Meikles Limited 2012 annual report

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Meikles Limited 2012 annual report

  1. 1. 2012Annual Report
  2. 2. CONTENTSChairman’s Statement 2Directorate and Corporate Governance 6Report of the Directors 8Directors’ Responsibility for Financial Reporting 10Report of the Independent Auditors 11Consolidated Statement of Comprehensive Income 12Consolidated Statement of Financial Position 13Company Statement of Financial Position 14Consolidated Statement of Changes in Equity 15Company Statement of Changes in Equity 16Consolidated Statement of Cash Flows 17Notes to the Financial Statements 18Key Performance Measures 64Supplementary Financial Information 65Shareholder Information 66Group Structure 67Tax Issues and Share Prices 68Corporate Information 69Notice of Meeting 70Form of Proxy 73Instructions for Signing and Lodging Form of Proxy 74 1 Meikles Limited 2012 Annual Report
  3. 3. Chairman’s Statement GROUP REVIEW Shareholders were advised in November 2011 that the Group made a loss in the first six months of the year under review of $5 million after taxation. The results of the second six months have reduced this loss to $3.4 million for the year as a whole. Your board decided that the results for the year be determined on a very conservative basis with full provision for all known and anticipated costs that may have an impact on the Group financials. Most of these expenses were incurred in the second half of the year and they include compensation for loss of office, legal and professional fees, a write off of certain receivables and advances, and the impairment of property, plant and equipment. Certain provisions have been provided deliberately on a worse case basis and there may well be some recovery in the future. The sum of these exceptional expenses amounted to $6.3 million. Regrettably the Group’s agricultural division suffered from a severe frost last winter and an unusual adverse weather pattern in the summer. Losses that arose and were accounted for in the second half of the year as a direct result of the adverse weather amounted to $2.9 million in direct revenue and $2.3 million loss of profit. The first half of the year saw senior management changes at both Group level and in certain of the operating companies. These changes did destabilise our operations when they occurred, but new structures have since been put in place. Furthermore, the Group has had to contend with stock write-offs and reduced margins. Finance costs were $4.3 million and $4.2 million in the first half and second half of the year respectively. These sums have been significant in their impact on Group performance, for the year under review. The Group’s successes have been substantial. Management is committed to the task of improving ongoing divisional performance, and the second half of the year has resulted in an improvement, but efforts continue to progress performance with urgency. The Pick n Pay investment in TM Supermarkets was finally consummated, although very late in the year. The Group’s indigenisation status has been established, making it more attractive to foreign investors as we pursue future growth projects. These opportunities will be pursued together with Mentor and with other potential investors. Group borrowings, net of the additional Pick n Pay investment, did increase, but these were largely incurred by the agricultural division where a substantial expansion project is underway. Your board has developed a sound policy for Group funding: • The Group will no longer use short-term local borrowings to fund medium term expansion projects. Term funding, shareholder funding, or minority shareholder funding, will be sought for these projects. • Funding for partly owned subsidiaries or associates will only be provided in proportion to the Group’s percentage shareholding, and will be provided with the co-operation and participation of other shareholders in these companies. • The Group will continue to fund its investment in Retail Store debtors from borrowings or from the sale of the debtors book to a third party. • Group will retain minimal and inexpensive short-term borrowings from local banking institutions. TheMeikles Limited 2012 Annual Report 2
  4. 4. Chairman’s Statement continuedProgress on the implementation of this policy is well advanced:• The two Zimbabwe based hotels have arranged term funding from external sources at favourable rates to fund renovations, which are now in progress.• The Retail Store debtors are now funded on a dedicated basis. Interest received from debtors will exceed the cost of funding.• Efforts are in progress to raise dedicated funding, either term or shareholder or a combination of both, to fund Tanganda’s expansion and to eliminate excess short-term borrowings. This funding is expected to be in place by September 2012. Substantial interest in Tanganda is already evident.The Group is in negotiation with various financiers regarding the injection of significant funding. Inaddition, the discussions with RBZ are continuing for the freeing of funds held on deposit. These initiativeswill retire all Group borrowings other than those identified above, will leave substantial credit balances withthe Group’s bankers, and will provide funding for expansion opportunities.The full implementation of this financial policy will result in a reduction in finance costs as well as securinga sound balance sheet structure for the Group. These factors, together with the improving performancein the divisions, and further profits from the region, will enable the resumption of dividend payments toGroup shareholders.Subject to regulatory approvals, the Group has a potential project that may commence shortly. The suminvolved amounts to $150 million. This amount will not be raised at holding Company level but willbe injected directly into the project itself. The project is still subject to a confidentiality constraint andshareholders will be updated when appropriate.Your board is of the opinion that the present market capitalisation of the Group fails to recognise theGroup’s performance, prospects for the future and the underlying asset values. These factors do restrain theGroup’s ability from a funding view-point, to take full advantage of opportunities that are on offer. Yourboard will assess these implications and will consider strategies that may be implemented to optimise thefuture growth of the Group.MENTOR AND THE CAPE GRACEWith effect from 1st April 2012, the Group will take up a shareholding in Mentor Africa Limited (‘Mentor’)and will merge the Cape Grace into Mentor and the funds which were being held by Mentor on behalf of theCape Grace will be converted into equity in Mentor. This transaction conforms with past communicationsto shareholders.The respective assets are being valued and reviewed by appropriate professionals, and when complete, it isestimated that the Group will have a 35% shareholding in these regional activities.The transaction will allow the Group to unlock further value in its foreign investments by providing accessto assets, which have greater growth prospects than the Cape Grace Hotel in isolation. The Cape GraceHotel is well run and the Group is satisfied with its performance, but it is a mature asset and its prospectsfor growth are limited and less than those of the Mentor assets.Mentor has a growing and diversified portfolio of investments in South Africa, including:• joint venture with dnata, the fourth largest air services provider in the world with operations at 76 a 3 Meikles Limited 2012 Annual Report
  5. 5. Chairman’s Statement continued airports in 38 countries and a member of the Emirates Group, in Wings Inflight Services, an airline catering business which provides inflight catering services to major international airlines operating to/from South Africa, including Emirates Airline, British Airways (international) and Singapore Airlines, on long term contracts; • interest in the market-leading provider in South Africa of energy efficient, low wattage, high an output, industrial, retail and commercial electronic fittings and safety approved retro-fit lighting products; and • minority interests and new opportunities in the financial services, resources and mining sectors. Mentor’s deal-flow pipeline is strong with good upside potential. The merger of these interests will enable the Group to enhance the value of its regional assets. Group management will now be in a position to focus on growth opportunities in Zimbabwe and work with Mentor management to grow the regional investments. The Board remains confident that the strategic investment in Mentor will produce significant high growth opportunities, similar to those which the Meikles Group derived from its previous investment in Rebhold/ Mvelaphanda, in the medium to long term. SUBSIDIARY REVIEW Tanganda A major plantation development program is in progress. On completion Tanganda will have planted 450 hectares of avocado, 300 hectares of coffee and 700 hectares of macadamia. This project will be completed by March 2014. On maturity this project will contribute substantially to Tanganda’s profits. Management is focusing on increasing tea yields and quality. There is evidence that there is a growing demand for tea in the world and Tanganda’s tea prospects remain promising. Tanganda is enhancing and updating its manufacturing capacity of packeted teas. There is a growing demand for packeted teas in the region. The water bottling plant was commissioned during the last quarter of the financial year and has resulted in increased production of water to 2.1 million liters (2011: 1.2 million liters). A second water plant is being explored. The additional investment in all these activities will amount to $15 million. Hotels Refurbishment of Meikles Hotel has commenced. The works are expected to be completed by December 2012. The Victoria Falls Hotel is also being refurbished, and work will be completed before the UNWTO conference scheduled for August 2013. The Hospitality division has successfully negotiated a lease agreement to operate a business style hotel in Lusaka, which is fast becoming a regional hub for travel. The hotel will be part of a mixed-use retail scheme being developed close to the airport by one of Africa’s leading real estate companies. This project is expected to be the first of similar hotel projects in appropriate regional destinations. Shareholders will be updated with more information at the opportune time.Meikles Limited 2012 Annual Report 4
  6. 6. Chairman’s Statement continuedTM SupermarketsThe capital injection of $13 million through Pick n Pay’s increased shareholding in TM Supermarkets isbeing utilised in the branch refurbishment. The Kamfinsa branch which has been reconstructed will bereopened in the last week of June 2012 as a Pick n Pay store including the Pick n Pay clothing and liquoroutlets. Refurbishment of the Borrowdale branch has started. A total of 6 branches have been earmarkedfor refurbishment in the new financial year and will incorporate rebranding of some stores to “Pick n Pay”on completion. These stores are located in Harare, Bulawayo, Mutare and Gweru. All these initiatives whichare well supported by Pick n Pay will help in restoring TM Supermarkets to its previous market leadershipposition.Thomas Meikle StoresThe stores operate from well-placed locations in most urban centers in Zimbabwe. Once further evidenceof growth in the economy and in the spending power of the people becomes evident, the stores will be ina position to provide a variety of merchandise in selected and focused ranges. There has been a brandingadjustment in recent months and the stores will no longer attempt to operate the full range of departmentsthat they have had in the past.Merchandise is now being more carefully selected, with a view to securing good stock turns and controlledinvestment in stock. The customers will be provided with competitive values and credit will be grantedwhere appropriate. The division currently has 44,000 credit customers.This division still has a remaining legacy issue. Certain merchandise, although saleable, can only be sold atreduced margins. The quantum of merchandise affected is greatly reduced, relative to the quantum that thedivision had to contend with during the past financial year.The stores will not immediately return to their full potential, but improvements, presently underway, aremaking a difference.ACKNOWLEDGMENTSThe resolution of a number of issues amongst them the granting of the indigenisation status and theapproval for the Pick n Pay investment was achieved through support from the relevant regulatory authoritiesto whom our appreciation is once again extended. The continued support from shareholders and staff isacknowledged and the anticipated turnaround in the coming year will be just reward for these stakeholders.For and on behalf of the BoardJRT MoxonChairmanHarare, 11 June 2012 5 Meikles Limited 2012 Annual Report
  7. 7. Directorate and Corporate Governance DIRECTORATE J.R.T. Moxon Executive Chairman B. J. Beaumont Group Chief Executive Officer – resigned 30 September 2011 O. Makamba Executive Director Finance and Administration R. Chidembo• * Non-executive Director B. Chimhini Executive Director T.B. Cameron Executive Director – resigned 18 August 2011 K. Ncube• * Non-executive Director M.L. Wood Executive Director • 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 10 the Directors have acknowledged their responsibility for the financial statements. The structure of the Board and its standing committees is as follows: - The Board At 31 March 2012, the Board consisted of the executive Chairman, three executive and two non-executive Directors, and met at least quarterly during the year. 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. Messrs O. Makamba and B. Chimhini retire by rotation in terms of the Articles of Association, and being eligible, offer themselves for re-election. Messrs T.B. Cameron and B.J. Beaumont resigned from the Board on 18 August 2011 and 30 September 2011 respectively. The Audit Committee The Audit Committee is chaired by Mr R. Chidembo and meets at least quarterly. Messrs J.R.T. Moxon, O. Makamba and M.L. Wood as well as the 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 internal controls, as well as advising the Board and management on measures which ensure that respect for both regulatory issues and internal controls 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 fees of external auditors.Meikles Limited 2012 Annual Report 6
  8. 8. Directorate and Corporate Governance continuedThe Remuneration CommitteeThe Remuneration Committee is chaired by Mr K. Ncube and meets at least quarterly. The terms ofreference of the Remuneration Committee are to determine the Group’s policy on the remuneration ofsenior executives.SubsidiariesThe Group operates a decentralised subsidiary structure. Each significant subsidiary has a formal operatingboard with a clear definition of responsibility, which operates within well-defined policies. There iscomprehensive financial reporting with actual results reported monthly against budget and prior year. 7 Meikles Limited 2012 Annual Report
  9. 9. Report of the Directors Your Directors have pleasure in presenting their report and the audited financial statements of the Group for the year ended 31 March 2012. Principal activities The main activities of the Group are those of agriculture, hotels and retail trading. Retail trading includes department stores and supermarkets. 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 notes 14 and 36. Financial results The results for the year ended 31 March 2012 are set out in the attached financial statements. Share capital Details of the authorised and issued share capital are set out in note 24 to the financial statements. Directors and their interests The names of the Directors of the Company during the year 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 or joint venture. No Director confirmed having, during or at the end of the year, any material interest in any contract of significance in relation to the Group’s businesses except as disclosed in note 27.1. 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 24 to the financial statements. Substantial shareholdings According to information received by the Directors, the following were the top ten shareholders of the Company as at 31 March 2012:Meikles Limited 2012 Annual Report 8
  10. 10. Report of the Directors continuedShareholder No. of shares %Gondor Capital Limited 120,355,076 47.42Old Mutual Assurance Company Zimbabwe Limited 22,790,353 8.98Clayway Investments (Private) Limited 12,612,381 4.97Meikles Limited Employee Share Ownership Trust 8,418,510 3.32Datvest Nominees (Private) Limited 5,634,024 2.22Stanbic Nominees (Private) Limited 5,323,685 2.10Zimcor Limited 3,653,167 1.44Old Mutual Zimbabwe Limited 3,520,292 1.39AATC 3,335,517 1.31Mining Industry Pension Fund 2,248,902 0.89AuditorsMessrs. Deloitte Touche offer themselves for re-election as auditors for the year ending 31 March 2013and shareholders will be asked to reappoint them, and to approve their fees for the year ended 31 March2012.J.R.T. MoxonChairmanHarare, 11 June 2012 9 Meikles Limited 2012 Annual Report
  11. 11. Directors’ Responsibilty for Financial Reporting 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 judgemental 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 2013 and, in light of this review and the current financial position, they are satisfied that the Group 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 O. Makamba Chairman Executive Director Finance and Administration Harare, 11 June 2012 Harare, 11 June 2012Meikles Limited 2012 Annual Report 10
  12. 12. P O Box 267 Deloitte Touche Harare Kenilworth Gardens Zimbabwe 1 Kenilworth Road Highlands Harare Tel: +263 (0)4 746248/54 +263 (0)4 746271/5 Fax: +263 (0)4 746255 www.deloitte.comREPORT OF THE INDEPENDENT AUDITORSTO THE MEMBERS OF MEIKLES LIMITEDREPORT ON THE FINANCIAL STATEMENTSWe have audited the accompanying Group financial statements for Meikles Limited, which comprisethe consolidated statement of financial position as at 31 March 2012, the consolidated statement ofcomprehensive income, the consolidated statement of changes in equity and the consolidated statement ofcash flows for the year then ended, and a summary of significant accounting policies and other explanatorynotes set out on pages 12 to 63.Directors’ responsibility for the financial statementsThe Directors are responsible for the preparation and fair presentation of these financial statements inaccordance with International Financial Reporting Standards and the Companies Act (Chapter 24:03) andrelevant statutory instruments (SI 33/99 and SI 62/96). This responsibility includes; designing, implementingand maintaining internal controls relevant to the preparation and fair presentation of financial statementsthat are free from material misstatement, whether due to fraud or error; selecting and applying appropriateaccounting policies; and making accounting estimates that are reasonable in the circumstances.Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conductedour audit in accordance with International Standards on Auditing. Those standards require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assurance whether thefinancial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements. The procedures selected depend on the auditor’s judgement, including theassessment 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 preparationand fair presentation of the financial statements in order to design audit procedures that are appropriatein the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’sinternal controls. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluating the overall presentationof the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.OpinionIn our opinion, the financial statements present fairly, in all material respects, the consolidated financialposition of Meikles Limited as at 31 March 2012, and its consolidated financial performance and itsconsolidated cash flows for the year then ended in accordance with International Financial ReportingStandards.Report on other legal and regulatory requirementsIn our opinion, the financial statements have, in all material respects, been properly prepared in compliancewith the disclosure requirements of the Companies Act (Chapter 24:03) and the relevant statutoryinstruments (SI 33/99 and SI 62/96).Deloitte ToucheChartered Accountants (Zimbabwe)Harare11 June 2012 11 Meikles Limited 2012 Annual Report
  13. 13. Consolidated Statement of Comprehensive Income For the year ended 31 March 2012 12 months to 15 months to 31 March 2012 31 March 2011 Notes US$ 000 US$ 000CONTINUING OPERATIONS Revenue 5 354,102 330,437 Net operating costs 7 (361,103) (336,485) Operating loss (7,001) (6,048)Investment revenue 12 2,011 3,593Finance costs 12 (8,453) (7,590)Net exchange gains / ( losses) 1,183 (229)Fair value adjustments 3,792 1,398Reinstatement of funds earmarked for future investment 20 - 11,737(Loss) / profit before tax (8,468) 2,861Income tax credit 13 2,544 793(Loss) / profit for the period from continuing operations (5,924) 3,654 DISCONTINUED OPERATIONS Profit for the period from discontinued operations 14 2,480 2,474(LOSS) / PROFIT FOR THE PERIOD (3,444) 6,128 Other comprehensive (loss) / income Exchange differences on translating foreign operations (1,992) 1,889Other comprehensive (loss) / income for the period, net of tax (1,992) 1,889 TOTAL COMPREHENSIVE (LOSS) / PROFIT FOR THE PERIOD (5,436) 8,017(Loss) / profit attributable to: Owners of the parent (3,537) 6,690 Non-controlling interests 93 (562) (3,444) 6,128Total comprehensive (loss) /profit attributable to: Owners of the parent (5,529) 8,579 Non-controlling interests 93 (562) (5,436) 8,017(Loss) / earnings per share Basic (loss) / earnings from continuing and discontinuedoperations (cents per share) 16 (1.44) 2.73Basic (loss) / earnings from continuing operations (cents per share) 16 (2.45) 1.72 Meikles Limited 2012 Annual Report 12
  14. 14. Consolidated Statement of Financial Position As at 31 March 2012 31 March 2012 31 March 2011 Notes US$ 000 US$ 000ASSETS Non-current assets Property, plant and equipment 17 86,122 84,280Investment property 18 43 44Biological assets 19 11,770 7,661Other financial assets 20 18,370 16,600Intangible assets – trademarks 124 124Balances with Reserve Bank of Zimbabwe 21 38,627 36,825Deferred tax 13 1,888 2,356Total non-current assets 156,944 147,890 Current assets Inventories 22 39,633 40,713Trade and other receivables 23 17,642 16,153Other financial assets 20 1,085 -Cash and bank balances 21 8,427 3,286 66,787 60,152Assets held for sale 15 37,871 41,440Total current assets 104,658 101,592 Total assets 261,602 249,482 EQUITY AND LIABILITIES Capital and reserves Share capital 24 2,538 2,454Share premium 1,316 -Non-distributable reserves 6,233 2,627Retained earnings 105,750 111,207Capital and reserves relating to assetsclassified as held for sale 15 19,644 18,083Equity attributable to equity holders of the parent 135,481 134,371Non-controlling interests 8,618 764Total equity 144,099 135,135 Non-current liabilities Borrowings 25 4,786 3,749Deferred tax 13 12,919 15,996Total non-current liabilities 17,705 19,745 Current liabilities Trade and other payables 26 38,371 30,493Borrowings 25 47,199 49,031 85,570 79,524Liabilities relating to assets classified as held for sale 15 14,228 15,078Total current liabilities 99,798 94,602Total liabilities 117,503 114,347Total equity and liabilities 261,602 249,482J.R.T. Moxon O. Makamba11 June 2012 11 June 2012 13 Meikles Limited 2012 Annual Report
  15. 15. Company Statement of Financial Position As at 31 March 2012 31 March 2012 31 March 2011 Notes US$ 000 US$ 000ASSETS Non-current assets Property, plant and equipment 17 102 202Investment in subsidiaries 20 74,129 74,129Other financial assets 20 365 372Balances with Reserve Bank of Zimbabwe 21 38,627 36,825Total non-current assets 113,223 111,528 Current assets Inventories 22 4 9Receivables 23 28,307 30,431Other financial assets 20 281 -Cash and bank balances 21 1,512 382 30,104 30,822Assets held for sale 15 - 12Total current assets 30,104 30,834 Total assets 143,327 142,362 EQUITY AND LIABILITIES Capital and reserves Share capital 24 2,538 2,454Share premium 1,316 -Non-distributable reserves 34,410 30,304Retained earnings 94,233 98,631Total equity 132,497 131,389 Non-current liabilities Deferred tax 13 1,959 2,796 Current liabilities Trade and other payables 26 1,167 1,627Borrowings 25 7,704 6,550Total current liabilities 8,871 8,177 Total equity and liabilities 143,327 142,362J.R.T. Moxon O. Makamba11 June 2012 11 June 2012 Meikles Limited 2012 Annual Report 14
  16. 16. Consolidated Statement of Changes in Equity For the year ended 31 March 2012 Disposal Non group Attributable Non Share Share distributable Retained capital and to owners controlling capital premium reserves earnings reserves of parent interests Total US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 0002012 Balance at 1April 2011 2,454 - 2,627 111,207 18,083 134,371 764 135,135Loss for the year - - - (6,017) 2,480 (3,537) 93 (3,444)Change in ownership interests in asubsidiary without loss of control - - 4,679 728 - 5,407 7,593 13,000Other comprehensive loss for the year - - (1,073) - (919) (1,992) - (1,992)Issue of shares for cash 84 1,316 - - - 1,400 - 1,400Transfer on disinvestment of noncontrolling interest in a subsidiary - - - (168) - (168) 168 -Balance at 31 March 2012 2,538 1,316 6,233 105,750 19,644 135,481 8,618 144,099 2011 Balance at 1 January 2010 - - 109,984 (21,325) 51,657 140,316 1,326 141,642Profit for the period - - - 4,216 2,474 6,690 (562) 6,128Transfer within reserves and ondisposal of subsidiaries - - (109,851) 146,859 (37,008) - - -Other comprehensive incomefor the period - - 856 - 1,033 1,889 - 1,889Share capital redenomination 2,454 - (2,454) - - - - -Transfer in respect of assetsclassified as held for sale - - 4,092 (4,019) (73) - - -Dividend in specie - - - (14,524) - (14,524) - (14,524)Balance at 31 March 2011 2,454 - 2,627 111,207 18,083 134,371 764 135,135 15 Meikles Limited 2012 Annual Report
  17. 17. Company Statement of Changes in Equity For the year ended 31 March 2012 Non Share Share distributable Retained capital premium reserves earnings Total US$ 000 US$ 000 US$ 000 US$ 000 US$ 0002012 Balance at 1April 2011 2,454 - 30,304 98,631 131,389Loss for the year - - - (292) (292)Issue of shares for cash 84 1,316 - - 1,400Transfer to non distributable reserves - - 4,106 (4,106) -Balance at 31 March 2012 2,538 1,316 34,410 94,233 132,497 2011 Balance at 1 January 2010 - - 103,758 (6,007) 97,751Profit for the period - - - 48,162 48,162Transfer from non-distributable reserves - - (71,000) 71,000 -Share capital redenomination 2,454 - (2,454) - -Dividend in specie - - - (14,524) (14,524)Balance at 31 March 2011 2,454 - 30,304 98,631 131,389 Meikles Limited 2012 Annual Report 16
  18. 18. Consolidated Statement of Cash Flows For the year ended 31 March 2012 12 months to 15 months to 31 March 2012 31 March 2011 US$ 000 US$ 000CONTINUING AND DISCONTINUED OPERATIONS Cash flows from operating activities (Loss) / profit before tax from continuing and discontinued operations (5,616) 6,638Adjustments for: - Depreciation and impairment 4,834 5,388- Net interest 6,371 4,921- Dividend received - (1,471)- Net exchange (gains) / losses (1,342) 423- Loss on disposal of subsidiaries - 3,842- Fair value adjustments (3,681) 1,978- Share of profits of associates - (666)- (Profit) / loss on disposal of property, plant and equipment (69) 787- Reinstatement of funds earmarked for investment - (11,737)Operating cash flow before working capital changes 497 10,103Decrease / (increase) in inventories 1,196 (23,642)Increase in trade and other receivables (3,252) (71,807)Increase in trade and other payables 7,675 56,278Cash generated from / (used in) operations 6,116 (29,068)Income taxes paid (9) (2,019)Net cash generated from /(used in) operating activities 6,107 (31,087) Cash flows from investing activities Payment for property, plant and equipment (6,839) (11,439)Proceeds from disposal of property, plant and equipment 1,503 1,789Net movement in service assets (21) (65)Dividends received - 1,471Payment for other investments (250) (152)Net expenditure on biological assets (496) (206)Net outflow on disposal of subsidiary - (16,434)Investment income 251 250Net cash used in investing activities (5,852) (24,786) Cash flows from financing activities Change in ownership interests in a subsidiary without loss of control 13,000 -Net increase in interest bearing borrowings 6 44,017Proceeds from issue of shares 1,400 -Finance costs (8,454) (7,601)Net cash generated from financing activities 5,952 36,416Net increase / (decrease) in cash and bank balances 6,207 (19,457)Cash and bank balances at the beginning of the period 4,785 25,509Net effect of exchange rate changes on cash and bank balances 606 (436)Translation of foreign entities (314) (831)Cash and bank balances at the end of the period (note 21) 11,284 4,785 17 Meikles Limited 2012 Annual Report
  19. 19. Notes to the Financial Statements1. General information 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 activity of the Company is investments holding. The principal activities of its subsidiaries are described in note 20.2. The financial statements are presented in United States of America dollars (US$).2 Application of new and revised International Financial Reporting Standards (IFRSs)2.1 New and revised IFRSs applied with no material effect on the consolidated financial statements The following new and revised IFRSs have 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 years but may affect the accounting for future transactions or arrangements. Amendments to IAS 1 Presentation of The amendments to IAS 1 clarify that an entity may choose to disclose Financial Statements (as part of Improvements to an analysis of other comprehensive income by item in the statement IFRSs issued in 2010) of changes in equity or in the notes to the financial statements. IAS 24 Related Party Disclosures (as revised in IAS 24 (as revised in 2009) has been revised on the following two 2009) aspects: (a) has changed the definition of a related party and (b) introduces a partial exemption from the disclosure requirements for government-related entities. The Company and its subsidiaries are not government-related entities. The application of the revised definition of related party set out in IAS 24 (as revised in 2009) in the current year has not resulted in the identification of related parties that were not identified as related parties under the previous Standard. Amendments to IFRS 3 Business Combinations As part of Improvements to IFRSs issued in 2010, IFRS 3 was amended to clarify that the measurement choice regarding non-controlling interests at the date of acquisition is only available in respect of non-controlling interests that are present ownership interests and that entitle their holders to a proportionate share of the entitys net assets in the event of liquidation. All other types of non-controlling interests are measured at their acquisition-date fair value, unless another measurement basis is required by other Standards. In addition, IFRS 3 was amended to provide more guidance regarding the accounting for share-based payment awards held by the acquirees employees. Specifically, the amendments specify that share-based payment transactions of the acquiree that are not replaced should be measured in accordance with IFRS 2 Share-based Payment at the acquisition date (‘market-based measure’). Meikles Limited 2012 Annual Report 18
  20. 20. Notes to the Financial Statements continued Amendments to IAS 32 Classification of Rights The amendments address the classification of certain rights issues Issues denominated in a foreign currency as either equity instruments or as financial liabilities. Under the amendments, rights, options or warrants issued by an entity for the holders to acquire a fixed number of the entitys equity instruments for a fixed amount of any currency are classified as equity instruments in the financial statements of the entity provided that the offer is made pro rata to all of its existing owners of the same class of its non-derivative equity instruments. Before the amendments to IAS 32, rights, options or warrants to acquire a fixed number of an entitys equity instruments for a fixed amount in foreign currency were classified as derivatives. The amendments require retrospective application. The application of the amendments has had no effect on the amounts reported in the current and prior years because the Group has not issued instruments of this nature. Amendments to IFRIC 14 Prepayments of a IFRIC 14 addresses when refunds or reductions in future contributions Minimum Funding Requirement should be regarded as available in accordance with paragraph 58 of IAS 19; how minimum funding requirements might affect the availability of reductions in future contributions; and when minimum funding requirements might give rise to a liability. The amendments now allow recognition of an asset in the form of prepaid minimum funding contributions. The application of the amendments has not had material effect on the Group’s consolidated financial statements. IFRIC 19 Extinguishing Financial Liabilities The Interpretation provides guidance on the accounting for with Equity Instruments the extinguishment of a financial liability by the issue of equity instruments. Specifically, under IFRIC 19, equity instruments issued under such arrangement will be measured at their fair value, and any difference between the carrying amount of the financial liability extinguished and the consideration paid will be recognised in profit or loss. The application of IFRIC 19 has had no effect on the amounts reported in the current and prior years because the Group has not entered into any transactions of this nature. Improvements to IFRSs issued in 2010 The application of Improvements to IFRSs issued in 2010 has not had any material effect on amounts reported in the consolidated financial statements.2.2 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 1 Government Loans – effective for annual periods beginning on or after1 January 2013. Amendments to IFRS 7 Disclosures – Offsetting financial assets and financial liabilities - effective for annual periods beginning on or after 1 July 2013. Amendments to IFRS 7 Disclosures – Transfers of Financial Assets - effective for annual periods beginning on or after 1 July 2011. IFRS 9 (2009) Financial Instruments – applies on a modified retrospective basis to annual periods beginning on or after 1 January 2015. IFRS 10 Consolidated Financial Statements - effective for annual periods beginning on or after 1 January 2013. IFRS 11 Joint Arrangements - effective for annual periods beginning on or after 1 January 2013. 19 Meikles Limited 2012 Annual Report
  21. 21. Notes to the Financial Statements continued IFRS12 Disclosure of Interests in Other Entities - effective for annual periods beginning on or after 1 January 2013. IFRS 13 Fair Value Measurement - effective for annual periods beginning on or after 1 January 2013. Amendments to IAS 1 Presentation of Items of Other Comprehensive Income - effective for annual periods beginning on or after 1 July 2012. Amendments to IAS 12 Deferred Tax – Recovery of Underlying Assets - effective for annual periods beginning on or after 1 January 2012. Amendments to IAS 32 Offsetting financial assets and financial liabilities – applicable to financial periods beginning on or after 1 January 2014. IAS 19 (as revised in 2011) Employee Benefits - effective for annual periods beginning on or after 1 January 2013. IAS 27 (as revised in 2011) Separate Financial Statements - effective for annual periods beginning on or after 1 January 2013. IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures - effective for annual periods beginning on or after 1 January 2013. Annual improvements 2009-2011 cycle Effective for annual periods beginning on or after 1 January 2013. The Directors have not quantified the impact that the adoption of these standards and interpretations in future periods will have on the financial statements of the Group.3. Significant accounting policies3.1 Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and the Companies Act (Chapter 24.03) and relevant statutory instruments (SI33/99 and SI62/96).3.2 Basis of preparation The financial statements are prepared from statutory records that are maintained under the historical cost convention 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 Company statement of financial position, statement of changes in equity and other explanatory notes have been presented as supplementary information to ensure compliance with the requirements of the Companies Act (Chapter 24:03). The complete financial statements of the Company have been presented separately.3.3 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. Interests in jointly controlled entities are reported using proportionate consolidation. 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. Meikles Limited 2012 Annual Report 20
  22. 22. Notes to the Financial Statements continued 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.3.4 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. the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the At acquisition date, except that: • eferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and d measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively; • iabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment l 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 • ssets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale a 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 non-controlling 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 acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling 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. 21 Meikles Limited 2012 Annual Report
  23. 23. Notes to the Financial Statements continued 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 non-controlling 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 non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS. When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’(which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss. When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of. the initial accounting for a business combination is incomplete by the end of the reporting period in which the If combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date. The policy described above is applied to all business combinations that take place on or after 1 January 2010.3.5 Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see 3.4 above) less accumulated impairment losses, if any. the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups For of cash-generating units) that is expected to benefit from the synergies of the combination. cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when A there is indication that the unit may be impaired. If the recoverable amount of the cash-generating 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 Meikles Limited 2012 Annual Report 22
  24. 24. Notes to the Financial Statements continued 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. disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination On of the profit or loss on disposal. The Group’s policy for goodwill arising on the acquisition of an associate is described at 3.6 below.3.6 Investments in associates associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest An 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. Upon disposal of an associate that results in the Group losing significant influence over that associate, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with IAS 39. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when it loses significant influence over that associate. 23 Meikles Limited 2012 Annual Report
  25. 25. Notes to the Financial Statements 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.3.7 Interests in joint ventures joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that A 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 3.4 and 3.5 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.3.8 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. Meikles Limited 2012 Annual Report 24
  26. 26. Notes to the Financial Statements continued3.9 Revenue recognition3.9.1 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 and services 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; • he Group retains neither continuing managerial involvement to the degree usually associated with ownership nor t 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.3.9.2 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.3.9.3 Rental income The Group’s policy for recognition of revenue from operating leases is described in policy note 3.10.1.3.10 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.3.10.1 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.3.10.2 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 25 Meikles Limited 2012 Annual Report
  27. 27. Notes to the Financial Statements continued 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 3.12 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. the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. In 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.3.11 Foreign currencies preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional In 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. Non-monetary 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: • xchange differences on foreign currency borrowings relating to assets under construction for future productive use, e 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 • xchange differences on monetary items receivable from or payable to a foreign operation for which settlement is e 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). the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal On 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. Meikles Limited 2012 Annual Report 26
  28. 28. Notes to the Financial Statements continued the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign In operation, the proportionate share of accumulated exchange differences are re-attributed to non-controlling 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.3.12 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.3.13 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 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 the defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.3.14 Taxation Income tax expense represents the sum of the tax currently payable and deferred tax.3.14.1 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 and / 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.3.14.2 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 differences. 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 27 Meikles Limited 2012 Annual Report
  29. 29. Notes to the Financial Statements continued 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.3.14.3 Current and deferred tax for the year 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.3.15 Property, plant and equipment Property, plant and equipment are stated at 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 or 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 their 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. Service assets comprising cutlery, crockery, glassware, kitchen utensils and linen are not depreciated but the annual charge for usage is recognised in the statement of comprehensive income. 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.3.15.1 Depreciation Freehold land and capital work in progress are 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 less their anticipated residual values, over their estimated useful lives. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any Meikles Limited 2012 Annual Report 28
  30. 30. Notes to the Financial Statements continued changes in estimate accounted for on a prospective basis. The estimated useful lives are as follows: Freehold buildings 60 years Leasehold improvements 8 - 10 years Furniture and equipment 3 - 15 years Motor vehicles 3 - 5 years Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their relevant useful lives. item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are An expected to arise from the continued use of the asset. Any 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.3.16 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, including transaction costs, less accumulated depreciation and accumulated impairment losses. investment property is derecognised upon disposal or when the investment property is permanently withdrawn An 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. Investment property is depreciated on a straight line basis at rates calculated to depreciate the cost over the estimated economic useful life of: Freehold buildings 60 years Land is not depreciated and is deemed to have an indefinite useful life.3.17 Intangible assets These comprise of trademarks, which are valued at cost less accumulated impairment losses. 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.3.17.1 Internally-generated intangible assets - research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. internally-generated intangible asset arising from development (or from the development phase of an internal An project) is recognised if, and only if, all of the following have been demonstrated: • the technical feasibility of completing the intangible asset so that it will be available for use or sale; • the intention to complete the intangible asset and use or sell it; • the ability to use or sell the intangible asset; • how the intangible asset will generate probable future economic benefits; • he availability of adequate technical, financial and other resources to complete the development and to use or sell the t intangible asset; and 29 Meikles Limited 2012 Annual Report

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