Meikles Ld - Abridged Financial Results for the y/e 31 Mar 2020

MEIKLES LIMITED

ABRIDGED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2020

CHAIRMAN’S STATEMENT

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

FINANCIAL OVERVIEW

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

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

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

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

FINANCIAL REPORTING

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

IAS 29 - Financial Reporting in Hyperinflationary economies

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

Adoption of IFRS 16 - Leases

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

GROUP FINANCIAL PERFORMANCE

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

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

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

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

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

REVIEW OF OPERATIONS

Supermarkets - trading as TM Pick n Pay

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

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

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

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

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

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

Agriculture

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

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

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

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

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

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

Hospitality

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

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

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

Properties

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

Security Services

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

MEIKLES FOUNDATION

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

CORPORATE SUSTAINABILITY

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

DIVIDEND

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

DIRECTORATE

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

STRATEGY AND OUTLOOK

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

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

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

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

APPRECIATION

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

JRT Moxon

Executive Chairman

19 August 2020

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

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

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2020

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

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2020

INFLATION ADJUSTED

	Share capital	Share premium	Other reserves	Investments revaluation	Retained earnings
	ZWL 000	ZWL 000	ZWL 000	ZWL 000	ZWL 000
2020
Balance at 1 April 2019	32,854	40,997	638,945	(74,536)	1,428,204
Profit for the year	-	-	-	-	1,053,010
Transfer from non-distributable reserves	-	-	(336,512)	-	336,512
Other comprehensive income / (loss) for the year	-	-	(12,608)	(249,651)	-
Dividend paid – ordinary shareholders	-	-	-	-	(81,987)
Non-controlling interests arising from Mopani Property Development (Private) Limited	-	-	-	-	-
Balance at 31 March 2020	32,854	40,997	289,825	(324,187)	2,735,739
2019
Balance at 1 April 2018 as restated	32,406	18,582	323,590	-	1,128,057
Profit / (loss) for the year	-	-	-	-	325,054
Issue of shares – scrip dividend	448	22,415	-	-	-
Dividend paid – ordinary shareholders	-	-	-	-	(24,907)
Other comprehensive income / (loss) for the year	-	-	315,355	(74,536)
Non-controlling interests arising from Mopani Property Development (Private) Limited	-	-	-	-	-
Balance at 31 March 2019	32,854	40,997	638,945	(74,536)	1,428,204

   

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

   

HISTORICAL COST*

	Share capital	Share premium	Other reserves	Investments revaluation	Retained earnings
	ZWL 000	ZWL 000	ZWL 000	ZWL 000	ZWL 000
2020
Balance at 1 April 2019	2,611	3,925	74,529	(9,600)	131,914
Profit for the year	-	-	-	-	907,868
Transfer from non-distributable reserves	-	-	(26,600)	-	26,600
Other comprehensive income / (loss) for the year	-	-	606,925	(249,651)	-
Dividend paid – ordinary shareholders	-	-	-	-	(46,130)
Non-controlling interests arising from Mopani Property Development (Private) Limited	-	-	-	-	-
Balance at 31 March 2020	2,611	3,925	654,854	(259,251)	1,020,252
2019
Balance at 1 April 2018 as restated	2,562	1,469	12,559	-	81,160
Profit / (loss) for the year	-	-	-	-	53,827
Issue of shares – scrip dividend	49	2,456	-	-	-
Dividend paid – ordinary shareholders	-	-	61,970	(9,600)	-
Other comprehensive income / (loss) for the year	-	-	-	-	(3,073)
Non-controlling interests arising from Mopani Property Development (Private) Limited	-	-	-	-	-
Balance at 31 March 2019	2,611	3,925	74,529	(9,600)	131,914

   

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

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

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2020

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

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

NOTES TO THE ABRIDGED AUDITED FINANCIAL RESULTS

1. Basis of preparation

The abridged audited financial results are prepared from statutory records that are maintained under the historical cost basis except for biological assets and certain financial instruments which are measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The historical costs have been adjusted for the effects of applying International Accounting Standard (“IAS”) 29 – ‘Financial Reporting in Hyperinflationary Economies’ . Refer to note 2.2 for further details.

2. Accounting policies

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

2.1 Functional and presentation currency

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

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

2.2 Hyperinflation 

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

The Directors have made appropriate adjustments to reflect the changes in the general purchasing power on the ZWL and for the purposes of fair presentation in accordance with IAS 29, these changes have been made on the historical cost financial information. Various assumptions have been made, with the significant assumption being the use of the consumer price indices (“CPI”), for the various years. Accordingly, the inflation adjusted financial statements represent the primary financial statements of the Group. The historical cost financial results are provided as supplementary information and as a result the auditors have not expressed an opinion on them.

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

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

3. Going concern

The Directors assess the ability of the Group to continue in operational existence in the foreseeable future at each reporting date. As at 31 March 2020, the Directors have assessed the Group’s ability to continue operating as a going concern and believe that the preparation of these financial results on a going concern basis is still appropriate. 

The Group’s segments have put in place various measures to mitigate the adverse impact of COVID-19 pandemic to the businesses. Apart from the hospitality segment, the rest of the Group’s segments are operating as they are classified as part of essential services. Their trading performance for three months to June 2020 is not significantly different from the period prior to outbreak of the pandemic. The hospitality segment closed at the end of March 2020 and its date of reopening remains uncertain. Both the hospitality segment and the Group have cash resources to fund operations for a prolonged period of care and maintenance.

4. Audit opinion

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

5. Segment information

		INFLATION ADJUSTED			HISTORICAL COST
		31 Mar 2020		31 Mar 2019	31 Mar 2020	31 Mar 2019
		ZWL 000		ZWL 000	ZWL 000	ZWL 000
Revenue – continuing operations
Supermarkets		7,954,179		7,827,634	3,819,565	747,338
Agriculture		719,593		389,051	321,456	37,015
Hotels		198,899		96,722	79,263	9,101
Corporate*		(37,148)		(28,083)	(18,447)	(2,626)
		8,835,523		8,285,324	4,201,837	790,828
Profit after tax – continuing operations
Supermarkets	674,849		(21,047)		240,262	24,788
Agriculture	157,159		332,016		387,011	40,428
Hotels	184,747		72,544		125,417	9,280
Corporate*	258,200		(187,208)		(33,993)	(4,482)
	1,274,955		196,305		718,697	70,014
Segment assets
Supermarkets	2,550,143		2,042,532		938,668	204,081
Agriculture	1,396,472		1,247,548		635,265	120,763
Hotels	686,453		629,818		547,585	54,930
Corporate*	521,980		885,188		461,025	102,353
	5,155,048		4,805,086		2,582,543	482,127
Segment liabilities
Supermarkets	963,254		1,163,097		593,171	108,112
Agriculture	296,449		292,586		172,704	33,385
Hotels	148,805		227,540		143,733	26,761
Corporate*	136,135		593,491		73,481	61,491
	1,544,643		2,276,714		983,089	229,749
*Included in the corporate revenue amount is an adjustment of ZWL62.3 million (2019: ZWL55.5 million); (Historical cost ZWL30 million (2019: ZWL5.2 million) against revenue in respect of inter-segment sales. Inter-company balances have been eliminated in the corporate amounts. Corporate also includes other operating segments that are immaterial to warrant separate disclosure. 5.1 Discontinued operations

Meikles Hotel

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

Greatermans Stores

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

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

5.1 Discontinued operations (continued)

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

NOTES TO THE ABRIDGED UNAUDITED FINANCIAL RESULTS

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

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

8. Implementation of IFRS 16

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

8.1 Right of use assets

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

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

8.2       Lease liabilities

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

Meikles Limited Website: www.meiklesltd.com

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