Meikles Limited: Analysts Presentation - May 2010
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Transcript of Meikles Limited: Analysts Presentation - May 2010
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Analysts’ Presentation19 May 2010
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Your Panel
Farai RwodziChairman
Brendan BeaumontGroup Chief Executive Officer
Tsitsi Madziro for Onias MakambaGroup Financial Controller
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Q & A guidelines:
All feedback is welcomedPlease use the microphone Please state your name and organisationA summary of the Q & A session will be available on our website www.meiklesinvestor.comRegister for news and other email alerts on our website
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Agenda
Special issues2009 resultsOperational overviewsOutlook 2010
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Forward looking statements
PLEASE NOTE:-This presentation may contain forward looking
statements, which statements are based on assumptions and current expectations, estimates and projections. The risks and uncertainties associated with these assumptions, estimates and opinions could cause actual results to differ materially from those anticipated.
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Special issues
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Special issues: communication
Corporate governanceCorporate governance appraisal process plannedMix of non-exec and executive directors to be addressed
Communication governanceDisclosure Committee of the Board to be established Investor relations strategy adopted at Board levelAppointment of an IR officer reporting to the BoardWebsite to be used as a key disclosure tool
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Special issues: assets classified for sale
Kingdom Financial Holdings LimitedShareholders resolved on 22 June 2009 to de-merge15 Oct 2009 certain shareholders reached agreementKML and KFHL not party to agreementCondition precedents de-merger subsequently not metBoard made every effort to effect the de-mergerAgreement lapsed on 21 April 2010
Continued…
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Special issues: assets classified for sale
Kingdom Financial Holdings Limited (cont.)Board has been tasked by shareholders to finding An amicable and suitable solution Further hiatus is unacceptable Board will report to shareholders on or before 31 May as to the way forward re KFHL
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Special issues: assets classified for sale
Cape GraceCall and put option conditions precedent with Mentor Africa remain unfulfilledNo litigation pendingCurrently cash positive, profitableNew Board is considering its options
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Litigation - other
Cool Bay & Mentor HoldingsBoard gave authority to withdraw litigation in August 2009Specification implemented in September 2009Investigators and RBZ finalised reports following an extensive review which lead to the de-specification of all companies and normalisation of shareholder and company relationshipsAll regulatory authorities in place
Continued……
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Litigation – Cool Bay and Mentor cont.
Cool Bay & Mentor Holdings (cont..)Actions of litigation withdrawal are close to finalisationFollowing which full disclosures will be made of all regulatory approvals and in accordance with good disclosure practice and accounting policies
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Special issues - other
Cotton PrintersVoluntary liquidation order granted 3 March 2010Final liquidation order given on 28 April 2010Liabilities will be met
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Special issues – specification & suspensions
SpecificationTM Supermarkets specified for 8 months of 2009Meikles stores, hotels & Tanganda specified for 3.5 months & 1.5 months in ‘09 & ’10 respectively
SuspensionZSE listing suspension specified for 3.5 months & 1.5 months in ‘09 & ’10 respectivelyLSE suspension still applies
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2009 resultsContinuing operations
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Overview of 2009
Following macro-economic meltdown were significant periods of specification which: -
Disrupted managementDistracted focus and group synergies were lost Severely hindered financing
Absence of leadership Deterioration & strain in supplier relationshipsMarket share in supermarkets & stores declinedTM / Stores losses US$4m & US$3m respectively
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Summary financial results
US$ ‘000Turnover * 148,838 Operating loss before tax 9,578 Comprehensive loss for the year 3,824
* Continuing
Shares in issue 245 374 791Comprehensive loss per share cents 1.61 Loss from continuing operations cents 1.24 Loss from discontinued operations cents 0.37
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Operating loss: continuing
US$ (Thousands) 2009
TM Supermarkets (4,037)
Meikles Stores (3,062)
Hotels (959)
Tanganda 686
Corporate (2,205)
(9,578)
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Loss before taxationUS$’000 2009
Operating profit / (loss) (9,578)Net finance income 271Fair value adj/exch gains 109Share of associate -
(9,197)Discontinued operations (908)Provision for funds / other 831(Loss)/profit before tax (9,274)
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Cash flow statement - extracts
US$’000 2009
Operating cash flow (3,441)Increase in receivables / inventories (14,729)Increase in payables 18,085Cash generated from operations 86Investment into expansion assets -Investment into maintenance assets (1,418)Proceeds from interest bearing loans 10,379Repayment of interest bearing loans (2,764)Opening cash & bank 1,506Closing cash & bank 3,422
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Operational review
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Retail supermarketsOperating loss US$4.3m
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Supermarkets: market position
Market status & competitive advantage25% owned by Pick n Pay SA (listed on the JSE)94,000m² retail & warehousing space53 branches – strong brandCapacity utilisation +/- 45%
Top operational issuesImplement technology: reduce shrinkage, improve WCCapital expenditure: refrigeration, POS, refurbishmentSkills and cost control Maximise relationship with Pick n Pay
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Supermarkets: in 2010 & beyond
Critical mass is competitive advantageOverall growth is stagnant : low disposable incomesSignificant proportion of demand at end of yearFinancing requirements US$21m required:-
US$11m capital expenditureUS$10m working capital
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Supermarket infrastructure:
2010 2009 2008 2007
Stores 52 53 57 57
Area retail m² 56,000 56,000 59,000 59,000
Area warehouse m² 38,000 38,000 38,000 38,000
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Retail storesOperating loss US$3.0m
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Stores: market position
Market status & strategyDepartment store concept being re-visitedModern credit systemsRefresh existing relationships
Top operational issuesRe-launch and growth of creditInventory management and brandingCapital expenditure: distribution assetsFocus on cost reduction
Finance requirementCapex US$8m: refurbishment / distribution: WC US$13m
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Stores: infrastructure
MeiklesStores
Clicks Barbours Greatermans
Stores:-2009 5 13 2 1
28,300m² of retail trading area
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HotelsOperating loss US$0.96mVictoria Falls HotelMeikles Hotel
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Meikles Hotels
Market positionLeading Hotels of The World past 14 years+80% foreign clientele5 star hotels - iconic brands – iconic locations
Top operational issuesRefurbishment Occupancy & ADR optimisation and cost reduction
Finance required: US$8m US$7m capex (Vic Falls US$2m and Meikles US$7m)
US$1m working capital ( Meikles US$1m)
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Hotels
Meikles Victoria Falls CommentAvailable room-nights’10 1st quarter‘09 1st quarter‘09’08
27,54027,540
111,690116,022
14,49014,49058,76558,765
2010 ARN expected to be consistent with that of 2009
Occupancies %’10 1st quarter’09 1st quarter‘09’08
32212731
41172338
2010 occupancies expected to be consistent with 1st
quarter results
Sales mix % foreign’10 1st quarter‘09 1st quarter‘09’08
74757554
94959494
No material change expected in occupancies for 2010
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Hotels
Meikles Victoria Falls CommentADR’10 1st quarter‘09 1st quarter‘09’08
130126129
88
123181166153
ADR increases in 2010. VF ADR expected to remain depressed in remainder of 2010
RevPar’10 1st quarter‘09 1st quarter‘09’08
42273528
50303858
Further increases in 2010 RevParexpected from 1st
quarter results
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Hotels: Cape Grace
Cape GraceAvailable room-nights’10 1st quarter‘09 1st quarter‘09’08
10,89010,89044,16544,286
Occupancies %’10 1st quarter’09 1st quarter‘09’08
71765870
Sales mix % foreign’10 1st quarter‘09 1st quarter‘09
929392
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Hotels: Cape Grace
Rand IndicativeUS$
ADR’10 1st quarter‘09 1st quarter‘09’08
3,5523,7383,4503,291
469377413398
RevPar’10 1st quarter‘09 1st quarter‘09’08
2,5102,8292,0132,315
331286241280
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TangandaOperating profit US$0.68m
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Tanganda: market position
Market status & competitive advantageTanganda’s 6 brands account for 65 - 70% of local marketConsistent supplier to loyal customer base60% export (SA and UK) 40% localBeverage division a success
Top operational issuesImproving quality: incentivisation, multiplier effectControl of costs: through mechanisationImproving power efficienciesNew products, packaging & improved water supply
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Tanganda: in 2010 & beyond
Good rains have increased yield significantlyReasonable growth in tea prices subject to qualityStrong demand for exportsGood growth in beverages: waterCapex US$1.7m: authorised & securedLabour availability no longer a constraint200 ha. available for new growth in long term
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Tanganda - historical
SalesTons
ProductionTons
YieldKg/Ha
PricesUS$ / ton
BeverageTonnes
’09 6,139 ’09 7,000 ’09 3,019 ’09 1,088 ’09 2,049
’08 5,630 ’08 5,124 ’08 2,178 ’08 777 ’08 1,367
’07 7,206 ’07 7,840 ’07 3,526 ’07 772 ’07 2,616
2010 indicators above are expected to be significantly higher than 2009 Mitigating this performance are costs (associated with dollarisation) which are significantly out of line with international and regional peers
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2010 outlook & strategy
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Strategic focus
Board focused on operational issuesHands on managementGroup synergies being re-established e.g. treasuryCost control is a key focusRecapitalisation / financing on the agenda in short and long termFocus is on stores and supermarkets Return to profitability by end 2010
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Funding initiatives:requirements
US$ ‘000 Required
TM 21.0
Stores 21.0
Hotels 8.0
Tanganda 1.7
Corporate 2.0
Total 53.7
Existing finance facilities being restructured & replaced
The Board is reviewing all long term financing
options for the creation of long term shareholder
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Funding initiatives: allocations
Capital expenditure : “catch up” on prior year deficits WC for inventory and repay expensive short term debt
US$ million Capitalexpenditure
Working capital
TM 11.0 10.0
Stores 8.0 13.0
Hotels 7.0 1.0
Tanganda 1.7 -
Corporate 2.0 -
29.7 24.0
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Property portfolio
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Zimbabwe property portfolio:insights
Freehold value as at 31 Dec 2009
US$m Mix at 31 Dec 2009
US$m
Harare 42,000 CBD 47,598
Bulawayo 5,925 Suburbs 8,750
Mutare 3,210 56,348
Masvingo 2,295
Gweru 1,940 Commercial 54,790
Marondera 600 Residential 1,558
Vic Falls 253 56,348
Chipinge 80
Chiredzi 45
56,348
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Trading update As at end April / May
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Trading update:
As at end April 2010
TM Operating break even - satisfactory progress
Stores Loss making - significant challenges – trend is toward reducing losses
Meikles Profitable – refurbishment of public areas planned
Vic Falls Profitable - ADR low
Cape Grace Profitable - occupancies lower than expected
Tanganda Good operational results - high cost base remain a challenge
KFHL Marginal profitability
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Trading update: debt
Borrowings to end April
Interest bearing debt at 15 May US$17mHas been used to finance working capitalAdditional fund raising initiatives may replace this borrowing
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Question time
www.meiklesinvestor.comAll queries through website will be responded to in a timely
manner
Investor Relations Officer
Brendan Beaumont+263 4 252068
Andy Lane-Mitchell+ 263 11 207880