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African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
African Sun 2011 annual report
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African Sun 2011 annual report

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African Sun 2011 annual report

African Sun 2011 annual report

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  • 1. Annual Report cover.pdf 1 2/27/06 4:41 PM African Sun Limited Strengthening The Core For Growth THE COMPANY SECRETARY African Sun Limited 17th Floor - Office 1708 C Crowne Plaza Monomotapa 54 Park Lane, Harare M PO Box CY 1211, Causeway Harare, Zimbabwe YCM Tel: +263 4 250501-7 or +263 4 700521-4MY Email: edwinsh@africansun.co.zw or edwin.shangwa@africansunhotels.comCY Web: www.africansunhotels.com Strengthening The Core For GrowthCMY K Investor Relations Web: www.africansuninvestor.com CORPORATE OFFICE African Sun Limited 17th Floor Office No 1708 Crowne Plaza Monomotapa 54 Park Lane , Harare P O Box CY 1211 Causeway Harare , Zimbabwe Tel: +263 4 250501-7 or 700521-4 Email: edwinsh@africansun.co.zw Web: www.africansunhotels.com Annual Report 2011 Annual Report 2011
  • 2. CONTENTSCompany Profile 3Financial Highlights 5Statement of Vision 7The African Sun Way 8Market Overview 9Our Footprint 10Historical Highlights 12Chairmans Statement 14Group Chief Executives Report 18Accounting Philosophy 20Certificate by the Company Secretary 21Directors Report 22Corporate Governance 24Directors Responsibility for Financial Reporting 26Independent Auditors Report 28Financial Statements Consolidated Statement of Financial Position 30 Company Statement of Financial Position 31 Consolidated Statement of Comprehensive Income 32 Consolidated Statement of Changes in Equity 33 Consolidated Statement of Cashflows 34 Notes to the Consolidated Financial Statements 35 Notes to the Company Statement of Financial Position 69Group Supplementary Information 75Shareholders Profile 78Group Structure 80Business Composition 81Board of Directors 82Corporate Information 85Management 86Notice to Members 87Shareholders Diary 88Corporate and Hotel Directory 89 STRENGTHENING THE CORE FOR GROWTH PAGE 1
  • 3. COMPANY PROFILEEstablished in 1968, the African Sun Group, then known as Zimbabwe Hotel in Masvingo, which is located within walking distance of the GreatSun Limited, has evolved significantly from being just a Zimbabwe-based Zimbabwe National Monuments. The other resorts are Troutbeck Resort inhospitality management company to a Pan-African entity. In Zimbabwe, Nyanga, Caribbea Bay Resort in Kariba and Fothergill Island, a safari lodgeAfrican Sun is the leading player in the tourism and hospitality industry, also located in Kariba.with the Zimbabwe operations forming the largest business under AfricanSun. Outside Zimbabwe, the Group has presence in Nigeria. In Nigeria, the Group operates under management contracts, Obudu Mountain Resort, inAfrican Sun has interests in Zimbabwe and Nigeria. The Group also houses the Cross River State, Nike Lake Resort in Enugu State, Best Western Ikejaits regional central reservations, sales and marketing offices in Johannesburg, in Lagos, and Best Western Homeville, in Benin City, Edo State. AfricanSouth Africa. The Group is poised to capitalize on international interest Sun Limited also has a strong pipeline of additional sub-Saharan Africain the African continent and has undertaken strategic marketing and properties under development.communications initiatives at international trade events showcasing itsofferings to the global tourism community and business travellers. As a The Groups theme is “Strengthening the Core for Growth”. The theme alignsresult of our geographical spread, we are geared to take advantage of both the Group to its vision which is “to be the benchmark hotel managementbusiness and leisure travel within sub-Saharan Africa. company in Africa”. In line with this theme, the Group disposed of non- performing and non-core operations and instituted a cost alignment exerciseThe Zimbabwe portfolio currently comprises 13 hotels and resorts across through staff rationalisation. These actions strengthen African Suns positionthe nation, including three resort hotels in the town of Victoria Falls, namely as a hospitality leader and the Group is poised for growth going forward.Elephant Hills Resort, The Kingdom at Victoria Falls and The Victoria FallsHotel, which is jointly managed with Meikles Africa Limited. Close to the As we continue in our quest to grow stakeholder value we are strengtheningresort town of Victoria Falls in Hwange is African Suns safari operation, the pillars of our core, that is; people, product and processes. Our coreHwange Safari Lodge. competence that distinguishes us from other players in this industry is and will continue to be our skills and capabilities, which lie in our people.The Group also operates five city hotels for business travellers, three resort African Sun places significant importance on its human capital base andproperties and one safari lodge. The city hotels include three InterContinental this has resulted in the strengthening of its training division, HospitalityHotels Group (IHG) affiliated brands, the Crowne Plaza Monomotapa, the Training Academy (HTA). As such, we continue to drive service excellencetwo Holiday Inn branded hotels in Harare and Bulawayo. African Sun Amber by continuous training, development and through performance managementHotel Mutare and Beitbridge Express Hotel are the Group’s home grown systems.brands. In addition to these, the Group also operates the Great Zimbabwe I am a creator. If I can imagine it, it can be done. African Sun Motto STRENGTHENING THE CORE FOR GROWTH PAGE 3
  • 4. COMPANY PROFILEWe are dedicated to the continuous improvement of our hotel products African Sun will use its own brands in markets where the Group deemsthrough periodic preventative maintenance and refurbishment. The this appropriate and these are made up of the following:refurbishment commenced with our city hotels in Zimbabwe, followed by • Five Star The Platinumthe hotels in the Victoria Falls area. Our clearly established operating • Mid-range Amberprocedures will ensure that we are predictable and consistent in our service • Value Amber Expressdelivery across all markets. • Long stay SuitesGrowing the brands regionally is a fundamental factor as the Group seeks Also under its wing, African Sun holds a 17.43% equity interest in Dawnto establish brand leadership in all markets in which we operate. As African Properties Limited, an investment property holding company formed andSuns growth strategy is implemented, a combined brand strategy involving listed on the Zimbabwe Stock Exchange in 2003 when the Group spun offthe use of InterContinental Hotels Group (IHG) brands, namely Holiday wholly owned property interests, in order to focus on the hotel managementInn and Crowne Plaza as well as the Best Western brand in emerging business. Dawn Properties Limited owns eight of the properties that Africanmarkets is key. IHG brands and the Best Western brand are tried and tested Sun leases and operates in Zimbabwe.with great brand equity and awareness, especially amongst internationaland business travellers. As the global economy continues to recover, African Sun will focus on driving revenue per available room (RevPAR) growth through the retention of existing leases and addition of fee based management contracts within the region, in line with our business model.PAGE 4 STRENGTHENING THE CORE FOR GROWTH
  • 5. FINANCIAL HIGHLIGHTSGROUP SUMMARY (CONTINUING OPERATIONS): (US$) 2011 2010Revenue 48 796 506 39 942 218EBITDA 2 733 646 1 295 272Loss before tax (4 746 763) ( 1 902 675)Attributable loss (10 261 831) (3 503 963)Total assets 46 341 872 49 954 294Market capitalisation 9 977 675 23 281 241SHARE PERFORMANCE: US centsLoss per shareBasic earnings basis:Basic loss per share from continuing operations (0.44) (0.13)Basic loss per share for the year (1.25) (0.40)Fully diluted earnings basis:Diluted loss per share from continuing operations (0.44) (0.13)Diluted loss per share for the year (1.25) (0.39)Net asset value per share 1.82 3.01Market price per share 1.20 2.79FINANCIAL STATISTICSReturn on equity: % (24) (4)Interest cover: times (2) (1) STRENGTHENING THE CORE FOR GROWTH PAGE 5
  • 6. The foundation of oursuccess is based on our unwaveringcommitment to service excellence.
  • 7. STATEMENT OF VISIONVISIONTo be the benchmark hotel management company in Africa.MISSIONWe exist to create value for all our stakeholders through the deployment of our intellectual property and service skillsin a professional, predictable and consistent manner.WE DO SO BY:• Having a formalised and proprietary business management system.• Anticipating and meeting the needs of our guests.• Delivering a consistent return to our shareholders and owners.• Creating opportunities for personal growth, development and equitable rewards for our employees.• Building long-term partnerships through win-win relationships with our stakeholders.OUR CORE VALUES AND BELIEFSINTEGRITY We do what we say. We are true to self and true to others.RESPECT In all our relationships, we seek to build and honour.CARE We show concern and seek the well-being of everyone.PROFESSIONALISM We exude expert competence in the way we do business.RESPONSIBLE MANAGEMENT Conservation of our natural and other resources is integral to all we do. Caribbea Bay Resort, Kariba, Zimbabwe The Terrace Patio Sunset at Lake Kariba STRENGTHENING THE CORE FOR GROWTH PAGE 7
  • 8. THE AFRICAN SUN WAYSHARED VISIONWe will always seek to have a buy-in whilst providing leadership.SHARED VALUESOur values are the glue that binds us together.TIMEOUS EXECUTION AND CLOSUREIt is not done until the task is complete.EFFECTIVENESSWe will deliver beyond expectations.ADAPTABILITYWe will be flexible without losing our strategic intent.EFFICIENCYWe will be disciplined in utilising resources in all we do.CONNECTIVITYIt is our responsibility to get the message across to the other party. When spider webs unite, they can tie up a lion. African ProverbPAGE 8 STRENGTHENING THE CORE FOR GROWTH
  • 9. MARKET OVERVIEWInternational tourism grew by almost 5% globally in the first half of 2011 shows the effectiveness of the aggressive international marketing strategiestotalling a new record of 440 million arrivals. This was 19 million more employed by the Group in these markets. African Sun will continue tothan the same period in 2010. Results released by the United Nations consolidate its presence in these markets by maintaining targeted campaignsWorld Tourism Organisation (UNWTO) confirm that, in spite of multiple for major tour operators and destination management companies thatchallenges, international tourism grew in 2011, consolidating the 6.6% specialise in selling packages to Southern Africa.increase that had been registered in 2010. In 2011, growth in advancedeconomies (+4.3%) continued and closed the gap with emerging economies Economic and political stability has brought about increased confidence(+4.8%). This trend reflects the decreases registered in the Middle East in Zimbabwe as a tourist destination. The availability of investmentand North Africa, as well as a slight slowdown in the growth of some Asian opportunities in Zimbabwe has seen an influx of business travellers comingdestinations following a very strong 2010. to Harare and thus increasing our regional business by 15% year on year. The South African market remains the major source for arrivals into AfricanAll world sub-regions showed positive trends with the exception of the Sun hotels contributing 66% to regional business.Middle East and North Africa. Results were better than expected in Europe(+6%), boosted by the recovery of Northern Europe (+7%) and Central and Year to date figures as at 30th September 2011 show that regional andEastern Europe (+9%), and the temporary redistribution of travel to international markets contributed 33% to total African Sun Zimbabwedestinations in Southern and Mediterranean Europe (+7%) due to room nights. The domestic market remains the major driver of businessdevelopments in North Africa (-13%) and the Middle East (-11%). Sub- for the Zimbabwe hotels contributing 67% to room nights. DomesticSaharan Africa (+9%) continued to perform soundly. The Americas (+6%) business is mainly from conferences and conventions.was slightly above the world average, with remarkably strong results forSouth America (+15%). Asia and the Pacific grew at a comparatively slower STRENGTHENING THE CORE FOR GROWTHpace of 5%, but this more than consolidates its 13% bumper growth of2010. Following an encouraging first half of 2011, growth in the remainder African Suns vision is to be the benchmark hotel management companyof the year is expected to be subdued as recent months have brought in Africa. We continue in our quest to grow stakeholder value by strengtheningincreased uncertainty, hampering business and consumer confidence. the pillars of our core, that is; people, product and processes.Foreign arrivals into African Sun hotels for the year under review increased The key strength for the Group is that its operations and initiatives areby 20% compared to the same period last year. This growth is above the supported by a management team comprising seasoned hotel and businessglobal tourist arrivals projected by World Travel and Tourism Council (WTTC) managers. The combined intellectual capital, expertise and experience ofof 4% to 5%. Major market contributions were as follows; USA 20%; UK the team will ensure that African Sun is well positioned to achieve the10%; France 9%; Other Europe 12%; Japan 7%. The USA, UK and France Group’s targets.are the major source of international tourists into African Sun hotels. This Troutbeck Resort, Nyanga, Zimbabwe STRENGTHENING THE CORE FOR GROWTH PAGE 9
  • 10. OUR FOOTPRINT ZIMBABWE ZIMBABWENIGERIA Nigeria Zimbabwe ZIMBABWE FRANCHISE BRANDSPAGE 10 STRENGTHENING THE CORE FOR GROWTH
  • 11. Tomorrow belongs to the people whoprepare for it today. African Proverb Holiday Inn Harare An executive room at Holiday Inn Harare Vumba Restaurant STRENGTHENING THE CORE FOR GROWTH PAGE 11
  • 12. HISTORICAL HIGHLIGHTSOUR JOURNEY THUS FAR 2002 - Zimbabwe Sun Limited is unbundled from Delta Corporation Limited 1952 - Rhodesia and Nyasaland Hotels (Private) Limited is formed as a wholly-owned subsidiary of Rhodesian Breweries 2003 - Zimbabwe Sun Limited owns 100% shares in the timeshare operation in Vilanculos, Mozambique 1968 - Sable Hotels (Private) Limited is established 2003 - Dawn Properties Limited is listed as the first property entity 1973 - Rhodesian Government grants first casino licence for The on the Zimbabwe Stock Exchange Victoria Falls Hotel 2003 - The Hospitality Training Academy (HTA) is re-launched 1974 - Development of the first four world-class hotels: Monomotapa Hotel in Salisbury, The Wankie Safari Lodge in Wankie, Caribbea Bay 2003 - First negotiations for management of Holiday Inn Accra Airport, at Kariba, and the Elephant Hills Country Club in Victoria Falls Ghana 1979 - Meikles Southern Sun Hotels is established, becoming the 2004 - Zimbabwe Sun Limited acquires a lease to manage The Grace largest hotel chain in Southern and Eastern Africa, with control of 13 Hotel in Rosebank, South Africa, ranked among the “Top Ten” hotels major properties in the country. in Africa and the Middle East by Conde Nast Traveller (USA) in its first year of operation 1980 - Meikles Southern Sun Hotels changes its name to Zimbabwe Sun Hotels after Zimbabwes independence 2008 - Zimbabwe Sun Limited adds The Lakes Hotel and Conference Centre, in Johannesburg, South Africa to its portfolio 1988 - Zimbabwe Sun Hotels merges with Touch the Wild safari operations, later selling it to Rainbow Tourism Group (Private) Limited 2008 - Zimbabwe Sun Limited rebrands its name to African on 30 April 1998 Sun Limited 1990 - Zimbabwe Sun Limited is floated on the Zimbabwe Stock 2008 - African Sun Limited adds Obudu Mountain Resort to its regional Exchange (ZSE), at the time being the largest flotation in Zimbabwe, portfolio with 70 million shares offered to the public, which was over-subscribed by 28% 2008 - African Sun Limited takes over management of Holiday Inn Accra Airport 1990 - Opening of the timeshares built in Troutbeck, Nyanga and at Caribbea Bay, which received “Gold Crown Resorts” status from the 2009 - African Sun Limited acquires Hotelserve Holdings (Private) RCI in 1999 Limited 1991 - First Holiday Inn franchise in Harare 2009 - The Company raises US$10 million through a Rights Offer 1991 - The Elephant Hills Resort hosts the Commonwealth Heads of 2010 - Best Western Ikeja - Lagos, Nigeria opened its doors to the Government meeting, officially opening in 1992 public on 1 October 2010 1994 - First regional office for reservations is established in Johannesburg 2011 - Best Western Homeville - Benin City, Nigeria opened its doors to the public on 1 July 2011 1998 - The construction of Express by Holiday Inn Beitbridge is completed 2011- African Sun Limited closed The Grace in Rosebank, The Lakes Hotel and Conference Centre in South Africa and disinvested from 1999 - Zimbabwe Sun Limited acquires 40% equity and management Hotelserve Holdings (Private) Limited in Zimbabwe because of viability of Baio Do Paraiso SARL, Mozambique challenges 1999 - Makasa Sun is re-developed into The Kingdom at 2011- African Sun Limited adopts the strategy to strengthen the core Victoria Falls for growth.PAGE 12 STRENGTHENING THE CORE FOR GROWTH
  • 13. The strength of atree lies in its roots. African Proverb
  • 14. CHAIRMANS STATEMENT MESSAGE TO SHAREHOLDERS The performance for the financial year was mixed, with Zimbabwe hotels registering strong growth, whilst the two South African hotels reported losses due to persistently difficult trading conditions. Consequently, a decision was taken to exit the leases for these two hotels and this was implemented in the last quarter of the financial period. In addition, and pursuant to a decision taken to disinvest out of non-core operations as previously advised, Hotelserve Holdings (Private) Limited (Hotelserve) was disposed of, with completion of the transaction expected in the first quarter of the next financial year. The two South African hotels, together with Hotelserve have resultantly been accounted for as discontinued operations in the Statement of Comprehensive Income. In view of the need to further align costs to revenues, a further restructuring exercise was implemented in September 2011, at a once-off cost of $2.8 million. This is in addition to the $0.48 million for retrenchments that were effected earlier in the year. The restructuring exercise is expected to bring about savings of at least $2.4 million per year going forward. The savings to be realised from the restructuring exercise, together with the closure of the South Africa hotels, sets the Group on a stronger footing. Refurbishment for the selected Zimbabwe hotels has commenced, utilising long-term financing secured during the year. We will continue to explore ways of restructuring short term borrowings with the aim of reducing the overall borrowing costs. Following the closure of the hotels in South Africa, we have reviewed the lease agreement for Holiday Inn Gaborone, and this has led to a decision, subsequent to year end, to exit the lease. T N Chiganze - Chairman BUSINESS ENVIRONMENT The world travel industry has remained volatile, posting mixed results for 2011 owing to the failure by major economies to realise recovery after the As we have aligned our global recession, forcing tourism growth figures to be revised downwards structures to the core in the US and key European countries. However, there was growth in some parts of the world, mainly in the BRICS (Brazil, Russia, India, China and operations, the Group forecasts South Africa) with Africa recording growth of 5%. an EBITDA margin of at least Despite the mixed growth trends, the overall pattern in our Zimbabwe hotels 8% in the coming financial year, continued on the recovery path, realizing a volumes growth of 13% over supported by cost savings as last year, with the foreign room nights sold increasing by 14% over the same period. well as volumes growth. Oil exports have continued to spur growth in Ghana and Nigeria, presenting an opportunity for further rooms growth within this hub, as economic activities and attendant business travel are expected to increase.PAGE 14 STRENGTHENING THE CORE FOR GROWTH
  • 15. CHAIRMANS STATEMENTFINANCIAL REVIEW The net current liabilities position of the Group increased fromRevenue from continuing operations grew by 22% to $48.8 million, up $1.39 million in September 2010 to $7.46 million at the end of the periodfrom $39.9 million last year, driven mainly by a strong RevPAR performance under review due to closure expenses for the two South African hotels andfrom the Zimbabwe hotels. The RevPAR growth of 21% that was achieved restructuring provisions. This position is expected to improve as we beginby the Zimbabwe hotels emanated from a 13% growth in volumes, and an the 2012 financial year in a much stronger position with only profitable8% increase in ADR over the last year. operations.Cost of sales increased by 27% over the same period last year, ahead of The Group closed the period with cash and cash equivalents ofa 22% growth in Revenue, owing to a 28% increase in NEC wages and a $4.66 million.surge in the prices of key food products due to the stronger South AfricanRand during the greater part of the financial period. DISCONTINUED OPERATIONS South AfricaOperating expenses (excluding once-off restructuring costs of $3.28 million) The South African operations remained depressed for the period underincreased by 12.7%; and were contained within the growth in RevPAR review, posting an EBITDA loss of $3.77 million. This resulted mainly fromfollowing benefits of earlier cost cutting initiatives implemented. a further drop in occupancies to an average of 30%. Revenue achieved for the 11 months amounted to $4.84 million, which was 59% of prior year.Resultantly, the Group achieved an EBITDA profit (before restructuring The leases were terminated by mutual agreement with the landlords.costs) of $2.73 million (5.6% margin) from continuing operations, whichis a 111% growth from same period last year of $1.3 million on a like- Hotelservefor-like basis. The entity was disposed of as it had become non-core to the Groups operations. Revenue from Hotelserve was depressed during the periodThe positive EBITDA performance from continuing operations was however under review, falling 39% short of what was achieved last year as volumesnegated by non-recurring charges emanating from the impairment of declined and margins were affected by the USD/Rand volatility, registeringproperty, plant and equipment, retrenchment costs and fair value adjustment an EBITDA loss of $279 100. As a way of unlocking value, the Groupon assets classified as held for sale, amounting to $6.45 million. This disposed of the entity effective 27 August 2011.resulted in a loss before tax from continuing operations of $4.75 million,increasing the loss by 149% from the prior year loss of $1.9 million. Refurbishment Refurbishment, which is capped at $10 million, has begun, though thereThe share of profits from associates amounted to $1.95 million and includes were delays due to the pending duty free facility which was recently gazetted$1.8 million which arose from the revaluation of investment properties. through Statutory Instrument 124, 2011. The project is funded from proceeds of a five year loan facility, which has an extension option for anNet finance costs attributable to the continuing operations increased by additional 2 years.44% from last year following a 17.5% increase in short term loans tofinance working capital. OUTLOOK Following the restructuring exercise, closure of the loss making operatingThe overall loss after tax for the period was $10.23 million after taking units and disposal of Hotelserve, the outlook for the continuing operationsinto account the impact of the discontinued operations which reported a is positive, with a forecast growth in RevPAR of at least 25% from theloss after tax of $6.62 million, with 28% of the loss arising from depreciation, $40 achieved in 2011. Foreign operations remain predominantly managementimpairment of intangible assets and a deferred tax asset reversal. contracts, and management fees are expected to grow by at least 20%.The Group closed the period with long-term interest bearing debt of As we have aligned our structures to the core operations, the Group forecasts$4.91 million following drawdown on facilities specifically obtained for an EBITDA margin of at least 8% in the coming financial year, supportedthe refurbishment of selected Zimbabwe hotels and furnishing of Holiday by cost savings as well as volumes growth.Inn Gaborone.Short-term loans closed at $8.16 million, a 17.5% increase from the sameperiod last year due to increased working capital requirements, which areexpected to ease with the closure of loss making hotels and disposal ofHotelserve. STRENGTHENING THE CORE FOR GROWTH PAGE 15
  • 16. CHAIRMANS STATEMENTDIRECTORATEMs Y Johnston resigned from the Board on 21 April 2011. Her valuedcontribution to the development of the sales and marketing function andto the Board at large during her tenure is much appreciated.DIVIDEND DECLARATIONIn view of the subdued performance, ongoing refurbishment and staffrationalisation, the Board has resolved not to declare a dividend for theyear ended 30 September 2011.APPRECIATIONI would like to commend management and staff for their continuedcommitment throughout the period. Much appreciation also goes to myfellow Directors for their support and contribution to the business duringthe financial year under review. We look forward to consolidating the gainsof all the hard decisions we have made this year in the forthcoming financialyear.Timothy N. ChiganzeChairman27 February 2012 The Kingdom at Victoria FallsPAGE 16 STRENGTHENING THE CORE FOR GROWTH
  • 17. Growth means change and change involves risk,stepping from the known to the unknown. Author Unknown
  • 18. GROUP CHIEF EXECUTIVES REPORT Growth in global tourism has experienced mixed fortunes with the Eurozone contagion still weighing down on most of the European and US markets as they struggle to recover from the debt crisis. However, notable growth was experienced in some parts of the world which include Brazil, Russia, India, China and South Africa which are emerging markets and have impacted positively on our business. Our Zimbabwean operations have continued to be the bedrock of our business and we have pulled out of the South African market and divested from Hotelserve Holdings (Private) Limited (Hotelserve) as these operations had become an albatross on the Group operations due to poor performance. Management contracts in West Africa remain relevant to our business model as the management fees contribute directly to the bottom line. BUSINESS REVIEW ZIMBABWE Occupancies in the city hotels remained strong closing the year at 65%, up from 60% achieved last year, with the foreign room nights sold increasing by 14% over the same period last year. Business in the resort areas has continued to be below potential even though occupancy improved by 5% to close the financial year at 35%. Overall, the Zimbabwe hotels experienced a 3% growth in occupancy from prior year to close at 51%, with a business mix of 67% domestic room nights and 33% foreign room nights. Turnover grew by 22% from prior year closing at US$48.8 million while cost of sales was within budget at 31%. City hotels contributed 47% to revenue and 76% to EBITDA spurred by strong occupancies and room rates. The contribution by resort hotels from both revenue and EBITDA perspectives are expected to improve as business into these hotels strengthens. RETAIL Hotelserve, which was acquired mainly as a means of enabling the Group to enhance procurement efficiencies of imported hotel amenities was disposed of during the year as it had become non-core to the Group Shingirai A. Munyeza - Group Chief Executive operations. SOUTH AFRICA We continue on our quest to The South African operations remained depressed for the year under review grow stakeholder value by in the aftermath of an oversupply of rooms in the market post 2010 FIFA World Cup, posting an EBITDA loss of $3.77 million. This resulted mainly strengthening the pillars of from a further drop in occupancies to an average of 30%. Revenue achieved our core, that is; people, for the 11 months was $4.84 million, which was 59% that of prior year. With no sign of significant improvement in the short to medium term the product and processes. operations were therefore discontinued. WEST AFRICA The Nigerian operations continue to experience low volumes with Nike Lake Resort achieving the highest occupancy at 22%, followed by the newly opened Best Western, Lagos Ikeja at 21%. These low occupancies impacted negatively on the management fees from management contracts in West Africa which amounted to $0.8 million which was 37% short of budget. Occupancies remained high for Ghana with RevPAR also growingPAGE 18 STRENGTHENING THE CORE FOR GROWTH
  • 19. GROUP CHIEF EXECUTIVES REPORTby $14 from prior year to close at $171. West Africa remains a vital cog OUTLOOKin our business model as it provides additional contribution from management As the Group strenghtens its core, the future looks bright since the businessfees without incremental costs. has streamlined. With the anticipated continual improvement of the global economy, the Group will focus on driving RevPAR growth. Foreign operationsREFURBISHMENT will remain predominantly management contracts in line with our businessZimbabwe hotels have not been able to grow their ADR due to the state model.of the infrastructure which is in need of refurbishment. The first phase ofthe refurbishment project was completed during the year with the completion In conclusion, I would like to thank my executive team, management andof the mock rooms. The main refurbishment commences in our traditional staff for their sterling efforts and hard work during 2011. My sincerelow season which starts in January. The exercise has been capped at $10 appreciation also goes to the Board and my fellow Directors for the leadershipmillion which is funded from proceeds of a five year facility which has an and guidance shown throughout the year.extension option of an additional two years.AWARDSDuring the period under review, we received several awards for our SHINGIRAI A. MUNYEZAcontribution and achievements in the hospitality and tourism industry. Group Chief ExecutiveMost notable is the “Best Tourism Infrastructure of Zimbabwe Award” 27 February 2012conferred by the Infrastructural Development Fund (IDF). Other awardsinclude sectoral awards for some of the individual hotels throughout theGroup. Elephant Hills Resort, Victoria Falls, Zimbabwe Pool Area STRENGTHENING THE CORE FOR GROWTH PAGE 19
  • 20. ACCOUNTING PHILOSOPHYAfrican Sun Limited is dedicated to achieving meaningful and responsible (IFAC). The Group is committed to the regular review of financial reportingreporting through comprehensive disclosure and explanation of its financial standards and to the development of new and improved accounting practices.results. This is done to ensure objective corporate performance measurement, This is practised to ensure that the information reported to managementto enable returns on investment to be assessed against the risks inherent and stakeholders of the Group continues to be internationally comparable,in their achievement and to facilitate appraisal of the full potential of the relevant and reliable. This includes, wherever it is considered appropriate,Group. the early adoption of financial reporting standards.The core determinant of meaningful presentation and disclosure of information The Group adopts all accounting standards and interpretations applicableis its validity in supporting managements decision-making process. While that are issued by the IASB and the International Financial Reportingthe accounting philosophy encourages the pioneering of new techniques, Interpretations Committee (IFRIC). Unless otherwise stated, these standardsit endorses the fundamental concepts underlying both the financial and are applied consistently to enhance comparability of financial informationmanagement accounting disciplines as enunciated by the Institute of relating to different financial periods.Chartered Accountants of Zimbabwe (ICAZ), the International AccountingStandards Board (IASB) and the International Federation of Accountants Mock room at Crowne Plaza MonomotapaPAGE 20 STRENGTHENING THE CORE FOR GROWTH
  • 21. CERTIFICATE BY THE COMPANY SECRETARY I the undersigned, in my capacity as Company Secretary, hereby confirm, to the best of my knowledge and belief that for the financial year ended 30 September 2011, the Company has complied with Zimbabwe Stock Exchange Listing Requirements, lodged with the Registrar of Companies all returns required of a public quoted Company in terms of the Companies Act (Chapter 24:03) and that all such returns are true, correct and up to date. EDWIN T. SHANGWA Company Secretary 27 February 2012E.T. Shangwa - Company Secretary STRENGTHENING THE CORE FOR GROWTH PAGE 21
  • 22. DIRECTORS’ REPORTThe directors present their Annual Report and the Audited Financial Statements of the Company and the Group for the 12 months ended 30 September2011.YEARS RESULT 2011 2010 US$ US$EBITDA from continuing operations (Before restructuring costs) 2 733 646 1 295 272Loss attributable to shareholders (10 234 672) (3 139 687)DividendNo dividend was declared for the year ended 30 September 2011.CAPITAL COMMITMENTS 2011 2010 US$ US$Authorised by directors and contracted for 2 399 162 3 000 000Authorised by directors but not contracted for 6 046 838 8 885 782Total Commitments 8 446 000 11 885 782INVESTMENTSThe Company holds equity investments in the following organisations to the extent indicated below:African Sun Limited PCC (Mauritius) 100%African Sun Zimbabwe (Private) Limited 100%Dawn Properties Limited 17.43%RCI Zimbabwe (Private) Limited 24%SHARE CAPITALThere were no changes to the issued shares which stands at 831 472 907 ordinary shares. However, the change in share capital and share premiumto $31 940 574 arose from issuing treasury shares to external parties (note 16.2).The Company has an approved share option scheme and no shares were granted as at 30 September 2011.RESERVESThe movement in the reserves of the Group are shown in the Group statement of comprehensive income, Group statement of changes in shareholdersequity and in the notes to the financial statements.DIRECTORSDuring the year Ms Y E Johnston resigned. Mr David W Birch, Mr Vernon W Lapham and Ms Elizabeth Chitiga retire by rotation. All being eligible,they will offer themselves for re-election at the Annual General Meeting.AUDITORSMembers will also be asked to re-appoint PricewaterhouseCoopers as Auditors to the Group for the ensuing year.ANNUAL GENERAL MEETINGThe Fortieth Annual General Meeting of members of the Company will be held on Friday 30 March 2012 at 1000hrs at Crowne Plaza Monomotapa1st Floor, Ophir Room, 54 Park Lane, Harare.By order of the Board:TIMOTHY N. CHIGANZE SHINGIRAI A. MUNYEZA EDWIN T. SHANGWAChairman Group Chief Executive Company Secretary27 February 2012PAGE 22 STRENGTHENING THE CORE FOR GROWTH
  • 23. He who wants to be king in the future must first learn to serve. African Proverb PAGE 23
  • 24. CORPORATE GOVERNANCETHE AFRICAN SUN CHARTER of Directors through independent evaluations and examinations of theAfrican Sun Limited personnel are committed to a long-published code of Groups activities and resultant business risks.ethics. This incorporates the Groups operating, financial and behaviouralpolicies in a set of integrated values, including the ethical standards BOARD MEETINGSrequired of members of the African Sun Limited family in their interface The Board meets at least four times per financial year in order to monitor,with one another and with all stakeholders. consider and review, inter alia, matters of a strategic, financial, non- financial and operational nature. Special Board meetings may be convenedThere are detailed policies and procedures in place across the Group, on an ad hoc basis, when necessary, to consider issues requiring urgentcovering the regulation and reporting of transactions in securities of the attention or decision. During the year under review, seven Board meetingsGroup by the directors and officers. The Group adopted a Corporate were held.Governance Charter and the recommendations made in the King ReportIII. The Board works to a formal agenda prepared by the Company Secretary in consultation with the Chairman and the Group Chief Executive, which,STAKEHOLDERS inter alia, covers operations, finance, capital expenditure, acquisitions andFor many years, African Sun Limited has had a formalised stakeholder strategy. Any Board member may request the addition of an item to thephilosophy and structures of corporate governance to manage the interface agenda and will liaise with the Company Secretary in this regard. Boardwith the various stakeholder groups. African Sun Limited has in place papers comprising the agenda, minutes of Board and Board committeeresponsive systems of governance and practice which the Board and meetings and the relevant supporting documentation are circulated to allmanagement regard as entirely appropriate and in accordance with the directors in advance of each meeting in order that they can adequatelyCode of Corporate Practices and Conduct contained in the Cadbury and prepare and participate fully, frankly and constructively in Board discussionsKing Reports I, II and III. and bring the benefit of their particular knowledge, skills and abilities to the Board table.DIRECTORATEThe Board of Directors of African Sun Limited is constituted with an BOARD COMMITTEESequitable ratio of executive to non-executive directors and meets at least The Board is authorised to form committees to assist in the execution ofquarterly. The African Sun Limited Board is chaired by a non-executive its duties, powers and authorities. The Board has five standing committees,director. namely: Risk and Audit, Human Resources and Remuneration, Finance and Investments, Marketing and Nominations. In addition, there is theDIRECTORS INTERESTS Corporate Governance Committee, which is an ad hoc committee. TheAs provided by the Companies Act (Chapter 24:03) and the Companys terms of reference and composition of the committees are determined andArticles of Association, the directors are bound to declare at any time approved by the Board and have been adopted by the Board on an annualduring the year, in writing, whether they have any material interest in any basis.contract of significance with the Company which could have given rise toa related conflict of interest. No such conflicts were reported this year. THE RISK AND AUDIT COMMITTEE The Risk and Audit Committee deals, inter alia, with compliance, internalINTERNAL CONTROL control and risk management. It is regulated by specific terms of reference,The Board of Directors is responsible for the Groups systems of internal chaired by a non-executive director, has one non-executive director andcontrol. These systems are designed to provide reasonable, but not absolute, incorporates the Group Chief Executive and Group Finance Director asassurance as to the integrity and reliability of the financial statements and members. It meets with the Companys external auditors to discussto safeguard, verify and maintain accountability of its assets and to detect accounting, auditing, internal control and financial reporting matters. Theand minimise significant fraud, potential liability, loss and material external and internal auditors have unrestricted access to the Risk andmisstatement while complying with applicable laws and regulations. Audit Committee.The controls throughout the Group concentrate on critical risk areas. All THE HUMAN RESOURCES AND REMUNERATION COMMITTEEcontrols relating to the critical areas in the casino and hotel operating The Group has a Human Resources and Remuneration Committee whichenvironments are closely monitored by the directors and subjected to is made up of a non-executive Chairman, the Group Chief Executive andinternal audit reviews. Furthermore, assessments of the information one non-executive director. The committee acts in accordance with thetechnology environment are also performed. Boards written terms of reference to review remuneration of all African Sun Limited executive directors, senior management and other membersAn Audit Services Manager, who reports directly to the Chairman of the of staff.Risk and Audit Committee, heads the Internal Audit department. TheInternal Audit department is designed to serve management and the BoardPAGE 24 STRENGTHENING THE CORE FOR GROWTH
  • 25. CORPORATE GOVERNANCETHE FINANCE AND INVESTMENTS COMMITTEE decision-making process and also discuss employees concerns with topThe Group has a Finance and Investments Committee which is made up management. The Group believes in and practices worker participationof a non-executive Chairman, the Group Chief Executive, Group Finance throughout the different levels. All hotels have Workers Committees, whichDirector and one non-executive director. It is chaired by a non-executive serve as a communication channel with shop floor employees.director. The committee is responsible for the review and preliminaryapproval of the major investment decisions of the Company. ANALYST BRIEFING The Group reports formally to shareholders twice a year when its half andTHE MARKETING COMMITTEE full year results are announced. The Group Chief Executive and the GroupThe Group has a Marketing Committee comprising, a non-executive Finance Director give presentations on these results to institutional investors,Chairman, the Group Chief Executive and one non-executive director. The analysts and the media. The data used in these presentations may be foundcommittee is responsible for the review of all sales and marketing programmes at www.africansuninvestor.com.of the Group. ANNUAL GENERAL MEETINGTHE NOMINATIONS COMMITTEE The Annual General Meeting provides a useful interface with privateThe Nominations Committee is now a standing, as opposed to an ad hoc, shareholders, many of whom are also customers.committee, pursuant to the recommendations made in the King III Report.It is made up of a non-executive Chairman, the Group Chief Executive, The Chairman of the Board and the Group Chief Executive are availableand one non-executive director. It assists with the identification and at the Annual General Meeting to answer questions. Information about therecommendation of potential directors to the Board. Group is maintained and available to shareholders at www.africansuninvestor.com.CORPORATE GOVERNANCE COMMITTEEThe Corporate Governance Committee is an ad hoc committee which sits DIRECTORS ATTENDANCE OF MEETINGS IN 2011as and when it is necessary. It is made up of a non-executive Chairman, Individual director attendance at Board and Committee meetings appearsthe Group Chief Executive and two other non-executive directors. in the table below. Where a director has not been able to attend a Board meeting, any comments which he or she had arising out of the papers toNATIONAL WORKS COUNCIL AND WORKERS COMMITTEES be considered at that meeting have been relayed in advance to the ChairmanThe Group holds National Works Council meetings at least twice a year. of the Board.Each hotel within the Group has a Works Council representative who attendsthese meetings, which is a forum where employees participate in the Main Board Finance and Marketing Risk and Audit Human Resources Investments Committee Committee and Remuneration Committee Committee Number of meetings 7 4 4 4 6 T N Chiganze 7 - - - *1 B L Nkomo 6 3 - 4 - S A Munyeza 7 3 4 4 6 D W Birch 7 - - 4 5 E Chitiga 5 - 1 - 4 Y E Johnston 2 - 2 - - V W Lapham 6 3 - - - N Mangwiro 5 4 - 4 - N R Ramikosi 3 - 4 - - * By invitation Ms Y E Johnston did not attend most of the meetings as she resigned during the year. STRENGTHENING THE CORE FOR GROWTH PAGE 25
  • 26. DIRECTORS RESPONSIBILITY FOR FINANCIAL REPORTINGAfrican Sun directors are required by the Companies Act (Chapter 24:03) of internal control is operating effectively. Both the internal and externaland the Zimbabwe Stock Exchange listings requirements, to maintain auditors have unlimited access to the Risk and Audit Committee. Theadequate accounting records and to prepare financial statements for each committee also reviews the interim and annual results of the Companyfinancial year which present a true and fair view of the state of affairs of prior to their publication.the Group at the end of the financial year, and of the profit or loss andcash flows for the period. In preparing the accompanying financial statements, In addition, the Groups external auditors review and test appropriategenerally accepted accounting practices have been followed and suitable aspects of the internal financial control systems during the course of theiraccounting policies have been used and applied consistently. Reasonable statutory examinations of the Group.and prudent judgements and estimates have been made. The financialstatements incorporate full and responsible disclosure in line with the The Risk and Audit Committee has met the internal and the externalaccounting philosophy of the Group stated on page 20. auditors to discuss their reports on the results of their work, which include assessments of the relative strengths and weaknesses of key control areas.The directors have reviewed the Groups budget and cash flow forecast forthe twelve months to 30 September 2012. On the basis of the review of In a Group of this size, complexity and geographical diversity, it may bethe operating forecasts and in light of the current financial position and expected that occasional breakdowns in established control proceduresexisting borrowing facilities, the directors are satisfied that African Sun may occur. No breakdowns involving material loss have been reported toLimited is a going concern and have continued to adopt the going concern the directors in respect of the year under review and it is believed thatbasis in preparing the financial statements. The Groups external auditors, none of any significance exist.PricewaterhouseCoopers, have audited the financial statements and theirreport appears on pages 28. The financial statements for the 12 months ended 30 September 2011 which appear on pages 30 to 74 have been approved by the Board ofThe Group has an independent internal audit function, which has the Directors and are signed on their behalf by:objective of assisting executive management and the Risk and AuditCommittee in the discharge of their responsibilities, and which monitorsthe effectiveness of the accounting system and related internal financialcontrols on a continuing basis. The internal audit function performs acritical examination of the financial and operating information formanagement, and reports its findings and its recommendations to TIMOTHY N. CHIGANZEmanagement and to the Risk and Audit Committee. ChairmanProcedures are in place to identify key business risks timeously, to determinethe likelihood of the risks crystallising, and to determine the significanceof the consequential financial impact on the business.The Risk and Audit Committee meets quarterly with management, the SHINGIRAI A. MUNYEZAinternal auditors and external auditors, to review specific accounting, Group Chief Executivereporting and internal control matters, and to satisfy itself that the system 27 February 2012 Great Zimbabwe Hotel, Masvingo, Zimbabwe.PAGE 26 STRENGTHENING THE CORE FOR GROWTH
  • 27. With an added passion in everything we do, we have mastered the art of hospitality, ensuring thevery best experience for our guests.
  • 28. INDEPENDENT AUDITOR’S REPORTTO THE SHAREHOLDERS OF AFRICAN SUN LIMITEDWe have audited the consolidated financial statements of African Sun Limited and its subsidiaries (the “Group”), and the accompanying statementof financial position of African Sun Limited (the “Company”) standing alone, together the “financial statements”, which comprise the consolidatedand separate statements of financial position at 30 September 2011, and the consolidated statements of comprehensive income, changes in equityand of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 30 to74.Directors responsibility for the financial statementsThe directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial ReportingStandards, and in the manner required by the Companies Act (Chapter 24:03) and the relevant Statutory Instruments (“SI”) SI 33/99 and SI 62/96and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from materialmisstatement.Auditors responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with InternationalStandards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurancewhether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The proceduresselected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether dueto fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation ofthe financial statements, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinionon the effectiveness of the entitys internal control. 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 presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the consolidated financial statements present fairly, in all material respect, the financial position of the Group and of the Company asat 30 September 2011, and of the Groups consolidated financial performance and its consolidated cash flows for the year then ended, in accordancewith International Financial Reporting Standards and in the manner required by the Companies Act (Chapter 24:03) and the relevant StatutoryInstruments 33/99 and SI 62/96.PRICEWATERHOUSECOOPERSCHARTERED ACCOUNTANTS (ZIMBABWE)HARARE29 FEBRUARY 2012PricewaterhouseCoopers, Building No. 4, Arundel Office Park, Norfolk Road, Mount PleasantP O Box 453, Harare, ZimbabweT: +263 (4) 338362-8, F: +263 (4) 338395, www.pwc.comTI Rwodzi - Senior PartnerThe Partnerships principal place of business is at Arundel Office Park, Norfolk Road, Mount Pleasant, Harare, Zimbabwe where a list of the Partnersnames is available for inspection.
  • 29. The marksman hitteth the targetpartly by pulling, partly by letting go. The boatsman reacheth the landingpartly by pulling, partly by letting go. Egyptian Proverb
  • 30. 2011 2010 Assets Note US$ US$ Non-current assets Property, equipment and motor vehicles 6 17 074 087 18 712 600 Intangible assets 7 - 1 495 535 Biological assets 8 234 937 255 776 Investment in associate 9 12 184 001 9 605 727 Available-for-sale financial assets 11 - 220 000 Deferred income tax asset 21 - 644 000 Deferred expenditure - 16 876 Other receivables 14 535 512 498 614 30 028 537 31 449 128 Current assets Inventories 13 1 324 690 2 159 514 Available-for-sale financial assets 11 10 000 32 050 Loans 12 1 130 504 1 114 650 Trade and other receivables 14 7 342 790 12 388 546 Cash and bank 15 4 657 480 2 810 406 14 465 464 18 505 166 Assets of a disposal group classified as held for sale 28.3 1 847 871 - 16 313 335 18 505 166 Total assets 46 341 872 49 954 294 Equity and liabilities Equity attributable to owners of the parent Share capital 16 8 239 409 8 165 069 Share premium 16 23 701 165 23 368 576 Non-distributable reserve 17.1 1 327 001 1 327 001 Foreign currency translation reserve 17.3 (1 616 568) (1 182 140) Available-for-sale investments reserve 17.4 - (461) Revaluation reserve 17.5 406 808 - Accumulated losses (16 909 494) (6 674 822) Total equity 15 148 321 25 003 223 Liabilities Non-current liabilities Other payables 18 - 756 958 Borrowings 20 4 914 134 694 125 Deferred income tax liabilities 21 2 497 281 3 602 076 7 411 415 5 053 159 Current liabilities Trade and other payables 18 10 941 593 12 085 486 Provisions 19 3 676 484 863 265 Borrowings 20 8 164 598 6 949 161 22 782 675 19 897 912 Liabilities of a disposal group classified as held for sale 28.3 999 461 - 23 782 136 19 897 912 Total liabilities 31 193 551 24 951 071 Total equity and liabilities 46 341 872 49 954 294 These financial statements were approved by the Board of Directors on the 27th of February 2012 and signed on its behalf by: Timothy N. Chiganze Shingirai A. Munyeza Chairman Group Chief ExecutivePAGE 30 STRENGTHENING THE CORE FOR GROWTH
  • 31. Note 2011 2010Assets US$ US$Non-current assetsProperty, equipment and motor vehicles 32 679 414 163 816Investments in subsidiaries 33 26 273 284 27 477 008Investments in associate 34 9 985 587 9 605 727Other receivables 38 535 513 28 149Deferred income tax asset 44 21 291 74 908 37 495 089 37 349 608Current assetsInventory 47 338 -Other receivables 38 893 419 1 857 261Available-for-sale financial assets 37 113 188 69 421Cash and cash equivalents 39 3 306 616 2 968 4 360 562 1 929 650Non-current assets held for sale 35 2 672 001 - 7 032 563 1 929 650Total assets 44 527 652 39 279 258Equity and liabilitiesEquity attributable to owners of the companyShare capital 43 8 314 729 8 314 729Share premium 43 24 734 304 24 734 304Accumulated losses (362 619) (318 837)Total equity 32 686 414 32 730 196LiabilitiesNon-current liabilitiesBorrowings 42 3 180 290 -Current liabilitiesOther payables 40 661 877 272 122Provisions 41 46 628 23 871Borrowings 42 7 952 443 6 253 069 8 660 948 6 549 062Total liabilities 11 841 238 6 549 062Total equity and liabilities 44 527 652 39 279 258These financial statements were approved by the board on the 27th of February 2012 and signed on its behalf by:Timothy N. Chiganze Shingirai A. MunyezaChairman Group Chief Executive STRENGTHENING THE CORE FOR GROWTH PAGE 31
  • 32. 2011 2010 Note US$ US$ Continuing Operations Revenue 5 48 796 506 39 942 218 Cost of sales 24 (14 560 854) (11 461 421) Gross profit 34 235 652 28 480 797 Other income 23 9 600 4 863 Operating expenses 24 (36 724 877) (28 354 639) Other expenses 23 (2 678 434) (869 695) Operating loss (5 158 059) (738 674) Finance income 25 138 373 193 785 Finance costs 25 (1 672 091) (1 258 415) Share of income / (loss) of associate 9 1 945 014 (99 371) Loss before income tax (4 746 763) (1 902 675) Income tax credit 21 1 132 982 880 276 Loss for the year from continuing operations (3 613 781) (1 022 399) Discontinued operations Loss for the year from discontinued operations 28.1 (6 620 891) (2 117 288) Loss for the year (10 234 672) (3 139 687) Other comprehensive income: Fair value adjustment on available-for-sale financial assets 11 - (1 145) Recycling of fair value loss on available-for-sale financial assets 17.6 466 - Foreign currency translation reserve 17.6 (434 428) (363 142) Share of other comprehensive income of associate 9 406 808 - Income tax relating to components of other comprehensive income 17.6 (5) 11 Other comprehensive loss net of income tax for the year (27 159) (364 276) Total comprehensive loss for the year (10 261 831) (3 503 963) Attributable to: Owners of the parent (10 261 831) (3 503 963) Total comprehensive income attributable to equity shareholders arises from: Continuing operations (3 640 940) (1 386 675) Discontinued operations (6 620 891) (2 117 288) (10 261 831) (3 503 963) Earning per share: cents Basic and diluted from continuing operations 26 (0.44) (0.13) Basic and diluted from discontinued operations 26 (0.81) (0.27) Earning per share for the year: cents 26 (1.25) (0.40)PAGE 32 STRENGTHENING THE CORE FOR GROWTH
  • 33. ATTRIBUTABLE TO OWNERS OF THE PARENT Amount Foreign currency Available-for-sale Total Share Share awaiting Non-distributable translation investments Revaluation Accumulated shareholders capital premium allotment reserve reserve reserve reserve losses equity US$ US$ US$ US$ US$ US$ US$ US$ US$At 1 October 2009 - - 21 690 721 1 327 001 (818 998) 673 - (3 535 135) 18 664 262Transfer from amountawaiting allotment 6 892 497 14 798 224 (21 690 721) - - - - - -Comprehensive incomeLoss for the year - - - - - - - (3 139 687) (3 139 687)Other comprehensive lossCurrency translation differences - - - - (363 142) - - - (363 142)Fair value adjustment onavailable-for-sale financial assets - - - - - (1 134) - - (1 134)Transactions with ownersIssue of shares 1 272 572 8 570 352 - - - - - - 9 842 924At 30 September 2010 8 165 069 23 368 576 - 1 327 001 (1 182 140) (461) - (6 674 822) 25 003 223Comprehensive incomeLoss for the year - - - - - - - (10 234 672) (10 234 672)Other comprehensive income / (loss)Currency translation differences - - - - (434 428) - - - (434 428)Reclassified to income statement - - - - - 461 - - 461Share of associates othercomprehensive income - - - - - - 406 808 - 406 808Transactions with ownersIssue of shares 74 340 332 589 - - - - - - 406 929At 30 September 2011 8 239 409 23 701 165 - 1 327 001 (1 616 568) - 406 808 (16 909 494) 15 148 321 STRENGTHENING THE CORE FOR GROWTH PPAGE33 AGE 1
  • 34. Note 2011 2010 Cash flows from operating activities US$ US$ Cash generated from / (used in) operations 27 1 336 471 (4 987 787) Interest paid 25 (1 754 153) (1 513 169) Income tax paid 21 (37 747) ( 30 771) Net cash used in operating activities (455 429) (6 531 727) Cash flows from investing activities Purchase of property, equipment and motor vehicles (1 420 218) (2 306 303) Investment to expand operations (Zimbabwe and Botswana project CWIP) (1 997 777) (101 288) Proceeds from sale of equipment 27 31 763 50 Purchase of available-for-sale financial assets 11 - (26 936) Proceeds from sale of shares in associate 9 - 487 606 Interest received 25 122 519 153 859 Dividend received 23 9 600 4 863 Net cash used in investing activities (3 254 113) (1 788 149) Cash flows from financing activities Proceeds from issuance of ordinary shares - 9 619 760 Purchase of treasury shares - (97 521) Proceeds from short-term borrowings 7 952 443 6 125 145 Proceeds from long-term borrowings 4 701 881 - Repayment of short-term borrowings (7 223 351) (5 617 051) Repayment of long-term borrowings - (47 418) Net cash generated from financing activities 5 430 973 9 982 915 Net increase in cash and cash equivalents 1 721 431 1 663 039 Cash and cash equivalents at beginning of the year 15 2 810 406 937 582 Exchange gains on cash and cash equivalents 125 643 209 785 Cash and cash equivalents at the end of the year 15 4 657 480 2 810 406PAGE 34 STRENGTHENING THE CORE FOR GROWTH
  • 35. 1 GENERAL INFORMATION (b) New standards, amendments and interpretations issued but not effective for the African Sun Limited (the Company) and its subsidiaries (together, the financial year beginning 1 October 2010 and not early adopted Group) leases and manages hotels. The Group has operations in Zimbabwe IAS 19, ‘Employee Benefits’ was amended in June 2011. The impact on and Nigeria and mainly operates in Zimbabwe, with twelve leases. During the Group will be as follows: to eliminate the corridor approach and recognise the year, the Group ceased operations in South Africa and took the decision all actuarial gains and losses in other comprehensive income as they occur; to dispose of one of its subsidiaries, Hotelserve Holdings (Private) Limited. to immediately recognise all past service costs; and to replace interest costs and expected return on plan assets with a net interest amount that is The Company is a public limited company, which is listed on the Zimbabwe calculated by applying the discount rate to the net defined benefit liability Stock Exchange and incorporated, and domiciled in Zimbabwe. The address (asset). The Group is yet to assess the full impact of the amendments. of its registered office is Office 1708, Crowne Plaza Monomotapa, 54 Park Lane, Harare, Zimbabwe. IFRS 9, ‘Financial Instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES issued in November 2009 and October 2010. It replaces the parts of IAS The principal accounting policies applied in the preparation of these 39 that relate to the classification and measurement of financial instruments. consolidated financial statements are set out below. These policies have IFRS 9 requires financial assets to be classified into two measurement been consistently applied to all the years presented, unless otherwise stated. categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification2.1 Basis of preparation depends on the entity’s business model for managing its financial instruments The Group’s financial statements have been prepared in accordance with and the contractual cash flow characteristics of the instrument. For financial International Financial Reporting Standards, ("IFRS") and the International liabilities, the standard retains most of the IAS 39 requirements. The main Financial Reporting Interpretations Committee, ("IFRIC") interpretations. change is that, in cases where the fair value option is taken for financial The consolidated financial statements have been prepared under the liabilities, the part of a fair value change due to an entity’s own credit risk historical cost convention as modified by the revaluation of property, is recorded in other comprehensive income rather than the income statement, equipment and motor vehicles, biological assets, and financial assets which unless this creates an accounting mismatch. The Group is yet to assess are measured at fair value. IFRS 9’s full impact and intends to adopt IFRS 9 no later than the accounting period beginning on or after 1 October 2012. The preparation of financial statements in conformity to IFRS requires the use of certain critical accounting estimates. It also requires management IFRS 10, ‘Consolidated Financial Statements’ builds on existing principles to exercise its judgement in the process of applying the Groups accounting by identifying the concept of control as the determining factor in whether policies. The areas involving a higher degree of judgement or complexity, an entity should be included within the consolidated financial statements or areas where assumptions and estimates are siginificant to the consolidated of the parent company. The standard provides additional guidance to assist financial statements are disclosed in note 4. in the determination of control where this is difficult to assess. The Group is yet to assess IFRS 10’s full impact and intends to adopt IFRS 10 no2.1.2 Going concern later than the accounting period beginning on or after 1 October 2012. The Group has repositioned itself following the closure of the loss making hotels in South Africa, disposal of Hotelserve Holdings (Private) Limited IFRS 12, ‘Disclosures of Interests in Other Entities’ includes the disclosure and a restructuring exercise that will result in savings in excess of requirements for all forms of interests in other entities, including joint US$2.4 million annually. This will allow the Group to focus on the profit arrangements, associates, special purpose vehicles and other off balance making Zimbabwe operations and profitable management contracts going sheet vehicles. The Group is yet to assess IFRS 12’s full impact and intends forward. The discontinuance of the loss making units is in addition to the to adopt IFRS 12 no later than the accounting period beginning on or after Group having secured long-term funding for its refurbishment program at 1 October 2012. lower interest rates. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements. IFRS 13, ‘Fair Value Measurement’, aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source2.1.3 Changes in accounting policy and disclosures of fair value measurement and disclosure requirements for use across IFRSs.(a) New and amended standards adopted by the Group The requirements, which are largely aligned between IFRSs and US GAAP, There are no IFRSs or IFRIC interpretations that are effective for the first do not extend the use of fair value accounting but provide guidance on how time for the financial year beginning on or after 1 October 2010 that would it should be applied where its use is already required or permitted by other be expected to have a material impact on the Group. standards within IFRSs or US GAAP. The Group is yet to assess IFRS 13’s full impact and intends to adopt IFRS 13 no later than the accounting period beginning on or after 1 January 2012. STRENGTHENING THE CORE FOR GROWTH PAGE 35
  • 36. There are no other IFRSs or IFRIC interpretations that are not yet effective of a subsidiary is the fair values of the assets transferred, the liabilities that would be expected to have a material impact on the Group. incurred to the former owners of the acquiree and the equity interest issued by the Group. Identifiable assets acquired and liabilities and contingent(c) New and amended standards, and interpretations mandatory for the first time liabilities assumed in a business combination are measured initially at their for the financial year beginning on or after 1 January 2010 but not currently fair values at the acquisition date, irrespective of the extent of any non- relevant to the Group controlling interest. The excess of the cost of acquisition over the fair value IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments, of the Group’s share of the identifiable net assets acquired is recorded as effective 1 July 2010. The interpretation clarifies the accounting by an goodwill. If the cost of acquisition is less than the fair value of the net entity when the terms of a financial liability are renegotiated and result in assets of the subsidiary acquired, the difference is recognised directly in the entity issuing equity instruments to a creditor of the entity to extinguish the statement of comprehensive income. all or part of the financial liability (debt for equity swap). It requires a gain or loss to be recognised in profit or loss, which is measured as the difference Investments in subsidiaries are accounted for at cost less impairment. Cost between the carrying amount of the financial liability and the fair value of is adjusted to reflect changes in consideration arising from contingent the equity instruments issued. If the fair value of the equity instruments consideration amendments. Cost also includes direct attributable costs of issued cannot be reliably measured, the equity instruments should be investment. measured to reflect the fair value of the financial liability extinguished. Inter-company transactions, balances, income and expenses on transactions(d) Interpretation and amendments to existing standards that are not yet effective between group companies are eliminated. Profits and losses resulting from and not relevant to the Groups operations inter-company transactions that are recognised in assets are also eliminated. IFRS 10, ‘Consolidated Financial Statements’. Effective 1 January 2011. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. IFRS 11, ‘Joint Arrangements’. Effective 1 January 2013. All subsidiaries in the Group are 100% owned and are consolidated in the IFRS 12, ‘Disclosure of Interests in Other Entities’. Effective 1 January presented financial statements. 2013. (b) Disposal of subsidiaries IAS 27, ‘Separate Financial Statements’ (Revised). Effective 1 January When the Group ceases to have control, any retained interest in the entity 2013. is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the IAS 28, ‘Investments in Associates and Joint Ventures,’ (Revised). Effective initial carrying amount for the purposes of subsequently accounting for the 1 January 2013. retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect IFRIC 14, ‘Pre-payments of a Minimum Funding Requirement,’ (amendment). of that entity are accounted for as if the Group had directly disposed of Effective 1 January 2011. the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. IFRIC 20, ‘Stripping Costs in the Production Phase of a Mine’, Effective 1 January 2013. (c) Associates Associates are all entities over which the Group has significant influence2.2 Consolidation but not control, generally accompanying a shareholding of between 20%(a) Subsidiaries and 50% of the voting rights (refer to note 4.2). Investments in associates Subsidiaries are all entities (including special purpose entities) over which are accounted for by the equity method of accounting and are initially the Group has the power to govern the financial and operating policies recognised at cost and the carrying amount is increased or decreased to generally accompanying a shareholding of more than one half of the voting recognise the investors share of profit or loss of the investee after the date rights. The existence and effect of potential voting rights that are currently of acquisition. The Groups investment in associates includes goodwill (net exercisable or convertible are considered when assessing whether the Group of any accumulated impairment loss) identified on acquisition (refer to note controls another entity. Subsidiaries are fully consolidated from the date 4.2). on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The Groups share of post-acquisition profit or loss is recognised in the income statement and its share of post-acquisition movements in other The acquisition method of accounting is used to account for the acquisition comprehensive income is recognised in other comprehensive income with of subsidiaries by the Group. The consideration transferred for the acquisition a corresponding adjustment to the carrying amount of the investment. WhenPAGE 36 STRENGTHENING THE CORE FOR GROWTH
  • 37. the Groups share of losses in an associate equals or exceeds its interest fair value of monetary securities denominated in foreign currency classified in the associate, including any other unsecured receivables, the Group does as available-for-sale are analysed between translation differences resulting not recognise further losses, unless it has incurred obligations or made from changes in the amortised cost of the security and other changes in payments on behalf of the associate. the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes The Group determines at each reporting date whether there is any objective in carrying amount are recognised in other comprehensive income. evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference Translation differences on non-monetary financial assets and liabilities such between the recoverable amount of the associate and its carrying value and as equities held at fair value through profit or loss are recognised in profit recognises the amount adjacent to share of profit / (loss) of an associate or loss as part of the fair value gain or loss. Translation differences on non- in the income statement. monetary financial assets, such as equities classified as available for sale are included in available-for-sale reserve equity. Unrealised gains on transactions between the Group and its associate are eliminated to the extent of the Groups interest in the associates. Unrealised (c) Group companies losses are also eliminated unless the transactions provide evidence of an The results and financial position of all the Group entities that have a impairment of the asset transferred. Accounting policies of associates have functional currency different from the presentation currency (none of which been changed where necessary to ensure consistency with the policies has the currency of a hyper-inflationary economy) are translated into the adopted by the Group. Dilution gains and losses arising in investments in presentation currency as follows: associates are recognised in the statement of comprehensive income. (i) Assets and liabilities for each statement of financial position presented In the parent Company, investment in associates are accounted for at cost are translated at the closing rate at the reporting date. less impairment. (ii) Income and expenses for each statement of comprehensive income are2.3 Segment reporting translated at average exchange rates (unless this average is not a Operating segments are reported in a manner consistent with the internal reasonable approximation of the cumulative effect of the rates prevailing reporting provided to the chief operating decision-maker. The chief operating on the transaction dates, in which case income and expenses are decision maker, who is responsible for allocating resources and assessing translated at the rate on the dates of the transactions); and performance of the operating segments, has been identified as the executive committee which makes strategic decisions. (iii) All resulting exchange differences are recognised as a separate component of equity.2.4 Foreign currency translation(a) Functional and presentation currency On consolidation, exchange differences arising from the translation of the Items included in the financial statements of each of the Groups entities net investment in foreign operations, and of borrowings and other currency are measured using the currency of the primary economic environment in instruments designated as hedges of such investments, are taken to which the entity operates ("the functional currency"). The financial statements shareholders equity. When a foreign operation is partially disposed of or are presented in United States of America Dollars (US$), which is the sold, exchange differences that were recorded in equity are recognised in Companys functional and the Groups presentation currency. the statement of comprehensive income as part of the gain or loss on sale.(b) Transactions and balances Goodwill and fair value adjustments arising on the acquisition of a foreign Foreign currency transactions are translated into the functional currency entity are treated as assets and liabilities of the foreign entity and translated using the exchange rates prevailing at the dates of the transactions or at the closing rate. Exchange differences arising are recognised in equity. valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation 2.5 Property, equipment and motor vehicles at year-end exchange rates of monetary assets and liabilities denominated Hotel properties are maintained as a matter of company policy by an on- in foreign currencies are recognised in the statement of comprehensive going programme of refurbishment and repairs. Property, equipment and income. motor vehicles are stated at fair value based on periodic valuations by the Directors or independent external valuers, less subsequent accumulated Foreign exchange gains and losses that relate to borrowings and cash and depreciation and impairment losses. cash equivalents are presented in the income statement within ‘finance income or cost’. All other foreign exchange gains and losses are presented in the income statement within ‘other (losses) / gains–net’. Changes in the STRENGTHENING THE CORE FOR GROWTH PAGE 37
  • 38. Any accumulated depreciation at the date of revaluation is eliminated In the event that, in a subsequent period, an asset that has been subject against the gross carrying amount of the asset, and the net amount is to an impairment loss is considered no longer to be impaired, the value is restated to the revalued amount of the asset. Increases in the carrying restored and the gain is recognised in the statement of comprehensive amount arising on revaluation of property, equipment and motor vehicles income. The restoration is limited to the value which would have been are credited to a revaluation reserve through the statement of comprehensive recorded had the impairment adjustment not taken place. income. Decreases that offset previous increases of the same asset are charged against other reserves in equity through other comprehensive Surpluses or deficits arising on the disposal of property, equipment and income; all other decreases are charged to the statement of comprehensive motor vehicles are determined by comparing proceeds with the carrying income. The revaluation surplus included in equity in respect of an item amount. These are included in the statement of comprehensive income. of property, equipment and motor vehicles is transferred directly to retained earnings when the asset is derecognised. The Group capitalises borrowing costs directly attributable to the construction of new projects or re-development of existing hotels as part of the cost of Subsequent costs are included in the assets carrying amount or recognised that asset. as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the 2.6 Intangible assets cost of the item can be measured reliably. The carrying amount of the (a) Goodwill replaced part is derecognised. All other repairs and maintenance are charged Goodwill represents the excess of the cost of an acquisition over the fair to the statement of comprehensive income during the financial period in value of the Group’s share of the net identifiable assets of the acquired which they are incurred. subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is included in "intangible assets". Separately recognised goodwill is tested Depreciation is calculated on a straight line basis at the following annual annually for impairment and carried at cost less accumulated impairment rates in order to allocate their cost or revalued amounts to the residual losses. Impairment losses on goodwill are not reversed. Gains and losses values over their estimated useful lives as follows: on the disposal of an entity include the carrying amount of goodwill relating • Freehold buildings 50 years to the entity sold. • Leasehold improvements 8-10 years • Equipment 7-15 years Goodwill is allocated to cash-generating units for the purpose of impairment • Motor vehicles 3-10 years testing. The allocation is made to these cash generating units that are expected to benefit from the business combination in which the goodwill Service stocks comprising standard service utensils and linen are not arose identified according to operating segment. depreciated but the annual charge for usage is recognised in the statement of comprehensive income. Following the closure of The Grace hotel in South Africa during the financial year, Goodwill was written down to nil. The useful lives and residual values of assets are reviewed and adjusted if appropriate at each reporting date. Where the residual value of an asset (b) Brand names and trademarks increases to an amount equal to or greater than the assets carrying amount, Brand names and trademarks have finite useful lives and are shown at cost depreciation will cease to be charged on the asset until its residual value less accumulated amortisation. Amortisation is calculated using the straight- subsequently decreases to an amount below its carrying amount. line method to allocate the cost of brand names and trademarks over their estimated useful lives of twenty years. Assets are assessed for potential impairment at each reporting date. If circumstances exist which suggest that there may be impairment, a more Brand names and trademarks are reviewed for impairment on an annual detailed exercise is carried out which compares the carrying values of the basis and the carrying amount of an asset is written down to its recoverable assets to recoverable value based on either realisable value (fair value less amount immediately, if the carrying amount is greater than the estimated costs associated with disposal) or value-in-use. Value-in-use is determined recoverable amount. using discounted cash flows budgeted for each cash-generating unit. Detailed budgets for the ensuing three years are used and, where necessary, these Following the closure of The Grace hotel in South Africa during the financial are extrapolated for future years taking into account known structure changes. year, the brand name was written down to nil. Service division assets and cash flows are allocated to operating divisions as appropriate. The discount rate used is the internally computed weighted (c) Distributorship agreements average cost of capital (WACC) which is currently at 13%. Impairment Distributorship agreements were separately identified and measured as an losses are recognised as an expense in the statement of comprehensive intangible asset on acquisition of a subsidiary, Hotelserve Holdings (Private) income and the carrying value of the asset and its annual depreciation are Limited in the financial year ended 30 September 2009. This arose from adjusted accordingly. contractual rights the subsidiary has with several merchandise suppliers.PAGE 38 STRENGTHENING THE CORE FOR GROWTH
  • 39. Initially, this was not recorded as an asset in the books of the subsidiary. were acquired. Management determines the classification of its financial The asset has finite life and is carried at cost less accumulated amortisation assets at initial recognition. and impairment. Amortisation is calculated using the straight-line method to allocate the cost of the intangible over its estimated useful life of five (a) Loans and receivables years. Loans and receivables are non-derivative financial assets with fixed or determinable payment terms that are not quoted in active markets. They Distributorship relationships are reviewed for impairment on an annual basis are included in current assets, except for maturities greater than twelve and the carrying amount of the asset is written down to its recoverable months after the reporting date. These are classified as non-current assets. amount immediately, if the carrying amount is greater than the estimated The Groups loans and receivables comprise "trade and other receivables" recoverable amount. and "cash and cash equivalents" in the statement of financial position. Following the decision to dispose of Hotelserve Holdings (Private) Limited, (b) Available-for-sale financial assets the intangible asset distributorship agreements is classified under assets Available-for-sale financial assets are non-derivatives that are either designated of a disposal group classified as held for sale. in this category or not classified in any other categories. They are included in non-current assets unless management intends to dispose of the investment2.7 Biological assets within twelve months of the reporting date. Gains or losses arising in the The Group engages in agricultural activity through management of biological fair value of the "available-for-sale financial assets" are recognised through assets for sale as agricultural produce. the statement of comprehensive income within the period in which they arise. Timber plantation Timber plantations are measured at their fair value less estimated point- 2.10.2 Recognition and measurement of-sale costs. The fair value of timber plantations is determined by a Regular purchases and sales of financial assets are recognised on the trade- professional valuer based on fair values for the stages of forest development. date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs.2.8 Impairment of non-financial assets Financial assets are derecognised when the rights to receive cash flows Assets that have an indefinite useful life, for example goodwill, are not from the investments have expired or have been transferred and the Group subject to amortisation and are tested annually for impairment. Assets that has transferred substantially all risks and rewards of ownership. Available- are subject to amortisation are reviewed for impairment whenever events for-sale financial assets are subsequently carried at fair value. Loans and or changes in circumstances indicate that the carrying amount may not be receivables are carried at amortised cost using the effective interest method. recoverable. An impairment loss is recognised for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable The fair values of quoted investments are based on current bid prices. If amount is the higher of an assets fair value less costs to sell and value in the market for a financial asset is not active (and for unlisted securities), use. For the purposes of assessing impairment, assets are grouped at the the Group establishes fair value by using valuation techniques. These include lowest levels for which there are separately identifiable cash flows (cash- the use of recent arm’s length transactions, reference to other instruments generating units). Non-financial assets other than goodwill that suffered an that are substantially the same, discounted cash flow analysis, and option impairment are reviewed for possible reversal of the impairment at each pricing models, making maximum use of market inputs and relying as little reporting date. as possible on entity-specific inputs.2.9 Non-current assets (or disposal groups) held for sale 2.11 Off-setting financial instruments Non-current assets (or disposal groups) are classified as assets held for sale Financial assets and liabilities are offset and the net amount reported in when their carrying amount is to be recovered principally through a sale the statement of financial position when there is a legally enforceable right transaction and a sale is considered highly probable. They are stated at the to offset the recognised amounts and there is an intention to settle on a lower of the carrying amount and fair value less costs to sell. net basis, or realise the asset and settle the liability simultaneously.2.10 Financial assets 2.12 Impairment of financial assets2.10.1 Classification (a) Assets carried at amortised cost The Group classifies its financial assets in the following categories: at fair The Group assesses at the end of each reporting period whether there is value through profit or loss, loans and receivables, and available-for-sale. objective evidence that a financial asset or group of financial assets is The classification depends on the purpose for which the financial assets impaired. A financial asset or a group of financial assets is impaired and STRENGTHENING THE CORE FOR GROWTH PAGE 39
  • 40. impairment losses are incurred only if there is objective evidence of A provision for impairment of trade receivables is established where there impairment as a result of one or more events that occurred after the initial is objective evidence that the Group will not be able to collect all amounts recognition of the asset (a "loss event") and that loss event (or events) has due according to the original terms of receivables. The amount of the an impact on the estimated future cash flows of the financial asset or group provision is the difference between the carrying amount and the present of financial assets that can be reliably estimated. value of future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the statement of comprehensive For loans and receivables category, the amount of the loss is measured as income. the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not 2.15 Cash and cash equivalents been incurred) discounted at the financial asset’s original effective interest In the consolidated statement of cash flows, cash and cash equivalents rate. The carrying amount of the asset is reduced and the amount of the includes cash in hand, deposits held at call with banks, other short-term loss is recognised in the consolidated income statement. highly liquid investments with original maturities of three months or less. In the statement of financial position, bank overdrafts are shown within If, in a subsequent period, the amount of the impairment loss decreases borrowings in current liabilities. and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit 2.16 Share capital rating), the reversal of the previously recognised impairment loss is recognised Ordinary shares are classified as equity. Incremental costs directly attributable in the consolidated income statement. to the issue of new shares or options are shown in equity as a deduction, net of income tax from the proceeds.(b) Assets classified as available-for-sale The Group assesses at the end of each reporting period whether there is Where any Group company purchases the companys equity share capital objective evidence that a financial asset or a group of financial assets is (treasury shares), the consideration paid, including any directly attributable impaired. In the case of equity investments classified as available-for-sale, incremental costs (net of income taxes) is deducted from equity attributable a significant or prolonged decline in the fair value of the security below its to the companys equity holders until the shares are cancelled or reissued. cost is also evidence that the assets, are impaired. If any such evidence Where such shares are subsequently reissued, any consideration received, exists for available-for-sale financial assets, the cumulative loss measured net of any directly attributable incremental transaction costs and the related as the difference between the acquisition cost and the current fair value, income tax effects is included in equity attributable to the companys equity less any impairment loss on that financial asset previously recognised in holders. profit and loss is removed from equity and recognised in the statement of comprehensive income. Impairment losses recognised in the income 2.17 Trade payables statement on equity instruments are not reversed through the statement Trade payables are obligations to pay for goods or services that have been of comprehensive income. If in a subsequent period, the fair value of a acquired in the ordinary course of business from suppliers. Trade and other debt instrument classified as available-for-sale increases and the increase payables are classified as current liabilities if payment is due within one can be objectively related to an event occurring after the impairment loss year or less (or in the normal operating cycle of the business if longer). If was recognised in the statement of comprehensive income, the impairment not, they are presented as non-current liabilities. loss is reversed through the consolidated income statement. Impairment testing of trade receivables is described in note 2.14. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.2.13 Inventory Inventories, which consist of foodstuffs, beverages, shop merchandise and consumable stores are stated at the lower of cost and net realisable value. Cost is determined on a "first in, first-out" (FIFO) basis. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale.2.14 Trade receivables Trade receivables are amounts due from customers for food, beverages, shop merchandise and rooms sold in the ordinary course of business. Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment.PAGE 40 STRENGTHENING THE CORE FOR GROWTH
  • 41. 2.18 Borrowings liability in a transaction other than a business combination that at the time Borrowings are recognised initially at fair value, net of transaction costs of the transaction affects neither accounting nor taxable profit or loss. incurred. Borrowings are subsequently carried at amortised cost; any Deferred income tax is determined using tax rates (and laws) that have difference between the proceeds (net of transaction costs) and the redemption been enacted or substantially enacted by the reporting date and are expected value is recognised in the statement of comprehensive income over the to apply when the related deferred income tax asset is realised or the period of the borrowings using the effective interest method. deferred income tax liability is settled. Fees paid on establishments of loan facilities are recognised as transaction Deferred income tax assets are recognised only to the extent that it is costs of the loan to the extent that it is probable that some or all of the probable that future taxable profit will be available against which the facility will be drawn down. In this case, the fee is deferred until the draw temporary differences can be utilised. down occurs. To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised Deferred income tax assets and liabilities are offset when there is a legally as a pre-payment for liquidity services and amortised over the period of enforceable right to offset current income tax assets against current income the facility to which it relates. tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable Borrowings are classified as current liabilities unless the Group has an entity or different taxable entities where there is an intention to settle the unconditional right to defer settlement of the liability for at least twelve balances on a net basis. months after the reporting date. 2.21 Employee benefits2.19 Borrowing costs (a) Pension obligations General and specific borrowing costs directly attributable to the acquisition, The Group has a defined contribution plan. A defined contribution plan construction or production of qualifying assets, which are assets that is a pension plan under which the Group pays fixed contributions into a necessarily take a substantial period of time to get ready for their intended separate entity. The Group has no legal or constructive obligations to pay use or sale, are added to the cost of those assets, until such time as the further contributions if the fund does not hold sufficient assets to pay all assets are substantially ready for their intended use or sale. employees the benefits relating to employee service in the current period and prior periods. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the The Group pays contributions to publicly or privately administered pension borrowing costs eligible for capitalisation. insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. All other borrowing costs are recognised in profit or loss in the period in The contributions are recognised as an employee benefit expense when which they are incurred. they are due. Pre-paid contributions are recognised as an asset to the extent that a cash refund or reduction in the future payments is available.2.20 Current and deferred income tax The income tax expense for the period comprises current and deferred (b) Termination benefits income tax. Tax is recognised in the statement of comprehensive income, Termination benefits are payable when employment is terminated by the except to the extent that it relates to items recognised in other comprehensive Group before the normal retirement date, or whenever an employee accepts income or directly in equity. In this case the tax is also recognised in other voluntary redundancy in exchange for these benefits. The Group recognises comprehensive income or directly in equity, respectively. termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan The current income tax charge is calculated on the basis of the tax laws without possibility of withdrawal; or providing termination benefits as a enacted or substantively enacted at the reporting date in the countries result of an offer made to encourage voluntary redundancy. Benefits falling where the companys subsidiaries and associates operate and generate due more than twelve months after the reporting period are discounted to taxable income. Management periodically evaluates positions taken in tax their present value. returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on (c) Bonus plans the basis of amounts expected to be paid to the tax authorities. The Group recognises a liability and an expense for bonuses based on a formula that takes into consideration key performance indicators measured Deferred income tax is recognised using the liability method on temporary on a quarterly basis. The Group recognises a provision where it iscontractually differences arising between the tax bases of assets and liabilities, and their obliged or where there is a past practice that has created a constructive carrying amounts in the financial statements. However, the deferred income obligation. tax is not accounted for if it arises from initial recognition of an asset or STRENGTHENING THE CORE FOR GROWTH PAGE 41
  • 42. 2.22 Provisions (iv) Interest income Provisions are recognised when the Group has a present legal or constructive Interest income on loans and receivables is recognised using the effective obligation as a result of past events; it is probable that an outflow of interest rate method. When a loan and receivable is impaired, the Group resources will be required to settle the obligation; and the amount has been reduces the carrying amount to its recoverable amount, being the estimated reliably estimated. Restructuring provisions comprise lease termination future cashflow discounted at the original effective interest rate of the penalties and employee termination payments. Provisions are not recognised instrument, and continues unwinding the discount as interest income. for future operating losses. Interest income on impaired loans and receivables are recognised using the original effective interest rate. Interest income on bank deposits is recognised Where there is a number of similar obligations, the likelihood that an outflow when received. will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of 2.24 Leases an outflow with respect to any one item included in the same class of Leases in which a significant portion of the risks and rewards of ownership obligations may be small. are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are Provisions are measured at the present value of the expenditures expected charged to the statement of comprehensive income on a straight-line basis to be required to settle the obligation using a pre-tax rate that reflects over the period of the lease. Leases of property, equipment and motor current market assessments of the time value of money and the risks specific vehicles where the Group has substantially all the risks and rewards of to the obligation. The increase in the provision due to passage of time is ownership are classified as finance leases. Finance leases are capitalised recognised as interest expense. at the leases commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments.2.23 Revenue recognition Revenue comprises the fair value of the consideration received or receivable Each lease payment is allocated between the liability and finance charges for the sale of goods and services in the ordinary course of the Groups so as to achieve a constant rate on the finance balance outstanding. The activities. Revenue is shown net of value-added tax, returns, rebates and corresponding rental obligations, net of finance charges, are included in discounts and after eliminating sales within the Group. other long-term payables. The interest element of the finance cost is charged to the statement of comprehensive income over the lease period so as to The Group recognises revenue when the amount of revenue can be reliably produce a constant periodic rate of interest on the remaining balance of measured, it is probable that future economic benefits will flow to the entity the liability for each period. The property, equipment and motor vehicles and when specific criteria have been met for each of the Groups activities acquired under finance leases is depreciated over the shorter of the useful as described below. The Group bases its estimates on historical results, life of the asset and the lease term. taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. 2.25 Dividend distribution Dividend distribution to the Companys shareholders is recognised as a(a) Revenue from leased operations liability in the Groups financial statements in the period in which the Revenue from leased operations is primarily derived from hotel operations, dividends are approved by the Companys shareholders. including the rental of rooms, and food and beverage sales from leased hotels operated under the Groups brand names. Revenue is recognised 3 FINANCIAL RISK MANAGEMENT when rooms, food and beverages are sold. 3.1 Financial risk factors The Groups activities expose it to a variety of financial risks; market risk(b) Management fees (including currency risk, fair value interest rate risk, cashflow interest rate Management fees represent fees earned from hotels managed by the Group risk and price risk), credit risk and liquidity risk. The Groups overall risk usually under long-term contracts with the hotel owner. These are generally management programme focuses on the unpredictability of financial markets a percentage of hotel revenue, and an incentive fee, which is based on a and seeks to minimise potential adverse effects on the Groups financial fixed or variable percent of hotel profits after a stated return threshold to performance. the owner. Management fees are recognised as revenue when they are earned in terms of the contracts. In interim periods and at year ends Risk management is carried out by a central treasury department (Group incentive fees are recognised as if they were due had the contract been treasury) under policies approved by the Board of Directors. Group treasury terminated at the end of the period. identifies, evaluates and hedges financial risks in close co-operation with the Groups operating units. The Board provides principles for overall risk(c) Timeshare revenue management, as well as policies covering specific areas, such as foreign The extended reservations system involves the advance sale of time modules exchange risk, interest rate risk, credit risk, use of derivative financial for use during the next 25 years of apartments owned by the Group. At the instruments and non-derivative financial instruments, and investment of end of this period all rights in the apartments revert to the Group. Revenue excess liquidity. is accounted for when timeshares are used or forfeited.PAGE 42 STRENGTHENING THE CORE FOR GROWTH
  • 43. (i) Market risk(a) Foreign exchange risk The Group operates regionally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the South African Rand. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. Foreign exchange risk arises when future commercial transactions or recognised assets and liabilities are denominated in a currency that is not the entitys functional currency. The Group has certain investments in foreign operations whose net assets are exposed to foreign currency translation risk. The table below summarises the Groups exposure to foreign exchange risk as at 30 September 2011. Included in the table are the Groups assets and liabilities at carrying amounts categorised by currency. 2011 2010 US$ US$ Assets South African Rand 883 162 930 086 Nigerian Naira 317 544 7 960 Ghanaian Cedi 150 536 45 934 1 351 242 983 980 Liabilities South African Rand 1 907 814 2 583 096 Nigerian Naira 167 442 111 051 Ghanaian Cedi 4 500 10 245 2 079 756 2 704 392 At 30 September 2011, if the United States of America Dollar (US$) had weakened / strengthened by 10% against all the other currencies with all other variables held constant, loss after tax for the year would have been US$72 851 (2010: US$142 264) higher / lower, mainly as a result of foreign exchange gains / losses on translation of South African Rand, Nigerian Naira and Ghanaian Cedi denominated trade receivables, trade payables and borrowings.(b) Price risk The Group is exposed to equity securities price risk because of investments held by the Group and classified in the statement of financial position as available- for-sale. To manage its price risk arising from investments in equity securities, the company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group treasury. At 30 September 2011, the Group did not hold siginificant equity securities that may impact the Groups profitability in the event of a price change.(c) Cash flow and fair value interest rate risk As the Group has no significant interest bearing assets, the Groups income and operating cash flows are substantially independent of changes in the market interest rates. The Groups interest rate risk arises from long-term and short-term borrowings. Borrowings issued at variable rates expose the Group to cashflow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions and alternative financing. Based on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. For each simulation, the same interest rate shift is used for all currencies. The scenarios are run only for liabilities that represent the major interest-bearing positions. Based on the simulations performed, the impact on post tax loss of a 1% shift would be a maximum increase / decrease of US$130 787 (2010: US$76 433). The simulations are done monthly given the nature of the current loan facilities to verify that the maximum loss potential is within the limit set by management. Currently, the Group does not undertake any hedging on its short-term loans due the nature and terms of the loan facilities. On long-term loans, the Group assesses all kinds of risks and hedge as the credit committee deems necessary. At 30 September 2011, there were on hedges in place. STRENGTHENING THE CORE FOR GROWTH PAGE 43
  • 44. (ii) Credit risk Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, as well as credit exposures to hotel customers and retail customers including outstanding receivables and committed transactions. For banks and financial institutions, only well established and reliable institutions are used. Management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal ratings in accordance with limits set by the credit committee. The utilisation of credit limits are regularly monitored. No credit limits were exceeded during the reporting period, and management does not expect any losses from non-performance by these counterparties. In the view of management, the credit quality of trade receivables is considered sound.(iii) Liquidity risk Cash flow forecasting is performed in the operating entities of the Group and aggregated by the Group treasury. The Group treasury monitors rolling forecasts of the Groups liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Groups debt financing plans, covenant compliance, compliance with internal financial position ratio targets and, if applicable external regulatory or legal requirements, for example, currency restrictions. Surplus cash held by the operating entities in excess of the balance required for working capital management are transferred to the Group treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits, money markets deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the above-mentioned forecasts. The table below analyses the Groups non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cashflows. Less than 1 Between 2 and Over year 5 years 5 years At 30 September 2011 US$ US$ US$ Borrowings 10 417 260 4 647 141 522 775 Trade and other payables 10 941 593 - - Long-term loans bank guarantees 7 344 000 - - Total 28 702 853 4 647 141 522 775 At 30 September 2010 Borrowings 6 949 161 694 125 - Trade and other payables 12 085 486 756 958 - Total 19 034 647 1 451 083 - Of the US$4 647 141 disclosed in the 2011 borrowings time band 1 and 2 years, the Company intends to repay $173 600 within the next financial year, and $1 225 000 will be taken over by the owners of the Gaborone project. Included in the maturity groupings of more than 1 year are long-term loans from Afreximbank and Banc ABC Botswana. See note 20 for more details. Liquidity risk on the long-term loans is reduced due to the following reasons; • The Afreximbank loan has 12 months moratorium, with an option to to extend the life of the loan with an additional two years, there by reducing the amounts of capital repayments required quarterly. • Only $173 600 of the Afreximbank loan will paid in the financial year ended 30 September 2012. • Following a negotiated exit of the Botswana lease, the Banc ABC Botswana loan will be transferred to the owners, reducing the Groups exposure resulting in lower liquidity risk associated with long-term loans. Liabilities of a disposal group classified as held for sale have been excluded from the maturity groupings as it is highly probable that will go through the sale within the next 12 months, thereby minimising liquidity risk of the Group.PAGE 44 STRENGTHENING THE CORE FOR GROWTH
  • 45. 3.2 Capital risk management The Groups objectives when managing capital are to safeguard the Groups ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including "current and non-current borrowings" as shown in the statement of financial position) less cash and cash equivalents. Total capital is calculated as "equity" as shown in the statement of financial position plus net debt. During the financial year ended 30 September 2011, the Groups strategy was to maintain gearing ratio below 40%. The gearing ratio at 30 September 2011 was as follows: 2011 2010 US$ US$ Total borrowings (note 20) 13 078 732 7 643 286 Less cash and cash equivalents (note15) (4 657 480) (2 810 406) Net debt 8 421 252 4 832 880 Total equity 15 148 321 25 003 223 Total capital 23 569 573 29 836 103 Gearing ratio 36% 16% The increase in the gearing ratio during the financial year resulted primarily from the increase in borrowings following drawdown on the companys long-term facilities.3.3 Fair value estimation Fair value hierarchy The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows; • Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). • Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). • Inputs for the asset or liability that are not based on observable market data (that is unobservable inputs) (level 3). At 30 September 2011 Level 1 Level 2 Level 3 Total Assets US$ US$ US$ US$ Available-for-sale financial assets Equity securities - - - - Investments in unlisted companies - - 10 000 10 000 Total - - 10 000 10 000 At 30 September 2010 Level 1 Level 2 Level 3 Total Assets US$ US$ US$ US$ Available-for-sale financial asses Equity securities 5 113 - - 5 113 Investments in unlisted companies - - 246 937 246 937 Total 5 113 - 246 937 252 050 STRENGTHENING THE CORE FOR GROWTH PAGE 45
  • 46. The fair value of financial instruments traded in active markets is based on quoted market prices on the reporting date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arms length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. Instruments included in level 1 comprise of primarily Zimbabwe Stock Exchange equity investments classified as trading securities or available-for-sale. The fair value of the instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximises the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more significant inputs is not based on observable market data, the instrument is included in level 3. Specific valuation techniques used to value financial instruments include; • Quoted market prices or dealer quotes for similar instruments. • Other techniques such as discounted cashflow analysis, are used to determine fair value for the remaining financial instruments. The following table presents the changes in level 3 instruments: At 30 September 2011 Unlisted investments held as available-for-sale Total US$ US$ Opening balance 246 937 246 937 Sold during the year (16 937) (16 937) Closing balance (10 000) (10 000) Total losses for the period included in income statement for assets held at the end of the reporting period 220 000 220 000 At 30 September 2010 Unlisted investments held as available-for-sale Total US$ US$ Opening balance 26 937 26 937 Transfer into level 3 (from non-current assets held for sale) 220 000 220 000 Closing balance (246 937) (246 937) Total losses for the period included in income statement for assets held at the end of the reporting period - -4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.4.1 Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.(a) Income taxes The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.PAGE 46 STRENGTHENING THE CORE FOR GROWTH
  • 47. Were the actual final outcome was to differ by 10% from managements estimates, the Group would need to: • Increase the deferred tax liability by US$113 298, if unfavourable, or • Decrease the deferred tax liability by US$113 298, if favourable.(b) Valuation of property, equipment and motor vehicles Property, equipment and motor vehicles is presented at revalued amounts less accumulated depreciation. A Directors or professional valuation is performed periodically to determine the market values, remaining useful lives and residual values of property, equipment and motor vehicles. These measurements require the use of critical judgement. Property, equipment and motor vehicles were last valued by a professional valuer on 31 August 2011 and the last used estimates are still relevant.(c) Going concern The Directors assess the ability of the Group to continue operating as a going concern at the end of each financial year. As at 30 September 2011, the Directors have assessed the ability of the Group to continue operating as a going concern and believe that the preparation of these financial statements on a going concern basis is appropriate. This is following the implementation of various initiatives to ensure that the Group returns to profitability and continues as a going concern. Some of the initiatives implemented are: • Restructuring exercise - reduction in Head Office staff. • Closure of loss making hotels and disposal of non-core assets (note 28). • Refurbishment of Zimbabwe hotels. • Raising of long-term loans and currently working on restructuring of short-term loans. To add to the above, the continuing operations would have made a profit of US$820 906, without the non-recurring expenses of US$5 567 669 arising from impairment and restructuring.(d) Valuation of investment in Dawn Properties Limited The Group applies the equity accounting method for the investment in Dawn Properties Limited. Impairment on investment in Dawn Properties Limited is tested by comparing the carrying amount to the higher of market value (using the market price of ordinary shares of Dawn Properties Limited), and the value-in-use. As at 30 September 2011, the investment in Dawn Properties Limited was not considered impaired, as the value-in-use was higher than the carrying amount. The value-in-use was calculated using Dawn Properties Limited pre-tax free cash flows for the next 5 years. The key assumptions in the calculation were as detailed below: • Period of planning: 5 years. • Discount rate: 7%. • Growth rate: 22% in the first two years, 20% in year 3,17% in year 4 and 15% in year 5. If growth rate for the first three years is reduced to 20%, maintaining the last two at 17% and 15% respectively, the value-in-use will decline by US$52 990. If growth rate for the five years is limited to 15%, the value-in-use will decline by US$237 076. If growth rate for the first year is limited to 15%, year two to 10%, and the last three years to 5%, the value-in-use will decline by US$450 024.4.2 Critical judgements in applying the entitys accounting policies. Investment in Dawn Properties Limited Management has assessed the level of influence that the Group has on Dawn Properties Limited and determined that it has significant influence even though the shareholding is below 20% because of the board representation and contractual terms. Consequently, this investment has been classified as an associate.5 SEGMENT INFORMATION Management has determined the operating segments based on the reports reviewed by the executive committee which makes strategic decisions for the purposes of allocating resources and assessing performance. The committee considers the business from both a geographic and deal type perspective. Geographically, management considers the performance of leased hotel properties in Southern Africa and properties under management in West Africa. The Southern Africa and West Africa segments are further segregated into Zimbabwe and South Africa, and Ghana and Nigeria respectively. Although there are no leased properties in West Africa, management has concluded that this segment should be reported, as it is closely monitored by the executive committee as a potential growth region and is expected to materially contribute to Group revenue in the future. The executive committee assesses the performance of the operating segments based on: • Hotel occupancies • Hotel revenue per available room (RevPAR) and, • Hotel average daily rate (ADR) STRENGTHENING THE CORE FOR GROWTH PAGE 47
  • 48. 5 SEGMENT INFORMATION (CONTINUED) The segment information provided to the executive committee for the reportable segments is as follows: As at 30 September 2011 Southern Africa West Africa Discontinued Continuing Zimbabwe South Africa Botswana Ghana Nigeria Consolidated operations operations Revenue: US$ US$ US$ US$ US$ US$ US$ US$ Sale of goods 25 621 469 2 332 381 - - - 27 953 850 5 687 255 22 266 595 Sale of services 30 554 551 2 850 688 - 641 723 136 298 34 183 260 2 850 688 31 332 572 Inter-segment revenue (4 456 503) (346 158) - - - (4 802 661) - (4 802 661) Total revenue 51 719 517 4 836 911 - 641 723 136 298 57 334 449 8 537 943 48 796 506 Other Information EBITDA 3 127 361 (4 569 380) - 334 628 (208 515) (1 315 906) (4 049 552) 2 733 646 Depreciation and usage (1 981 349) (166 430) - - (3 118) (2 150 897) (224 470) (1 926 427) Amortisation (68 777) (28 079) - - - (96 856) (96 856) - Impairment (2 460 434) (1 251 637) - - - (3 712 071) (1 029 637) (2 682 434) Net finance costs (1 145 047) (589 008) - - - (1 734 055) (200 337) (1 533 718) Other income / (expenses) - net (2 253 098) (1 029 746) - - - (3 282 844) - (3 282 844) Share of income of associate 1 945 014 - - - - 1 945 014 - 1 945 014 (Loss) / profit before income tax (2 836 330) (7 634 280) - 334 628 ( 211 633) (10 347 615) (5 600 852) (4 746 763) Total assets 43 345 022 697 780 1 425 765 574 358 298 947 46 341 872 1 847 871 44 494 001 Total assets include: Investment in associate 12 184 001 - - - - 12 184 001 - 12 184 001 Additions to non-current assets (other than financial instruments and deferred income tax assets) 2 864 136 - 1 425 765 - - 4 289 901 5 190 4 284 711 Total liabilities 26 404 713 3 368 309 1 225 779 - 194 750 31 193 551 999 461 30 194 090PAGE 48 STRENGTHENING THE CORE FOR GROWTH
  • 49. 5 SEGMENT INFORMATION (CONTINUED) As at 30 September 2010 Southern Africa West Africa Discontinued Continuing Zimbabwe South Africa Botswana Ghana Nigeria Consolidated operations operations Revenue: US$ US$ US$ US$ US$ US$ US$ US$ Sale of goods 21 003 692 4 512 178 - - - 25 515 870 10 479 982 15 035 888 Sale of services 25 850 478 3 691 782 - 809 840 598 042 30 950 142 3 760 033 27 190 109 Inter-segment revenue (1 901 504) (382 275) - - - (2 283 779) - (2 283 779) Total revenue 44 952 666 7 821 685 - 809 840 598 042 54 182 233 14 240 015 39 942 218 Other Information EBITDA 1 948 285 (1 667 669) - 368 037 (284 125) 364 528 (930 744) 1 295 272 Depreciation and usage (1 921 859) (255 895) - - (2 879) (2 180 633) (406 472) (1 774 161) Amortisation (47 028) (28 311) - - - (75 339) (75 339) - Impairment (605 047) (80 000) - - - (685 047) (605 047) (80 000) Net finance costs (949 912) (391 838) - - - (1 341 750) (277 121) (1 064 630) Other income / (expenses) - net (179 785) - - - - (179 785) - (179 785) Share of loss of associate (99 371) - - - - (99 371) - (99 371) (Loss) / profit before income tax (1 854 717) (2 423 713) - 368 037 (287 004) (4 197 397) (2 294 723) (1 902 675) Total assets 41 417 684 8 155 891 - 59 743 320 976 49 954 294 - 49 954 294 Total assets include: Investment in associate 9 605 727 - - - - 9 605 727 - 9 605 727 Additions to non-current assets (other than financial instruments and deferred tax assets) 1 970 701 212 252 - 2 311 7 777 2 193 041 - 2 193 041 Total liabilities 19 996 854 4 782 275 - 4 500 167 442 24 951 071 - 24 951 071 STRENGTHENING THE CORE FOR GROWTH PAGE 49
  • 50. 6 PROPERTY, EQUIPMENT AND MOTOR VEHICLES Leasehold Service Motor properties Equipment Stocks vehicles Total Year ended 30 September 2010 US$ US$ US$ US$ US$ Opening book amount 4 066 106 12 956 696 1 246 783 1 482 334 19 751 919 Additions 134 978 779 788 411 145 272 857 1 598 768 Capital work in progress - 745 022 - - 745 022 Disposals (802 350) (356) - (462 003) (1 264 709) Exchange differences 5 536 36 062 20 051 584 62 233 Hotel usage - - (208 229) - (208 229) Depreciation charge (464 107) (1 267 044) - (241 253) (1 972 404) Closing net book amount 2 940 163 13 250 168 1 469 750 1 052 519 18 712 600 At 30 September 2010 Cost / valuation 4 531 358 18 091 253 1 677 979 1 786 689 26 087 279 Accumulated depreciation (1 591 195) (4 841 085) (208 229) (734 170) (7 374 679) Net book amount 2 940 163 13 250 168 1 469 750 1 052 519 18 712 600 Year ended 30 September 2011 Opening book amount 2 940 163 13 250 168 1 469 750 1 052 519 18 712 600 Additions 730 269 1 019 549 445 827 504 042 2 699 687 Capital work in progress - 1 974 596 - - 1 974 596 Disposals (157 182) (568 236) (257 760) (321 981) (1 305 159) Impairment (1 369 180) (1 070 992) - (18 262) (2 458 434) Transfer to assets of a disposal group classified as held for sale (11 552) (133 083) - (111 397) (256 032) Exchange differences (60 240) (30 994) (50 437) (603) (142 274) Hotel usage - - (229 291) - (229 291) Depreciation charge (430 513) (1 319 145) - (171 948) (1 921 606) Closing net book amount 1 641 765 13 121 863 1 378 089 932 370 17 074 087 At 30 September 2011 Cost / valuation 5 044 205 20 486 168 1 815 609 1 968 147 29 314 129 Accumulated depreciation and impairment (3 402 440) (7 364 305) (437 520) (1 035 777) (12 240 042) Net book amount 1 641 765 13 121 863 1 378 089 932 370 17 074 087 Property, equipment and motor vehicles transferred to the disposal group classified as held-for-sale amounts to US$256 032 and relates to assets that are used by Hotelserve Holdings (Private) Limited. See note 28 for further details regarding the disposal group held for sale. An independent valuation of the Group’s property, equipment and motor vehicles was performed by valuers to determine the fair values as at 31 August 2011. The valuation, which conforms to International Valuation Standards, was determined by reference to recent market transactions on arm’s length terms, and some assets were impaired by US$2 458 434. Capital work in progress relates to refurbishment equipment and hotel furniture, fittings and equipment for the Zimbabwe hotels and Gaborone project that was acquired during the financial year. This had not qualified to be classified as property and equipment and was not depreciated. All the depreciation is charged in operating expenses in the statement of comprehensive income.PAGE 50 STRENGTHENING THE CORE FOR GROWTH
  • 51. 6 PROPERTY, EQUIPMENT AND MOTOR VEHICLES (CONTINUED) None of the assets reported above are under a finance lease where the Group is a leasee. If property, equipment and motor vehicles were stated on the cost basis, the carrying amount would be as follows: Leasehold Service Motor properties Equipment Stocks vehicles Total US$ US$ US$ US$ US$ At 30 September 2011 1 641 765 13 121 863 1 378 089 932 370 17 074 087 At 30 September 2010 2 940 163 13 250 168 1 469 750 1 052 519 18 712 600 For cash flow purposes, non-cash additions to property, equipment and motor vehicles are as detailed below: • Leasehold properties amounting to $704 000 being capitalisation of amounts previously spent on hotel improvements. • Vehicles amounting to $451 000 were acquired on short-term credit.7 INTANGIBLE ASSETS Distributorship agreements Goodwill Brand name Total Year ended 30 September 2010 US$ US$ US$ US$ Opening net book amount 920 929 771 304 418 442 2 110 675 Impairment charge (605 047) - - (605 047) Amortisation charge (47 028) - (28 311) (75 339) Exchange differences - 43 734 21 512 65 246 Closing net book amount 268 854 815 038 411 643 1 495 535 At 30 September 2010 Cost at acquisition 940 524 815 038 463 829 2 219 391 Accumulated amortisation and impairment (671 670) - (52 186) (723 856) Net book amount 268 854 815 038 411 643 1 495 535 Year ended 30 September 2011 Opening book amount 268 854 815 038 411 643 1 495 535 Exchange differences - (116 434) (52 531) (168 965) Amortisation charge (68 777) - (28 079) (96 856) Impairment arising from closure of The Grace hotel - (698 604) (331 033) (1 029 637) Classified to assets of a disposal group held for sale (200 077) - - (200 077) Closing net book amount - - - - Goodwill and brand name have been written down to nil following the closure of The Grace Hotel in South Africa. Details of the discontinued operations are as shown in note 28. Distributorship agreements are classified under assets of a disposal group held for sale, following the decision to dispose of Hotelserve Holdings (Private) Limited. STRENGTHENING THE CORE FOR GROWTH PAGE 51
  • 52. 8 BIOLOGICAL ASSETS The Group owns biological assets in the form of a timber plantation. The timber is held mainly for sale as raw timber on maturity. The total area under the timber plantation as at 30 September 2011 was approximately 567 hectares. The fair value of the biological assets was as follows 2011 2010 US$ US$ Carrying amount at 1 October 255 776 238 610 (Loss) / gain from changes in fair value less estimated point of sale costs (20 839) 17 166 At 30 September 234 937 255 776 Fair value of the timber plantations has been determined by an independent valuer based on the stages of the timber development. There were no harvests during the financial year.9 INVESTMENT IN ASSOCIATE 2011 2010 US$ US$ Carrying amount at 1 October 9 605 727 10 397 720 Shares acquired during the year 242 527 - Disposal of shares (16 075) (692 622) Share of profit / (loss) 1 945 014 (99 371) Share of other comprehensive income 406 808 - At 30 September 12 184 001 9 605 727 The Group has a 17.43% (2010 : 15.68%) share in Dawn Properties Limited, a listed company. Dawn Properties Limited has a 31 March financial year end. The share of results of Dawn Properties Limited are based on an aggregation of six months of the audited financials for the year ended 31 March 2011 with the interim financials for six months ended 30 September 2011. In the Company statement of financial position, investment in Dawn Properties Limited is carried at cost less impairment. At 30 September 2011, the cost was US$9 985 587 (2010: US$9 605 727). See note 34. The summarised pro-forma financial statements of Dawn Properties Limited for the 12 months ended 30 September 2011 are as follows: 2011 2010 Statement of comprehensive income US$ US$ Revenue 4 377 204 4 820 505 Operating expenses (4 027 836) (4 191 594) Operating profit 349 368 628 911 Other income 5 005 112 396 492 Profit before taxation 5 354 480 1 025 403 Taxation 6 362 362 (160 505) Net profit for the year 11 716 842 864 898 Statement of financial position Total assets 88 110 233 80 223 877 Total liabilities 8 075 416 16 193 593 Equity 80 034 817 64 030 284 Total equity and liabilities 88 110 233 80 223 877PAGE 52 STRENGTHENING THE CORE FOR GROWTH
  • 53. 9 INVESTMENT IN ASSOCIATE (CONTINUED) Total assets comprise mainly investment properties of Dawn Properties Limited, which predominantly constitute hotel properties which are leased and occupied by African Sun Limited. From an assessment performed by management, the investment is not impaired.10 FINANCIAL INSTRUMENTS Financial instruments by category 30 September 2011 Loans and receivables Available-for-sale Total Assets as per statement of financial position US$ US$ US$ Available-for-sale financial assets - 10 000 10 000 Trade and other receivables excluding pre-payments 7 564 808 - 7 564 808 Loans 1 130 504 - 1 130 504 Cash and cash equivalents 4 657 480 - 4 657 480 Total 13 352 792 10 000 13 362 792 Non-derivative Liabilities at fair value financial liabilities through profit and loss at amortised cost Total Liabilities as per statement of financial position US$ US$ US$ Borrowings - 13 078 732 13 078 732 Trade and other payables excluding statutory liabilities - 9 208 124 9 208 124 Total - 22 286 856 22 286 856 30 September 2010 Loans and receivables Available-for-sale Total Assets as per statement of financial position US$ US$ US$ Available-for-sale financial assets - 252 049 252 049 Trade and other receivables excluding pre-payments 12 459 543 - 12 459 543 Loans 1 114 650 - 1 114 650 Cash and cash equivalents 2 810 406 - 2 810 406 Total 16 384 599 252 049 16 636 648 Non-derivative Liabilities at fair value financial liabilities through profit and loss at amortised cost Total Liabilities as per statement of financial position US$ US$ US$ Borrowings - 7 643 286 7 643 286 Trade and other payables excluding statutory liabilities - 10 393 194 10 393 194 Total - 18 036 480 18 036 480 STRENGTHENING THE CORE FOR GROWTH PAGE 53
  • 54. 11 AVAILABLE-FOR-SALE FINANCIAL ASSETS 2011 2010 US$ US$ At 1 October 252 050 6 259 Investments (sold) / acquired during the year (16 975) 26 936 Net (losses) / gains transferred to equity - (1 145) Transfer from non-current assets held for sale - 220 000 Impaired during the year (220 000) - Transfer to assets of a disposal group held for sale (5 075) - 10 000 252 050 Less: Non-current portion (10% Investment in Baia Do Paraiso) - (220 000) Total - current 10 000 32 050 Available-for-sale financial assets include the following: Shares listed on the Zimbabwe Stock Exchange - 5 113 Unlisted investments 10 000 246 937 10 000 252 050 Impairment of $220 000 was charged to the income statement as the 10% investment in Baia Do Paraiso was impaired and written off to nil. All available-for-sale financial assets are denominated in United States of America Dollars. The above equity securities are managed and their performance evaluated on a fair value basis in accordance with the Groups risk management strategy. The fair value of all listed equity securities are based on their current bid prices in an active market. The fair values of unlisted securities are based on cash flows discounted using a rate based on the market interest rate of 16.5%. The maximum exposure to credit risk at the reporting date is the carrying value of the securities classified as available-for-sale. None of these financial assets is past due.12 LOANS 2011 2010 US$ US$ At 1 October 1 114 650 1 074 724 Accrued interest 15 854 39 926 At 30 September 1 130 504 1 114 650 The company advanced a loan of US$1 000 000 to Holiday Inn Accra in four disbursements during the financial year ended 30 September 2009. The loan carries interest at US six months LIBOR plus 3% and is carried at amortised cost. The first disbursement matured on 28 October 2011, with the last maturing on 20 April 2012.13 INVENTORIES 2011 2010 US$ US$ Food and beverage 777 154 470 086 Shop merchandise 35 772 853 125 Consumable stocks 376 410 691 561 Maintenance stocks 135 354 144 742 1 324 690 2 159 514 The cost of inventories recognised as expense and included in "cost of sales" for the continuing operations amounted to US$6 496 722 (2010: US$5 535 268).PAGE 54 STRENGTHENING THE CORE FOR GROWTH
  • 55. 14 TRADE AND OTHER RECEIVABLES 2011 2010 US$ US$ Trade receivables 4 552 010 5 134 224 Less: provision for impairment of trade receivables (356 791) (103 399) Trade receivables - net 4 195 219 5 030 825 Prepayments 849 006 427 617 Deposit in partial fullfilment of Industrial Development Corporation (IDC) loan conditions precedent - 1 162 000 Amount receivable from Meikles Africa Limited 253 100 866 401 Receivable from Royal Chundu - 335 295 Other sundry receivables 1 820 330 3 749 574 Receivables from related parties - 689 000 Staff debtors 760 647 415 577 Security deposit - 210 871 7 878 302 12 887 160 Less non-current portion Staff debtors (535 512) (287 743) Security deposit - (210 871) Current portion 7 342 790 12 388 546 All non-current receivables are due within five years from the end of the reporting period. The fair values of trade and other receivables are as follows: Trade receivables 4 195 218 5 030 825 Other receivables excluding pre-payments 2 073 431 6 113 270 Receivables from related parties - 689 000 Staff debtors 610 665 365 671 Security deposit - 210 871 6 879 314 12 409 637 The fair value of staff debtors is based on cashflows discounted using an average borrowing rate of 16.5%. The receivables relate to car loans and are payable over 60 months. The effective interest rates on non-current receivables were as follows: 2011 2010 Staff debtors 13.5% 12% Security deposit - 12% As of 30 September 2011, trade receivables of US$2 935 233 (2010: US$2 995 472) were fully performing. As of 30 September 2011 trade receivables of US$1 259 985 (2010: US$2 035 353) were past due but not impaired. These relate to a number of independent customers from whom there is no recent history of default. The ageing analysis of these trade receivables is as follows: 2011 2010 US$ US$ Up to 30 days 292 357 728 175 30 to 60 days 105 996 1 307 178 Over 60 days 861 632 - 1 259 985 2 035 353 STRENGTHENING THE CORE FOR GROWTH PAGE 55
  • 56. 14 TRADE AND OTHER RECEIVABLES (CONTINUED) As of 30 September 2011, trade receivables of US$356 791 (2010: US$208 414) were impaired and provided for. The individually impaired receivables mainly relate to customers of the recently closed hotels in South Africa. It was assessed that a portion of the receivables is expected to be received. The amount of the provision was US$356 791 as of 30 September 2011 (2010 : US$103 399). The ageing of these receivables is as follows: 2011 2010 US$ US$ 30 to 60 days - - Over 60 days 356 791 208 414 356 791 208 414 The carrying amounts of the groups trade and other receivables are denominated in the following currencies: United States of America Dollars 5 760 175 11 680 024 South African Rand 1 280 991 742 846 Nigerian Naira 275 902 315 294 Ghanaian Cedi 561 234 148 996 7 878 302 12 887 160 Movements on the Group’s provision for impairment of trade receivables are as follows: At 1 October 103 399 74 488 Provision for receivables impairment 301 460 33 126 Receivables written off during the year as uncollectible (48 068) (4 215) At 30 September 356 791 103 399 The creation and release of provision for impaired receivables have been included in "other expenses" in the statement of comprehensive income. Amounts charged to the allowance account generally written off when there is no expectation of recovering additional cash. The other classes within trade and other receivables do not contain impaired assets. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. The Group does not hold any collateral as security.15 CASH AND CASH EQUIVALENTS 2011 2010 US$ US$ Cash and cash equivalents comprise the following for the purposes of the statement of cashflows: Cash and bank 4 657 480 2 810 406PAGE 56 STRENGTHENING THE CORE FOR GROWTH
  • 57. 16 SHARE CAPITAL AND PREMIUM16.1 Authorised and issued share capital Number Ordinary Share of shares share capital premium Total US$ US$ US$ At 1 October 2009 689 249 739 - - - Reclassified from amounts awaiting allotment (note 17.2) - 6 892 497 14 798 224 21 690 721 Issue of shares 127 257 161 1 272 572 8 570 352 9 842 924 At 30 September 2010 816 506 900 8 165 069 23 368 576 31 533 645 Issue of shares 7 433 974 74 340 332 589 406 929 At 30 September 2011 823 940 874 8 239 409 23 701 165 31 940 574 The total authorised number of ordinary shares is 1,5 billion (2010: 1,5 billion) with a par value of US$0.01 per share. All issued shares are fully paid. The unissued shares are under the control of the Directors. Shares under option The Company has an approved share option scheme and no shares were granted as at 30 September 2011.16.2 Treasury shares 30 September 2011 Number Ordinary Share of shares share capital premium Total US$ US$ US$ At 1 October 2010 14 966 052 149 661 1 365 728 1 515 389 Issues to external parties (7 433 974) (74 340) (332 589) (406 929) At 30 September 2011 7 532 078 75 321 1 033 139 1 108 460 30 September 2010 Number Ordinary Share of shares share capital premium Total US$ US$ US$ At 1 October 2009 12 000 000 120 000 949 540 1 069 540 Issued during the year 5 000 000 50 000 395 629 445 629 Issues to external parties (3 550 000) (35 500) (99 400) (134 900) Acquired during the year 1 516 052 15 161 119 959 135 120 30 September 2010 14 966 052 149 661 1 365 728 1 515 389 The Company issued 7 433 974 treasury shares to Riustrix Investments (Private) Limited on 27 March 2011 (0.9% of the total ordinary share capital issued) in exchange for 21 782 426 Dawn Properties Limited shares (0.89% of the total ordinary shares of Dawn Properties Limited). The ordinary shares issued have the same rights as the other shares in issue. The fair value of the shares issued amounted to US$217 072 (US$0.0292 per share). The related transaction costs amounting to US$10 132 have been netted off with the deemed proceeds. The transaction was done at arm’s lenght with reference to share prices on the Zimbabwe Stock Exchange. Treasury shares at 30 September 2011 relate to 7 532 078 ordinary shares held by African Sun Limited, the parent Company. STRENGTHENING THE CORE FOR GROWTH PAGE 57
  • 58. 16 SHARE CAPITAL AND PREMIUM (CONTINUED)16.3 Directors shareholding As at 30 September 2011, the directors held directly the following number of shares in the Company: 2011 2010 Non-executive Directors Number of shares Number of shares E Chitiga 5 983 5 983 D W Birch 8 948 8 948 14 931 14 931 Messrs T N Chiganze, S A Munyeza and N Mangwiro, and Ms E Chitiga held indirectly shares in the Company through controlling interests in the following companies: 2011 2010 Number of Number of % ordinary shares held % ordinary shares held Name Company T Chiganze Msasa Nominees (Private) Limited 72 005 554 8.66 73 751 647 8.87 S A Munyeza Riustrix Investments (Private) Limited 151 311 650 18.20 207 369 343 24.94 Cotition Investments (Private) Limited 1 413 504 0.17 - 0.00 Criben Investments (Private) Limited 12 721 535 1.53 1 496 651 1.80 Total shareholding 165 446 689 19.90 208 865 994 26.74 N Mangwiro Ganlake Investments (Private) Limited 2 244 977 0.27 2 993 302 0.36 N K Rehoaboth (Private) Limited - 0.00 2 660 713 0.32 Total shareholding 2 244 977 0.27 5 654 015 0.68 E Chitiga Pickover Investments (Private) Limited 3 073 450 0.37 3 073 450 0.3717 OTHER RESERVES17.1 Non-distributable reserve The non-distributable reserve arose as the net effect of restatement of assets and liabilities previously denominated in Zimbabwe dollars on 1 February 2009.17.2 Amount awaiting allotment In terms of a Directors resolution, an amount of US$21 690 721 was transferred from the non-distributable reserve to "amount awaiting allotment" in equity on 30 September 2009 pending regulatory approval of the redenomination of the Companys share capital. The redenomination was approved during the year and the amounts have since been reclassified to share capital and share premium.17.3 Foreign currency translation reserve On consolidation, exchange differences arising from the translation of transactions and balances of foreign operations which are different to the Groups presentation currency are taken to the foreign currency translation reserve.17.4 Available-for-sale investments reserve Changes in the fair value of available-for-sale financial assets are recognised in the available-for-sale investments reserve.17.5 Revaluation reserve The revaluation reserve relates to revaluations of the Groups property, equipment and motor vehicles and share of revaluation reserves of associate.PAGE 58 STRENGTHENING THE CORE FOR GROWTH
  • 59. 17 OTHER RESERVES (CONTINUED)17.6 Movements in other reserves Non-distributable Available-for-sale Foreign currency and amount awaiting investments translation Revaluation allotment reserve reserve reserve reserve Total US$ US$ US$ US$ US$ At 1 October 2009 23 017 722 673 (818 998) - 22 199 397 Transfer to ordinary share capital and premium (21 690 721) - - - (21 690 721) Currency translation differences from subsidiary - - (363 142) - (363 142) Revaluation - gross - (1 145) - - (1 145) Revaluation - tax (note 21) - 11 - - 11 At 30 September 2010 1 327 001 (461) (1 182 140) - 144 400 Reclassified to income statement - gross - 466 - - 466 Reclassified to Income statement - tax - (5) - - (5) Currency translation differences from subsidiary - - (434 428) - (434 428) Revaluation of property, plant and equipment of associate - - - 406 808 406 808 At 30 September 2011 1 327 001 - (1 616 568) 406 808 117 24118 TRADE AND OTHER PAYABLES 2011 2010 US$ US$ Non-current Other payables - 756 958 Current Trade payables 1 356 807 3 060 340 Amounts due to related parties (note 29) 208 837 227 965 Statutory liabilities 1 733 469 1 692 292 Accruals and other creditors 7 642 480 7 104 889 10 941 593 12 085 48619 PROVISIONS Provisions are recorded when the Group has a present legal or constructive obligation as a result of past events, for which it is probable that an outflow of economic benefits will occur, and where a reliable estimate can be made of the amounts of the obligations. A reliable estimate is the amount the Group would rationally pay to settle the obligation at the reporting date. The provisions balance is made up of the following: Balance at Current Utilised Balance at 30 Sept 2010 provision provision 30 Sept 2011 US$ US$ US$ US$ Retrenchments - 2 889 235 - 2 889 235 Leave pay 419 865 367 384 - 787 249 Legal 443 400 - (443 400) - 863 265 3 256 619 (443 400) 3 676 484 STRENGTHENING THE CORE FOR GROWTH PAGE 59
  • 60. 20 BORROWINGS 2011 2010 US$ US$ Non-current Foreign bank loans 4 914 134 694 125 Current Foreign bank loans 235 086 6 949 161 Local bank loans 7 929 512 - 8 164 598 6 949 161 Total borrowings 13 078 732 7 643 286 Current bank borrowings mature in 2012 and bear an average all-in cost of 17.53% annually. All current bank borrowings are unsecured. Non-current bank loans have the following terms: US$3 180 290 from Afreximbank bears interest at LIBOR plus 7% and is secured by bank guarantees. The loan is for 5 years with an option to extend for an additional 2 years. US$1 521 591 from Banc ABC Botswana bears interest at bank prime (averaging 11.5%) plus 2% and is secured by a guarantee from African Sun Limited. The loan is for 7 years. US$212 253 from Nedbank South Africa bears interest at bank prime (average 9%) and is secured by a bank guarantee. The loan was for 7 years, with 24 months remaining as at 30 September 2011. The exposure of the Groups borrowings to interest rate changes and the contractual repricing dates at the end of the reporting period are as follows: 2011 2010 US$ US$ 6 months or less 3 960 000 6 867 775 6-12 months 4 204 598 81 386 1-5 years 4 914 134 694 125 13 078 732 7 643 286 The fair value of long-term loans is US$4 914 134, based on cashflows discounted using a rate based on the borrowing rate of 7.28%. The carrying amount of the short-term borrowings approximate their fair value as the impact of discounting is not siginificant. The Groups bank loans are denominated in the following currencies: 2011 2010 US$ US$ United States of America Dollars 11 311 953 6 867 775 Botswana Pula 1 225 779 - South African Rand 541 000 775 511 13 078 732 7 643 286 The Group has the following undrawn borrowing facilities: Floating rate -Expiring within one year 3 190 000 1 092 394 -Expiring after one year 7 721 903 - Fixed rate -Expiring within one year - 5 869 412 -Expiring after one year - - 10 911 903 6 961 806 The facilities expiring within one year are with Zimbabwean financial institutions and are subject to review at various dates during the next financial year. Bank loans expiring after one year are with Afreximbank and Banc ABC Botswana. Bank long-term loans are specifically for hotel refurbishments and new projects while short-term bank loans are for working capital.PAGE 60 STRENGTHENING THE CORE FOR GROWTH
  • 61. 21 INCOME TAXES21.1 Income tax credit 2011 2010 US$ US$ Current income tax: Withholding tax on interest (37 747) (30 772) Current tax on profits for the year - - Total current income tax (37 747) (30 772) Deferred income tax: Change in tax rate - 682 733 Originating and reversal of temporary differences 1 170 729 228 315 1 170 729 911 048 Income tax credit 1 132 982 880 276 The tax on the Groups loss before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows: 2011 2010 US$ US$ Loss before income tax (4 746 763) (1 902 675) Tax calculated at domestic tax rates applicable to profits in the respective countries 1 312 589 811 258 Tax effects of: -Associate results reported net of tax 500 841 (25 588) -Income not subject to tax 38 422 40 168 -Expenses not deductible for tax purposes (1 105 638) (215 418) -Change in tax rate - 682 733 -Tax losses for which no deferred income tax asset was recognised 386 678 (412 877) Income tax credit 1 132 892 880 27621.2 Deferred income taxes The analysis of deferred income tax assets and deferred income tax liabilities is as follows: Deferred income tax assets: -Deferred income tax assets to be recovered after more than 12 months - 462 935 -Deferred income tax assets to be recovered within 12 months - 181 065 - 644 000 Deferred income tax liabilities: -Deferred income tax liabilities to be recovered after more than 12 months 1 999 791 3 267 326 -Deferred income tax liabilities to be recovered within 12 months 497 490 334 750 2 497 281 3 602 076 Net deferred income tax liabilities 2 497 281 2 958 076 The gross movement on the deferred income tax account is as follows: At 1 October 2 958 076 3 960 461 Income statement credit - continuing operations (1 170 729) (911 048) Income statement charge / (credit) - discontinuing operations 531 741 (177 434) Classified to assets of a disposal group held for sale (note 28.3) 202 087 - Tax charge / (credit) relating to components of other comprehensive income 5 (11) Exchange differences (23 999) 86 108 At 30 September 2 497 281 2 958 076 STRENGTHENING THE CORE FOR GROWTH PAGE 61
  • 62. 21 INCOME TAXES (CONTINUED) The movement in deferred income tax assets and liabilities during the year, without taking into consideration the off-setting of balances within the same tax jurisdiction, is as follows: Accelerated Deferred income tax liabilities tax depreciation Fair value gains Other Total US$ US$ US$ US$ At 1 October 2009 5 782 479 168 - 5 782 647 Credited to the income statement - - (528 810) (528 810) Credited to other comprehensive income - (11) - (11) Change in tax rate (894 882) - - (894 882) At 30 September 2010 4 887 597 157 (528 810) 4 358 944 Credited to other comprehensive income (523 515) 5 - (523 510) At 30 September 2011 4 364 082 162 (528 810) 3 835 434 Deferred income tax assets Provisions Tax losses Other Total US$ US$ US$ US$ At 1 October 2009 (313 994) (1 360 400) (157 280) (1 831 674) Charge to the income statement 47 245 221 022 - 268 267 Change in tax rate 52 332 196 315 - 248 647 Exchange differences - - (86 108) (86 108) At 30 September 2010 (214 417) (943 063) (243 388) (1 400 868) Charged to the income statement (816 154) 878 869 - 62 715 At 30 September 2011 (1 030 571) (64 194) (243 388) (1 338 153) Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise income tax assets of US$386 678 (2010: US$412 877) in respect of losses amounting to US$1 380 994 (2010: US$1 474 561) that can be carried forward against future taxable income. Losses amounting to US$3 524 925 and US$856 556 expire in 2015 and 2016 respectively.22 RETIREMENT BENEFIT OBLIGATIONS The Group and all employees contribute to one or more of the following independently administered defined contribution pension funds:(a) African Sun Limited Pension Fund This fund is a fully funded, uninsured, consolidated defined contribution scheme. All employees, except those who are members of the Catering Industry Pension Fund are members of this fund.(b) Catering Industry Pension Fun This is a defined contribution scheme which covers employees in specified occupations of the catering industry. The majority of employees of African Sun Limited are members of this fund.(c) African Sun SA (Proprietary) Limited The subsidiary company has a defined contribution provident fund, of which full time employees of the company are members.(d) National Social Security Authority Scheme The Group and all its employees based in Zimbabwe contribute to the National Social Security Authority Scheme, promulgated under the National Social Security Act 1989. The Groups obligations under this scheme are limited to specific contributions legislated from time to time.PAGE 62 STRENGTHENING THE CORE FOR GROWTH
  • 63. 22 RETIREMENT BENEFIT OBLIGATIONS (CONTINUED) Group contributions to the plans during the year charged to the income statement amounted to; 2011 2010 US$ US$ African Sun Limited Pension Fund 367 178 362 160 African Sun SA (Proprietary) Limited 162 486 56 328 Catering Industry Pension Fund 203 429 249 638 National Social Security Authority Scheme 323 038 256 356 1 056 131 924 48223 OTHER INCOME AND EXPENSES 2011 2010 US$ US$ Other income Dividend income from associate 9 600 4 863 Other expenses Impairment of property, equipment and motor vehicles 2 458 434 - Impairment of intangible assets - 605 047 Impairment of available-for-sale financial assets 220 000 - Fair value adjustment on non-current assets held for sale - 80 000 Loss on disposal of shares in associate - 184 648 2 678 434 869 69524 EXPENSES BY NATURE 2011 2010 US$ US$ Inventory recognised in cost of sales 6 496 722 5 535 268 Employee benefit expenses - pension costs 1 056 131 924 482 - payroll burden in cost of sales 8 064 132 5 926 153 -payroll burden in administration expenses 11 616 279 10 237 343 -retrenchment costs 2 889 235 - Directors remuneration -fees 94 360 74 500 -salaries 360 000 360 000 Depreciation and usage 1 926 427 1 774 161 Advertising costs 2 622 604 1 991 386 Operating lease costs 4 587 477 3 578 624 Audit fees -current year 38 150 39 991 -prior year 158 400 146 427 Repairs and maintenance 2 108 135 2 483 034 Electricity and water 2 186 026 1 977 126 Franchise fees 1 230 496 936 329 Insurance 761 546 600 189 Outside laundry 768 197 664 613 Other expenses 4 321 414 2 566 434 Total cost of sales and operating expenses 51 285 731 39 816 060 STRENGTHENING THE CORE FOR GROWTH PAGE 63
  • 64. 25 FINANCE COSTS AND INCOME 2011 2010 US$ US$ Finance income from continuing operations: -Accrued interest income on loans to Holiday Inn Accra Airport 15 854 39 926 -Interest income on bank deposits 122 519 153 859 138 373 193 785 Finance costs from continuing operations: -Interest on bank borrowings (1 672 091) (1 258 415) Net financing costs from continuing operations (1 533 718) (1 064 630) Financing costs from discontinued operations (200 337) (277 121) Net financing costs for the year (1 734 055) (1 341 751) For the purposes of statement of cashflows, net interest paid comprise the following: Interest on bank borrowings charged to the statement of comprehensive income including component of discontinued operations (1 872 428) (1 535 536) Interest on borrowings paid in prior year 96 195 118 562 Interest and financing costs on bank loans paid in advance (63 798) (96 195) Accrued interest on bank loans 85 878 - Total interest paid (1 754 153) (1 513 169) Interest income on bank deposits 122 519 153 859 Net Interest paid (1 631 634) (1 359 310) The amount of US$63 798 (2010: US$96 195) represents financing costs on bank loans paid in advance. These costs were not expensed during the year ended 30 September 2011 but netted off against borrowings due to application of the effective interest rate method. There were no borrowing costs capitalised during the financial year ended 30 September 2011 (2010: nil).26 EARNINGS PER SHARE26.1 Basic Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year excluding ordinary shares purchased by the Company and held as treasury shares (note 16.2). 2011 2010 Loss attributable to equity holders of the Company from continuing operations: US$ (3 613 781) (1 022 399) Loss from discontinued operations attributable to equity holders of the Company (note 28.1): US$ (6 620 891) (2 117 288) Loss for the year: US$ (10 234 672) (3 139 687) Weighted average number of ordinary shares 820 843 029 795 418 339 Basic loss per share from continuing operations: cents (0.44) (0.13) Basic loss per share from discontinued operations: cents (0.81) (0.27) Basic loss per share for the year: cents (1.25) (0.40)PAGE 64 STRENGTHENING THE CORE FOR GROWTH
  • 65. 26 EARNINGS PER SHARE (CONTINUED)26.2 Diluted Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. At the end of 30 September 2011, there were no potentially dilutive ordinary shares (2010: nil), and the same weighted average number of shares used in basic earnings is applied. 2011 2010 Loss attributable to equity holders of the Company from continuing operations: US$ (3 613 781) (1 022 399) Loss from discontinued operations attributable to equity holders of the Company (note 28.1): US$ (6 620 891) (2 117 288) Loss for the year: US$ (10 234 672) (3 139 687) Weighted average number of ordinary shares: US$ 820 843 029 795 418 339 Diluted loss per share from continuing operations: cents (0.44) (0.13) Diluted loss per share from discontinued operations: cents (0.81) (0.27) Diluted loss per share for the year: cents (1.25) (0.40)27 CASH GENERATED FROM / (USED IN) OPERATIONS 2011 2010 US$ US$ Loss before income tax including discontinued operations (10 835 913) (4 197 397) Adjustments for: -Depreciation and hotel equipment usage 2 150 897 2 180 633 -Loss on sale of property, equipment and motor vehicles 72 495 12 340 -Amortisation and impairment 2 779 290 760 386 -Goodwill and brand name write off 1 029 637 - -Loss recognised on the re-measurement of assets of a disposal group 488 298 - -Loss on sale of investments - 184 648 -Restructuring costs 3 283 259 - -Other income (9 600) (4 823) -Finance costs-net 1 734 055 1 341 751 -Share of (income) / loss from associate (1 945 014) 99 371 Changes in working capital -Decrease / (increase) in inventories 834 824 (121 186) -Decrease / (increase) in trade and other receivables 627 480 (5 173 798) -Increase / (decrease) in trade and other payables 1 126 763 (69 712) Cash generated from / (used in) operations 1 336 471 (4 987 787) In the statement of cash flows, proceeds from sale of property, equipement and motor vehicles comprise: Net book amount 39 052 498 Loss on disposal of property, equipement and motor vehicles (7 289) (448) Proceeds from disposal of property, equipement and motor vehicles 31 763 50 Other disposals amounting to US$1 266 107 (2010: US$1 264 211) were non-cash, with amounts transferred to receivables and some netted off against creditors. Disposal of vehicles relate to previously company owned vehicles which were sold to employees under a vehicle ownership scheme introduced in 2010. STRENGTHENING THE CORE FOR GROWTH PAGE 65
  • 66. 28 NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS During the year, the Group ceased operations of its two loss making South African hotels, as well as disposing of its non-core operations, Hotelserve Holdings (Private) Limited, which was acquired in May 2009. The analysis of the performance of the discontinued operations, cashflows, assets and liabilities is shown below:28.1 Loss after tax from discontinued operations During the year, discontinued operations recorded a loss of US$6 620 891 (2010: US$2 117 288) which has been included in the Group statement of comprehensive income as loss from discontinued operations. The analysis of the years results including the comparatives are shown below: 2011 2010 US$ US$ Revenue 8 616 733 14 240 015 Cost of sales (6 392 975) (8 030 604) Gross profit 2 223 758 6 209 411 Operating expenses (6 273 310) (7 140 155) Earnings before interest, tax, depreciation and amortisation (EBITDA) (4 049 552) (930 744) Depreciation and amortisation (321 326) (481 811) Impairment of intangible assets - (605 047) Derecognition of intangible assets on closure of The Grace Hotel (1 029 637) - Net financing costs (200 337) (277 121) Loss before tax (5 600 852) (2 294 723) Income tax (expense) / credit (531 741) 177 435 Loss after tax from discontinued operations (6 132 593) (2 117 288) Loss recognised on the re-measurement of assets of a disposal group (488 298) - Loss for the year from discontinued operations (6 620 891) (2 117 288)28.2 Cashflows from discontinued operations and disposal group classified as held for sale The net increase or drecrease in cash and cash equivalents from the discontinued operations are summarised below: Net cash used in operations (185 535) (435 806) Net cash used in investing activities (5 190) (64 485) Net cash (used in) / generated from financing activities (1 032) 648 347 Net (decrease) / increase in cash and cash equivalents (191 757) 148 056PAGE 66 STRENGTHENING THE CORE FOR GROWTH
  • 67. 28 NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (CONTINUED)28.3 Assets and liabilities of a disposal group classified as held for sale The assets and liabilities relating to the subsidiary company Hotelserve Holdings (Private) Limited have been presented as held for sale following the approval by the Groups Board on 5 September 2011 to sell the subsidiary. The completion date for the transaction is expected by September 2012. Assets of disposal group classified as held for sale 2011 2010 US$ US$ Property, equipment and motor vehicles 256 032 - Distributorship agreements 200 077 - Deferred income tax assets 202 087 - Available for sale financial assets 5 075 - Inventory 513 782 - Trade Receivables 591 232 - Other current assets 79 586 - Total assets of a disposal group classified as held for sale 1 847 871 - Liabilities of a disposal group classified as held for sale Trade and other payables 391 195 - Short-term loans 608 266 - Total liabilities of a disposal group classified as held for sale 999 461 - Net assets 848 410 -29 RELATED-PARTY TRANSACTIONS The major shareholders of the Group are Riustrix Investments (Private) Limited, Old Mutual Life Assurance Company Zimbabwe (Private) Limited, L.E.S. Nominees Private) Limited, Old Mutual Zimbabwe Limited and Msasa Nominees (Private) Limited, who combined, own 59.02% of African Sun Limited shares. The remaining 40.98% of the shares are widely held. The following transactions were carried out with related parties: 2011 2010(a) Lease rentals US$ US$ Rent paid 2 030 490 1 546 510 African Sun Limited owns 17.43% (2010:15.68%) of the shares in Dawn Properties Limited. Lease rentals relate to the leases of 8 hotels rented from Dawn Properties Limited. All leases with Dawn Properties Limited are at normal commercial terms and conditions.(b) Key management compensation Key management includes Directors (executive and non-executive), members of the Executive Committee, the Company Secretary and Head of Internal Audit. The compensation paid or payable to key management for employee services is as shown below; 2011 2010 US$ US$ Salaries and other short term employee benefits 1 444 831 2 055 402 Termination benefits 1 528 687 310 053 Post employment benefits 232 737 66 134 3 206 255 2 431 589(c) Year end balances arising from transactions with related parties Payables (rentals) 208 837 227 965 The payables to Dawn Properties Limited arose from lease rentals and are due one month after billing. The payables bear no interest. STRENGTHENING THE CORE FOR GROWTH PAGE 67
  • 68. 29 RELATED-PARTY TRANSACTIONS (CONTINUED)(d) Loans to executives The receivables from executives arose from vehicle loans and housing loans advanced. Vehicle loans are payable over 5 years and attract no interest. Housing loans have a grace period of 5 years, after which, capital and interest accrued are paid over 5 years. Interest on housing loans is charged at 15% per annum. No provisions are held against receivables from executives (2010: nil). The balance on loans to executives is analysed below: 2011 2010 US$ US$ At 1 October 415 577 35 551 Vehicle loans advanced during the year 348 100 420 826 Housing loans advanced during the year 180 000 - Other loans advanced during the year 37 398 - Loan repayments received (220 428) (40 800) At 30 September 760 647 415 57730 COMMITMENTS30.1 Operating lease commitments The Group leases all its hotels in Zimbabwe under operating lease agreements. The lease terms are between 5 and 15 years, and all the lease agreements are renewable at the end of the lease period at market rates. The future minimum lease payments under the operating leases are as follows: 2011 2010 US$ US$ Not later than 1 year 4 587 477 5 142 857 - Fixed 1 224 000 2 538 857 - Variable based on actual performance 3 363 477 2 604 000 Later than 1 year and not later than 5 years 18 349 906 17 485 714 - Fixed 4 896 000 7 069 714 - Variable based on actual performance 13 453 906 10 416 000 Later than 5 years 16 973 663 25 014 324 - Fixed 4 528 800 10 988 571 - Variable based on actual performance 12 444 863 14 025 753 Total lease commitments 39 911 046 47 642 89530.2 Capital expenditure 2 399 162 3 000 000 Authorised by Directors and contracted for 6 046 838 8 885 782 Authorised by Directors but not contracted for 8 446 000 11 885 782 The greater part of capital expenditure will be financed from long-term financing ranging between 5 and 10 years.31 EVENTS AFTER THE REPORTING DATE Exit from the Botswana lease The Group reviewed the Botswana lease agreement, which resulted in the cancellation of the lease following a disagreement on the rental structure which favoured the landlord more. The effect of this is that, the Group no longer operates any leases outside Zimbabwe. Termination of the Holiday Inn Accra Airport management contract The Group has signed a termination agreement of the 10 year management contract, which was ending on 30 June 2018 with effect from 1 January 2012. The termination will result in the Group having no interests in Ghana. A termination fee based on discounting the anticipated management fees for the unexpired management term using the Groups weighted average cost of capital (WACC) of 13%, was agreed. Rebranding of our two hotels The Group has rebranded Holiday Inn Mutare to African Sun Amber Hotel Mutare, while the Express by Holiday Inn Beitbridge was rebranded to Beitbridge Express Hotel. Both are the Group’s own brands.PAGE 68 STRENGTHENING THE CORE FOR GROWTH
  • 69. 32 PROPERTY, EQUIPMENT AND MOTOR VEHICLES Leasehold properties Equipment Motor vehicles Total Year ended 30 September 2010 US$ US$ US$ US$ Opening net book amount 1 330 850 - 271 500 1 602 350 Additions - 5 206 2 284 7 490 Disposals - - (259) (259) Inter-segment transfers (1 330 850) - - (1 330 850) Impairment - - (49 250) (49 250) Depreciation charge - (568) (65 097) (65 665) Closing net book amount - 4 638 159 178 163 816 At 30 September 2010 Cost / valuation 120 986 5 206 335 827 462 019 Accumulated depreciation (120 986) (568) (176 649) (298 203) Net book amount - 4 638 159 178 163 816 Year ended 30 September 2011 Opening net book amount - 4 638 159 178 163 816 Additions - 13 400 318 859 332 259 Capital work in progress - 331 717 - 331 717 Disposals - - (86 485) (86 485) Depreciation charge - (606) (61 287) (61 893) Closing net book amount - 349 149 330 265 679 414 At 30 September 2011 Cost / valuation 120 986 350 323 568 201 1 039 510 Accumulated depreciation (120 986) (1 174) (237 936) (360 096) Net book amount - 349 149 330 265 679 414 An independent valuation of the Company’s property, plant and motor vehicles was performed by valuers to determine the fair values as at 31 August 2011. The valuation, which conforms to International Valuation Standards, was determined by reference to recent market transactions on arm’s length terms. Capital work in progress relates to hotel furniture, fittings and equipment for refurbishment of the Zimbabwe hotels that was acquired during the financial year. This had not qualified to be classified as property and equipment and was not depreciated. All the depreciation is charged in operating expenses in the statement of comprehensive income. STRENGTHENING THE CORE FOR GROWTH PAGE 69
  • 70. 32 PROPERTY, EQUIPMENT AND MOTOR VEHICLES (CONTINUED) None of the assets reported above are under a finance lease where the company is a leasee. If property, equipment and motor vehicles were stated on the cost basis, the carrying amount would be as follows: Leasehold properties Equipment Motor vehicles Total US$ US$ US$ US$ At 30 September 2011 - 349 149 330 265 679 414 At 30 September 2010 - 4 638 159 178 163 81633 INVESTMENTS IN SUBSIDIARIES 2011 2010 African Sun Limited PCC (Mauritius) 100% US$ US$ At acquisition 682 000 682 000 Shareholders loan 7 766 410 5 385 028 Total investment in African Sun Limited PCC (Mauritius) 8 448 410 6 067 028 African Sun Zimbabwe (Private) Limited 100% At acquisition 4 630 991 4 630 991 Shareholders loan 13 193 883 14 196 489 Total investment in African Sun Zimbabwe (Private) Limited 17 824 874 18 827 480 Hotelserve Holdings (Private) Limited 100% At acquisition 1 200 000 1 200 000 Shareholders loan 1 472 001 1 382 500 2 672 001 2 582 500 Classified to non-current assets held for sale (2 672 001) - Total investment in Hotelserve Holdings (Private) Limited - 2 582 500 Total investment in subsidiaries 26 273 284 27 477 008 Loans to the subsidiaries bear no interest and do not have fixed repayment dates.34 INVESTMENT IN ASSOCIATE 2011 2010 US$ US$ Cost at 1 October 9 605 727 10 298 349 Shares acquired during the year 242 257 - Adjustment 153 678 - Shares sold during the year (16 075) (692 622) 9 985 587 9 605 727 The Company has a 17.43% (2010: 15.68%) share in Dawn Properties Limited, a listed company. Dawn Properties Limited has a 31 March financial year end.PAGE 70 STRENGTHENING THE CORE FOR GROWTH
  • 71. 35 NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS During the year, the Company made a decision to dispose of its non-core operations of a 100% owned subsidiary Hotelserve Holdings (Private) Limited, which was acquired in May 2009 (see note 28). The analysis of the investment in the subsidiary is as detailed below: 2011 2010 US$ US$ At acquisition 1 200 000 - Shareholders loan 1 472 001 - Total investment classified as held for sale 2 672 001 -36 FINANCIAL INSTRUMENTS Financial instruments by category 30 September 2011 Loans and receivables Available-for-sale Total Assets as per statement of financial position US$ US$ US$ Available-for-sale financial assets - 113 188 113 188 Receivables excluding pre-payments 1 408 609 - 1 408 609 Cash and cash equivalents 3 306 616 - 3 306 616 Total 4 715 225 113 188 4 828 413 Non-derivative Liabilities at fair value financial liabilities through profit and loss at amortised cost Total Liabilities as per statement of financial position US$ US$ US$ Bank borrowings - 11 132 733 11 132 733 Other payables excluding statutory liabilities - 616 252 616 252 Total - 11 748 985 11 748 985 30 September 2010 Loans and receivables Available-for-sale Total Assets as per statement of financial position US$ US$ US$ Available-for-sale financial assets - 69 421 69 421 Receivables excluding pre-payments 1 857 261 - 1 857 261 Cash and cash equivalents 2 968 - 2 968 Total 1 860 229 69 421 1 929 650 Non-derivative Liabilities at fair value financial liabilities through profit and loss at amortised cost Total Liabilities as per statement of financial position US$ US$ US$ Bank borrowings - 6 253 069 6 253 069 Other payables excluding statutory liabilities - 295 993 295 993 Total - 6 549 062 6 549 062 STRENGTHENING THE CORE FOR GROWTH PAGE 71
  • 72. 37 AVAILABLE-FOR-SALE FINANCIAL ASSETS 2011 2010 US$ US$ At 1 October 69 421 400 735 Investments acquired during the year 392 740 70 567 Investments sold during the year (235 965) (400 735) Net losses arising from fair value adjustments (113 008) (1 146) At 30 September 113 188 69 421 Available-for-sale financial assets include the following: Shares listed on the Zimbabwe Stock Exchange 103 188 69 421 Investment in preference shares of an unlisted company-Everway investments (Private) Limited 10 000 - 113 188 69 421 There were no reclassification of losses during the year as none of the assets are impaired. All available-for-sale financial assets are denominated in United States of America Dollars. The above equity securities are managed and their performance evaluated on a fair value basis in accordance with the Groups risk management strategy. The fair value of listed equity securities are based on their current bid prices in an active market. The fair values of unlisted securities are based on cash flows discounted using a rate based on the market interest rate of 16.5%. The maximum exposure to credit risk at the reporting date is the carrying value of the securities classified as available-for-sale. None of these financial assets are either past due or impaired.38 RECEIVABLES 2011 2010 Non-current US$ US$ -Staff debtors 535 513 28 148 Current -Receivables from related parties 622 366 1 851 033 -Staff debtors 271 053 6 228 893 419 1 857 261 Total receivables 1 428 932 1 885 409 All non-current receivables are due within five years from the reporting period. The fair values of the receivables are as follows: Staff debtors 610 665 30 248 Receivables from related parties 622 366 1 851 033 1 233 031 1 881 281 The fair value of staff debtors is based on cashflows discounted using an average borrowing rate of 16.5%. The receivables relate to car loans and are payable over 60 months. The effective interest rates on non-current receivables were as follows: 2011 2010 Staff debtors 14% 12%PAGE 72 STRENGTHENING THE CORE FOR GROWTH
  • 73. 39 CASH AND CASH EQUIVALENTS 2011 2010 US$ US$ Cash and cash equivalents comprise the following for the purposes of the statement of cashflows: Cash and bank 3 306 616 2 96840 PAYABLES 2011 2010 US$ US$ Other payables 99 922 80 765 Statutory liabilities 189 263 125 044 Accruals 372 692 66 313 661 877 272 12241 PROVISIONS Provisions are recorded when the Company has a present legal or constructive obligation as a result of past events, for which it is probable that an outflow of economic benefits will occur, and where a reliable estimate can be made of the amounts of the obligations. A reliable estimate is the amount the Company would rationally pay to settle the obligation at the reporting date. The provisions balance is made up of the following: Balance at Current Utilised Balance at 30 Sept 2010 provision provision 30 Sept 2011 US$ US$ US$ US$ Back pay - 46 628 - 46 628 Leave pay 23 871 - (23 871) - 23 871 46 628 (23 871) 46 62842 BORROWINGS 2011 2010 US$ US$ Non-current Bank loans 3 180 290 - Current Bank loans 7 952 443 6 253 069 Total borrowings 11 132 733 6 253 069 Current bank loans mature in 2012 and bear an average all-in cost of 16.5% annually. All current bank loans are unsecured. Non-current bank loans have the following terms: US$3 180 290 from Afreximbank bears interest at LIBOR plus 7% and is secured by bank guarantees. The loan is for 5 years with an option to extend for an additional 2 years. STRENGTHENING THE CORE FOR GROWTH PAGE 73
  • 74. 42 BORROWINGS (CONTINUED) The exposure of the Companys borrowings to interest rate changes and the contractual repricing dates at the end of the reporting period are as follows: 2011 2010 US$ US$ 6 months or less 3 960 000 6 235 069 6 to 12 months 3 992 443 - More than 12 months 3 180 290 - Total 11 132 733 6 235 069 The fair value of long-term loans is US$3 180 290, based on cashflows discounted using a rate based on borrowing rate of 7.28%. The carrying amount of the short-term loans approximate their fair value as the impact of discounting is not significant. The Companys bank loans are all denominated in United States of America Dollars:43 SHARE CAPITAL AND PREMIUM Number Ordinary Share of shares Share capital premium Total US$ US$ US$ At 1 October 2009 701 249 739 - - - Reclassified from amounts awaiting allotment - 7 012 497 15 878 224 22 890 721 Issue of shares 130 223 168 1 302 232 8 856 080 10 158 312 At 30 September 2010 831 472 907 8 314 729 24 734 304 33 049 033 At 30 September 2011 831 472 907 8 314 729 24 734 304 33 049 033 The total authorised number of ordinary shares is 1,5 billion (2010: 1,5 billion) with a par value of US$0.01 per share. The unissued shares are under the control of Directors.44 DEFERRED INCOME TAXATION Deferred income tax is calculated in full on temporary differences under the liability method using a principal tax rate of 25.75% (2010: 25.75%) The analysis of deferred income tax assets and deferred income tax liabilities are as follows: 2011 2010 US$ US$ Deferred income tax assets: -Deferred income tax assets to be recovered after more than 12 months (103 621) (115 288) -Deferred income tax assets to be recovered within 12 months - - (103 621) (115 288) Deferred income tax liabilities: -Deferred income tax liabilities to be recovered after more than 12 months 81 198 13 460 -Deferred income tax liabilities to be recovered within 12 months 1 132 26 920 82 330 40 380 Net deferred income tax assets (21 291) (74 908) The gross movement on the deferred income tax account is as follows: At 1 October (74 908) 475 656 Change in tax rate - (76 728) Charged / (credited) to statement of comprehensive income 53 617 (473 836) At 30 September (21 291) (74 908)PAGE 74 STRENGTHENING THE CORE FOR GROWTH
  • 75. 2011 2010SHARE PERFORMANCE: CENTSPer shareBasic earnings:Basic loss per share from continuing operations (0.44) (0.13)Basic loss per share from discontinued operations (0.81) (0.27)Basic loss per share for the year (1.25) (0.40)Diluted earnings:Diluted loss per share from continuing operations (0.44) (0.13)Diluted loss per share from discontinued operations (0.81) (0.27)Diluted loss per share for the year (1.25) (0.40)Net asset value 1.82 3.01Closing market price 1.20 2.79Share informationIn issue 831 472 907 831 472 907Market capitalisation 9 977 675 23 281 241ZSE industrial index 156 137RATIOS AND RETURNSRevenue generationRoom occupancy: % 51 46RevPAR: US$ 40 33ADR: US$ 80 74ProfitabilityReturn on equity: % (68) (14)Income after taxation to total capital employed: % (22) (7)Pre-tax return on total assets: % (22) (6)SolvencyFinancial gearing ratio: % 36 16Interest cover: times (2) (1)Total liabilities to total shareholders funds: % 206 100LiquidityCurrent assets to interest free liabilities and short term borrowings 0.69 0.93ProductivityTurnover per employee: US$ 27 980 26 691OtherNumber of employees 1 744 2 030Number of shareholders 9 107 9 244 STRENGTHENING THE CORE FOR GROWTH PAGE 75
  • 76. DEFINITIONS Diluted earnings per share Diluted earnings per share are calculated by dividing the profit / (loss) shown aboveTaxed interest payable by the adjusted weighted average number of ordinary shares, assuming conversionThis is calculated by taxing interest payable at the standard rate of taxation. of all dilutive potential ordinary shares.Interest cover times Financial gearing ratioThis is the ratio which the aggregate of operating income, non recurring items and This represents the ratio of interest bearing debt, less cash to total shareholdersequity accounted earnings bears to interest payable (including capitalised interest). equity.Net assets Revenue per available room (RevPAR)These are equivalent to shareholders equity. This represents total rooms revenue divided by total rooms available.Pre-tax return on total assets Average daily rate (ADR)This is calculated by relating to closing total assets, operating income plus dividend This represents total rooms revenue divided by total rooms sold.income and equity accounted earnings. OccupancyTaxed operating return This represents total rooms sold divided by total rooms available.This is calculated by relating to closing total capital employed, income after taxationplus taxed interest payable. EBITDA This is earnings before interest, tax, depreciation and amortisation.Basic earnings per shareThe calculations are based on the earnings attributable to ordinary shareholders.Account is taken of the number of shares in issue for the period during which theyhave participated in the income of the Group. The Kingdom at Victoria Falls, Zimbabwe The Kingdom at Victoria Falls, ZimbabwePAGE 76 STRENGTHENING THE CORE FOR GROWTH
  • 77. Obudu Mountain Resort Water ParkObudu Mountain Resort Conference Centre A room at Obudu Mountain Resort STRENGTHENING THE CORE FOR GROWTH
  • 78. As at 30 September 2011 By Size Number ofRange of Holdings shareholders % Issued shares %1 - 5 000 7,494 82.29 6,227,873 0.765 001 - 10 000 515 5.65 3,574,005 0.4310 001 - 25 000 521 5.72 8,052,923 0.9725 001 - 50 000 189 2.08 6,606,274 0.7950 001 - 100 000 131 1.44 9,007,006 1.08100 001 - 200 000 93 1.02 12,743,008 1.53200 001 - 500 000 63 0.69 19,626,074 2.36500 001 - 1 000 000 30 0.33 22,761,814 2.74Above 1 000 000 71 0.78 742,873,930 89.34Total 9,107 100.00 831,472,907 100.00Shareholder analysis by type Number of shareholders % Issued shares %Local Companies 481 5.28 336,141,353 40.43Banks 112 1.23 123,998,002 14.90Insurance Companies 12 0.13 123,729,823 14.88Investments and Trusts 452 4.96 80,052,660 9.63Local Resident Individuals 7,492 82.27 60,971,630 7.34Pension Funds 90 0.99 41,108,709 4.94Nominees Local 126 1.38 33,260,047 4.00New Non Residents 28 0.31 8,382,604 1.01Employee Share Trust 12 0.13 8,235,730 0.99Nominees Foreign 20 0.22 5,872,296 0.71Foreign Companies 5 0.05 4,803,533 0.58Non Residents 174 1.91 2,994,639 0.36Other Organisations 84 0.92 1,883,714 0.23Deceased Estates 7 0.08 24,259 0.00Fund Managers 11 0.12 12,081 0.00Executive Share Trust 1 0.02 1,827 0.00Total 9,107 100.00 831,472,907 100.00African Sun top ten shareholdersAs at 30 September 2011Shareholder Shareholding 2011 % Shareholding 2010 %Old Mutual Life Assurance Company Zimbabwe Ltd 188,783,425 22.70 189,375,070 22.78Riustrix Investments (Pvt) Ltd 151,311,650 18.20 207,336,690 24.94L.E.S Nominees (Pvt) Ltd 78,659,897 9.46 - -Msasa Nominees (Pvt) Ltd 71,997,418 8.66 73,760,705 8.87Zimbabwe Allied Banking Group Limited 41,131,913 4.95 41,131,913 4.95Criben Investments (Pvt) Ltd 12,689,225 1.53 14,939,116 1.80Everway Investments (Pvt) Ltd - - 14,825,099 1.78Chikata Trust 11,015,674 1.32 11,015,674 1.32Workers Compensation Insurance Fund (NSSA WCIF) 10,616,739 1.28 9,845,993 1.18National Social Security Authority (NSSA NPS) 9,578,811 1.15 - -Bretwin Investments - - 11,479,371 1.38Scaiflow Investments (Pvt) Ltd 9,446,115 1.14 12,609,207 1.52Other 246,242,040 29.61 245,154,069 29.48Total 831,472,907 100.00 831,472,907 100.00 PAGE 78 STRENGTHENING THE CORE FOR GROWTH
  • 79. As at 30 September 2011 By Type (summarised)Shareholder type Number of shareholders % Issued shares %Public 8,372 91.93 556,886,520 66.98Directors 5 0.05 239,715,680 28.83Non-Public 730 8.02 34,870,707 4.19Total 9,107 100.00 831,472,907 100.00• Non-public include Employee Share Participation Trust and managerial employees who hold shares in the Company in their individual capacities.• Public refers to Local Companies, Insurance Companies, Nominees, Banks, Investments, Trusts, Pension Funds and other organisations.• Directors mean Company directors who hold shares in the Company directly and indirectly.Major Shareholders 2011 % 2010 %Old Mutual 188,783,425 22.70 189,375,070 22.78Riustrix Investments (Pvt) Ltd 151,311,650 18.20 207,336,690 24.94L.E.S Nominees (Pvt) Ltd 78,659,897 9.46 - -Msasa Nominees (Pvt) Ltd 71,997,418 8.66 73,760,705 8.87Total 490,752,390 59.02 470,472,465 56.59Resident and Non Resident Shareholders 2011 % 2010 %Resident 820,748,544 98.71 822,008,456 98.59Non Resident 10,724,363 1.29 9,464,451 1.41Total 831,472,907 100.00 831,472,907 100.00The residency of a shareholder is based on place of domicile as recorded in the share register as defined for Exchange Control and does not denotestatus in terms of indigenisation regulations.Share price informationMid-Market Price at:Friday 31 December 2010 ZSE closed for tradeThursday 31 March 2011 US 2.02 centsThursday 30 June 2011 US 1.80 centsFriday 30 September 2011 US 1.20 centsPrice RangeHighest : 2 November 2010 US 3.01 centsLowest : 24 May 2011 US 0.70 cents STRENGTHENING THE CORE FOR GROWTH PAGE 79
  • 80. GROUP STRUCTURE AFRICAN SUN LIMITED AFRICAN SUN ZIMBABWE DAWN PROPERTIES RCI (ZIMBABWE) AFRICAN SUN LIMITED (PRIVATE) LIMITED LIMITED (PRIVATE) LIMITED PCC (MAURITIUS) 100% 17.43% 24% 100% SHAREHOLDER STRUCTURE 2011 Old Mutual Riustrix Investments (Private) Limited L.E.S. Nominees Msasa Nominees Public Investors Employee Share Participation Trust 0.98% 18.20% 40.00% 22.70% 9.46% 8.66%PAGE 80 STRENGTHENING THE CORE FOR GROWTH
  • 81. The Company operates in the hospitality and leisure industry through a number of hotels, resorts, casinos and timeshare operations throughoutZimbabwe. It also operates two resorts and two city hotels in Nigeria.ZimbabweThe Victoria Falls Hotel Partnership (50%)Elephant Hills ResortThe Kingdom at Victoria FallsTroutbeck ResortCaribbea Bay ResortGreat Zimbabwe HotelHwange Safari LodgeFothergill Island Safari LodgeCrowne Plaza MonomotapaHoliday Inn HarareHoliday Inn BulawayoAfrican Sun Amber Hotel MutareBeitbridge Express HotelSun CasinosMakasa Sun CasinoHarare Sun CasinoBulawayo Sun CasinoRedcliff Sun CasinoManica Sun CasinoCaribbea Bay Sun CasinoSun VacationsBlue Swallow Lodges - NyangaKingfisher Cabanas - KaribaNigeriaObudu Mountain ResortNike Lake ResortBest Western Lagos, IkejaBest Western Homeville, Benin City STRENGTHENING THE CORE FOR GROWTH PAGE 81
  • 82. TIMOTHY NATHAN CHIGANZE Chairman Mr Timothy Chiganze was appointed as Chairman on 1 August 2009 having joined the African Sun Limited Board on 1 July 2006. Mr Chiganze has experience in the fields of law and over 25 years experience in insurance, operations and executive management at senior level. His operational and executive experience led him to assume the following roles from 1984 to 1998: Operations Executive Director, Managing Director and Head of Insurance, Group Managing Director and Chief Executive of one of the blue chip companies in Zimbabwe. A distinguished and successful businessman in his own right, Mr Chiganze sits on several boards which include financial, engineering, insurance, manufacturing and pharmaceutical companies. BEKITHEMBA LLOYD NKOMO Deputy Chairman Mr Bekithemba Nkomo was appointed as Deputy Chairman on 1 August 2009, having joined the African Sun Limited Board on 21 November 2004. Mr Nkomo worked for various companies at senior and executive management level before establishing his own business. He has over 16 years experience in financial management and general management. He is currently the Managing Director of a manufacturing business he acquired ten years ago. He sits on various boards, which include financial, manufacturing and marketing companies. SHINGIRAI ALBERT MUNYEZA Group Chief Executive Dr Munyeza is an accomplished business leader and currently holds the reins at African Sun Limited. He is a visionary with global perspective and entrepreneurial drive. Dr Munyeza holds a balanced portfolio of experience that has been recognised in the business arena. He is the 2010 winner of the Hospitality Investment Conference Africa (HICA) Mover and Shaker Award. He was conferred an honorary Doctorate in Business Administration and Development by Solusi University in March 2010 in recognition of his contribution to business development in the tourism sector. He is the Zimbabwe 2008 Institute of Directors Award winner, was twice recipient of the Institute of Directors Runner-up Award, crowned CEO of the Year 2008 by the Institute of People Management Zimbabwe and received the Zimbabwe Tourism Authority Personality of the Year Award for four years running. Dr Munyeza played an instrumental role in bringing about a turnaround of tourism in Zimbabwe through various initiatives, and works closely with governments in Africa to improve tourism and hotel development. He serves on a number of boards which include financial institutions, tourism and hospitality and property and investment.PAGE 82 STRENGTHENING THE CORE FOR GROWTH
  • 83. DAVID WILLIAM BIRCHNon-Executive DirectorMr David Birch joined the Board of African Sun Limited on 21 November 2004. He is aseasoned insurance practitioner whose experience spans over 30 years at senior and executivemanagement level. He held operational and executive management positions culminating inhis appointment as the General Manager, Managing Director, Regional Director and as aConsultant after retirement, for a leading insurance broker in Zimbabwe. In addition to theAfrican Sun Limited Board, he sits on the boards of a financial institution and three insurancecompanies. He is the past Chairman of Zimbabwe Insurance Brokers Association and Chairmanof the Board of Trustees of Junior Achievement in Zimbabwe.ELIZABETH CHITIGANon-Executive DirectorMs Elizabeth Chitiga joined the African Sun Limited Board on 1 October 2002.She is an internationally respected business woman, having been selected by KPMG CharteredAccountants (Zimbabwe) as one of the top 50 world-class executives in 1996, Global Leaderfor Tomorrow by the World Economic Forum in 1997 and one of the 25 most powerful businesswomen by “Marie Claire”, a French magazine, in 1997. Her experience in financial management,economics and general management at senior level resulted in her assuming the followingroles:Economist for the Reserve Bank of Zimbabwe and Deputy Chief Executive and Chief Executive(first female in Zimbabwe to assume this role) for a minerals marketing entity. She sits onthe boards of companies in the mining and arts sectors.VERNON WRIGHT LAPHAMNon-Executive DirectorMr Lapham joined the Board of African Sun Limited on 1 July 2009.A winner of the ICAZ Duff Award for being the overall top student in Zimbabwe and ICAZAward for being the top student in Financial Management, Financial and ManagementAccounting. A former partner with Ernst and Young, Mr Laphams area of expertise is corporatefinance. He was instrumental in setting up a new service offering with Ernst and Young andsubsequently recommended the disposal of this entity to a well established Merchant Bankin Zimbabwe. He also sits on a Zimbabwe listed pharmaceuticals board and managementadvisory services company. STRENGTHENING THE CORE FOR GROWTH PAGE 83
  • 84. NONHLANHLA RENE RAMIKOSI Non-Executive Director Mrs Ramikosi, a South African national, was appointed to the African Sun PCC board on 1 August 2009 and subsequently to the African Sun Limited Board on 17 September 2010. A holder of a Masters degree in Business Administration, a Post-graduate Diploma in Advertising and Marketing (majoring in Strategic Planning and Client Service) and a Bachelor of Science degree, Mrs Ramikosi has extensive experience in Marketing, Advertising and Communications. She has worked for multinationals and South Africas leading listed private enterprises and South African governments state-owned companies. She has extensive experience working on global brands on the African continent, North and South America, Europe and Asia. She is the founding member of Phuphani Marketing, a strategic marketing consultancy and co-founder of Masters and Savant Worldwide, a specialist design production agency. NIGEL MANGWIRO Group Finance Director Mr Mangwiro joined the African Sun Limited Board on 24 February 2006. A Chartered Accountant, Mr Mangwiro has served as Finance Director at three companies where he was instrumental in the financial turnaround of two of the institutions, which are listed on the Zimbabwe Stock Exchange. He has over ten years experience at senior level in the finance field and his areas of expertise are structured finance with focus on modelling and investments, mergers and acquisitions as well as turnaround of companies to profit-making position. As the Group Finance Director at African Sun, Mr Mangwiro plays a pivotal role in raising capital and expansion initiatives for the entire Group. In addition to the African Sun Limited board, Mr Mangwiro sits on various boards including a pharmaceuticals company, which he chairs.PAGE 84 STRENGTHENING THE CORE FOR GROWTH
  • 85. DIRECTORATE AuditorsChairmanT N Chiganze PricewaterhouseCoopers Chartered Accountants (Zimbabwe) Building Number 4, Arundel Office ParkDeputy Chairman Norfolk RoadB L Nkomo Mount Pleasant P O Box 453Executive Directors HarareS A Munyeza - Group Chief Executive ZimbabweN Mangwiro - Group Finance Director BankersNon-Executive DirectorsE Chitiga MBCA Bank LimitedD W Birch 16th Floor, Old Mutual CentreV W Lapham Third StreetN R Ramikosi Harare ZimbabweCompany SecretaryE T Shangwa Legal AdvisorsBOARD COMMITTEES Dube, Manikai & Hwacha Legal Practitioners 6th Floor, Gold BridgeRisk and Audit Committee Eastgate ComplexB L Nkomo (Chairman) Robert Mugabe RoadD W Birch HarareS A Munyeza ZimbabweN Mangwiro REGISTERED OFFICEHuman Resources and Remuneration CommitteeD W Birch (Chairman) African Sun LimitedE Chitiga Crowne Plaza MonomotapaS A Munyeza 17th Floor 54 ParklaneFinance and Investments Committee HarareV W Lapham (Chairman) ZimbabweB L NkomoS A MunyezaN MangwiroMarketing CommitteeN R Ramikosi (Chairman)E ChitigaS A MunyezaNominations CommitteeT N Chiganze (Chairman)B L NkomoS A Munyeza STRENGTHENING THE CORE FOR GROWTH PAGE 85
  • 86. EXECUTIVE COMMITTEES A Munyeza Group Chief ExecutiveN Mangwiro Group Finance DirectorJ Mwanza Group Operations DirectorE Nyakurerwa Group Human Resources DirectorE T Shangwa Company SecretarySENIOR EXECUTIVESA Chinhara Group Sales & Marketing ManagerD Mudyirwa Internal Audit Services ManagerT Hwingwiri Operations ManagerS Mukukumira Group Technical ManagerS Samoto Group Business Information Systems ManagerHOTEL AND RESORT GENERAL MANAGEMENTProperty General ManagersNigeriaG. Woodside Obudu Mountain ResortD Kanyandu Nike Lake ResortG Manyumwa Best Western Ikeja, LagosK Mupfigo Best Western Homeville, Benin CityZimbabwe*K Snater The Victoria Falls Hotel PartnershipT Mutyandasvika Elephant Hills ResortD Kung The Kingdom at Victoria FallsC Chinwada Troutbeck ResortA Hadebe Caribbea Bay ResortM Zulu Great Zimbabwe HotelT Makiwa Hwange Safari LodgeI Kasozi Crowne Plaza MonomotapaI Katsidzira Holiday Inn HarareN Moyo Holiday Inn BulawayoS Dube African Sun Amber Hotel MutareC Mulinde Beitbridge Express HotelSun CasinosR Choto General ManagerJ Kaseke Bulawayo Sun CasinoM Matanhike Makasa Sun CasinoB Chiutare Harare Sun CasinoG Gochera Redcliff Sun CasinoM Parichi Manica Sun Casino**C Tsatsi Caribbea Bay Sun CasinoSun VacationsC Svova Blue Swallow Lodges and Kingfisher Cabanas*Acting General Manager**Acting Slots ManagerPAGE 86 STRENGTHENING THE CORE FOR GROWTH
  • 87. NOTICE IS HEREBY GIVEN THAT the Fortieth Annual General Meeting of shareholders of African Sun Limited will be held in the Ophir Room, 1stFloor, at Crowne Plaza Monomotapa, 54 Park Lane Harare, on Friday 30 March 2012 at 1000hrs for the following purposes:ORDINARY RESOLUTIONS1. Statutory Financial Statements To receive and adopt the financial statements for the year ended 30 September 2011, together with the report of the Directors and Auditors therein.2. To appoint Directors During the year Ms Y E Johnston resigned. Mr David W Birch, Mr Vernon W Lapham and Ms Elizabeth Chitiga retire by rotation. All being eligible, they will offer themselves for re-election at the Annual General Meeting.3. Auditors Remuneration To determine the Auditors remuneration for the past audit. PricewaterhouseCoopers have indicated their willingness to continue in office.4. Directors Fees To approve the payment of Directors fees for the chairman and non-executive directors for the year ended 30 September 2011.SPECIAL BUSINESS5. Share Buy-Back That the company be authorized to purchase at a price not greater than 5% above the weighted average of the market value and the minimum of not less than the nominal value for the securities for the five business days immediately preceding the date of repurchase its own ordinary shares up to a maximum of ten percent of the issued ordinary shares at the date of the Annual General Meeting, for the purpose of holding the said shares as treasury shares. That a capital redemption reserve fund, appropriated out of revenue reserves standing from time in the books of the Company, be created and further, that this authority expires at the next Annual General Meeting, provided it shall not go beyond 15 months from the date of the resolution.Note:(a) In terms of section 129 of the Companies Act (Chapter 24:03), members are entitled to appoint one or more proxies to act in the alternative, to attend, vote and speak in their place at the meeting. A proxy need not be a member of the Company.(b) In terms of Article 80 of the Companys Articles of Association, instruments of the proxy must be lodged at the registered office of the Company at least forty-eight hours before the time appointed for holding the meeting.By order of the BoardE T ShangwaCompany SecretaryAfrican Sun LimitedCrowne Plaza Monomotapa, 17th Floor54 Park Lane, HarareZimbabwe27 February 2012 STRENGTHENING THE CORE FOR GROWTH PAGE 87
  • 88. Full year Results 2011 December 2011 Annual Report 2011 Published February 2012 Fortieth Annual General Meeting March 2012 INTERIM REPORTS ANTICIPATED DATE Half Year Results 2012 June 2012 Full Year Results 2012 November/December 2012 Forty-first Annual General Meeting March 2013 PROCESSES Our “How May I Serve You” culture ensures excellence in service delivery and unforgettable experiences for our guests. Crowne Plaza Monomotapa ReceptionParkview Restaurant buffet PAGE 88 STRENGTHENING THE CORE FOR GROWTH
  • 89. African Sun LimitedIncorporated in the Republic of Zimbabwe Registration number: 643/1971Registered Office Transfer SecretariesAfrican Sun Limited Corpserve (Private) Limited17th Floor Office No 1708 2nd FloorCrowne Plaza Monomotapa ZB Bank Centre54 Park Lane Cnr Kwame Nkrumah Avenue/First StreetP O Box CY 1211 P O Box 2208Causeway HarareHarare ZimbabweZimbabwe Tel: +263 4 751559/61Tel: +263 4 250501-7 or 700521-4 Email: busi@corpserve.co.zwEmail: edwinsh@africansun.co.zwWeb: www.africansunhotels.comInvestor RelationsWeb: www.africansuninvestor.comTelephone DirectoryFor Reservations:Pan-African Central Reservations Office, Johannesburg (PACRO) +27 100030079 or 100030081-5Email: pacro@africansunhotels.comHarare Central Reservations Office, Harare (HACRO) +263 4 700521-4 or 250501-7 or 705110/94Email: hacro@africansun.co.zwCorporate Headquarters +263 4 250501-7 or 700521-4Resorts, City Hotels and LodgesZimbabweThe Victoria Falls Hotel Partnership +263 13 44751-60 or 44203-5Elephant Hills Resort +263 13 44793-9The Kingdom at Victoria Falls +263 13 44275 or 13 42358Troutbeck Resort +263 298 881 or 298 883-6Caribbea Bay Resort +263 61 2452-4Hwange Safari Lodge +263 18 331-6Great Zimbabwe Hotel +263 39 262274, 265427 or 264187Crowne Plaza Monomotapa +263 4 704501-30Holiday Inn Harare +263 4 251200-14 or 795610-38Holiday Inn Bulawayo +263 9 252464, 257211 or 252460-9African Sun Amber Hotel Mutare +263 20 64431Beitbridge Express Hotel +263 286 23001-4 or 23371-2NigeriaObudu Mountain Resort +234 803 550 6257 or 803 550 6252 +234 803 364 8209 or 803 472 9327Nike Lake Resort +234 805 055 7000 or 803 762 2200 or 802 536 6655Best Western Ikeja, Lagos +234 1 448 2200-1 or 1 448 3340-67Best Western Homeville, Benin City +234 52 290 830 or 52 885 687 STRENGTHENING THE CORE FOR GROWTH PAGE 89
  • 90. PRODUCTThrough a dynamic organisational approach to our operations, wecontinue to break new ground and seize new opportunities as they arise, to create value for all our stakeholders. Mock room at Crowne Plaza Monomotapa Crowne Plaza Monomotapa boardroomPAGE 90 STRENGTHENING THE CORE FOR GROWTH
  • 91. PEOPLEWe believe that by employing the best professionals, we guaranteeoperational excellence, ensuring the best possible results for our shareholders and all our guests. STRENGTHENING THE CORE FOR GROWTH PAGE 91
  • 92. Every morning in Africa, a Gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a Lion wakes up. It knows it must outrun the slowest Gazelle or it will starve to death. It doesnt matter whether you are a Lion or a Gazelle... when the sun comes up, youd better be running. Author UnknownPAGE 92 STRENGTHENING THE CORE FOR GROWTH
  • 93. Annual Report cover.pdf 1 2/27/06 4:41 PM African Sun Limited Strengthening The Core For Growth THE COMPANY SECRETARY African Sun Limited 17th Floor - Office 1708 C Crowne Plaza Monomotapa 54 Park Lane, Harare M PO Box CY 1211, Causeway Harare, Zimbabwe YCM Tel: +263 4 250501-7 or +263 4 700521-4MY Email: edwinsh@africansun.co.zw or edwin.shangwa@africansunhotels.comCY Web: www.africansunhotels.com Strengthening The Core For GrowthCMY K Investor Relations Web: www.africansuninvestor.com CORPORATE OFFICE African Sun Limited 17th Floor Office No 1708 Crowne Plaza Monomotapa 54 Park Lane , Harare P O Box CY 1211 Causeway Harare , Zimbabwe Tel: +263 4 250501-7 or 700521-4 Email: edwinsh@africansun.co.zw Web: www.africansunhotels.com Annual Report 2011 Annual Report 2011

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