumulated impairment Carrying value at 31 December 2009 74,855,102 204,465 75,059,567 (9,910,000) (1,410,455) 518,746 (542,189) 63,715,669 65,846,144 (720,020) (1,410,455) 63,715,669 Group Leasehold Furniture and Motor improvements equipment vehicles US$ US$ US$ 513,742 513,742 20,702 (56,920) 477,524 596,405 (118,881) 477,524 8,557,828 3,234,497 11,792,325 5,585,658 1,281,792 6,867,450 Work in progress US$ 138,212 138,212 Total US$ 89,650,542 4,720,754 94,371,296
(619,397) (3,382,864) 2,530,216 673,932 527,477 303,910 154,504 (63,337) (201,249) 11,015 (1,444,062) 12,888,741 70,993 (987,015) 3,345,157
- (13,912,261) - (1,410,455) 9,246 3,752,842 59,018 890,405 (102,872) 51,632 (264,586) 103,604 206,476 (102,872) 103,604 82,008 (3,030,186) 80,530,695 85,780,103 (3,838,953) (1,410,455) 80,530,695
14,754,513 4,376,565 (1,865,772) (1,031,408) 12,888,741 3,345,157
A valuation of the Group's land and buildings, other than those on the estates, was performed by independent valuers not connected to the Group to determine the market value of the land and buildings at 31 December 2008 and at 31 December 2009. The valuation, which conforms to International Valuation Standards, was determined by reference to market evidence on the transaction prices for similar properties. The value of Tanganda Tea Company buildings which are on the estates was estimated by the Directors due to their specialised nature. The valuation at 31 December 2008 was utilised to determine the deemed cost at 1 January 2009 while the valuation performed at 31 December 2009 was used for impairment assessment, with carrying values impaired where appropriate. Assets pledged as security Freehold land and buildings with carrying amounts of US$1.9 million and US$1.25 million (2009: US$2.2 million and US$600,000) have been pledged to secure a loan of the Group (see note 27) and a trade credit facility (see note 28) respectively. Freehold land and buildings have been pledged as security under a mortgage. The Group is not allowed to pledge these assets as security for other borrowings or sell them to another entity. Company Motor vehicles US$ 84,328 (13,549) 9,325 (23,280) (11,814) 45,010 104,500 (59,490) 45,010
Furniture and equipment US$ At 31 March 2011 Acquisitions through internal reorganisation (refer to note 21.2) Additions replacement Disposals Disposals accumulated depreciation Depreciation expense Transferred to assets held for sale (see note 15) Closing carrying value At cost or deemed cost Accumulated depreciation Carrying value at 31 March 2011 177,205 6,650 (7,549) 4,623 (24,742) 156,187 250,299 (94,112) 156,187
Total US$ 261,533 6,650 (21,098) 13,948 (48,022) (11,814) 201,197 354,799 (153,602) 201,197
45
A n n u a l R e p o r t 2 0 1 1
18.
Investment property Group 31 March 2011 31 December 2009 US$ US$ At fair value Opening carrying value Transfer to land and buildings Transferred to assets held for sale Depreciation Impairment loss Closing carrying value * Unaudited The fair value of the investment property was arrived at on the basis of a valuation carried out at 31 December 2009 by independent valuers not connected to the Group. The fair value was assessed for impairment at 31 March 2011. The valuation, which conforms to International Valuation Standards, was determined by reference to market evidence on the transaction prices for similar properties. The Group owns the investment property through its subsidiary TM Supermarkets (Private) Limited as detailed below: - Stand number 32, Main Street, Chipinge at a carrying amount of US$44,036 (2009: US$45,000). 72,046 (27,046) (964) 44,036 394,000* (286,500) (1,796) (33,658) 72,046
19.
Biological assets Group Restated 31 March 2011 31 Decemeber2009 US$ US$ Opening carrying value Additions Disposals Fair value adjustments Write offs Closing carrying value Comprising: Tea plantations Livestock and other * Unaudited Refer to note 32 for details of the restatement. 6,310,560 402,711 (197,075) 1,256,748 (111,787) 7,661,157 4,006,745 3,654,412 7,661,157 4,999,548* 229,973 1,158,654 (77,615) 6,310,560 2,876,597 3,433,963 6,310,560
20.
Investment in associates Opening carrying value Share of profits Additions Dividends received Translation adjustment Transfer to assets held for sale Closing carrying value * Unaudited 1,025,929* 1,321,166 571,933 (454,768) 34,395 (2,498,655) -
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21.
Other financial assets and investments Group 31 March 2011 31 December 2009 US$ US$ Opening carrying value (short term and long term portions) Balances transferred to assets held for sale Exchange difference Interest accrual Additions Fair value adjustments Reinstatement of funds earmarked for investment Less: short term portion in current assets Non-current closing carrying value Comprising: Funds earmarked for investment by shareholder entities1 Funds earmarked for investments - Mentor Africa Limited Other Closing carrying value * Unaudited
1
Unaudited 1 January 2009 US$ 5,237,499 5,237,499 5,237,499 (787,605) 4,449,894
4,554,984 4,554,984 (22,246) 143,956 151,620 34,774 11,737,013 16,600,101 16,600,101
5,237,499 (781,199) 4,456,300 (44,243) 111,793 17,792 37,540 4,579,182 (24,198) 4,554,984
11,737,013 4,702,518 160,570 16,600,101
4,545,293 9,691 4,554,984
4,404,492 45,402 4,449,894
Refer to note 4.5 for details Company 31 March 2011 31 December 2009 US$ US$ 82,125,148 82,125,148 (24,615,605) 16,619,535 74,129,078 32,760,711 16,619,535 3,977,344 20,771,488 74,129,078 180,391 19,184 160,085 13,521 373,181 213,024 151,620 8,537 373,181 123,974,684 (39,501,137) 84,473,547 (2,348,399) 82,125,148 57,376,316 3,977,344 20,771,488 82,125,148 140,728 10,682 28,981 180,391 180,391 180,391
21.1 Investments in subsidiaries and other financial assets Investments in subsidiaries Opening net carrying value Balances transferred to assets held for sale Impairment losses on investments in subsidiaries Additions through internal reorganisation (refer to note 21.2) Closing net carrying value Comprising: Investment in Thomas Meikle Centre (Private) Limited Investment in Greatermans (1979) (Private) Limited Investment in TM Supermarkets (Private) Limited Investment in Tanganda Tea Company Limited Other financial assets Opening carrying amount Interest accrued on funds earmarked for investment Additions Exchange difference on funds earmarked for investment Closing net carrying value Comprising: Funds earmarked for investment with Mentor Africa Limited (see above) Investment in unlisted shares Other investments * Unaudited
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21.2 Holdings in material subsidiary companies: Entity Continuing operations: Thomas Meikle Centre (Private) Limited Tanganda Tea Company Limited Thomas Meikle Properties (Private) Limited Ninety Speke Avenue (Private) Limited TM Supermarkets (Private) Limited Greatermans (1979) (Private) Limited Cape Grace Hotel Limited Cape Grace Investments Limited Chapin Hotel and Resorts Limited Assets held for sale: Cape Grace Hotel (Proprietary) Limited Cape Grace Investments (Proprietary) Limited Plumway Investments (Proprietary) Limited Holding Business 100% 100% 100% 100% 75% 100% 100% 100% 100% 100% 100% 100% Hotels Agriculture Property owning Property owning Supermarkets Retail Investments holding Investments holding Hotel Investments Hotel Property owning Property owning Country of incorporation Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe Zimbabwe British Virgin Islands British Virgin Islands Channel Islands South Africa South Africa South Africa
Thomas Meikle Centre (Private) Limited (TMC) was unbundled during the year resulting in the retail operations being moved to Greatermans (1979) (Private) Limited and TMC head office operations being moved to Meikles Limited. Only the hotel operations remain in TMC. Details of other subsidiary companies are disclosed in the Group structure on page 64. 21.3 Interest in joint venture: The Group has a 50% interest in a joint venture, which operates The Victoria Falls Hotel in Zimbabwe. There has been no change in the Group's ownership or voting interests in this joint venture since inception. The following amounts are included in the Group financial statements as a result of the proportionate consolidation of The Victoria Falls Hotel: Unaudited 1 January 2009 US$ 1,419,799 2,815,734 4,235,533 (419,972) (419,972) 3,815,561
31 March 2011 31 December 2009 US$ US$ Non-current assets Current assets Non-current liabilities Current liabilities Net assets Revenue Operating loss Profit / (loss) for the period 1,523,122 3,059,424 4,582,546 (362,773) (814,454) (1,177,227) 3,405,319 4,297,071 (261,866) 171,265 1,573,217 2,995,290 4,568,507 (991,923) (991,923) 3,576,584 2,004,978 (351,598) (238,976)
There are no contingent liabilities relating to the Group's interest in the joint venture. The Victoria Falls Hotel partnership leases the property on an operating lease which is valid until 2021. The partnership has the first right to renew the lease at the end of this period for a further ten years. Lease payments are computed as 10% of the Hotel's revenue as defined in the lease agreement.
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22.
Cash and bank balances Group 31 March 2011 31 December 2009 US$ US$ Banking: Balances with the Reserve Bank of Zimbabwe: - Statutory deposit - Nostro accounts Non-banking: Balances with the Reserve Bank of Zimbabwe* Cash and other bank balances Less: Non-current balances with Reserve Bank of Zimbabwe Cash and bank balances disclosed in the consolidated statement of financial position Add: Cash and bank balances relating to disposal group (note 15) Cash and cash equivalents disclosed in the consolidated statement of cash flows * Refer to note 4.6 for details Company 31 March 2011 31 December 2009 US$ US$ Balances with the Reserve Bank of Zimbabwe* Cash and other bank balances Less: Non-current balances with Reserve Bank of Zimbabwe Cash and bank balances disclosed in the company statement of financial position * Refer to note 4.6 for details 36,824,671 381,817 37,206,488 (36,824,671) 381,817 Unaudited 1 January 2009 US$ Unaudited 1 January 2009 US$
36,824,671 3,285,599 40,110,270 (36,824,671) 3,285,599 1,498,927 4,784,526
12,541,825 2,536,106 15,077,931 (12,541,825) 2,536,106 22,972,784 25,508,890
23,042,839 10,555,333 11,960,252 5,933,515 51,491,939 (35,003,091) 16,488,848 67,158 16,556,006
23.
Non cash transactions The Group disposed of the financial services group, KFHL, effective 31 October 2010 by way of a dividend in specie to Meikles Limited shareholders. Shareholders received two (2) shares in KFHL for every share held in Meikles Limited. Refer to note 31.1 for details of the net assets disposed of.
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24.
Inventories Group Restated Unaudited 31 March 2011 31 December 2009 1 January 2009 US$ US$ US$ Inventories comprise: Raw materials and consumables Merchandise and manufactured goods Work in progress 5,655,819 33,439,547 1,617,265 40,712,631 6,711,341 9,958,912 445,017 17,115,270 3,613,497 1,093,837 356,236 5,063,570
See note 32 for details of the restatement of prior year figures. The cost of inventories recognised as an expense includes US$3.5 million (2009: US$3.3 million) in respect of write-offs of inventory due to shrinkage. Inventories worth US$4.3 million (2009: US$3.5 million) were pledged to secure borrowings of the Group (see note 27). Company Unaudited 31 March 2011 31 December 2009 1 January 2009 US$ US$ US$ Consumables 25. Trade and other receivables Group Restated Unaudited 31 March 2011 31 December 2009 1 January 2009 US$ US$ US$ Trade receivables Allowance for doubtful receivables Advance crop expenditure Other receivables and prepayments 10,317,279 (428,319) 9,888,960 735,122 5,528,847 16,152,929 3,389,814 (13,838) 3,375,976 824,644 3,133,269 7,333,889 6,350,264 6,350,264 5,676 3,772,492 10,128,432 8,653 -
See note 32 for details of the restatement of prior year figures. The average credit period on sale of goods and services is 193 days for department stores, 35 days for hotels and 60 to 90 days for agriculture. Interest is charged on the department stores debtors after 30 days. The allowance for doubtful receivables is in respect of specific customers. Overdue but not impaired amounts were US$215,690 (2009: US$177,881) in the 30 to 60 days category, US$50,625 (2009: US$73,008) in the 60 to 90 days category and US$1,395,203 (2009: US$263,092) over 90 days. Receivables amounting to US$6.6 million (2009: US$1.15 million) were pledged to secure borrowings of the Group (see note 27). The Directors consider that the carrying amount of trade and other receivables approximates their fair value. Company Unaudited 31 March 2011 31 December 2009 1 January 2009 US$ US$ US$ Inter-company balances Other receivables The inter-company balances have no fixed repayment terms. The Directors consider that the carrying amount of the other receivables approximates their fair value. 30,264,330 167,303 30,431,633 8,018,658 166,740 8,185,398 6,365,757 6,365,757
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26. Share capital and Directors beneficial interests 26.1 Share capital Ordinary shares of US1 cent each: Group and Company Number Number Number 31 March 2011 31 December 2009 1 January 2009 245,374,791 245,374,791 154,625,209 400,000,000 245,374,791 245,374,791 154,625,209 400,000,000 242,301,554 1,419,425 1,191,901 461,911 245,374,791 154,625,209 400,000,000
Opening shares in issue Scrip dividend Issued to share purchase scheme companies Issued to IMARA - discharge of share based payment reserve Closing shares in issue Unissued Authorised
At the Annual General Meeting held on 23 July 2010, the shareholders authorised a redenomination of the authorised share capital of the Company from 10 Zimbabwe cents per share (that is Z$ prior to any restatement to address inflation) to US1 cent per share. Shareholders further authorised that a transfer be made from nondistributable reserves to share capital of an amount sufficient to fund the redenomination. In 2009, share capital was presented as US$1 pending the aforesaid redenomination. 26.2 Directors' beneficial interests At 31 March 2011 the direct and indirect beneficial interests of the Directors in the ordinary shares of the Company are shown below: Fully paid ordinary shares 31 March 2011 31 December 2009 F. Rwodzi (resigned 15 June 2011) J.R.T. Moxon (appointed 16 June 2011) B.J. Beaumont T.B. Cameron R. Chidembo B. Chimhini O. Makamba R.H. Meiring (resigned 8 April 2011) A.C. Mills (resigned 15 June 2011) K. Ncube M.L.Wood 21,337,915 214,284 468,614 3,874 10,703 492,285 600,601 129,149 1,054,714 21,337,915 468,614 4,613,046 10,703 278,353 600,601 129,149 840,782
Mr. J.R.T. Moxon is also director of shareholder entities namely JRTM Investments (Private) Limited, ASH Investments (Private) Limited, FPS Investments (Private) Limited, ACM Investments (Private) Limited and APWM Investments (Private) Limited. 27. Borrowings Group 31 March 2011 US$ Secured: Acceptance credits, loans and overdrafts Unsecured: Acceptance credits, loans and overdrafts Less portion repayable in 12 months Due for repayment: On demand and within one year In second year In fourth year 37,868,270 14,912,408 52,780,678 (49,031,109) 3,749,569 49,031,109 3,111,167 638,402 52,780,678 Unaudited 31 December 2009 1 January 2009 US$ US$ 6,539,768 1,290,618 7,830,386 (6,985,213) 845,173 6,985,213, 845,173 7,830,386 981,514 981,514 (769,330) 212,184 769,330 212,184 981,514
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27. Borrowings (continued) Company Unaudited 31 March 2011 31 December 2009 1 January 2009 US$ US$ US$ Secured: Acceptance credits, loans and overdrafts Unsecured: Acceptance credits, loans and overdrafts Due for repayment: On demand and within one year 5,276,386 1,274,292 6,550,678 6,550,678 -
US$4.3 million (2009: US$3.5 million) worth of the acceptance credits, loans and overdrafts are secured by inventories. US$6.6 million (2009: US$1.15 million) worth of loans are secured by receivables. US$9 million (2009: nil) worth of loans are secured by a negative pledge over assets. US$1.9 million (2009:US$2.2 million) in freehold land and buildings has been pledged as security for a loan of US$2.4 million (2009: US$1.5 million) which bears interest at 8% (2009: 8.9%) per annum and matures on 14 May 2012. The Group has issued cross guarantees for subsidiary facilities worth US$24.8 million (2009:US$15 million).
28. Trade and other payables Group 31 March 2011 31 December 2009 US$ US$ Trade payables Accruals and deferred income Other payables 23,588,524 4,691,517 1,723,881 30,003,922 16,310,121 4,405,152 2,172,862 22,888,135 Unaudited 1 January 2009 US$ 1,924,837 774,441 2,544,738 5,244,016
The credit period on purchases ranges from 30 to 60 days (2009: 30 days). However, payments are made within 30 to 120 days. Foreign suppliers are predominantly on prepayment and cash bases. Interest is charged by certain but not all suppliers on overdue payables. US$1.25 million (2009: US$600,000) in freehold land and buildings has been pledged as security for a credit facility offered by a supplier. Trade payables comprise amounts outstanding for trade purchases. The Directors consider that the carrying amount of trade payables approximates their fair values. Company Unaudited 31 March 2011 31 December 2009 1 January 2009 US$ US$ US$ Group balances Provisions and other payables 29. Customer deposits Group Unaudited 31 March 2011 31 December 2009 1 January 2009 US$ US$ US$ Current accounts Maturity analysis: 3 months or less including repayable on demand 17,029,804 17,029,804 495,999 1,130,778 1,626,777 23,036,151 258,656 23,294,807 22,459,571 157,981 22,617,552
The customer deposits related to the Group's banking operations which were demerged effective 31 October 2010. Refer to note 14.
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30. Related party balances and transactions and compensation of executive Directors and key management personnel 30.1 Related party balances and transactions Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of balances and transactions between the Group and other related parties are disclosed below and in note 21. Unaudited 31 March 2011 31 December 2009 1 January 2009 US$ US$ US$ Balances with related parties Meikles Consolidated Holdings (Private) Limited - current account 53,139 26,376 13,810 Polyfoil Zimbabwe (Private) Limited - trade payable 41,486 Transactions with related parties: Cost recoveries - Meikles Consolidated Holdings (Private) Limited 54,828 24,679 14,366 Purchases - Polyfoil Zimbabwe (Private) Limited 1,259,717 Meikles Consolidated Holdings (Private) Limited (MCH) is indirectly owned by shareholders who hold 42.9% (2009: 42.9%) of the Company's issued shares. The current account has no fixed terms of repayment. Mr B.J. Beaumont has a significant interest in Polyfoil Zimbabwe (Private) Limited. 30.2 Compensation of executive Directors and key management personnel Continuing operations Short-term benefits Post-employment benefits Total 31 March 2011 31 December 2009 US$ US$ 5,145,075 516,336 5,661,411 1,153,890 70,335 1,224,225
Compensation of key management personnel represents remuneration of executive Directors and other members of key management for continuing operations during the year.
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31. 31.1
Disposal of subsidiaries Kingdom Financial Holdings Limited (KFHL) The Group disposed of the financial services group, KFHL, effective 31 October 2010 by way of a dividend in specie to Meikles Limited shareholders. Shareholders received two (2) shares in KFHL for every share held in Meikles Limited. Analysis of assets and liabilities over which control was lost Balances as at 31 October 2010 US$ Current assets Cash and cash equivalents Trade and other receivables Other financial assets Non-current assets Property, plant and equipment Investment property Investment in associates Current liabilities Customer deposits Trade and other payables Other financial liabilities Non-current liabilities Deferred tax liabilities Net assets disposed of Loss on disposal of subsidiary Non cash consideration received Net assets disposed of Loss on disposal 18,626,867 101,829,018 4,207,858 124,663,743 8,254,525 176,000 2,769,094 11,199,619 (43,918,271) (27,250,151) (48,177,196) (119,345,618) (917,788) 15,599,956 14,524,030 (15,599,956) (1,075,926)
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31. 31.2
Disposal of subsidiaries (continued) Cotton Printers (Private) Limited Following viability problems, Cotton Printers (Private) Limited was voluntarily liquidated during 2010. Analysis of assets and liabilities over which control was lost: Balances as at 1 January 2010 US$ Current assets Cash and cash equivalents Trade and other receivables Inventory Non-current assets Property, plant and equipment Current liabilities Trade and other payables Short term borrowings Non-current liabilities Deferred tax liabilities Net assets disposed of Loss on disposal of subsidiary Consideration received Net assets disposed of Loss on disposal 31,602 120 133,564 165,286 4,345,796 (1,513,994) (223,358) (1,737,352) (7,510) 2,766,220 (2,766,220) (2,766,220)
32. 32.1
Prior year adjustments Opening balances of property, plant and equipment During the period errors were identified on the 1 January 2009 carrying amounts of certain property, plant and equipment for the stores and agricultural operations. The assets were omitted from the valuation exercise carried out at 1 January 2009 when the functional currency was changed from ZW$ to US$. This has been corrected by the restatement of the 2009 comparatives included in these financial statements. Opening balances of biological assets, other receivables and nursery stocks During the period, it was discovered that the carrying amounts of certain biological assets of the agricultural segment were understated while certain receivables and nursery stocks were incorrectly valued at 1 January 2009, resulting in a misstatement of the opening carrying amounts. The error has been corrected in the comparative statements of financial position. Presented below are only those statement of comprehensive income and statement of financial position items which have been impacted by the prior year adjustments.
32.2
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34.
Prior year adjustments (continued) Statement of comprehensive income 31 December 2009 Adjustments to previously stated property, plant and equipment US$ US$ Other operating costs Fair value adjustments Income tax Loss for the year from continuing operations Total comprehensive loss for the year Statements of financial position 1 January 2009 as previously stated 1 January 2009 Property, plant and equipment Inventories Trade and other receivables Total assets Non-distributable reserves Deferred tax liability Total equity and liabilities US$ 89,650,542 5,565,764 10,280,439 200,489,141 (148,118,994) (23,074,660) (200,489,141) Adjustments to property, plant and equipment US$ 4,720,754 4,720,754 (3,476,943) (1,243,811) (4,720,754) Adjustments to inventories US$ (502,194) (502,194) 502,194 502,194 Adjustments to property, plant and equipment US$ (862,866) (862,866) 478,536 384,330 862,866 Adjustments to trade and other receivables US$ (152,007) (152,007) 152,007 152,007 Adjustments to biological assets US$ 2,116,946 2,116,946 (1,571,832) (545,114) (2,116,946) 1 January 2009 restated US$ 94,371,296 5,063,570 10,128,432 204,555,694 (150,941,736) (24,318,471) (204,555,694) 31 December 2009 restated US$ 80,530,695 6,310,560 17,115,270 7,333,889 276,749,895 (109,983,720) 21,325,383 (15,346,508) (276,749,895) (16,067,056) (35,712) 5,449,453 (3,747,889) (3,824,645) (862,866) 384,330 (478,536) (478,536) Adjustments to biological assets US$ 2,116,946 (545,114) 1,571,832 1,571,832 31 December 2009 restated US$ (16,929,922) 2,081,234 5,288,669 (2,654,593) (2,731,349)
31 December 2009 Property, plant and equipment Biological assets Inventory Trade and other receivables Total assets Non-distributable reserves Accumulated loss Deferred tax Total equity and liabilities
31 December 2009 1 January 2009 as previously stated net adjustments as above US$ US$ 76,672,807 4,193,614 17,617,464 7,485,896 271,429,262 (107,160,978) 22,418,679 (13,941,913) (271,429,262) 4,720,754 (502,194) (152,007) 4,066,553 (2,822,742) (1,243,811) (4,066,553)
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32.3 Prior year costs reclassification Certain prior year costs have been reclassified to conform to current year presentation. 33. Borrowing powers In terms of the Company's Articles of Association, the Directors shall not allow the borrowings of the Company to exceed at any time, twice the value of the funds attributable to the shareholders, without the sanction of the Company in a general meeting. 34. Operating lease commitments The Group is lessee for various properties under operating leases, the majority of which have revenue-based rentals. These rentals vary from 1% to 10% of revenue. In terms of the leases, the Group is required to pay property rates, insurance and maintenance costs. The operating leases are renewable on fixed dates. 35. Commitments 31 March 2011 US$ Capital commitments Authorised but not yet contracted for Group's share of capital commitments of joint venture 36. Retirement benefits The Meikle Group Pension Scheme All eligible employees in Zimbabwe contribute to an independently administered pension scheme. The scheme is based on a defined contribution plan. National Social Security Authority Scheme All eligible employees in Zimbabwe continue to contribute to the National Social Security Scheme. The contribution rate is 3% per employee per annum up to a maximum of US$200 per employee each month. 37. Litigation and claims Meikles Limited vs Coolbay Investments and Mentor Africa Limited These litigations have been withdrawn. There are other pending labour related litigations and claims whose resolution the Directors are of the opinion will not have a significant bearing to the Groups financial position. 38. Financial risk management The Group's principal financial instruments comprise cash and bank balances, interest bearing borrowings, overdrafts and short term money market investments. The main purpose of these financial instruments is to raise finance for the Group's operations. The Group has other various financial assets and liabilities such as trade receivables and trade payables which arise directly from its operations. The main categories of risk inherent in the business of the Group are: Credit risk Liquidity risk Market risk The Group's objective is to effectively manage each of the above risks associated with its financial instruments in order to limit the Group's exposure as far as possible to any financial loss associated with these risks. The Board is ultimately responsible and accountable for ensuring that adequate procedures and processes are in place to identify, assess, manage, and monitor key business risks. The Audit Committee is responsible for developing and monitoring the Group's risk management policies. The committee reports at least quarterly to the Board on its activities. 25,795,156 304,228 Group 31 December 2009 US$ 24,011,305 1,031,591
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38.
Financial risk management (continued) The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and Group's activities. The Audit Committee oversees how management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risk faced by the Group. The Committee is assisted in this regard by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee at least quarterly. The Group operates a central treasury function, the objective being to provide competitive funding costs and investment income as well as the monitoring of financial risk, under policies approved by the Board. The Group treasury activity, which operates in close co-operation with the Group's operating units, is routinely reported to executive Directors, and is subject to review by the external auditors. In accordance with Group policy, Group treasury does not engage in speculative activity.
38.1
Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group has adopted the policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the financial loss from defaults. Financial assets, which potentially subject the Group to concentrations of credit risk, consist principally of trade receivables and cash and cash equivalents. The carrying amounts of financial assets represents the maximum exposure. The maximum exposure to credit risk at 31 March 2011 was: GROUP Unaudited 31 March 2011 31 December 2009 1 January 2009 US$ US$ US$ Balance with the Reserve Bank of Zimbabwe (RBZ) (note 22) Trade receivables (note 25) Cash and cash equivalents (note 22) 36,824,671 9,888,960 3,285,599 12,541,825 3,375,976 2,536,106 35,003,091 6,350,264 16,488,848
Trade receivables are amounts owing by customers and are presented net of allowance for doubtful amounts. Trade debtors are unsecured. The total credit risk with respect to receivables is limited as a result of the dispersion amongst the individual debtors and across different geographical areas. Accordingly, the Group has no significant concentration of credit risk. Refer to note 4.6 on the funds with the RBZ. The Group's cash is placed with major banks of high credit standing and within specific guidelines laid down by the Group Treasury and approved by the Board. The Group does not consider there to be significant exposure to credit risk. 38.2 Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations when they fall due. Ultimate responsibility for liquidity risk management rests with the Board. The Group's approach to managing liquidity risk is to ensure, as far as possible, that it always has sufficient liquidity to meet its liabilities when due, without incurring unacceptable losses or risking damage to the Group's reputation. Exposure to liquidity risk is managed through a diversity of funding sources and a spread of debt maturities. Adequate liquidity is further managed through the use of cash flow forecasts and by maintenance of adequate borrowing facilities. In terms of the Company's Articles of Association, the Company's borrowing powers are limited to twice the value of the funds attributable to the shareholders, unless sanctioned in a general meeting of the Company. Group Treasury maintains strict control over the acceptance and draw-down of any loan facility.
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38.2 Liquidity risk (continued) On average, trade receivables and inventory are realised within 35 to 193 days. Trade payables are settled within 30 to 120 days. To the extent that the Group requires short-term funds, it utilises the banking facilities available. The following are the contractual maturities of financial liabilities, including estimated interest payments: Group - 31 March 2011 Carrying amount US$ 37,868,270 14,912,408 30,491,649 83,272,327 6,539,768 1,290,618 22,798,345 30,628,731 Within 1 year US$ 34,118,701 14,912,408 30,491,649 79,522,758 5,694,595 1,290,618 22,798,345 29,783,558 1 to 2 years US$ 3,111,167 3,111,167 3 to 5 years US$ 638,402 638,402 845,173 845,173
Secured acceptance credits and loans Unsecured acceptance, credits, loans and overdrafts Trade and other payables Total financial liabilities Group - 31 December 2009 Secured acceptance credits and loans Unsecured acceptance, credits, loans and overdrafts Trade and other payables Total financial liabilities 38.3
Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on the risk. Currency risk The Group undertakes transactions denominated in currencies other than its functional currency and has investment operations in South Africa whose functional currency is the South African rand. Consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved parameters by liquidating foreign denominated cash balances at approved rates. With foreign suppliers on a prepayment or cash basis, exposure with respect to foreign payables is minimal. The South African operations' net assets are exposed to foreign currency translation risk. The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows: GROUP Unaudited 31 March 2011 31 December 2009 1 January 2009 US$ US$ US$ Assets South African rand Euro Botswana pula Australian dollar British pound Liabilities South African rand 23,230,563 16,682 16,330 14,540 7,194 23,285,309 22,775,448 10,928,086 15,019 4,593 18,625 28,887 10,995,210 24,180,667 8,051,354 7,732 52,318 3,474 15,416 8,130,294 18,863,194
As at 31 March 2011, if the US$ weakened or strengthened by 10% against all the above currencies with all other variables held constant, profit after tax for the year would have been US$51,000 (2009: US$1.3 million) higher or lower, mainly as a result of foreign exchange gains or losses on translation of foreign currency denominated trade and other receivables, trade and other payables and borrowings. The Group did not use forward foreign exchange contracts during the period under review and does not apply cash flow hedge accounting.
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38.3
Market risk (continued) Interest rate risk The Group manages the interest rate risk on long and short term borrowings by fixing the interest rate with the relevant financial institution wherever possible. Borrowings issued at variable interest rates expose the Group to cash flow interest risk whereas borrowings issued at fixed interest rates expose the Group to fair value interest risk. The Group's significant interest bearing assets are the funds at the Reserve Bank of Zimbabwe and the funds held by Mentor Africa Limited. The effective rates on financial instruments at 31 March 2011 are: Group - 31 March 2011 With no fixed Weighted average interest rate realisation period % US$
Total US$
Financial assets Balances with the Reserve Bank of Zimbabwe (note 22) Funds held by Mentor Africa Limited (note 21) Total financial assets Weighted average interest rate % Financial liabilities Acceptance credits and loans Bank overdrafts Total financial liabilities Group - 31 December 2009 18.90% 15.55%
4.42% 2.27%
36,824,671 4,702,518 41,527,189 2 to 5 years US$ 3,749,569 3,749,569 With no fixed realisation period US$
36,824,671 4,702,518 41,527,189 Total US$ 42,732,705 10,047,973 52,780,678 Total US$
Within 1 year US$ 38,983,136 10,047,973 49,031,109 Weighted average interest rate %
Financial assets Balances with the Reserve Bank of Zimbabwe (note 22) Funds held by Mentor Africa Limited (note 21) Total financial assets Weighted average interest rate % Financial liabilities Acceptance credits and loans Bank overdrafts Total financial liabilities 29.09% 8.00%
4.61% 2.26%
12,541,825 4,545,293 17,087,118 2 to 5 years US$ 845,173 845,173
12,541,825 4,545,293 17,087,118 Total US$ 7,092,439 737,947 7,830,386
Within 1 year US$ 6,247,266 737,947 6,985,213
Market price The Group currently has no significant investments in equity securities and therefore has minimal exposure to market price risk. Fair value At 31 March 2011 the carrying amounts of cash and cash equivalents, trade and other receivables and trade and other payables approximate their fair values due to their short-term maturities. Trade receivables and payables will mature within 35 to 193 days. The fair value of loans, investments and interest bearing debt approximate their carrying value as disclosed on the statement of financial position.
60
A n n u a l R e p o r t 2 0 1 1
38.4
Capital management The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt (borrowings as detailed in note 27) and equity of the Group (comprising issued capital, reserves, retained earnings and non-controlling interests). Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. The Group reviews its capital structure periodically. As part of this review, the Group considers the cost of capital and the risks associated with each class of capital. The Group has a target total debt ratio of 40% determined as the proportion of total fixed interest bearing debt to equity. The gearing ratio at 31 March 2011 of 42.8% (see below) was higher than the target range, and has not changed significantly after the end of the reporting period. The gearing ratio at the end of the reporting period was as follows: GROUP 31 March 2011 31 December 2009 US$ US$ Long term and short term debt Total equity Debt to equity ratio 52,780,678 123,353,015 42.8% 7,830,386 141,662,281 5.5% Unaudited 1 January 2009 US$ 981,514 145,027,795 0.7%
The Board considers working capital management critical to the business, and in doing so, manages the balance between current assets and current liabilities. 39. Exchange rates 31 March 2011 31 December 2009 Statement of financial position rate: South African rand British pound Average transaction rate: South African Rand British Pound 6.8045 1.6100 7.2488 1.5552 7.3967 1.608 8.2905 1.5627
61
A n n u a l R e p o r t 2 0 1 1
KEY PERFORMANCE MEASURES
31 March 2011 Continuing operations Gross margin (%) Net margin (%) EBITDA Gross profit Revenue Operating profit Revenue Earnings before interest, taxes, depreciation and amortisation Revenue Attributable earnings Average shareholders' funds
31 December 2009
22.03% (1.83%) 3.47%
20.04% (7.01%) (1.99%)
Return on equity (%)
6.53%
(2.59%)
Continuing and discontinued operations Gross margin (%) Net margin (%) EBITDA Gross profit Revenue Operating profit Revenue Earnings before interest, taxes, depreciation and amortisation Revenue Attributable earnings Average shareholders' funds 26% 0.74% 26% (7.69%)
4.07% 4.87%
(3.87%) (2.02%)
Return on equity (%)
62
A n n u a l R e p o r t 2 0 1 1
S H A R E H O L D E R I N F O R M AT I O N
HOLDERS Number % Analysis of ordinary shareholdings at 31 March 2011 Type of holder Zimbabwe Register Individuals Companies not subject to dividend tax FCDA resident Pension funds Nominee companies Non resident Insurance companies Totals for Zimbabwe London Register Banks and nominee companies Individuals Other corporate bodies Pension funds and investment trusts Totals for London Totals for Zimbabwe and London Size of holdings 1 - 5 000 5 001 - 10 000 10 001 - 50 000 50 001 - 100 000 100 001 - 500 000 Exceeding 500 000 Totals Top ten shareholders as at 31 March 2011 Shareholder EW Capital Holdings (Private) Limited* JRTM Investments (Private) Limited ASH Investments (Private) Limited FPS Investments (Private) Limited ACM Investments (Private) Limited APWM Investments (Private) Limited Old Mutual Life Assurance Company Zimbabwe Limited L.E.S Nominees (Private) Limited Fed Nominees (Private) Limited Old Mutual Life Assurance Company Zimbabwe Limited Other Total Top ten shareholders as at 31 December 2009 Shareholder EW Capital Holdings (Private) Limited JRTM Investments (Private) Limited ASH Investments (Private) Limited FPS Investments (Private) Limited ACM Investments (Private) Limited APWM Investments (Private) Limited Old Mutual Life Assurance Company Zimbabwe Limited Valleyfield Investments (Private) Limited Fed Nominees (Private) Limited Old Mutual Zimbabwe Limited Other Total
SHARES Number %
6,512 957 52 258 85 32 27 7,923 15 412 9 1 437 8,360 7,617 245 306 80 71 41 8,360
77.89 11.45 0.62 3.09 1.02 0.38 0.32 94.77 0.18 4.93 0.1 0.01 5.23 100.00 91.11 2.93 3.66 0.96 0.85 0.49 100.00
9,793,840 162,846,875 5,890,829 18,201,506 17,240,213 4,866,942 21,977,687 240,817,892 551,723 3,963,536 40,662 978 4,556,899 245,374,791 3,434,172 1,740,185 6,908,763 5,616,212 15,585,832 212,089,627 245,374,791 No. of shares 25,899,448 21,337,915 21,115,769 20,980,949 20,961,256 20,958,030 16,423,885 12,801,157 4,229,561 4,039,462 168,747,432 76,627,359 245,374,791 No of shares 25,899,448 21,337,915 21,115,769 20,980,949 20,961,256 20,958,030 16,929,486 6,341,506 5,013,567 4,451,346 163,989,272 81,385,519 245,374,791
3.99 66.37 2.40 7.42 7.03 1.98 8.96 98.15 0.22 1.62 0.02 1.86 100.00 1.4 0.71 2.82 2.29 6.35 86.43 100.00 % 10.56 8.70 8.61 8.55 8.54 8.54 6.69 5.22 1.72 1.65 68.78 31.22 100.00 % 10.56 8.70 8.61 8.55 8.54 8.54 6.90 2.58 2.04 1.81 66.83 33.17 100.00
*EW Capital Holdings (Private) Limited distributed its entire shareholding in the Company as a dividend in specie to EW Capital Holdings (Private) Limited shareholders on 13 May 2011.
63
GROUP STRUCTURE
A n n u a l R e p o r t 2 0 1 1
Pick n Pay 25% 75% 100%
Meikles Limited
100%
Greatermans Stores (1979) (Private) Limited (Departmental Stores)
100%
Tanganda Tea Company Limited
TM Supermarkets (Private) Limited See note below 100% Cape Grace Hotel Limited
Thomas Meikle Centre (Private) Limited) (incorporating 50% partnership in Victoria Falls Hotel)
100%
Thomas Meikle Properties (Private) Limted
100%
Tingamira Tea Estates (Private) Limited
100%
100% Meikles Hotel (Private) Limited (dormant)
100% 50% 50% 100% Chapin Hotel and Resorts Limited 50%
1 Cape Grace Hotel (Proprietary) Limited
50%
Ninety Speke (Private) Limited
Coffee & Tea Services (Private) Limited
49% Cape Grace Investments Limited 100%

Thomas Meikle Stores (Private) Limited t/a Meikles Financial Services
51%
Toolsen Investments (Private) Limited Tuscarora Investments (Private) Limited (dormant)
Cape Grace Hotel (Proprietary) Limited 49% 100% 100%

1
100%
Chataprops (Proprietary) Limited
1
Plumway Investments (Proprietary) Limited
100%
1 NIB 36 (Proprietary) Limited
Stripwax Investments (Private) Limited (dormant)
Note : TM Supermarkets (Private) Limited has the following 100% owned subsidiaries : Are You Looking Investments (Private) Limited, Bushell Investments Services (Private) Limited, Cambuild Investments (Private) Limited, Kelview Investments (Private) Limited, Ebony Properties (Private) Limited, Mopani Property Development (Private) Limited, Osterland Investments (Private) Limited, Petria Properties (Private) Limited, Proposal Investments Services (Private) Limited, Ringsmoke Investment (Private) Limited and Strove Enterprises (Private) Limited. 1 Assets held for sale
64
A n n u a l R e p o r t 2 0 1 1
TA X I S S U E S A N D S H A R E P R I C E S
Zimbabwe Tax The following summary addresses the Zimbabwe tax consequences for investors who hold shares as capital assets. Dividend withholding tax Dividends payable to non-residents are subject to withholding tax of 10% for dividends listed on the stock exchange and 15% in the case of any other dividends. Lesser rates apply where double taxation agreements exist. Dividends payable to non-corporate residents are subject to withholding tax of 10% for securities listed on the Zimbabwe Stock Exchange and 15% in the case of any other dividends. Dividends payable to corporate residents are not subject to withholding tax. Capital gains tax Sale of securities listed on the Zimbabwe Stock Exchange is subject to withholding tax of 1% of sale proceeds and is exempt from capital gains tax. Dividend distribution In terms of Zimbabwe Exchange Control Regulations, distribution of retained earnings by way of dividends is restricted. The regulations provide that dividends may only be paid to non-resident shareholders with the specific approval of the exchange authority. Only after-tax revenue profits accruing during the financial year immediately preceding the application are remittable. Accordingly, profits accruing in financial years preceding the most recent yearend are effectively blocked. Approval of remittance is at the discretion of the exchange control authorities. Withholding tax is payable thirty days after the declaration of the dividend, notwithstanding that an application for its remittance may be denied. Share prices The middle market prices of Meikles Limited shares on the Zimbabwe Stock Exchange during the course of the year were: 31 March 2010 30 June 2010 30 September 2010 31 December 2010 31 March 2011 41 cents 28.5 cents 38 cents 44.5 cents 46 cents
65
A n n u a l R e p o r t 2 0 1 1
NOTICE TO SHAREHOLDERS
Notice is hereby given that the seventy-fourth ANNUAL GENERAL MEETING of the shareholders of Meikles Limited in respect of the period ended 31 March 2011 will be held in the Stewart Room First Floor, Meikles Hotel, 3rd Street, Harare on 18 August 2011 at 8.15 am to conduct the following business: ORDINARY BUSINESS 1. 2. 3. 4. To receive and adopt the Group Financial Statements for the period ended 31 March 2011 and the reports of the Directors and Auditors. Mr. J. R. T. Moxon who was appointed as a Director with effect from 16 June 2011 now retires and being eligible offers himself for re-election. To consider the appointment of Mr. J. R. T. Moxon as a Director. Mr. M. L. Wood who was appointed as a Director with effect from 5 July 2010 now retires and being eligible offers himself for re-election. To consider the appointment of Mr. M. L. Wood as a Director. To consider the re-appointment of the following Director who retires by rotation and being eligible offers himself for re-election: B. J. Beaumont. To consider the re-appointment of the following Director who retires by rotation and being eligible offers himself for re-election: K. Ncube. To consider the re-appointment of the following Director who retires by rotation and being eligible offers himself for re-election: R. Chidembo. To confirm Directors' fees amounting to US$25,530 for the period ended 31 March 2011. To appoint auditors for the year ending 31 March 2012 and to approve the Auditors' fees of US$115,000 for the period ended 31 March 2011. Messrs Deloitte & Touch, auditors for the period ended 31 March 2011, have indicated their willingness to continue in office.
5.
6.
7. 8.
By order of the Board A P LANE-MITCHELL Secretary 7 July 2011
66
A n n u a l R e p o r t 2 0 1 1
P R OX Y F O R M
I/We ____________________________________________________________________________________________ (Name/s in block letters) of ______________________________________________________________________________________________ being a member of Meikles Limited and entitled to _______________________________________________________________________________ votes hereby appoint ________________________________________ of _________________________________________ or failing him/her ______________________________________ of __________________________________________ or failing him/her the Chairman of the meeting as my/our proxy to attend and speak for me/us and on my/our behalf at the annual general meeting of the Company to be held in in the Stewart Room, First Floor, Meikles Hotel, 3rd Street, Harare on 18 August 2011 at 8.15 am and at any adjournment thereof and to vote or abstain from voting. Any member of the Company entitled to attend and vote at the meeting may appoint a proxy or proxies to attend, speak and vote in his stead. A proxy need not be a member of the Company. Every person present and entitled to vote at a general meeting shall, on a show of hands, have one vote only, but in the event of a poll, every share shall have one vote. Please read the notes appearing on the reverse hereof.
Signed at _________________________________
on ____________________________2011
Signature(s) ____________________________________________________________________
Assisted by me __________________________________________________________________ Full name(s) of signatory/ies if signing in a representative capacity (see note 2) (please use block letters)
67
A n n u a l R e p o r t 2 0 1 1
N O T E S T O P R OX Y
INSTRUCTIONS FOR SIGNING AND LODGING THIS FORM OF PROXY 1. A deletion of any printed matter and the completion of any blank spaces need not be signed or initialled. Any alteration or correction must be initialled by the signatory/ies. 2. (a) (b) The Chairman shall be entitled to decline to accept the authority of a person signing the proxy form: under a power of attorney on behalf of a company unless that person's power of attorney or authority is deposited at the offices of the Company's Company Secretary or Zimbabwe transfer secretaries or the London transfer secretaries not less than 48 hours before the meeting. 3. If two or more proxies attend the meeting then that person attending the meeting whose name appears first on the proxy form and whose name is not deleted, shall be regarded as the validly appointed proxy. 4. When there are joint holders of shares, any one holder may sign the form of proxy. In the case of joint holders, the senior who tenders a vote will be accepted to the exclusion of other joint holders. Seniority will be determined by the order in which names stand in the register of members. 5. The completion and lodging of this form of proxy will not preclude the member who grants this proxy form from attending the meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof should such member wish to do so. 6. In order to be effective, completed proxy forms must reach the Company's Company Secretary or Zimbabwe or London transfer secretaries not less than 48 hours before the time appointed for the holding of the meeting. 7. Please ensure that the name(s) of the member(s) on the form of proxy and the voting form are exactly the same as those on the share register. 8. Please be advised that the number of votes a member is entitled is determined by the number is shares recorded in the share register 48 hours before the time appointed for the holding of the meeting.
OFFICE OF THE ZIMBABWE TRANSFER SECRETARIES ZB Bank Limited First floor ZB Centre, Corner First Street / Kwame Nkrumah Avenue P.O Box 2540 Telephone 263-4 -796842/44 263-4759660/9 263-4-2912729/20 Harare Zimbabwe Email: rmutakwa@zb.co.zw
OFFICE OF THE LONDON TRANSFER SECRETARIES Computershare Services PLC P.O. Box 82 The Pavilions Bridgwater Bristol BS99 7NH Telephone 44-870-702 0001 London England www.computershare.com
OFFICE OF THE COMPANY SECRETARY 6th Floor 99 Jason Moyo Avenue P O Box 3598 Telephone 263-4-252068-78 Harare Zimbabwe Email: alanemitchell@meikleslimited.co.zw
68
A n n u a l R e p o r t 2 0 1 1
C O R P O R AT E I N F O R M AT I O N
Meikles Limited (Registration No. 1/37) Business Address and Registered Office P.O. Box 3598, Harare 6th Floor 99 Jason Moyo Avenue Harare Zimbabwe Telephone +263-4-252068-71 Telefax +263-4-252067 email: alanemitchell@meikleslimited.co.zw Zimbabwe Transfer Secretaries ZB Bank Limited First Floor ZB Centre Corner First Street / Kwame Nkrumah Avenue P.O Box 2540 Harare Zimbabwe Telephone 263-4-759660/9 263-4-2912729/20 email: rmutakwa@zb.co.zw London Secretaries Petershill Secretaries Limited 1 Embankment Place London WC2N 6RH Telephone +44-20-7583 5000 Telefax +44-20-7822 4652
London Transfer Secretaries Computershare Services PLC P.O. Box 82 The Pavilions Bridgwater Bristol BS99 7NH Telephone +44-870-702 0001 Telefax +44-870-703 0005 Bristol England Website: www.computershare.com Legal Practitioners Scanlen and Holderness P.O. Box 188 Harare Zimbabwe email: scanlen@mweb.co.zw Website Address www.meiklesinvestor.com Company Secretary Andrew Lane-Mitchell email: alanemitchell@meikleslimited.co.zw Executive Director Finance and Administration Onias Makamba email: omakamba@meikleslimited.co.zw
Auditors Deloitte & Touche (Chartered Accountants) P.O. Box 267 Harare Zimbabwe email: deloitte@deloitte.co.zw Corporate Bankers Stanbic Bank Zimbabwe Limited 59 Samora Machel Avenue P.O. Box 300 Harare Zimbabwe email: allzimcbd@stanbic.com Group Chief Executive Officer Brendan J. Beaumont email: b.beaumont@telkomsa.net
69
A n n u a l R e p o r t 2 0 1 1
NOTES
70
A n n u a l R e p o r t 2 0 1 1
NOTES
71
KINGDOM MEIKLES
LIMITED

Meikles March 2011

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Meikles March 2011

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ANNUAL REPORT 2011

J. R. T. MOXON EXECUTIVE CHAIRMAN 7 July 2011

% 10.56 8.70 8.61 8.55 8.54 8.54 6.69 5.22

J.R.T. Moxon Executive Chairman Harare, 7 July 2011

DIRECTORS' RESPONSIBILITY AND CONCLUSION

J.R.T. Moxon Executive Chairman Harare, 7 July 2011

B. J. Beaumont Group Chief Executive Officer Harare, 7 July 2011

P O Box 267 Harare Zimbabwe

Deloitte & Touche Chartered Accountants (Zimbabwe) Harare 7 July 2011

J.R.T. Moxon 7 July 2011

B. J. Beaumont 7 July 2011

2,453,747 30,303,613 98,631,052 131,388,412 2,796,179 1,626,777 6,550,678 8,177,455 142,362,046

1 103,757,359 (6,007,023) 97,750,337 4,106,257 23,294,807 23,294,807 125,151,401

1 103,757,359 103,757,360 4,106,257 22,617,552 22,617,552 130,481,169

J.R.T. Moxon 7 July 2011

B. J. Beaumont 7 July 2011

109,983,720 (109,850,773) 855,472 (2,453,746) 4,092,008 2,626,681

(21,325,383) 4,213,219 146,859,490 (4,018,527) (14,524,030) 111,204,769

51,658,125 2,474,066 (37,008,717) 1,033,239 (73,481) 18,083,232

140,316,463 6,687,285 1,888,711 (14,524,030) 134,368,429

1,325,782 141,642,245 (562,360) 6,124,925 1,888,711 -

- (14,524,030) 763,422 135,131,851

148,118,994 (502,196) (152,007) 3,476,945 150,941,736 773,591 (41,731,607) 109,983,720

(19,221,260) (19,221,260) (1,948,570) (155,553) (21,325,383)

10,621,312 10,621,312 (908,040) 57,693 41,887,160 51,658,125

139,519,047 (502,196) (152,007) 3,476,945 142,341,789 (2,856,610) 831,284 140,316,463

FOR THE PERIOD ENDED 31 MARCH 2011

(6,007,023) 97,750,337 48,162,106 48,162,106 71,000,000 (14,524,030) (14,524,030) 98,631,053 131,388,413

- 103,757,360 (6,007,023) (6,007,023) (6,007,023) 97,750,337

Amendments to IFRS 3 (revised 2008) Business Combinations

Improvements to IFRSs issued in 2009

123,549,306 (2,799,734) 16,317 (152,905) 965,250 (1,971,072)

8,277,370 (584,779) 1,242 (12,161) (40,264) 1,417,455 781,493

12,925,401 967,279 4,884 (322,572) 2,116,946 (65,663) 2,700,874

4,086,043 (3,550,874) 3,269 (111,481) (7,421) 1,174,308 (2,492,199)

(4,472,453) 669,973 174,071 193,113 (35,712) 1,797,319 (1,673,689)

148,838,120 (10,440,561) 695,685 (425,048 145,428 2,081,234 5,288,669 (2,654,593)

Segment assets and liabilities Continuing and discontinued operations

(17,160,449) 15,339,575 (99,269,050)

29,283,147 36,847,922 66,131,069

28,920,859 28,920,859 (5,424,688)

- 32,744,400 104,093,663 104,093,663 32,744,400 - (10,265,874)

17,328,357 4,497,374 21,825,731 9,247,352

131,310,936 145,438,959 276,749,895 (46,479,181)

29,745,874 28,037,302 57,783,176

172,980,786 31,574,908 204,555,694 (47,691,695) (12,490,405) (60,182,100)

(42,310,338) (2,278,232) (12,490,405) (54,800,743) (2,278,232)

(5,591,826) ( 21,281,356) (6,416,440) (5,591,826) (21,281,356) (6,416,440)

NonZimbabwe Zimbabwe Zimbabwe US$ US$ US$ 148,838,120 -

Group 31 December 2009 US$

(522,151) (58,700) (3,702,104) (111,787) (183,934) (167,222) (540,368)

(405,210) (2,487,997) (1,410,455) (77,615) (76,836) -

1,827,319 1,470,742 294,649 3,592,710

575,592 120,093 695,685

(7,332,757) (159,201) (98,373) (7,590,331)

(102,057) (275,156) (47,835) (425,048)

(7,943,262) 2,454,468 801,451 1,985,755 46,995 5,288,699 5,288,669

193,659 (272,390) (12,378) 1,123,875 1,239,135 2,271,901

1,512,202 (2,367,306) (325,267) 221,510 (958,861) -

3,233 3,233 (1,123,875) 272,390 (193,659) 12,378 (1,239,135) (2,271,901)

(1,555,956) (183,349) (1,739,305)

(6,128,739) 892,492 (5,236,247) Company

39,977,389 1,462,892 41,440,281 15,078,333 15,078,333 26,361,948 18,083,232 18,083,232