2. Contents 1Company Profile 2Financial Highlights 5Statement of Vision 6The African Sun Way 7Market Overview 8Our Footprint 9Historical Highlights 11Chairmans Statement 13Group Chief Executives Report 16Accounting Philosophy 19Certificate by the Company Secretary 21Directors Report 22Corporate Governance 24Directors Responsibility for Financial Reporting 27Independent 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 35Group Supplementary Information 66Shareholders Profile 68Group Structure 71Business Composition 73Board of Directors 74Corporate Information 77Management 78Notice of Annual General Meeting 79Shareholders Diary 81Contact Information 82Proxy Form for the Annual General Meeting 83
3. Company Profile 2African Sun Limited, (African Sun) has experienced strong and Established in 1968, the Group, then known as Zimbabweconsistent growth in sub-Saharan Africa this year. While the Sun Limited, was part of Delta Corporation, but has evolvedrealities of the Global Financial Crisis cannot be ignored, the significantly from being just a Zimbabwe-based hospitalityGroup has remained upbeat, carefully managing its cost base management company. That being said, in Zimbabwe, Africanwhile making plans for an ambitious acquisition trail in 2010. Sun is still the leading player in the tourism and hospitalityThis year alone, the Group’s first round of capital raising industry, with the Zimbabwe operations forming the largesthas secured US$10 million required for its refurbishment business under the African Sun Limited group of companies.and expansion programme and its shareholders haveunanimously agreed to raise a further US$25 million by way The Zimbabwe operations portfolio currently comprisesof Private Placement and Equity-Secured Debt. A strong vote thirteen hotels and resorts across the nation, including threeof confidence indeed, backed by the rise in occupancy levels resort hotels in the town of Victoria Falls, namely, Elephantin the second half of this year. Hills Resort, The Kingdom at Victoria Falls and The Victoria Falls Hotel. The Victoria Falls Hotel is jointly managed withWith the FIFA 2010 World Cup in South Africa just around Meikles Africa Limited. Close to the resort town of Victoria Fallsthe corner, African Sun plans to use some of the capital to in Hwange is one of African Sun’s safari operations, Hwangerenovate six of its Zimbabwean hotels to world-class standards Safari Lodge. These four hotels together make up the Westernin support of an already impressive secured tournament Region of African Suns Zimbabwe hotels and resorts.occupancy rate. The Group is also poised to capitalise oninternational interest in the continent and has undertaken The Eastern Region comprises mainly city hotels for businessstrategic marketing and communication initiatives at travellers, three resort properties and one safari lodge. The cityinternational trade events showcasing its offering to the global hotels are three InterContinental Hotels Group (IHG) affiliatedtourism community. African Sun has interests in a number of brands; the Crowne Plaza Monomotapa, the three Holiday InnAfrican countries, namely, Zimbabwe, South Africa, Nigeria, – branded hotels in Harare, Bulawayo, and Mutare, and theGhana and Zambia. Express by Holiday Inn Beitbridge.
4. Company Profile 3In addition to these, the Group also operates the Great Through HTA, African Sun will replicate its excellent serviceZimbabwe Hotel in Masvingo, which is located within walking standards via the installation of satellite training academiesdistance from the Great Zimbabwe Monument z. The three in west and east Africa, the two main areas of expansionresorts in the Eastern Region are Troutbeck Resort in Nyanga, into sub-Saharan Africa. Growing the brands regionally is aCaribbea Bay Resort and Fothergill Island Safari Lodge, both fundamental factor as the Group continues in its quest tolocated in Kariba. establish brand leadership where African Sun will dominate other brands and become the benchmark for other players inIn South Africa, operations are made up of The Grace in the region.Rosebank and The Lakes Hotel and Conference Centre,both in Johannesburg. In Nigeria, the Group operates, under As African Sun’s expansion strategy is implemented, amanagement contracts, Obudu Mountain Resort and Amber combined brand strategy of the use of IHG brands, namely,Tinapa, in Cross River State, and Nike Lake Resort in Enugu Holiday Inn, Crowne Plaza and Express by Holiday Inn inState. In Ghana, also under management contract, there is emerging markets is key. IHG brands are tried and testedHoliday Inn Accra Airport. Royal Chundu Zambezi River with great brand equity, especially for foreign and businessLodge, a 5-Star luxury lodge in Zambia, joined the property travellers, due to their high international brand awareness.portfolio this year. African Sun also has a strong pipeline ofadditional sub-Saharan Africa properties in development, African Sun will use its own brands in markets where themany scheduled to come on line in 2010. company has gained acceptance, and these are made up of the following mix:A key strength for the Group is that its operations and initiativesare supported by a management team comprising seasoned • Five Star Luxury: The Mulberryhotel and business managers. Their combined intellectual • Five Star City: Platinumcapital and expertise ensures that African Sun is well positioned • Mid-range: Amberto implement its business strategy against aggressive timeline • Value: Amber Expresstargets. • Long stay: MyPlaceAs part of its strategic thrust, African Sun places significant Also under its wing, African Sun holds 17.72% equity interestimportance on its human capital base, and this has resulted in in Dawn Properties Limited, an investment property-holdingthe strengthening of its training division, Hospitality Training company formed and listed on the Zimbabwe Stock ExchangeAcademy, commonly abbreviated as HTA. The academy in 2003 when the Group spun-off wholly-owned propertyhas grown over the years to become a fully-fledged tertiary interests, retaining the hotel management business. DawnHotel School, offering a full array of hospitality and tourism Properties Limited owns nine of the properties that Africancourses. Sun leases and operates in Zimbabwe.The main role of the training academy is to ensure andmaintain excellent service delivery within the Group throughthe implementation of correct training programmes for staff. A tree is known by its fruit. – African Proverb
5. A man who paysrespect to the great,paves the way for hisown greatness – African Proverb
6. Financial Highlights 5for the year ended 30 september 2009 2009GROUP SUMMARY ($):Revenue 35 236 138EBITDA (3 199 381)Loss before tax (5 367 659)Attributable loss (4 364 899)Total assets 46 688 071Market capitilisation 62 032 477SHARE PERFORMANCE (cents):Loss per shareBasic earnings basis (0.63)Fully diluted earnings basis (0.63)Net asset value per share 3.06Market price per share 9FINANCIAL STATISTICSReturn on equity (%) (21)Interest cover (times) (11)
7. Statement of VisionVISIONThe Lifestyle Company creating unforgettable leisure experiences.MISSIONWe exist to create wealth in a sustainable manner by anticipating andmeeting the needs of our stakeholders, through the provision of seamlessleisure services in our chosen markets.WE DO SO BY:• Developing intimate and emotional relationships, as we reach out to hearts and minds• Exceeding guest expectations• Having a formalised unique sequence of doing things• Implementing innovative techniques that seek to continuously re-invent African Sun Limited in order to maintain excellence in everything we do• Creating opportunities for personal growth and balanced lifestyles for all staff to enable them to positively impact lives around themFOCUS• We have re-defined our business as encompassing all aspects of the tourism chain• We are committing ourselves to expanding our operations throughout Africa through direct investment, equity participation and strategic alliances• We will provide a holistic hospitality and leisure product that will meet the needs and exceed the expectations of our guests These include the integration and co-ordination of: • Seamless delivery of guests to and from the destination • Co-ordination of an exciting suite of activities and attractions • Provision of appropriate high quality accommodation and amenitiesCORE VALUES AND BELIEFSINTEGRITY – We do what we say. We are true to self and true to othersRESPECT – In all our relationships, we seek to build and honourCARE – We show concern and seek the well-being of everyoneFUN – We celebrate life together
8. The African Sun WaySHARED VISIONWe will always seek to have a buy-in whilst providing leadershipSHARED VALUESOur values are the glue that binds us togetherTIMEOUS EXECUTION AND CLOSUREIt is not done until there is closureEFFECTIVENESSWe will deliver beyond expectationsADAPTABILITYWe will be flexible without losing our strategic intentEFFICIENCYWe will be disciplined in utilizing resources in all we doCONNECTIVITYIt is our responsibility to get the message across to the other party
9. Market Overview 8the business environment in africaAfrica is on the move, and African Sun with hotels and resorts across Africa has, over the years, gained in-depth knowledgeand understanding of the broad African business environment. In particular, African Sun operates in those regions ofdynamic growth and opportunity – regions with different business cultures and environments, from Ghana and Nigeria inWest Africa to Zimbabwe, South Africa and Zambia in sub-Saharan Africa.This understanding and knowledge comes at an opportune time with the growth and prospects for business in Africa lookingbrighter. In the past millennium, trading in Africa was limited to the old trading ports along the east and west coasts – thecommodities sold being palm oil, rubber, peanuts, cocoa, ivory and much underpinned by the slave trade. The tradingwas primarily with Europe and mostly agriculture. In more recent times, Africa’s business has become more focused onsupplying partners across the globe with resources, driven by the vast mineral regions of the south and the oil and miningsectors of the central and west African regions. Today, Africa is a carte blanche for business and we are proud to be part ofthe new chapter – opening the doors to a revitalized business future across the African continent.The growth of African business has escalated in recent years. A look at some published trade figures showsthat in 2008 the United States of America (US) imports from Africa were valued by the US Census Bureauas worth some US$113 billion. This is up nearly tenfold from the US$15.8 billion in imports only ten yearspreviously. Every day the media reports new developments, "China pledges $10 billion in low cost loans"; "Anew German loan to African Development Bank is announced"; "Niger Delta and NPC partner in a new naturalgas development".The latest UNWTO World Tourism Barometer reports excellent growth for Africa. The continent has confirmed its goodmomentum in sustaining the growth of 5% in 2009 spearheaded by sub-Sahara destinations against the background ofdeclining global tourism trends in other markets.As a result of these positive developments, there is an upsurge in the flow of visitors to African Sun hotels and resorts.Stepping through African Suns doors daily are business and industrial leaders from China, Europe, India and America,travelling to Africa on a mission to develop and negotiate contracts and establish new relationships and partners.Why African Sun opens doors to business in AfricaFirstly, African Sun is the fastest-growing hotel Group in Africa, putting in place a range of hotels in all the targeted highgrowth regions. In Johannesburg, South Africa, the Group operates The Grace in Rosebank – the award winning, five-starhotel in the heart of the select suburb of Rosebank. We manage the popular The Lakes Hotel and Conference Centre, tenminutes from OR Tambo Airport – the air transport hub of southern Africa catering for over seventeen million passengersin the last year.In Zimbabwe, the Groups hotels and resorts cover all the main business and popular tourist destinations with no less thanfour famous hotels and resorts in the Victoria Falls area, including the the world-renowned grand lady of southern Africa,The Victoria Falls Hotel. In Ghana and Nigeria, African Suns hotels and resorts under management contracts are at the heartof new business developments. These include Holiday Inn Accra Airport – recently host to President Obama and his family,Amber Tinapa hotel located at the heart of Nigerias only Free Trade Zone, adjacent to the city of Calabar, Obudu MountainResort and Nike Lake in bustling Enugu State.Secondly, the Group is moving fast to become an international organisation of hospitality service excellence, with staffdedicated to African Suns motto “How May I Serve You”. Accommodation and facilities are being upgraded to meet the newand increasing demands of the business and tourist traveller and to offer customers a world-class experience.Today, there is an open book for business in Africa. African Sun, with its long history in the hotel industry on the continent,is proud to be part of this new and exciting chapter in Africa’s trading growth and expansion.
10. Our Footprint 9 geographical locations zimbabwe western regionghana zimbabwe eastern regionACC R A A I R P O R Tnigeria Egypt Nigeria Ethiopia Ghana Cameroon Cote Uganda dIvoire Equatorial Kenya DRC Guinea Tanzania zimbabwe zambia franchise brands Angola Zambia Malawi Zimbabwe Madagascar Namibia south africa Botswana Mozambique South Africa
11. There are three kinds of people;those who make things happen,those who watch things happenand those who dont knowwhats happening. – African Proverb The Victoria Falls, line drawing by Gwelo Goodman – Circa 1920
12. Historical Highlights 11our journey thus far• 1952 – Rhodesia and Nyasaland Hotels (Private) Limited • 1999 – Zimbabwe Sun Limited acquires 40% equity and is formed as a wholly-owned subsidiary of Rhodesian management of Baio Do Paraiso Breweries • 1999 – Makasa Sun is re-developed into The Kingdom at• 1968 – Sable Hotels (Private) Limited is established Victoria Falls• 1973 – Rhodesian Government grants first casino licence • 2002 – Zimbabwe Sun Limited is unbundled from for The Victoria Falls Hotel Delta Corporation• 1974 – Development of first four world-class hotels: • 2003 – Zimbabwe Sun Limited owns 100% shares in the Monomotapa Hotel in Salisbury, The Wankie Safari Lodge, timeshare operation in Vilanculos, Mozambique Caribbea Bay at Kariba, and the Elephant Hills Country Club in Victoria Falls • 2003 – Dawn Properties Limited is listed as the first property entity on the Zimbabwe Stock Exchange• 1979 – Meikles Southern Sun Hotels is established, becoming the largest hotel chain in southern and eastern • 2003 – The Hospitality Training Academy (HTA) is re-launched Africa, with control of thirteen major properties in the country • 2003 – First negotiations for management of Holiday Inn Accra Airport, Ghana• 1980 – Meikles Southern Sun Hotels changes its name to Zimbabwe Sun Hotels after Zimbabwe’s independence • 2004 – Zimbabwe Sun Limited acquires The Grace Hotel in Rosebank, South Africa, ranked among the “Top Ten” hotels in• 1988 – Zimbabwe Sun Hotels merges with Touch the Wild Africa and the Middle East by Condé Nast Traveller (USA) in its safari operations, later selling it to Rainbow Tourism Group first year of operation (Private) Limited on 30 April 1998 • 2008 – Zimbabwe Sun Limited adds The Lakes Hotel and• 1990 – Zimbabwe Sun Limited is floated on the Zimbabwe Conference Centre, in Johannesburg, South Africa to Stock Exchange (ZSE), at the time being the largest its portfolio flotation in Zimbabwe, with 70 million shares offered to the public, which was over-subscribed by 28% • 2008 – Zimbabwe Sun Limited rebrands its name to African Sun Limited• 1990 – Opening of the timeshares built in Troutbeck, Nyanga and at Caribbea Bay, which received “Gold Crown • 2008 – African Sun Limited adds Obudu Mountain Resort to its Resorts” status from the RCI in 1999 regional portfolio• 1991 – First Holiday Inn franchise in Harare • 2008 – African Sun Limited takes over management of Holiday Inn Accra Airport• 1991 – The Elephant Hills Resort hosts the Commonwealth Heads of Government meeting, officially opening in 1992 • 2009 – African Sun Limited aquires Hotelserve Holdings (Private) Limited• 1994 – First regional office for reservations is established in Johannesburg • 2009 – African Sun Limited opens Royal Chundu Zambezi River Lodge• 1998 – The construction of Express by Holiday Inn in Beitbridge is completed • 2009 – The company raises US$10 million through a Rights Offer
13. Chairmans Statement 13to our shareholders and potential partners OPEN FOR BUSINESS IN AFRICA A s we look to the future, we have every reason to believe that our footprint across Africa will continue to grow based on our rate of expansion over the past three years. Our previous achievements have left us in a very strong position as we have created many advocates for our brand across the continent, and we must build upon this base as the global economy recovers. Despite the capacity growth setbacks we have experienced as a result of the Global Financial Crisis, we remain focused on our destination 2012 goals. These are: • to achieve market capitalisation of US$1 billion; • growing room capacity to 8500 rooms; and • seeking a dual listing on a major international bourse.Timothy Chiganze – ChairmanWHERE WE ARE COMING FROMThe year 2009 was a year fraught with challenges for us as the effects of the Global Financial Crisis took hold. Our strategicgoals were affected in several ways as low liquidity on international capital markets increased the cost of capital. As a result,capacity growth was stifled by delays and non-openings of new projects.At the beginning of the year we saw a multiple currency regime come into effect in Zimbabwe, predominantly through theusage of the United States of America Dollar and South African Rand. We had to re-align our strategy and mindsets fromthe hyperinflationary environment that had become the norm. Although the new currency regime has given us the benefit ofbeing able to compare the performance of our Zimbabwean operations to those in the rest of the continent, the imminentresurgence of the local hospitality industry has also meant that we have had to start scouting capital markets to refurbishour Zimbabwean properties. We have now moved to using Earnings Before Interest, Taxes, Depreciation and Amortisation(EBITDA) to measure our performance and for the period under review we incurred an EBIDTA loss of US$3.2 million onrevenues of US$35.2 million, owing to the challenges alluded to earlier. The coming year is, however, looking positive, as weare set to benefit from the 2010 FIFA World Cup and the resurgence of the Zimbabwean economy.CAPACITY BUILDINGWe have invested in skills retention and capacity building through several developmental programmes and the establishmentof the Hospitality Training Academy (HTA) as a stand-alone training institution.CORPORATE SOCIAL RESPONSIBILITYWe are currently running a Corporate Social Responsibility Programme with several initiatives under the banner of Sun Care.The objective of this programme is in line with the United Nations eight Millennium Development Goals and the company hasadopted the following specific goals:• to achieve universal primary education;• to improve health; and• to eradicate poverty and hunger.The above initiatives have seen the company distributing primary school textbooks to selected schools in the areas withinwhich African Sun operates. We have also undertaken to assist less privileged hospitals with linen and crockery in the areaswithin which we operate. Recipient institutions under this initiative include Mpilo General Hospital and United BulawayoHospitals, both in Bulawayo. Other hospitals that have benefited from donations include Beitbridge District Hospital, Nyanga
14. Chairmans Statement 14to our shareholders and potential partnersHospital, Morgenster Hospital in Masvingo and Matthew We will continue to improve on service excellence in ourRusike Children’s Home in Harare, catering for orphans. expansion beyond Zimbabwe.In addition to the primary school and hospital donations, we The increase in rooms to 8500 by 2012 (Destination 2012)are also involved with the following organisations: remains one of the main objectives targeted by our business• World Vision Zimbabwe, to assist in their efforts towards model. Pipeline projects nearing completion include hotels poverty and hunger eradication with specific reference to in Botswana and Nigeria. identified children who have been orphaned as a result of HIV/AIDS Royal Chundu Zambezi River Lodge in Livingstone, Zambia• In partnership with the United States Embassy Public came on board and began operations on 10 December Affairs department, we provided air tickets to three 2009. deserving scholarship students from disadvantaged backgrounds under the United States Achievers DIRECTORATE Programme (USAP) Mr Eben Makonese and Dr Leonard Kapungu resigned from• The company partnered with the City of Harare towards the Board with effect from 1 June 2009 after thirteen years the maintenance of Mbare Swimming Pool with an and eight years of service, respectively, and Mr Farai Rwodzi outreach of nine primary schools and five secondary resigned from the Board from 1 December 2009 after schools in the community faithfully serving on the Board since 2002. I would like to take this opportunity to thank all three members for theirOUTLOOK service, valuable contribution, and wise counsel. Their valuedAs the larger global economies climb out of recession, contribution to the Board over the years is much appreciatedbusiness will inevitably strengthen and we can expect to see and their active involvement in the affairs of the company willa measurable improvement in our hotels, especially those be greatly missed. I wish them all the best in their respectivein Zimbabwe as a result. The 2010 FIFA World Cup soccer endeavours.showcase will present a wealth of opportunities, providingfresh impetus into the southern African tourism industry, Mr Bekithemba Nkomo and I were appointed Board Deputywith the effect going beyond the event, as this will be a Chairman and Chairman, respectively. Mr Vernon Laphamhuge marketing event for the region’s tourism industry. It is and Ms Yvonne Johnston joined the African Sun Limitedvital that we use this opportunity to establish African Sun’s Board effective 1 July 2009 and bring with them a wealth ofreputation as the leading pan-African hospitality Group. experience and expertise. DIVIDENDIn the short term, our financing needs will be met through the In light of the Group’s capital requirements and the depressedfollowing mechanisms for which we were granted approval on performance, the Board has resolved not to declare a dividend13 November 2009: for the year ended 30 September 2009.• rights offer;• private placement; and APPRECIATION• equity secured credit. I would like to commend management and staff for their commitment throughout the financial year. Much appreciationThe rights offer was successful with the Group raising $10 also goes to my fellow Directors for their support andmillion dollars. Part of the proceeds will be used to refurbish contribution to the business of the Group over the past twelvethe following Zimbabwe hotels: months.• Crowne Plaza Monomotapa;• Holiday Inn Harare;• Holiday Inn Bulawayo;• Elephant Hills Resort;• The Victoria Falls Hotel; and TIMOTHY CHIGANZE• The Kingdom at Victoria Falls. Chairman 8 January 2010
15. Tomorrow belongsto the peoplewho prepare for it today. – African Proverb
16. Group Chief Executives Report 16business review T he year under review has been one with many challenges; the most notable of which is the Global Financial Crisis, which has left no sector untouched. As a result, the hospitality industry has witnessed a general slowdown in available capital for hotel and leisure developments from the international investment community. Closer to home, the regions within which we operate have not been spared either, with some of them, as in the case of Zimbabwe, experiencing unprecedented changes in the political arena. I will expand on these as I appraise each region on an individual basis. The year 2009 has been a watershed and I am happy to point out that as we look into the future, we expect more positive developments globally with the onset of green shoots in the various economic segments, and in the Africa region, which will result in an increase in revenue and occupancies for the Group.Shingirai Munyeza – Group Chief ExecutiveZIMBABWEHotel operationsThe first four months of the financial year were characterised by chronic hyper-inflation, price distortions and unreliable exchangerates. This, compounded by the Global Financial Crisis and travel warnings issued by several traditional source markets, led to asharp decline in foreign arrivals of 19% year-on-year from 48 159 to 38 811 by August 2009. Zimbabwe has seen a drastic shiftin economic variables when it ceased to be a low cost producer soon after the implementation of the Global Political Agreementand resultant Government of National Unity, as well as the multi-currency system.More optimistically, the period after dollarisation saw lifting of travel warnings by the traditional source markets such asGermany, United States of America and Japan resulting in our operations achieving an average growth in occupancies of 2%per month from an average of 23% in February to 41% in September. This year, the Zimbabwe hotel operations contributedUS$24 million in revenue to the Group at an average occupancy of 32%, compared to 41% recorded in 2008.Distribution – Hotelserve Holdings (Private) LimitedThe newly acquired subsidiary achieved turnover of US$2 million (6% of the Group’s turnover) for the five months sinceacquisition. The integration of this subsidiary to the Group has been accomplished successfully and it is expected that it willcontribute positively to the Group in the future.SOUTH AFRICASouth African hotels suffered a sharp decline in occupancies as a result of the Global Financial Crisis. However, the hosting ofthe 2010 FIFA World Cup in South Africa is expected to spur growth in occupancies in the coming year. These hotels achievedoccupancies of 38% and RevPar of US$40 with an ADR of US$106 compared to occupancies of 52%, RevPar of US$54 withan ADR of US$104 in the prior period.NIGERIAThe hotels under management in Nigeria now constitute 22% of room capacity, following the opening of Amber Tinapa andNike Lake Resort in December 2008. Occupancies in the Nigerian hotels averaged 15% for the period under review, however,contribution from these hotels is set to improve as the underlying performance improves.
17. Group Chief Executives Report 17business reviewGHANA area during that period. We shall also be targeting displacedGhana achieved a third consecutive decline in annual inflation business in-bound into South Africa and from South Africato 18.37% owing to tighter fiscal policy and low domestic itself. We will be playing a key role in bringing the World Cupfood prices. The recovery of the global economy will see an to thousands of Zimbabweans by facilitating the set up of Fanincrease in export prices increasing real economic growth to Parks in conjunction with local authorities, thereby generating5.2%. additional food and beverage revenues for the participating hotels.Holiday Inn Accra Airport achieved an occupancy of 70% withthe highest ADR and RevPar in the Group of US$187 and MOBILIZATION AND SKILL-BASE CONSOLIDATIONUS$131, respectively. The Hospitality Training Academy (HTA), an academy for the learning and development of hospitality operationalBRAND LEADERSHIP skills, was created by African Sun Hotels in 1995 as HTIIt has been a year since we opened Amber Tinapa, our first mid- (Hospitality Training Institution) to spearhead and enhancemarket city brand, in Nigeria. This brand has been received skills development within the Group. The Institution waspositively by developers and has led to the foundation of a subsequently named HTA on 1st of January 2004.select service hotel brand under the name Amber Express.This replaces the Adrenal-Inn brand which we had developed Following the repositioning and rebranding of African Sunfor the value segment. Amber Express therefore becomes Limited in 2008, as well as the direction given by our strategicthe value brand that African Sun will drive into the African goals, the focus of the Academy has changed significantly.continent as we continue with our regional expansion. The following reflects the new thrust of HTA: • to become a viable and competitive strategic businessOur relationship with InterContinental Hotels Group continues unit within the African Sun Group;to strengthen with the signing on of Holiday Inn Gaborone • to become the renowned hospitality academy and centrethis year. The hotel is currently under construction and is of excellence for leadership in the Service Industry inexpected to open its doors in the second quarter of 2010. southern Africa within three years of operation; • to contend with, and earn a name within, the top five2010 FIFA WORLD CUP STRATEGY ranked hospitality academies and leadership centresSouth Africa internationally within five years of operation; andBoth our South African Hotels are fully booked for the duration • to provide products that will service the Retail Sector,of the tournament, with The Lakes Hotel and Conference Airline Industry, Tour Operators, Banking and FinanceCentre contracted to MATCH, FIFAs hospitality arm. Industry and Hospitality Industry.Zimbabwe The corporate vision for HTA is to become a change agentFrom a Zimbabwe perspective, we believe that the 2010 FIFA for its clients, while its mission is to create wealth for itsWorld Cup presents an opportunity for many international stakeholders. HTA’s product offering is summarised in thetravellers to experience The Victoria Falls. There is an following three key pillars:opportunity for us to benefit from the captive market for theentire period as international fans cannot go home between Pillar 1 Pillar 2 Pillar 3matches because the venue is a long haul destination for themajority of teams and fans. As a result, extended length of Skills (Competencies) Organizational Consultancy Generation Capacity Building Servicesstay packages will be a viable option. • Certified Operative • Supervisory • Service AuditsAs an organization, we are working closely with Tour Operators Programmes • Management • Process Auditsin South Africa to drive business into our hotels during the • Certified Degree & • Leadership • OrganizationalWorld Cup period, targeting mainly the Victoria Falls area as Diploma Programmes • Coaching Effectivenesswell as the two major cities, Harare and Bulawayo. We are • Refresher Courses • Career – Path • Head Hunting Determination • Assessment Centrescognisant that there is limited access to Zimbabwe via air with • Research &little scope for additional capacity. However, we intend to get Developmenta significant share of the available seats for the Victoria Falls
18. Group Chief Executives Report 18business reviewAccreditation of programmes is a critical component for any increase as corporate and leisure business is expected toAcademy’s reputation. HTA’s long term programmes for 2010 strengthen from an almost zero base.will be accredited by the Higher Examinations Council ofZimbabwe (HEXCO), and for west Africa, the American Hotels In the short term, management will focus on skills retentionand Lodges Institution. From 2011, programmes will be and refurbishment of Zimbabwe hotels in order to improve theaccredited by the reputable Swiss School, Cornell University guest experience and make them regionally competitive. Otherand Wits Business School. areas of preference will be cash protection, cost management through procurement efficiencies and restructuring of shortIMPACT OF REFURBISHMENT AND CAPITAL RAISING term loans to reduce the interest burden. Negotiations haveThe Group embarked on a capital raising initiative through started with several trade partners with the aim of reviewingthree vehicles, namely, a Rights Issue, Private Placement and pricing of goods and services to align costs to revenues andEquity-Secured Debt. The exercise was targeted at raising to match the rest of the southern Africa region.funds for refurbishment of existing hotels as well as fundingthe regional expansion. The expansion will take the Group from its current 2940 rooms to 8500 rooms by 2012, focusing mainly on the managementThe refurbishment exercise, targeted at Zimbabwe hotels, contracts model due to country risks and the inherent riskwill allow us to deliver our promise to our guests in terms of associated with leases. December 2009 saw Royal Chunduoffering a world class product and service, thereby maximising Zambezi River Lodge, our first five-star lodge, coming onguest satisfaction and experience, as is expected of our brand. board. Management is working on several pipeline projects,Upgrading the facilities to internationally accepted standards with more than six-hundered rooms coming on board in Southis critical ahead of the 2010 FIFA World Cup. This project Africa, Nigeria, Ghana, Botswana and Kenya.will be conducted in phases, with the six hotels that will havemaximum exposure to travellers during the 2010 World Cup In conclusion, I would like to thank my executive team,tournament being upgraded first. management and staff for their hard work during 2009. In addition, I would like to express my appreciation for theAs a result, Incentive and Conferencing business guests leadership shown by the Board and my fellow directorscan expect modern, up-to-date facilities, in keeping with throughout this year. Furthermore, I would also like tointernational standards. The refurbishment will enable us to thank the former Chairman, Mr Eben Makonese, Dr Leonardattract additional business from these segments and improve Kapungu and Mr Farai Rwodzi who resigned who resigned fromour yields on rooms. Currently Zimbabwes ADR is 30% below the Board, for their invaluable contribution to African Sun. Iregional rates. also take this opportunity to welcome the new Chairman, Mr Timothy Chiganze, and his Deputy Chairman, Mr BekithembaOUTLOOK Nkomo, and acknowledge the addition of Ms Yvonne JohnstonThe year under review was besieged with the Global Financial and Mr Vernon Lapham to the Board.Crisis which had a negative impact on pipeline projectsresulting in the slowing down of new developments. However,the worst is now behind us and we can see the emergence ofgreen shoots, as powerhouse economies such as the UnitedStates of America, Japan, Germany and France officially SHINGIRAI MUNYEZAemerge from the recession. From an African Sun perspective, Group Chief Executiveour RevPar outlook is positive. We are expecting to grow it 8 January 2010from 28% to approximately 48% as occupancies and ADRimprove.With Zimbabwe still constituting 64% of the room capacity,the Group is ready to capitalise on the country’s increasingstability, improved business environment, growth and abilityto attract the foreign tourist market. Yields are expected to
19. Accounting Philosophy 19African Sun Limited is dedicated to achieving meaningfuland responsible reporting through comprehensive disclosureand explanation of its financial results. This is done toensure objective corporate performance measurement, toenable returns on investment to be assessed against the risksinherent in their achievement and to facilitate appraisal of thefull potential of the Group.The core determinant of meaningful presentation anddisclosure of information is its validity in supportingmanagement’s decision-making process. While theaccounting philosophy encourages the pioneering of newtechniques, it endorses the fundamental concepts underlyingboth the financial and management accounting disciplinesas enunciated by the Institute of Chartered Accountants ofZimbabwe (ICAZ), the International Accounting StandardsBoard (IASB) and the International Federation of Accountants(IFA). The Group is committed to the regular review offinancial reporting standards and to the development ofnew and improved accounting practices. This is practisedto ensure that the information reported to management andstakeholders of the Group continues to be internationallycomparable, relevant and reliable. This includes, whereverit is considered appropriate, the early adoption of financialreporting standards.The Group adopts all accounting standards and interpretationsapplicable that are issued by the IASB and the InternationalFinancial Reporting Interpretations Committee (IFRIC). Unlessstated, these standards are applied consistently to enhancecomparability of financial information relating to differentfinancial periods.
20. The Victoria Falls Hotel, ZimbabweThe Grace in Rosebank, Johannesburg
21. Certificate By The Company Secretary 21 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 2009, 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 SHANGWA Company Secretary 8 January 2010Edwin Shangwa – Company Secretary
22. Directors Report 22The Directors present their Annual Report and the Audited Financial Statements of the Company and the Group forthe twelve months ended 30 September 2009.YEARS RESULTLoss attributable to shareholders US$4 364 899.DividendsNo dividend was declared for the year ended 30 September 2009.CAPITAL COMMITMENTS $Authorised by Directors and contracted for 3 196 538Authorised by Directors but not contracted for 22 100 316Total 25 296 854INVESTMENTSThe Group holds equity investments in the following organisations to the extent indicated below:African Sun Limited PCC (Mauritius) 100%African Sun Zimbabwe (Private) Limited 100%Hotelserve Holdings (Private) Limited 100%RCI (Zimbabwe) (Private) Limited 24%Dawn Properties Limited 17.72%SHARE CAPITALThe issued share capital was increased, by the issue of 1,282,335 ordinary shares to 689,249,739. The shareswere issued as scrip dividend. The share capital and share premium remained nil in United States Dollars as thepar value of the ordinary shares was still denominated in Zimbabwe Dollars. There are no unexercised sharesunder the current employee share option scheme.RESERVESThe movement in the reserves of the Group are shown in the Group Statement of Comprehensive Income, GroupStatement of Changes in Shareholders’ Equity and in the Notes to the Financial Statements.DIRECTORSShingirai A Munyeza, David W Birch and Elizabeth Chitiga retire by rotation. All being eligible, they will offerthemselves for re-election at the Annual General Meeting.Members will be asked to confirm the appointment of Vernon W Lapham and Yvonne E Johnston to the Board byan ordinary resolution to this effect.
23. Directors Report 23AUDITORSMembers will also be asked to re-appoint PricewaterhouseCoopers as Group auditors for the ensuing year.ANNUAL GENERAL MEETINGThe Thirty-Eighth Annual General Meeting of members of the Company will be held on Thursday 18 March 2010 at 10h00at Crowne Plaza Monomotapa, 54 Park Lane, Harare.By the order of the Board:TIMOTHY CHIGANZEChairmanSHINGIRAI MUNYEZAGroup Chief ExecutiveEDWIN SHANGWACompany Secretary8 January 2010
24. Corporate Governance 24 THE AFRICAN SUN CHARTERCORPORATE GOVERNANCE and minimise significant fraud, potential liability, loss andA frican Sun Limited personnel are committed to a material misstatement while complying with applicable laws long-published code of ethics. This incorporates the and regulations.Group’s operating, financial and behavioural policies in aset of integrated values, including the ethical standards The controls throughout the Group concentrate on criticalrequired of members of the African Sun Limited family in risk areas. All controls relating to the critical areas intheir interface with one another and with all stakeholders. the casino and hotel operating environments are closely monitored by the Directors and subjected to internal auditThere are detailed policies and procedures in place across the reviews. Furthermore, assessments of the informationGroup, covering the regulation and reporting of transactions technology environment are also performed.in securities of the Group by the Directors and officers. TheGroup recently adopted a Corporate Governance Charter and An Audit Services Manager, who reports directly to thethe recommendations made in the King Report III. Chairman of the Risk and Audit Committee, heads the internal audit department. The internal audit department isSTAKEHOLDERS designed to serve management and the Board of DirectorsFor many years, African Sun Limited has had a formalised through independent evaluations and examinations of thestakeholder philosophy and structures of corporate governance Group’s activities and resultant business risks.to manage the interface with the various stakeholder groups.African Sun Limited has in place responsive systems of BOARD MEETINGSgovernance and practice which the Board and Management The Board meets at least four times per financial year inregard as entirely appropriate and in accordance with the order to monitor, consider and review, inter alia, matters ofCode of Corporate Practices and Conduct contained in the a strategic, financial, non-financial and operational nature.Cadbury and King Reports I, II and III. Special Board meetings may be convened on an ad hoc basis, when necessary, to consider issues requiring urgentDIRECTORATE attention or decision. During the year under review, fourThe Board of Directors of African Sun Limited is constituted Board meetings were held.with an equitable ratio of executive to non-executive Directorsand meets at least quarterly. The African Sun Limited Board The Board works to a formal agenda prepared by theis chaired by a non-executive Director. Company Secretary in consultation with the Chairman and the Group Chief Executive, which, inter alia, covers operations,DIRECTORS INTERESTS finance, capital expenditure, acquisitions and strategy. AnyAs provided by the Companies Act (Chapter 24:03) and the Board member may request the addition of an item toCompany’s Articles of Association, the Directors are bound to the agenda and will liaise with the Company Secretary indeclare any time during the year, in writing, whether they have this regard. Board papers comprising the agenda, minutesany material interest in any contract of significance with the of Board and Board committee meetings and the relevantCompany which could have given rise to a related conflict of supporting documentation are circulated to all Directors ininterest. No such conflicts were reported this year. advance of each meeting in order that they can adequately prepare and participate fully, frankly and constructively inINTERNAL CONTROL Board discussions and bring the benefit of their particularThe Board of Directors is responsible for the Group’s systems knowledge, skills and abilities to the Board table.of internal control. These systems are designed to providereasonable, but not absolute, assurance as to the integrity BOARD COMMITTEESand reliability of the financial statements and to safeguard, The Board is authorised to form committees to assist in theverify and maintain accountability of its assets and to detect execution of its duties, powers and authorities. The Board has
25. Corporate Governance 25five standing committees, namely: Risk and Audit, Human THE NOMINATIONS COMMITTEEResources and Remuneration, Finance and Investments, The Nominations Committee is now a standing, as opposedMarketing and Nominations Committees. In addition, there to an ad hoc, committee pursuant to the recommendationsis the Corporate Governance Committee, which is an ad hoc made in King III Report. It is made up of a non-executivecommittee. The terms of reference and composition of the Chairman, the Group Chief Executive, and one non-committees are determined and approved by the Board and Executive Director. It assists with the identification andhave been adopted by the Board on an annual basis. recommendation of potential Directors to the Board.THE RISK AND AUDIT COMMITTEE CORPORATE GOVERNANCE COMMITTEEThe Risk and Audit Committee deals, inter alia, with The Corporate Governance Committee is an ad hoccompliance, internal control and risk management. It committee which sits as and when it is necessary. It is madeis regulated by specific terms of reference, chaired by a up of a non-executive Chairman, the Group Chief Executivenon-executive Director, has one non-executive Director and and two other non-executive Directors.incorporates the Group Chief Executive and Chief FinanceOfficer as members. It meets with the Company’s external NATIONAL WORKS COUNCIL AND WORKERSauditors to discuss accounting, auditing, internal control COMMITTEESand financial reporting matters. The external and internal The Group holds National Works Council meetings at leastauditors have unrestricted access to the Risk and Audit twice a year. Each hotel within the Group has a Works CouncilCommittee. representative who attends these meetings, which is a forum where employees participate in the decision-makingTHE HUMAN RESOURCES AND REMUNERATION process and also discuss employees’ concerns with topCOMMITTEE management. The Group believes in and practises workerThe Group has a Human Resources and Remuneration participation throughout the different levels. All hotels haveCommittee which is made up of a non-executive Chairman, Workers’ Committees, which serve as a communicationthe Group Chief Executive and one non-executive Director. channel with shop floor employees.The Committee acts in accordance with the Board’s writtenterms of reference to review remuneration of all African Sun ANALYST BRIEFINGLimited Executive Directors, senior management and other The Group reports formally to shareholders twice a yearmembers of staff. when its half year and full year results are announced. The Group Chief Executive and the Chief Finance Officer giveTHE FINANCE AND INVESTMENTS COMMITTEE presentations on these results to institutional investors,The Group Finance and Investments Committee is made up analysts and the media. The data used in these presentationsof a non-executive Chairman, the Group Chief Executive, may be found at www.africansuninvestor.com.Chief Finance Officer and two non-executive Directors. TheCommittee is responsible for the review and preliminary ANNUAL GENERAL MEETINGapproval of the major investment decisions of the The Annual General Meeting provides a useful interface withCompany. private shareholders, many of whom are also customers.THE MARKETING COMMITTEE The Chairman of the Board and the Group Chief ExecutiveThe Group has a Marketing Committee comprising a non- are available at the Annual General Meeting to answerexecutive Chairman, the Group Chief Executive and one questions. Information about the Group is maintained andnon-executive Director. The Committee is responsible for available to shareholders at www.africansuninvestor.com.the review of all sales and marketing programmes of theGroup.
26. Corporate Governance 26DIRECTORS ATTENDANCE OF MEETINGS IN 2009Individual Director attendance at Board and Committeemeetings appears in the table below. Where a Director hasnot been able to attend a Board meeting, any commentswhich he or she has had arising out of the papers to beconsidered at that meeting have been relayed in advance tothe Chairman of the Board. Main Board Finance and Marketing Risk and Audit Human Resources Investments Committee Committee and Committee Remuneration Committee Number of 4 4 4 4 4 meetings Timothy Chiganze 3 3 – – – Bekithemba Nkomo 3 4 4 4 – Shingirai Munyeza 4 4 3 4 4 David Birch 4 – – 4 4 Elizabeth Chitiga 4 – – – – Yvonne Johnston 1 – 1 – – Vernon Lapham 1 1 – – – Nigel Mangwiro 4 4 *3 4 – Farai Rwodzi 4 4 – 1 –* by invitation• Vernon Lapham and Yvonne Johnston did not attend all of the meetings because they were both appointed to the Boardwith effect from 1 July 2009
27. Directors Responsibility For Financial Reporting 27A frican Sun’s Directors are required by the Companies unlimited access to the Risk and Audit Committee. The Act (Chapter 24:03) and the Zimbabwe Stock Exchange Committee also reviews the interim and annual results oflisting requirements, to maintain adequate accounting the Company prior to their publication.records and to prepare financial statements for eachfinancial year which present a true and fair view of the In addition, the Group’s external auditors review andstate of affairs of the Group at the end of the financial test appropriate aspects of the internal financial controlyear, and of the profit or loss and cash flows for the period. systems during the course of their statutory examinationsIn preparing the accompanying financial statements, of the Group.generally accepted accounting practices have been followedand suitable accounting policies have been used and The Group’s Risk and Audit Committee has met the internalapplied consistently. Reasonable and prudent judgements and the external auditors to discuss their reports on theand estimates have been made. The financial statements results of their work, which include assessments of theincorporate full and responsible disclosure in line with the relative strengths and weaknesses of key control areas. Inaccounting philosophy of the Group stated on page 19. a Group of the size, complexity and geographical diversity of African Sun Limited, it may be expected that occasionalThe Directors have reviewed the Group’s budget and cash breakdowns in established control procedures may occur.flow forecast for the twelve months to 30 September No breakdowns involving material loss have been reported2010. On the basis of the review of the operating to the Directors in respect of the year under review and itforecasts and in light of the current financial position and is believed that none of any significance exist.existing borrowing facilities, the Directors are satisfiedthat African Sun Limited is a going concern and have The financial statements for the twelve months ended 30continued to adopt the going concern basis in preparing September 2009 which appear on pages 30 to 65 havethe financial statements. The Group’s external auditors, been approved by the Board of Directors and are signedPricewaterhouseCoopers, have audited the financial on its behalf by:statements and their report appears on pages 28 to 29.The Group has an independent internal audit function,which has the objective of assisting executive managementand the Risk and Audit Committee in the discharge of theirresponsibilities, and which monitors the effectiveness TIMOTHY CHIGANZEof the accounting system and related internal financial Chairmancontrols on a continuing basis. The internal audit functionperforms a critical examination of the financial andoperating information for Management, and reports itsfindings and its recommendations to Management and tothe Risk and Audit Committee. SHINGIRAI MUNYEZAProcedures are in place to identify key business risks Group Chief Executivetimeously, to determine the likelihood of the risks 8 January 2010crystallising, and to determine the significance of theconsequential financial impact on the business.There is a Risk and Audit Committee of the Board ofDirectors, which meets quarterly with Management, theinternal auditors and external auditors, to review specificaccounting, reporting and internal control matters, and tosatisfy itself that the system of internal control is operatingeffectively. Both the internal and external auditors have
28. PricewaterhouseCoopers Building Number 4, Arundel Office Park Norfolk Road Mount Pleasant P Box 453 .O. Harare ZimbabweINDEPENDENT AUDITORS REPORTTO THE MEMBERS OF AFRICAN SUN LIMITEDW e have audited the accompanying consolidated financial statements of African Sun Limited and its subsidiaries (the “Group”) and the accompanying statement of financial position of African Sun Limited (the “Company”) standing alone, together the“financial statements”, which comprise the consolidated and separate statements of financial position as at 30 September 2009, andthe consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement ofcashflows for the year then ended and a summary of significant accounting policies and other explanatory notes, set out on pages 30to 65.DIRECTORS RESPONSIBILITY FOR THE FINANCIAL STATEMENTSThe directors are responsible for the preparation and fair presentation of these financial statements in accordance with InternationalFinancial Reporting Standards and the provisions of the Zimbabwe Companies Act (Chapter 24:03) and the relevant StatutoryInstruments ("SI") SI 33/99 and SI 62/96. This responsibility includes designing, implementing and maintaining internal controlrelevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due tofraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in thecircumstances.AUDITORS RESPONSIBILITYOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance withInternational Standards on Auditing. These Standards require that we comply with ethical requirements and plan and perform the auditto obtain reasonable assurance whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain evidence about the amounts and disclosures in the financial statements. Theprocedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of thefinancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevantto the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriatein the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An auditalso includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, 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 adverse audit opinion.BASIS FOR ADVERSE OPINIONAs explained in note 2.2 to the financial statements, the functional and presentation currency of the Company and the presentationcurrency of the Group changed on 1 February 2009 from the Zimbabwe Dollar (ZWD) to the United States of America Dollar (USD). TheZimbabwe economy was previously recognised as being hyperinflationary for purposes of financial reporting. To effect the change infunctional currency, the Group and the Company were required by International Accounting Standard ("IAS") 21, The Effects of Changesin Foreign Exchange Rates, to restate their financial statements as at and for the four months ended 31 January 2009 in accordancewith IAS 29, Financial Reporting in Hyperinflationary Economies, before translating the amounts at the closing rate as at 1 February2009. However, the Group and the Company translated ZWD balances to USD at 1 February 2009 at fair value and transactions forthe four months to 31 January 2009 at market exchange rates prevailing during the period, as disclosed in note 2.6(d) to the financialstatements, without first restating and translating these transactions and balances as required by IAS 29 and IAS 21, respectively.
29. Furthermore, IAS 21 and IAS 29 require that the inflation adjusted comparative financial information should be translated at theclosing exchange rate as at 30 September 2008. The directors have however not presented any comparative information for the reasonsdisclosed in note 2.3 to the financial statements. Presentation of comparative information is required by IAS 1, Presentation of FinancialStatements.It was impracticable for us to quantify the effects of non-compliance with IAS 1, IAS 21 and IAS 29 on the financial statements.Non-preparation of inflation-adjusted financial information as required by IAS 29 was the basis for our adverse opinion on the financialstatements as at and for the year ended 30 September 2008, dated 12 February 2009.ADVERSE OPINIONIn our opinion, because of the significance of the matters referred to in the Basis for Adverse Opinion paragraph, the accompanyingfinancial statements do not give a true and fair view of the financial position of the Group and of the Company as at 30 September2009 and of the Group’s consolidated financial performance and consolidated cash flows for the year then ended in accordancewith International Financial Reporting Standards and the Zimbabwe Companies Act (Chapter 24:03) and the relevant StatutoryInstruments SI 33/99 and SI 62/96.EMPHASIS OF MATTERWithout further qualifying our opinion, we draw attention to note 32 which indicates that the Group and the Company operate in anuncertain macro-economic environment in Zimbabwe.PRICEWATERHOUSECOOPERSCHARTERED ACCOUNTANTS (ZIMBABWE)HARARE29 JANUARY 2010
30. Consolidated Statement Of Financial Position 30as at 30 september 2009 2009 ASSETS Note US$ Non-current assets Property, plant and equipment 6 22 543 389 Intangible assets 7 2 110 675 Biological assets 8 238 610 Investment in associate 9.1 10 397 720 Other investments 9.2 1 074 724 Deferred income tax asset 20 519 195 Receivables 10 199 556 37 083 869 Current assets Inventories 11 2 331 495 Non-current assets held for sale 12 300 000 Trade and other receivables 13 5 573 650 Available-for-sale financial assets 6 259 Cash and bank 1 392 798 9 604 202 Total assets 46 688 071 EQUITY AND LIABILITIES Equity attributable to owners of the company Share capital 15 – Amount awaiting allotment 17.2 21 690 721 Non-distributable reserve 17.1 3 728 407 Other reserves 17.3 (818 325) Accumulated loss 16 (3 535 135) Total equity 21 065 668 Liabilities Non-current liabilities Other payables 18 405 124 Borrowings 19 741 543 Deferred income tax liability 20 5 270 257 6 416 924 Current liabilities Trade and other payables 18 12 764 412 Borrowings 19 6 441 067 19 205 479 Total liabilities 25 622 403 Total equity and liabilities 46 688 071These financial statements were approved by the board on the 8th of January 2010 and signed on its behalf by:TIMOTHY CHIGANZE SHINGIRAI MUNYEZAChairman Group Chief Executive
31. Company Statement Of Financial Position 31as at 30 september 2009 2009ASSETS Note US$Non-current assetsProperty, plant and equipment 6 1 641 380Investment in subsidiaries 34 12 819 982Investment in associate 9.1 10 397 720 24 859 082Current assetsReceivables 35 866 552Cash and bank 1 378 867 930Total assets 25 727 012EQUITY AND LIABILITIESEquity attributable to owners of the companyShare capital 15 –Amount awaiting allotment 22 890 721Accumulated loss 16 (253 525)Total equity 22 637 196LiabilitiesNon-current liabilitiesDeferred income tax 37 453 393Current liabilitiesPayables 36 663 340Borrowings 1 973 083 2 636 423Total liabilities 3 089 816Total equity and liabilities 25 727 012These financial statements were approved by the board on the 8th of January 2010 and signed on its behalf by:TIMOTHY CHIGANZE SHINGIRAI MUNYEZAChairman Group Chief Executive
32. Consolidated Statement Of Comprehensive Income 32for the year ended 30 september 2009 2009 Note US$Revenue 5 35 236 138Cost of sales 23 (12 103 404)Gross profit 23 132 734Operating expenses 23 (29 066 886)Other income 22 119 154Gain on acquisition of subsidiary 28 884 568Operating loss (4 930 430)Finance income 24 78 442Finance costs 24 (461 364)Share of loss from associate 9.1 (54 307)Loss before taxation (5 367 659)Taxation 25 1 002 760Loss for the year (4 364 899)Other comprehensive income net of tax:Fair value adjustment on available-for-sale financial assets 673TOTAL COMPREHENSIVE LOSS FOR THE YEAR (4 364 226)Loss attributable to:Owners of the company (4 364 899)Total comprehensive loss attributable to:Owners of the company (4 364 226)Earnings per share (cents)Basic and diluted 26 (0.63)The loss for the parent company for the year ended 30 September 2009 was US$253 525
33. Consolidated Statement Of Changes In Equity 33 for the year ended 30 september 2009 ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY Share Amount awaiting Non-distributable Foreign currency Fair value Accumulated Total capital allotment reserve translation reserve reserve loss shareholders equity US$ US$ US$ US$ US$ US$ US$Balance at 1October 2008 – – – 109 064 – 829 764 938 828Arising fromrestatement onchange in functionalcurrency – – 25 419 128 – – – 25 419 128Transfer to amountawaiting allotment – 21 690 721 (21 690 721) – – – –Currency translationdifferences – – – (928 062) – – (928 062)Othercomprehensiveincome – – – – 673 – 673Loss for the year – – – – – (4 364 899) (4 364 899)Balance at 30September 2009 – 21 690 721 3 728 407 (818 998) 673 (3 535 135) 21 065 668
34. Consolidated Statement Of Cashflows 34for the year ended 30 september 2009 2009 Note US$Cash flows from operating activitiesCash used in operations 27 (4 373 600)Net interest paid 24 (576 208)Income tax paid (38 207)Net cash used in operations (4 988 015)Cash flows from investing activitiesAdditions to property, plant and equipment 6 (83 870)Replacement of property, plant and equipment 6 (2 112 668)Investment to expand operations (1 000 000)Disposal of property, plant and equipment 9 727Net cash used in investing activities (3 186 811)Cash flows from financing activitiesDisposal of investments 483 774Increase in long term borrowings 741 543Increase in short term borrowings 5 617 051Net cash generated from financing activities 6 842 368Net decrease in cash and cash equivalents (1 332 458)Cash and cash equivalents at the beginning of the year 2 260 207Exchange loss on cash and cash equivalents 9 833Cash and cash equivalents at the end of the year 14 937 582
35. Notes to the Consolidated Financial Statements 35for the year ended 30 september 20091. GENERAL INFORMATION 2.1.1 ADOPTION OF NEW AND REVISED STANDARDSEstablished in 1968, the company was part of beverage (a) Standards and interpretations early adopted by themanufacturer Delta Corporation. It has grown significantly Group:into a pan-Africa hospitality group with interests in Zimbabwe, IAS 1: Presentation of Financial Statements. Effective fromSouth Africa, Nigeria, Ghana and Zambia and is listed on the 1 January 2009Zimbabwe Stock Exchange. IFRS 8: Operating Segments. Effective from 1 January 2009To reflect its pan-African ambitions, the company changed its (b) Standards and interpretations effective but not relevant:name from Zimbabwe Sun Limited to African Sun Limited in IFRIC 11, IFRS 2: Group and Treasury Share Transactions.May 2008. Effective from 1 January 2008. IFRIC 13: Customer Loyalty Programme. Effective 1 JanuaryAfrican Sun Limited owns 100% of African Sun Zimbabwe 2008.(Private) Limited, 100% of African Sun Limited (PCC) IFRIC 14, IAS 19: The Limit on a Defined Benefit Asset,Mauritius, its regional investment vehicle, 100% of Hotelserve Minimum Funding Requirements and their Interaction.Holdings (Private) Limited, a procurement and distribution Effective 1 January 2008.company as well as 17.72% in Dawn Properties Limited.The Group leases most of its hotels from Dawn Properties (c) Standards and interpretations issued or revised not yetLimited. effective but relevant to the Group: IFRS 2: Share-based Payments (revised). Effective from 12. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES January 2009The following paragraphs set out the principal accounting IFRS 3: Business Combinations (revised). Effective from 1policies of the Group in compliance with International Financial January 2009Reporting Standards (IFRS) promulgated by the International IFRS 5: Non-current Assets Held for Sale and DiscontinuedAccounting Standards Board (IASB). (International Operations (revised). Effective from 1 January 2009Financial Reporting Standards incorporate all International IFRS 7: Financial Instruments: Disclosures. Effective from 1Accounting Standards previously issued by the IASB). Unless January 2009otherwise stated, these are consistent with previous years. IAS 16: Property, Plant and Equipment (revised). Effective from 1 January 2009 2.1 BASIS OF PREPARATION IAS 19: Employee Benefits (revised). Effective from 1The consolidated financial statements have been prepared in January 2009accordance with International Financial Reporting Standards IAS 23: Borrowing Costs (revised). Effective from 1 January(IFRS) except for non-compliance with International 2009Accounting Standards (IAS) 1; "Presentation of Financial IAS 27: Consolidated and Separate Financial StatementsStatements", IAS 21; "The Effects of Changes in Foreign (revised). Effective from 1 July 2009Exchange Rate" and IAS 29; "Reporting in Hyperinflationary IAS 28: Investment in Associates (revised). Effective from 1Economies". The financial statements are based on statutory July 2009records that are maintained under the historical cost IAS 23: Financial Instruments: Presentation (revised).convention as modified by the revaluation of property, plant Effective from 1 January 2009and equipment and biological assets. IAS 36: Impairment of Assets (revised). Effective from 1 January 2009The preparation of financial statements in conformity with IAS 38: Intangible Assets (revised). Effective from 1 JanuaryIFRS requires the use of certain critical accounting estimates. 2009It also requires management to exercise its judgement in the IAS 39: Financial Instruments: Recognition andprocess of applying the Groups accounting policies. The Measurement (revised). Effective from 1 July 2009areas involving a higher degree of judgement or complexity, IAS 40: Investment Property (revised). Effective from 1or areas where assumptions and estimates are significant to January 2009the consolidated financial statements, are disclosed in note4.
36. Notes to the Consolidated Financial Statements 36for the year ended 30 september 2009(d) Standards and interpretations issued or revised not yet it was practically impossible to restate prior year Zimbabweeffective and not relevant to the Group: Dollar figures into United States Dollars in a mannerIAS 20: Accounting for Government Grants and Disclosure consistent with IAS 21 and IAS 29 (as described above) givenof Government Assistance(revised). Effective from 1 January the unavailability of reliable and prerequisite inflation indices2009 and exchange rates.IFRIC 15: Agreements for Construction of Real Estates(revised). Effective from 1 January 2009 2.4 CONSOLIDATION (a) Subsidiaries 2.2 NON-COMPLIANCE WITH INTERNATIONAL Subsidiaries are all entities over which the Group has theFINANCIAL REPORTING STANDARDS (IFRS) power to govern the financial and operating policies generallyThe Groups and the Companys functional currency changed accompanying a shareholding of more than one-half of theon 1 February 2009 from the Zimbabwe Dollar to the United voting rights. The existence and effect of potential voting rightsStates of America Dollars following the introduction of the that are currently exercisable or convertible are consideredmulti-currency system in Zimbabwe. The Group and company when assessing whether the Group controls another entity.have not been able to comply with the requirements of IAS 21: Subsidiaries are fully consolidated from the date on whichEffects of Changes in Exchange Rates because this standard control is transferred to the Group. They are de-consolidatedrequires that, in accounting for changes in functional currency, from the date that control ceases.all transactions that are in the currency of a hyperinflationaryeconomy be adjusted to a unit of measure current at the The purchase method of accounting is used to account formeasurement date before conversion to an alternative the acquisition of subsidiaries by the Group. The cost of anpresentation currency. The Group and Company have not been acquisition is measured as the fair value of the assets given,able to comply with the requirements of IAS 29: Reporting equity instruments issued and liabilities incurred or assumedin Hyperinflationary Economies due to non availability of at the date of exchange, plus costs directly attributable to thereliable inflation indices, consequently the Zimbabwe Dollar acquisition. Identifiable assets acquired and liabilities andbalances and transactions were not inflation adjusted. contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date,The inflation indices applicable to the Zimbabwe Dollar were irrespective of the extent of any minority interest. The excessnot published from 31 July 2008. Estimates by economists of the cost of acquisition over the fair value of the Group’sfor the Zimbabwe Dollar inflation in the period post 31 July share of the identifiable net assets acquired is recorded as2008 were wide ranging and extremely high (percentages in goodwill. If the cost of acquisition is less than the fair valueexcess of hundreds of trillions to quadrillions in some cases). of the net assets of the subsidiary acquired, the differenceIt was impossible to reliably measure inflation in Zimbabwe is recognised directly in the statement of comprehensiveduring this period because of the rate of change of inflation income.on a daily basis was extremely high. Any attempt to measureinflation was subject to various limitations because reliable Inter-company transactions, balances and unrealised gainsand timely price data was not available. The inability to reliably on transactions between group companies are eliminated.measure inflation was also exacerbated by the existence of Unrealised losses are also eliminated but considered anmultiple exchange rates, the use of foreign currency for some impairment indicator of the asset transferred. Accountingtransactions and the existence of multiple pricing criteria for policies of subsidiaries have been changed where necessarysimilar products based on the mode of settlement. to ensure consistency with the policies adopted by the Group.In these circumstances, inflation adjusted financialstatements were not prepared up to 1 February 2009 (date (b) Associatesof change in functional currency) as required by IAS 29, Associates are all entities over which the Group has"Financial Reporting in Hyperinflationary Economies". significant influence but no control, generally accompanying a shareholding of between 20% and 50% of the voting 2.3 COMPARATIVE FINANCIAL STATEMENTS rights. Investments in associates are accounted for by theIAS 1 requires that comparative financial statements equity method and are initially recognised at cost. Thebe presented alongside current financial statements. Groups investment in associates includes goodwill (net ofComparitive financial statements have not been presented as any accumulated impairment loss) identified on acquisition.
37. Notes to the Consolidated Financial Statements 37for the year ended 30 september 2009The Groups share of its associates post-acquisition profits statement of comprehensive income, except when deferredor losses are recognised in the statement of comprehensive in equity as qualifying cash flow hedges and qualifying netincome and its share of post-acquisition movements in reserves investment hedges.is recognised in reserves. The cumulative post-acquisitionmovements are adjusted against the carrying amount of the Foreign exchange gains and losses that relate to borrowingsinvestment. When the Groups share of losses in an associate and cash and cash equivalents are presented in the statementequals or exceeds its interest in the associate, including any other of comprehensive income within "finance income or cost".unsecured receivables, the Group does not recognise further All other foreign exchange gains and losses are presented inlosses, unless it has incurred obligations or made payments the statement of comprehensive income within other "losses oron behalf of the associate. Unrealised gains on transactions gains".between the Group and its associate are eliminated to the extentof the Groups interest in the associates. Unrealised losses are Translation differences on non-monetary financial assets andalso eliminated unless the transactions provide evidence of an liabilities such as equities held at fair value through profit orimpairment of the asset transferred. loss are recognised in profit or loss as part of fair value gain or loss. Translation differences on non-monetary financialAccounting policies of associates have been changed where assets such as equities classified as available-for-sale arenecessary to ensure consistency with the policies adopted by included in the available-for-sale reserve in equity.the Group. Dilution gains and losses arising in investments inassociates are recognised in the statement of comprehensive (c) Group companiesincome. The results and financial position of all the Group entities that have a functional currency different from the presentation 2.5 SEGMENT REPORTING currency (none of which has the currency of a hyper-Operating segments are reported in a manner consistent inflationary economy) are translated into the presentationwith the internal reporting provided to the chief operating currency as follows:decision-maker. The chief operating decision-maker, whois responsible for allocating resources and assessing (i) assets and liabilities for each Statement of Financialperformance of the operating segments, has been identified Position presented are translated at the closing rate at theas the Managing Director, who makes strategic decisions. reporting date; 2.6 FOREIGN CURRENCY TRANSLATION (ii) income and expenses for each statement of comprehensive(a) Functional and presentation currency income are translated at average exchange rates (unless thisItems included in the financial statements of each of the average is not a reasonable approximation of the cumulativeGroups entities are measured using the currency of the primary effect of the rates prevailing on the transaction dates, ineconomic environment in which the entity operates ("the which case income and expenses are translated at the ratefunctional currency"). The consolidated financial statements on the dates of the transactions); andare presented in United States Dollars (USD), which is theCompanys functional and the Groups presentation currency. (iii) all resulting exchange differences are recognised as aThe functional and presentation currency for the Zimbabwe separate component of equity.operations changed from Zimbabwe Dollars (ZWD) to UnitedStates Dollars (USD) with effect from 1 February 2009, On consolidation, exchange differences arising from thefollowing the introduction of the multi-currency system. translation of the net investment in foreign operations, and of borrowings and other currency instruments designated(b) Transactions and balances as hedges of such investments, are taken to shareholdersForeign currency transactions are translated into the equity. When a foreign operation is partially disposed of orfunctional currency using the exchange rates prevailing at the sold, exchange differences that were recorded in equity aredates of the transactions or valuation where items are re- recognised in the statement of comprehensive income asmeasured. Foreign exchange gains and losses resulting from part of the gain or loss on sale.the settlement of such transactions and from the translationat year-end exchange rates of monetary assets and liabilities Goodwill and fair value adjustments arising on the acquisitiondenominated in foreign currencies are recognised in the of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
38. Notes to the Consolidated Financial Statements 38for the year ended 30 september 2009(d) Change in functional and presentation currency plant and equipment is transferred directly to retainedDuring the year the Group changed its functional and earnings when the asset is de-recognised.presentation currency from the Zimbabwe Dollar (ZWD) tothe United States of America Dollar (USD) with effect from Subsequent costs are included in the assets carrying amount1 February 2009. Accordingly, the financial statements are or recognised as a separate asset as appropriate, only whenpresented in USD. As at that date, balances in the Zimbabwe it is probable that future economic benefits associated withentities were taken on in USD, in line with the guidance the item will flow to the Group and the cost of the item canissued jointly by the Public Accountants and Auditors Board, be measured reliably. The carrying amount of the replacedthe Zimbabwe Stock Exchange and the Zimbabwe Accounting part is de-recognised. All other repairs and maintenance arePractices Board, as follows: charged to the statement of comprehensive income during• Property plant and equipment – revalued based on a the financial period in which they are incurred. Directors valuation• Biological assets – revalued based on a Directors Depreciation is calculated on a straight line basis to allocate valuation their cost or revalued amounts to the residual values over• Investment in associate – based on net assets of their estimated useful lives as follows: associate• Receivables – actual USD amounts receivable from Freehold buildings 50 years customers and other parties Leasehold improvements 8 - 10 years• Payables – based on actual USD amounts owed to Plant and equipment 7 - 15 years suppliers of goods and services Vehicles 3 - 10 years• Inventories – based on invoice prices as most goods were imported and acquired from local suppliers using Hotel equipment comprising standard service stocks is not foreign currency depreciated but the annual charge for usage is recognised in• Cash and bank – actual foreign currency cash and bank the statement of comprehensive income. balances The useful lives and residual values of assets are reviewedThe surplus on the restatement of the assets and liabilities was and adjusted if appropriate at each reporting date. Where thecredited to non-distributable reserve in equity. Subsequent residual value of an asset increases to an amount equal to orto 1 February 2009, all transactions were accounted for in greater than the assets carrying amount, depreciation will ceaseaccordance with the accounting policies set out herein. to be charged on the asset until its residual value subsequently decreases to an amount below its carrying amount. 2.7. PROPERTY, PLANT AND EQUIPMENTHotel properties are maintained as a matter of company Assets are assessed for potential impairment at each reportingpolicy by an ongoing programme of refurbishment and repair. date. If circumstances exist which suggest that there mayProperty, plant, equipment and vehicles are stated at fair value be impairment, a more detailed exercise is carried out whichbased on periodic valuations by the Directors, less subsequent compares the carrying values of the assets to recoverable valueaccumulated depreciation and impairment losses. Property, based on either realisable value (fair value less costs associatedplant and equipment was last valued on 29 January 2009 by with disposal) or value in use. Value in use is determined usingindependent external valuers. discounted cash flows budgeted for each cash-generating unit. Detailed budgets for the ensuing three years are used and, whereAny accumulated depreciation at the date of revaluation is necessary, these are extrapolated for future years taking intoeliminated against the gross carrying amount of the asset, account known structural changes. Service division assets andand the net amount is restated to the revalued amount of the cash flows are allocated to operating divisions as appropriate.asset. Increases in the carrying amount arising on revaluation Discount rates used are the medium term expected pre-taxof property, plant and equipment are credited to a revaluation real rates of return, adjusted in the case of historical financialreserve through the statement of comprehensive income. information, to take account of inflation. Impairment losses areDecreases that offset previous increases of the same asset recognised as an expense in the statement of comprehensiveare charged against other reserves in equity through other income and the carrying value of the asset and its annualcomprehensive income; all other decreases are charged to depreciation are adjusted accordingly.the statement of comprehensive income. The revaluationsurplus included in equity in respect of an item of property,
39. Notes to the Consolidated Financial Statements 39for the year ended 30 september 2009In the event that, in a subsequent period, an asset that has merchandise suppliers. Initially, this was not recorded as anbeen subject to an impairment loss is considered no longer to asset in the books of the subsidiary. The asset has a finitebe impaired, the value is restored and the gain is recognised life and is carried at cost less accumulated amortisation andin the statement of comprehensive income. The restoration is impairment. Amortisation is calculated using the straight-limited to the value which would have been recorded had the line method to allocate the cost of the intangible over itsimpairment adjustment not taken place. estimated useful life of twenty years.Surpluses or deficits arising on the disposal of property, Customers and distributorship relationships are reviewedplant, equipment and vehicles are determined by comparing for impairment on an annual basis and the carrying amountproceeds with the carrying amount. These are included in the of the asset is written down to its recoverable amountstatement of comprehensive income. immediately, if the carrying amount is greater than the estimated recoverable amount.The Group capitalises borrowing costs directly attributableto the construction of new projects or re-development of 2.9. BIOLOGICAL ASSETSexisting hotels as part of the cost of that asset. The Group engages in agricultural activity through management of the biological transformation of biological 2.8. INTANGIBLE ASSETS assets for sale as agricultural produce or transformation into(a) Goodwill additional biological assets.Goodwill represents the excess of the cost of an acquisitionover the fair value of the Group’s share of the net identifiable The Group owns 566.76 hectares of timber plantation.assets of the acquired subsidiary at the date of acquisition.Goodwill on acquisition of subsidiaries is included in "intangible Timber plantationassets". Separately recognised goodwill is tested annually for Timber plantations are measured at their fair value lessimpairment and carried at cost, less accumulated impairment estimated point-of-sale costs. The fair value of timberlosses. Impairment losses on goodwill are not reversed. Gains plantations is determined by a professional valuer based onand losses on the disposal of an entity include the carrying fair values for the stages of forest development.amount of goodwill relating to the entity sold. 2.10. IMPAIRMENT OF NON-FINANCIAL ASSETSGoodwill is allocated to cash-generating units for the purpose Assets that have an indefinite useful life, for example goodwill,of impairment testing. The allocation is made to these are not subject to amortisation and are tested annually forcash-generating units that are expected to benefit from the impairment. Assets that are subject to amortisation are reviewedbusiness combination in which the goodwill arose identified for impairment whenever events or changes in circumstancesaccording to operating segment. indicate that the carrying amount may not be recoverable. An(b) Brand names and trademarks impairment loss is recognised for the amount by which theBrand names and trademarks have finite useful lives and are assets carrying amount exceeds its recoverable amount. Theshown at cost, less accumulated amortisation. Amortisation recoverable amount is the higher of an assets fair value lessis calculated using the straight-line method to allocate the costs to sell and value in use. For the purposes of assessingcost of brand names and trademarks over their estimated impairment, assets are grouped at the lowest levels for whichuseful lives of twenty years. there are separately identifiable cash flows (cash-generating units). Non-financial assets, other than goodwill, that suffered anBrand names and trademarks are reviewed for impairment impairment are reviewed for possible reversal of the impairmenton an annual basis and the carrying amount of an asset is at each reporting date.written down to its recoverable amount immediately, if thecarrying amount is greater than the estimated recoverable 2.11. FINANCIAL ASSETSamount. 2.11.1 Classification The Group classifies its financial assets in the following(c) Distributorship agreements categories: at fair value through profit or loss, loansDistributorship agreements were seperately identified and receivables, available-for-sale and held to maturity.and measured as an intangible asset on aquisition of a The classification depends on the purpose for which thesubsidiary (Hotelserve Holdings (Private) Limited). This financial assets were acquired. Management determines thearose from contractual rights the subsidiary has with several classification of its financial assets at initial recognition. At
40. Notes to the Consolidated Financial Statements 40for the year ended 30 september 2009year end, the company only had loans and receivables and are de-recognised when the rights to receive cash flows fromavailable-for-sale financial assets. the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards(a) Loans and receivables of ownership. Available-for-sale financial assets and financialLoans and receivables are non-derivative financial assets with assets at fair value through profit or loss are subsequentlyfixed or determinable payment terms that are not quoted in carried at fair value. Loans and receivables are carried atactive markets. They are included in current assets, except amortised cost using the effective interest method.for maturities greater than twelve months after the reportingdate. These are classified as non-current assets. The Groups Dividend income from financial assets at fair value throughloans and receivables comprise "trade and other receivables" profit or loss is recognised in the statement of comprehensiveand cash and cash equivalents in the statement of financial income as part of other income when the Group’s right toposition. receive payments is established.(b) Fair value through profit or loss The fair values of quoted investments are based on currentFinancial assets at fair value through profit or loss are financial bid prices. If the market for a financial asset is not activeassets held for trading. A financial asset is classified in this (and for unlisted securities), the Group establishes fair valuecategory if acquired principally for the purpose of selling by using valuation techniques. These include the use of recentin the short term. Gains or losses arising from changes in arm’s length transactions, reference to other instruments thatthe fair value of the "financial assets at fair value through are substantially the same, discounted cash flow analysis, andprofit or loss" category are recognised directly into income option pricing models, making maximum use of market inputsstatement within the period in which they arise. and relying as little as possible on entity-specific inputs.(c) Held-to-maturity investments 2.12. OFF-SETTING FINANCIAL INSTRUMENTSHeld to maturity investments include non-derivative financial Financial assets and liabilities are offset and the net amountassets with fixed or determinable payments and fixed reported in the statement of financial position when there ismaturities that the Groups management has the positive a legally enforceable right to offset the recognised amountsintention and ability to hold to maturity. These are classified and there is an intention to settle on a net basis, or realise theas non-current assets. Held-to-maturity investments are asset and settle the liability simultaneously.included in unlisted investments and loans in the balancesheet. 2.13. IMPAIRMENT OF FINANCIAL ASSETS (a) Assets carried at amortised cost(d) Available-for-sale financial assets The Group assesses at the end of each reporting periodAvailable-for-sale financial assets are non-derivatives that are whether there is objective evidence that a financial asset oreither designated in this category or not classified in any group of financial assets is impaired. A financial asset or aother categories. They are included in non-current assets group of financial assets is impaired and impairment lossesunless management intends to dispose of the investment are incurred only if there is objective evidence of impairmentwithin twelve months of the reporting date. Gains or losses as a result of one or more events that occurred after thearising in the fair value of the "available-for-sale financial initial recognition of the asset (a "loss event") and that lossassets" are recognised in the statement of comprehensive event (or events) has an impact on the estimated future cashincome within the period in which they arise. flows of the financial asset or group of financial assets that can be reliably measured. 2.11.2 Recognition and measurementRegular purchases and sales of financial assets are recognised (b) Assets classified as available-for-saleon the trade-date – the date on which the Group commits to The Group assesses at the end of each reporting period whetherpurchase or sell the asset. Investments are initially recognised there is objective evidence that a financial asset or a group ofat fair value plus transaction costs for all financial assets financial assets is impaired. For debt securities, the Groupnot carried at fair value through profit or loss. Financial uses the criteria to (a) above. In the case of equity investmentsassets carried at fair value through profit or loss are initially classified as available-for-sale, a significant or prolongedrecognised at fair value, and transaction costs are expensed decline in the fair value of the security below its cost is alsoin the statement of comprehensive income. Financial assets evidence that the assets are impaired. If any such evidence
41. Notes to the Consolidated Financial Statements 41for the year ended 30 september 2009exists for available-for-sale financial assets, the cumulative the proceeds.loss measured as the difference between the acquisition costand the current fair value, less any impairment loss on that Where any Group company purchases the companys equityfinancial asset previously recognised in other comprehensive share capital (treasury shares), the consideration paid,income, is removed from equity and recognised in the including any directly attributable incremental costs (net ofseparate consolidated income statement. Impairment losses income taxes) is deducted from equity attributable to therecognised in the separate consolidated income statement companys equity holders until the shares are cancelled oron equity instruments are not reversed through the separate reissued. Where such shares are subsequently reissued,consolidated income statement. If, in a subsequent period, any consideration received, net of any directly attributablethe fair value of a debt instrument classified as available-for- to incremental transaction costs and the related income taxsale increases and the increase can be objectively related to effects is included in equity attributable to the companysan event occurring after the impairment loss was recognised equity holders.in the income statement, the impairment loss is reversedthrough the separate consolidated income statement. 2.18. TRADE PAYABLES Trade payables are obligations to pay for goods or services 2.14. INVENTORY that have been acquired in the ordinary course of businessInventories, which consist of foodstuffs, beverages, shop from suppliers. Accounts payable are classified as currentmerchandise and consumable stores, are stated at the lower liabilities if payment is due within one year or less (or in theend of cost and net realisable value. Cost is determined on normal operating cycle of the business if longer). If not, theya "first-in, first-out" (FIFO) basis. Net realisable value is the are presented as non-current liabilities.estimated selling price in the ordinary course of business,less the estimated costs necessary to make the sale. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective 2.15. TRADE RECEIVABLES interest method.Trade receivables are amounts due from customers forgoods sold or services performed in the ordinary course 2.19. BORROWINGSof business. Trade receivables are recognised initially at Borrowings are recognised initially at fair value, net offair value and subsequently measured at amortised cost transaction costs incurred. Borrowings are subsequentlyusing the effective interest rate method, less provision carried at amortised cost; any difference between thefor impairment. proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensiveA provision for impairment of trade receivables is established income over the period of the borrowings using the effectivewhere there is objective evidence that the Group will not be interest method.able to collect all amounts due according to the original termsof receivables. The amount of the provision is the difference Fees paid on establishment of loan facilities are recognised asbetween the carrying amount and the present value of future transaction costs of the loan to the extent that it is probablecash flows, discounted at the effective interest rate. The that some or all of the facility will be drawn down. In this case,amount of the provision is recognised in the statement of the fee is deferred until the draw down occurs. To the extentcomprehensive income. that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre- 2.16. CASH AND CASH EQUIVALENTS payment for liquidity services and amortised over the periodCash and cash equivalents include cash-in-hand, deposits of the facility to which it relates.held at call with banks, other short term, highly-liquidinvestments with original maturities of three months or less, Borrowings are classified as current liabilities unless the Groupand bank overdrafts. has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. 2.17. SHARE CAPITALOrdinary shares are classified as equity. Incremental 2.20. PROVISIONScosts directly attributable to the issue of new shares or Provisions are recognised when the Group has a presentoptions are shown in equity as a deduction, net of tax from legal or constructive obligation as a result of past events;
42. Notes to the Consolidated Financial Statements 42 for the year ended 30 september 2009it is probable that an outflow of resources will be required Deferred income tax assets are recognised only to the extentto settle the obligation; and the amount has been reliably that it is probable that future taxable profit will be availableestimated. Provisions are not recognised for future operating against which the temporary differences can be utilised.losses. Deferred income tax assets and liabilities are offset when thereWhere there is a number of similar obligations, the likelihood is a legally enforceable right to offset current tax assets againstthat an outflow will be required in settlement is determined current tax liabilities and when the deferred income taxes assetsby considering the class of obligations as a whole. A provision and liabilities relate to income taxes levied by the same taxationis recognised even if the likelihood of an outflow with respect authority on either the taxable entity or different taxable entitiesto any one item included in the same class of obligations where there is an intention to settle the balances on a netmay be small. basis.Provisions are measured at the present value of the 2.22. EMPLOYEE BENEFITSexpenditures expected to be required to settle the obligation (a) Pension obligationsusing a pre-tax rate that reflects current market assessments The Group has a defined benefit and a defined contribution plan. Aof the time value of money and the risks specific to the defined contribution plan is a pension plan under which the Groupobligation. The increase in the provision due to passage of pays fixed contributions into a separate entity. The Group has notime is recognised as interest expense. legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the 2.21. CURRENT AND DEFERRED INCOME TAX benefits relating to employee service in the current period andThe tax expense for the period comprises current and prior periods. A defined benefit plan is a pension plan that is notdeferred tax. Tax is recognised in the income statement, a defined contribution plan. Typically defined benefit plans defineexcept to the extent that it relates to items recognised in an amount of pension benefit that an employee will receive onother comprehensive income or directly in equity. In this retirement, usually dependant on one or more factors such ascase, the tax is also recognised in other comprehensive age, years of service and compensation.income or directly in equity, respectively. The liability recognised in the statement of financial position inThe current income tax charge is calculated on the basis respect of defined benefit pension plans is the present value ofof the tax laws enacted or substantively enacted at the the defined benefit obligation at the end of the reporting period,reporting date in the countries where the companys less the fair value of plan assets, together with adjustmentssubsidiaries and associates operate and generate taxable for unrecognised actuarial gains or losses and past serviceincome. Management periodically evaluates positions taken costs. The defined benefit obligation is calculated annually byin tax returns with respect to situations in which applicable independent actuaries using the projected unit credit method.tax regulation is subject to interpretation. It establishes The present value of the defined benefit obligation is determinedprovisions, where appropriate, on the basis of amounts by discounting the estimated future cash outflows using interestexpected to be paid to the tax authorities. rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms toDeferred income tax is recognised, using the liability maturity approximating the terms of the related pension liability.method, on temporary differences arising between the tax Actuarial gains and losses arising from experience adjustmentsbases of assets and liabilities and their carrying amounts and changes in actuarial assumptions are charged or creditedin the consolidated financial statements. However, the to equity in other comprehensive income in the period in whichdeferred income tax is not accounted for if it arises from they arise.initial recognition of an asset or liability in a transactionother than a business combination that at the time of the Past-service costs are recognised immediately in income, unlesstransaction affects neither accounting nor taxable profit or the changes to the pension plan are conditional on the employeesloss. Deferred income tax is determined using tax rates (and remaining in service for a specified period of time (the vestinglaws) that have been enacted or substantially enacted by the period). In this case, the past-service costs are amortised on areporting date and are expected to apply when the related straight-line basis over the vesting period.deferred income tax asset is realised or the deferred incometax liability is settled.
43. Notes to the Consolidated Financial Statements 43for the year ended 30 september 2009For defined contribution plans, the Group pays contributions if any, in the statement of comprehensive income, with ato publicly or privately administered pension insurance plans corresponding adjustment to equity.on a mandatory, contractual or voluntary basis. The Group hasno further payment obligations once the contributions have The proceeds received net of any directly attributablebeen paid. The contributions are recognised as an employee transaction costs are credited to share capital and sharebenefit expense when they are due. Prepaid contributions are premium when the options are exercised.recognised as an asset to the extent that a cash refund orreduction in the future payments is available. 2.24. REVENUE RECOGNITION Revenue comprises the fair value of the consideration(b) Termination benefits received or receivable for the sale of goods and servicesTermination benefits are payable when employment is in the ordinary course of the Groups activities. Revenue isterminated by the Group before the normal retirement date, shown net of value-added tax, returns, rebates and discountsor whenever an employee accepts voluntary redundancy in and after eliminating sales within the Group.exchange for these benefits. The Group recognises terminationbenefits when it is demonstrably committed to either The Group recognises revenue when the amount of revenueterminating the employment of current employees according can be reliably measured, it is probable that future economicto a detailed formal plan without the possibility of withdrawal, benefits will flow to the entity and when specific criteria haveor providing termination benefits as a result of an offer made been met for each of the Groups activities as describedto encourage voluntary redundancy. Benefits falling due more below. The Group bases its estimates on historical results,than 12 months after the reporting period are discounted to taking into consideration the type of customer, the type oftheir present value. transaction and the specifics of each arrangement.(c) Bonus plans (a) Revenue from leased operationsThe Group recognises a liability and an expense for Revenue from leased operations is primarily derived frombonuses based on a formula that takes into consideration hotel operations, including the rental of rooms, food andkey performance indicators measured on a biannual basis. beverage sales from leased hotels operated under theThe Group recognises a provision where contractually Groups brand names. Revenue is recognised when roomsobliged or where there is a past practice that has created a are occupied and food and beverages are sold.constructive obligation. (b) Management fees 2.23. SHARE-BASED PAYMENT Management fees represent fees earned from hotelsThe Group operates an equity-settled, share-based compensation managed by the Group, usually under long-term contractsplan, under which the entity receives services from employees as with the hotel owner. These are generally a percentage ofconsideration for equity instruments of the Group. The fair value hotel revenue, and an incentive fee, which is based on a fixedof the employee services received in exchange for the grant of or variable percentage of hotel profits after a stated returnthe options is recognised as an expense. The total amount to threshold to the owner. Management fees are recognised asbe expensed is determined by reference to the fair value of the revenue when they are earned in terms of the contracts.options granted, excluding the impact of any non-market service In interim periods and at year end, incentive fees areand performance vesting condition, for example, profitability, recognised as if they were due, had the contract beensales growth targets and remaining an employee of the entity terminated at the end of the period.over a specified time period. (c) Timeshare revenueNon-market vesting conditions are included in assumptions The extended reservations system involves the advance saleabout the number of options that are expected to vest. The of time modules for use during the next twenty-five years oftotal expense is recognised over the vesting period, which is apartments owned by the Group. At the end of this period,the period over which all of the specified vesting conditions all rights in the apartments revert to the Group. Revenueare to be satisfied. At the end of each reporting period, the is accounted for when a time module sale contract isentity revises its estimates of the number of options that are concluded.expected to vest, based on the non-market vesting conditions.It recognises the impact of the revision to original estimates,
44. Notes to the Consolidated Financial Statements 44for the year ended 30 september 2009 2.25. LEASES (a) Market riskLeases in which a significant portion of the risks and rewards of (i) Foreign exchange riskownership are retained by the lessor are classified as operating The Group operates regionally and is exposed to foreignleases. Payments made under operating leases (net of any exchange risk arising from various currency exposures,incentives received from the lessor) are charged to the statement primarily with respect to the South African Rand. Foreignof comprehensive income on a straight-line basis over the exchange risk arises from future commercial transactions,period of the lease. Leases of property, plant and equipment recognised assets and liabilities and net investments inwhere the Group has substantially all the risks and rewards of foreign operations.ownership are classified as finance leases. Finance leases arecapitalised at the leases commencement at the lower of the Foreign exchange risk arises when future commercialfair value of the leased property and the present value of the transactions or recognised assets and liabilities areminimum lease payments. denominated in a currency that is not the entitys functional currency. The Group has certain investments in foreignEach lease payment is allocated between the liability and operations whose net assets are exposed to foreign currencyfinance charges so as to achieve a constant rate on the finance translation risk. Currency exposure arising from the netbalance outstanding. The corresponding rental obligations, net assets of the Groups foreign operations is managed primarilyof finance charges, are included in other long-term payables. through borrowings denominated in the relevant foreignThe interest element of the finance cost is charged to the currencies.statement of comprehensive income over the lease period so asto produce a constant periodic rate of interest on the remaining (ii) Price riskbalance of the liability for each period. The property, plant and The Group is exposed to equity securities price risk becauseequipment acquired under finance leases is depreciated over of investments held by the Group and classified on thethe shorter of the useful life of the asset and the lease term. consolidated Statement of Financial Position, either as available-for-sale or at fair value through profit or loss. 2.26. DIVIDEND DISTRIBUTIONDividend distribution to the companys shareholders is (iii) Cashflow and fair value interest rate riskrecognised as a liability in the Groups financial statements in As the Group has no significant interest bearing assets, thethe period in which the dividends are approved by the companys Groups income and operating cashflows are substantiallyshareholders. independent of changes in the market interest rates. The Groups interest rate risk arises from long-term and current3. FINANCIAL RISK MANAGEMENT borrowings. Borrowings issued at variable rates expose the 3.1 FINANCIAL RISK FACTORS Group to cashflow interest rate risk. Borrowings issued atThe Groups activities expose it to a variety of financial risks: fixed rates expose the Group to fair value interest rate risk.market risk (including currency risk, fair value interest raterisk, cashflow interest rate risk and price risk), credit risk and The Group analyses its interest rate exposure on dynamicliquidity risk. The Groups overall risk management programme basis. Various scenarios simulated taking into considerationfocuses on the unpredictability of financial markets and seeks refinancing, renewal of existing positions and alternativeto minimise potentially adverse effects on the Groups financial financing. Based on these scenarios, the group calculates theperformance. impact on profit and loss of a defined interest rate shift.Risk management is carried out by a central treasury (b) Credit riskdepartment (Group treasury) under policies approved by the Credit risk is managed on a Group basis. Credit risk arisesBoard of Directors. Group treasury identifies, evaluates and from cash and cash equivalents, and deposits with banks andhedges financial risks in close co-operation with the Groups financial institutions, as well as credit exposures to wholesaleoperating units. The Board provides principles for overall risk and retail customers, including outstanding receivables andmanagement, as well as policies covering specific areas such committed transactions. For banks anf financial institutions,as foreign exchange risk, interest rate risk, credit risk, use of only well established and reliable insitutions are used.derivative financial instruments and non-derivative financial Management assesses the credit quality of the customer,instruments, and investment of excess liquidity. taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal
45. Notes to the Consolidated Financial Statements 45for the year ended 30 september 2009ratings in accordance with limits set by the credit committee. The utilisation of credit limits are regularly monitored.(c) Liquidity riskCash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasurymonitors rolling forecasts of the Groups liquidity requirements to ensure it has sufficient cash to meet operational needs whilemaintaining sufficient headroom on its undrawn committed borrowing facilities at all times, so that the Group does not breachborrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration theGroups 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 over and above balance required for working capital management is transferred tothe Group treasury. Group treasury invests surplus cash in interest-bearing current accounts, time deposits, money marketsdeposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficientheadroom as determined by the above-mentioned forecasts.The table below analyses the Groups non-derivative financial liabilities in relevant maturity groupings based on the remainingperiod at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscountedcashflows. Less than 1 Between 1 and Between 2 and Over 5 years year 2 years 5 years US$ US$ US$ US$ At 30 September 2009 Borrowings 6 559 629 842 393 – – Trade and other payables 12 764 412 405 124 – – Total 19 324 041 1 247 517 – – 3.2. CAPITAL RISK MANAGEMENTThe Groups objectives when managing capital are to safeguard the ability to continue as a going concern in order to providereturns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the costof 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 asnet debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowingsas shown in the consolidated balance sheet) less cash and bank. Total capital is calculated as equity as shown in theconsolidated balance sheet plus net debt.
46. Notes to the Consolidated Financial Statements 46for the year ended 30 september 2009During 2009, the Groups strategy was to maintain a lower gearing ratio within 10% to 15% due to high cost of borrowing.The gearing ratio at 30 September 2009 was as follows: US$Total borrowings (note 18) 7 182 610Less cash and bank (note 14) (1 392 798)Net debt 5 789 812Total equity 21 065 668Total capital 26 855 480Gearing ratio 22% 3.3. FAIR VALUE ESTIMATIONThe fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. Amarket is regarded as active if quoted prices are readily and regularly available from an exchange dealer, broker, industrygroup, pricing service, or regulatory agency and those prices represent actual and regularly-occuring market transactionson an arms length basis.4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSEstimates and judgements are continually evaluated and are based on historical experience and other factors, includingexpectations of future events that are believed to be reasonable under the circumstances. 4.1. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONSThe 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 materialadjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.(a) Value of "The Grace" brand nameThe value of the brand name "The Grace" has been determined by assuming the hotel maintains certain average room ratesand occupancy levels over a projected time period. If revised estimated average room rates and occupancy levels were lowerthan managements estimates at 30 September 2009, the Group would need to reduce the carrying value of the brand nameaccordingly.(b) Estimated impairment of goodwillGoodwill was recognised when The Grace was purchased, which was determined as the excess of the cost of the businesscombination over the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. The Grouptests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.9.As at 30 September 2009, the recoverable amount of the business as determined by the hotels discounted cashflows over atwelve year period had significantly increased. If assumptions used by management had been 10% lower, goodwill could havestill not been impaired for the year ended 30 September 2009. The increase in the value of the business since acquisitionindicates that goodwill of The Grace is not impaired.(c) Income taxesThe Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwideprovision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. TheGroup recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final
47. Notes to the Consolidated Financial Statements 47for the year ended 30 september 2009tax outcome of these matters is different from the amounts that (f) Going concernwere initially recorded, such differences will impact the current The Directors assess the ability of the Group to continueand deferred income tax assets and liabilities in the period in operating as a going concern at the end of each financial year.which such determination is made. As at 30 September 2009, the Directors have assessed the ability of the Group to continue operating as a going concernIf the actual final outcome was to differ by 10% from managements and believe that the preparation of these financial statementsestimates, the Group would need to: on a going concern basis is still appropriate. However, the• increase the deferred tax liability by US$100,276, if Directors believe that under the current Zimbabwe economic unfavourable; or environment a continuous assessment of the ability of the• decrease the deferred tax liability US$100,276, if Group to continue to operate as a going concern will need to favourable. be performed to determine the continued appropriateness of the going concern assumption that has been applied in(d) Deemed opening balances on change in functional the preparation of these financial statements.currency(i) Property, plant and equipment (g) Intangible assets - Distributorship agreementsA valuation by an independent professional valuer was Distributorship agreements were recognised at acquisitionperformed in United States Dollars in order to reflect the of Hotelserve Holdings (Private) Limited, which wascorrect carrying amounts of the assets for the opening determined as the difference between the present value ofstatement of financial position. the company cashflows for five years with the dealership agreements and present value of the company cashflows for(ii) Current assets and current liabilities five years without the dealership agreements. The Group willA significant amount of the assets and liabilities were test annually whether the asset has suffered any impairment,converted to their actual United States Dollar values as most in accordance with the accounting policy stated in note 2.8of the balances were denominated in currencies other than (c).the Zimbabwe Dollar. The Zimbabwe Dollar denominatedamounts were converted using the market exchange rate on As at 30 September 2009, the recoverable amount of thedate of change in functional currency. business as determined by discounted cashflows over a five year period was equal to the carrying amount indicating that(iii) Retained earnings the tangible asset is not impaired.The Group maintained retained earnings from foreignoperations only as the conversion of the Zimbabwe Dollaramounts would have amounted to distortion of the openingbalance. Retained earnings denominated in Zimbabwe Dollarswere written to non-distributable reserves.In the Directors opinion, the opening statement of financialposition represents a true and fair position of the Groupsfinancial position and has been adopted as a base for financialreporting.(e) Valuation of property, plant and equipment Property, plant and equipment is presented at revaluedamounts less accumulated depreciation. A directorsvaluation is performed annually to determine the marketvalues, remaining useful lives and residual values of property,plant and equipment. These measurements require the useof critical judgement. Property, plant and equipment waslast valued on 1 February 2009 and in the opinion of theDirectors, these estimates are still relevant.
48. Notes to the Consolidated Financial Statements 48 for the year ended 30 september 2009 5. SEGMENT INFORMATION Management has determined the operating segments based on the reports reviewed by the Executive Committee that makes strategic decisions. 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). The segment information provided to the executive committee for the reportable segments for the year ended 30 September 2009 is as follows: Southern Africa West Africa Eliminations Consolidated Zimbabwe South Africa Ghana Nigeria US$ US$ US$ US$ US$ US$Revenue:Sale of goods 2 218 323 – – – – 2 218 323Sale of services 26 135 106 7 281 366 593 692 187 288 (1 179 637) 33 017 815Total revenue 28 353 429 7 281 366 593 692 187 288 (1 179 637) 35 236 138Other InformationEBITDA (2 307 246) (1 075 972) 309 906 (126 069) (3 199 381)Depreciation 1 516 054 225 821 – – – 1 741 875Amortisation 19 595 23 875 – – – 43 470Capital additions 1 942 051 303 995 10 455 4 179 – 2 260 680Total assets 39 425 250 7 194 294 56 388 12 139 46 688 071Total assets include:Investment in associate 10 397 720 – – – – 10 397 720Additions to non-current assets(other than financial instrumentsand deferred tax assets) 1 942 051 303 995 10 455 4 179 – 2 260 680Total liabilities 18 580 981 6 920 126 10 245 111 051 – 25 622 403 The significant addition of hotels operating outside Zimbabwe, in line with the Groups expansion drive, has led management to change its approach to the allocation of resources and assessment of operating segments. This has resulted in a change on the basis of segmentation of operating segments from a country basis to a regional basis. This change differs materially from the previous annual report.
49. Notes to the Consolidated Financial Statements 49 for the year ended 30 september 2009 6. PROPERTY, PLANT AND EQUIPMENT GROUP Leasehold Plant and Hotel Motor properties equipment equipment vehicles Total US$ US$ US$ US$ US$Year ended 30 September 2009Opening book amount 242 334 596 715 – 109 726 948 775Deemed cost at 1 February 2009 3 786 178 14 925 319 1 011 051 1 422 233 21 144 781Additions 1 131 431 600 009 83 870 445 370 2 260 680Disposals – – – (9 729) (9 729)Hotel usage – – (59 243) – (59 243)Depreciation charge (414 022) (1 094 649) – (233 204) (1 741 875)Closing net book amount 4 745 921 15 027 394 1 035 678 1 734 396 22 543 389At 30 September 2009Cost/valuation 5 193 194 16 530 737 1 035 678 1 975 251 24 734 860Accumulated depreciation (447 273) (1 503 343) – (240 855) (2 191 471)Net book amount 4 745 921 15 027 394 1 035 678 1 734 396 22 543 389 COMPANY Leasehold properties Motor vehicles Total US$ US$ US$Year ended 30 September 2009Deemed cost at 1 February 2009 1 512 330 364 953 1 877 283Depreciation charge (155 722) (80 181) (235 903)Closing net book amount 1 356 608 284 772 1 641 380At 30 September 2009Cost/valuation 1 512 330 364 953 1 877 283Accumulated depreciation (155 722) (80 181) (235 903)Net book amount 1 356 608 284 772 1 641 380
50. Notes to the Consolidated Financial Statements 50 for the year ended 30 september 2009 7. INTANGIBLE ASSETS GROUP Distributorship Goodwill Brand name TOTAL agreements US$ US$ US$ US$Year ended 30 September 2009Opening net book amount – 771 304 429 226 1 200 530Acquisition of subsidiary 940 524 – – 940 524Amortisation charge (19 595) – (23 875) (43 470)Exchange differences – 13 091 13 091Closing net book amount 920 929 771 304 418 442 2 110 675At 30 September 2009Cost 940 524 771 304 442 317 2 154 145Accumulated amortisation (19 595) – (23 875) (43 470)Net book amount 920 929 771 304 418 442 2 110 675 Goodwill is allocated to the Groups cash generating unit in South Africa. No impairment charge was recognised for the year as the recoverable amount from the cash generating unit, based on value-in-use calculations, is in excess of the carrying amount of goodwill. Brand name refers to "The Grace" and its registered trademark. The brand name is amortised using the straight-line method over a period of 20 years. Distributorship agreements relate to supplier contracts between Hotelserve Holdings (Private) Limited and several merchandise suppliers which were capitalised on aquisition. These were not recognised as an asset in the books of the recently aquired subsidiary. The asset will be amortised using the straight-line method over a period of twenty years. 8. BIOLOGICAL ASSETS 2009 US$ Deemed cost at 1 February 2009 238 610 At 30 September 2009 238 610 Biological assets consist of 566.67 hectares of timber plantation. Fair value of the timber plantation has been determined by an independent valuer based on the stages of forest development.
51. Notes to the Consolidated Financial Statements 51 for the year ended 30 september 2009 9. INVESTMENTS 2009 US$9.1 Investment in associate Deemed cost at 1 February 2009 10 597 099 Acquired during the year 188 268 Disposal of shares (333 340) Share of loss (54 307) At 30 September 2009 10 397 720 The loss from associate resulted from the elimination of intercompany transactions (rentals) to the extent of the Groups shareholding interest in the associate. African Sun Limited has a 17.72% (2008:17.72%) share in Dawn Properties Limited, a listed company. The market value of its investment amounted to $5.78m at 30 September 2009 based on a share price of US1.4c. Dawn Properties Limited has a 31 March financial year end. The share of profit or loss from Dawn Properties Limited is based on an aggregation of six months of the audited financials for the year ended 31 March 2009 with the reviewed interim financials for six months ended 30 September 2009. Subsequent to the reporting date, the share price increased to US1.7c. The Directors believe that the investment is not impaired as the low share price brought about by the low liquidity environment after the introduction of the multi-currency system will not be prolonged. The summarised pro forma financial statements of Dawn Properties Limited for the half year ended 30 September 2009 are as follows: Income Statement Revenue 1 609 713 Operating expenses (1 182 199) Operating profit 427 514 Other income 52 247 Profit before taxation 479 761 Taxation (75 271) Net profit for the period 404 490 Balance Sheet Total assets 78 326 035 Total liabilities 21 311 285 Equity 57 014 750 Total equity and liabilities 78 326 035 The investment properties of Dawn Properties Limited mainly constitute hotel properties leased and occupied by African Sun Limited. The properties are therefore classified as owner-occupied from a Group perspective. As a result, the Groups portion of the fair value gains on investment properties, which are accounted for in the income statement of Dawn Properties Limited, are credited to a fair value reserve in the consolidated financial statements.9.2 Other investments Debenture investment 1 074 724 During the year, the Group aquired a three year debenture in Royal Airport Hotel (Private) Limited, the owners of Holiday Inn Accra Airport hotel. Interest is accrued at 3% plus US one year LIBOR. The debenture matures after three years and is carried at amortised cost.
52. Notes to the Consolidated Financial Statements 52for the year ended 30 september 200910. NON-CURRENT RECEIVABLES 2009 US$Security deposit 199 556African Sun SA (Pty) Limited entered into a lease agreement in terms of which a security deposit waspayable.The non-current receivable has been recognised at amortised cost using the effective interest ratemethod.11. INVENTORIESFood and beverage 483 179Shop merchandise 32 322Consumable stores 1 612 615Maintenance stock 203 379 2 331 495The cost of inventories recognised as expense and included in "cost of sales" amounted toUS$7 630 043.12. NON-CURRENT ASSETS HELD FOR SALEInvestment in Baia Do Paraiso 300 000At 30 September 2009, the Group held a 10% investment in Baia Do Paraiso. The investmentwill be recovered through sale. At 30 September 2009, management had reached an agreementto dispose the investment. It is highly likely that the sale will take place within the next twelvemonths as Directors have reached advanced stages in finalising the sale with the potentialbuyers.13. TRADE AND OTHER RECEIVABLESTrade receivables 2 412 652Less: provision for impairment of receivables (74 488)Trade receivables - net 2 338 164Prepayments 801 130Other receivables 2 398 805Amounts due from related parties (note 29) 35 551 5 573 650As of 30 September 2009, trade receivables of US$2 338 164 were fully performing.As of 30 September 2009, trade receivables of US$2 155 398 were past due but not impaired.The ageing analysis of these trade receivables is as follows: up to 30 days 2 025 078 31 to 60 days 130 320 2 155 398As of 30 September 2009, trade receivables of US$74 488 were impaired and provided for.The amount of the provision was US$74 488 as of 30 September 2009. The ageing of thesereceivables is as follows: 30 to 60 days 3 459 over 60 days 71 029 74 488
53. Notes to the Consolidated Financial Statements 53for the year ended 30 september 200914. CASH AND CASH EQUIVALENTS 2009 US$Cash and cash equivalents comprise the following for the purposes of the statement ofcashflows:Cash and bank 1 392 798Bank overdrafts (455 216) 937 58215. SHARE CAPITAL AND PREMIUMThe companys shares had a nominal value in Zimbabwe Dollars. However, following the change in functional currency, no pronouncement had been madeby the authorities as to the nominal value of the shares in the new currency adopted. As such, the share capital of the Group has been presented as nil inUnited States of America Dollars. ORDINARY SHARE Number of shares Share capital Share premium Total US$ US$ US$At 1 October 2008 687 967 404 – – –Issue of shares 1 282 335 – – –At 30 September 2009 689 249 739 – – – The total authorised number of shares is 1,5 billion ordinary shares (2008: 1,5 billion) with a par value of nil, and 200 million unissued preference shares (2008: 200 million) with a par value of nil. All issued shares are fully paid. At year end, Hotelserve Holdings (Private) Limited held twelve million African Sun Limited shares and these have been classified as treasury shares on consolidation. Directors Shareholdings As at 30th September 2009, the Directors held directly and indirectly the following number of shares in the Company of which the total shares are 689 249 739. 2009 2008 Number of shares Number of sharesExecutive DirectorsN Mangwiro – –S A Munyeza – –Non Executive DirectorsT N Chiganze – –B L Nkomo – –E Chitiga 5 082 5 074Y E Johnston – –F Rwodzi – –D W Birch 7 600 7 588V W Lapham – – 12 682 12 662
54. Notes to the Consolidated Financial Statements 54 for the year ended 30 september 2009 15. SHARE CAPITAL AND PREMIUM (CONTINUED) Messrs F Rwodzi, T N Chiganze, S A Munyeza, N Mangwiro and Ms E Chitiga held indirectly shares in the company through controlling interests in the following companies: Name Company Shareholding in African Sun Limited (%) 2009 2008 F Rwodzi/ T Chiganze Msasa Nominees 12.65 14.62 S A Munyeza Riustrix Investments (Pvt) Ltd 25.6 25.31 Criben Investments (Pvt) Ltd 1.84 1.84 Total Shareholding 27.44 27.15 N Mangwiro Ganlake Investments (Pvt) Ltd 0.37 0.33 N K Rehoaboth (Pvt) Ltd 0.33 0.69 Total Shareholding 0.70 1.02 E Chitiga Pickover Investments (Pvt) Ltd 0.38 0.38 16. ACCUMULATED LOSS 2009 US$16.1 Group At 1 October 2008 829 764 Loss for the period (4 364 899) At 30 September 2009 (3 535 135)16.2 Company At 1 October 2008 – Loss for the period (253 525) At 30 September 2009 (253 252) 17. 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$21 690 721 was transferred from non-distributable reserve to "Amount awaiting allotment" in equity pending regulatory approval of the redenomination of the Companys share capital (see note 30 (a)).17.3 Other This comprises foreign currency translation reserve and fair value reserve. On consolidation, exchange differences arising from the translation of transactions and balances of foreign operations to the Groups presentation currency are taken to the foreign currency translation reserve. Changes in the fair value of available-for-sale financial assets are recognised in the fair value reserve in equity.
55. Notes to the Consolidated Financial Statements 55 for the year ended 30 september 2009 18. TRADE AND OTHER PAYABLES 2009 US$ Non-current Other payables 405 124 Current Trade payables 3 224 435 Amounts due to related parties (note 29) 498 419 Accruals and other payables 8 025 395 Provisions (note 18.1) 1 016 163 12 764 41218.1 Provisions Bonus 24 670 Leave 814 984 Other 176 509 1 016 163 The non-current liability of US$405 124 arises from the effect of recognising the operating lease expense for The Grace in Rosebank hotel on a straight-line basis as opposed to cashflow basis. 19. BORROWINGS 2009 US$ Non-current Bank loan 741 543 Current Bank loan 5 985 851 Bank overdraft 455 216 Total current 6 441 067 Total borrowings 7 182 610 Bank loans mature in 2010 and bear an average all-in cost of 38% per annum. Borrowings amounting to US$820 000 are secured by 42,066,011 Dawn Properties Limited shares as at 30 September 2009. The rest of the borrowings are unsecured. The exposure of the Groups borrowings to interest rate changes and the contractual repricing dates at the end of the reporting period are as follows: 6 months or less 6 055 170 6-12 months 385 897 1-5 years 741 543 7 182 610
56. Notes to the Consolidated Financial Statements 56for the year ended 30 september 200919. BORROWINGS (CONTINUED) 2009 US$The carrying amount of the borrowings approximate their fair value and are denominatedin the following currencies:US Dollar 6 055 170RSA Rand 1 127 440 7 182 610The Group has the following undrawn borrowing facilities:Floating rate- Expiring within one year 4 620 235Fixed rate- Expiring within one year – 4 620 235The facilities expiring within one year are annual facilities subject to review at various dates during the next financial year.20. DEFERRED INCOME TAX 2009 US$The analysis of deferred tax assets and deferred tax liabilities is as follows:Deferred tax assets:- Deferred tax asset to be recovered after more than 12 months 364 891- Deferred tax asset to be recovered within 12 months 154 304 519 195Deferred tax liabilities:- Deferred tax liability to be recovered after more than 12 months 4 586 244- Deferred tax liability to be recovered within 12 months 684 013 5 270 257Deferred tax liabilities (net) 4 751 062The gross movement on the deferred income tax account is as follows:Opening balances (58 620)Deemed balance at 1 February 2009 5 824 727Exchange differences (12 453)Income statement credit (1 002 760)Tax charge relating to components of other comprehensive income 168At 30 September 2009 4 751 062
57. Notes to the Consolidated Financial Statements 57 for the year ended 30 september 2009 20. DEFERRED INCOME TAX (CONTINUED) The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balance within the same tax jurisdiction, is as follows:Deferred income tax liabilities Accelerated tax Fair value gains TOTAL depreciation US$ US$ US$Deemed balance at 1 February 2009 5 824 727 – 5 824 727Charged to the statement of comprehensive income 757 841 – 757 841Charged to other comprehensive income – 168 168At 30 September 2009 6 582 568 168 6 582 736Deferred income tax assets Tax losses Other TOTAL US$ US$ US$At 1 October 2008 – (58 620) (58 620)Credited to the statement of comprehensive income (1 674 394) (38 207) (1 712 601)Credited to other comprehensive income – (48 000) (48 000)Exchange differences – (12 453) (12 453)At 30 September 2009 (1 674 394) (157 280) (1 831 674) Deferred income tax assets are recognised for tax losses carry-forwards to the extent that realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax asset of US$279 098 in respect of losses amounting to US$996 779 that can be carried forward against future taxable income. Losses amounting to US$5 920 824 expire in 2015. 21. RETIREMENT BENEFIT OBLIGATIONS The company and all employees contribute to one or more of the following independently administered pension funds: (a) African Sun Limited Pension Fund This fund is a fully funded, uninsured, consolidated scheme consisting of a defined benefit scheme and a defined contribution scheme. All employees, except those who are members of the Catering Industry Pension Fund, are members of this fund. No actuarial valuation has been performed on the defined benefit scheme due to the insignificant number of employees currently on the scheme. The effects of the defined benefit scheme on the financial statements is therefore not considered material. (b) Catering Industry Pension Fund This is a defined contribution scheme which covers employees in specified occupations of the catering industry. The majority of employees of African Sun Limited are members of this fund. (c) African Sun SA (Pty) Limited The subsidiary company has a defined contribution provident fund, of which full-time employees of the company are members. (d) National Social Security Authority Scheme The Company and all its employees based in Zimbabwe contribute to the National Social Security Scheme, promulgated under the National Social Security Act 1989. The companys obligations under this scheme are limited to specific contributions legislated from time to time. 2009 US$ (e) Pension costs recognised as an expense for the period African Sun Limited Pension Fund 185 546 African Sun SA (Pty) Limited 173 377 Catering Industry Pension Fund 74 178 National Social Security Authority Scheme 93 423 526 524
58. Notes to the Consolidated Financial Statements 58for the year ended 30 september 200922. OTHER INCOME 2009 US$Profit on disposal of investment 119 15423. EXPENSES BY NATUREInventory recognised in cost of sales 7 630 043Employee benefit expenses– pension costs 526 524– salaries and wages 11 352 863– other 3 946 837Directors remuneration– fees 113 900– other 300 000Depreciation and amortisation 1 785 345Advertising costs 1 824 375Operating lease payments 3 744 487Audit fees 142 808Other expenses 9 803 108Total cost of sales and operating expenses 41 170 29024. FINANCE INCOME AND COSTSFinance costs- Interest expense: bank borrowings (461 364)Finance income- Accrued debenture interest 74 724- Interest income on short term bank deposits 3 718 78 442For the purposes of statement of cashflows, net interest paid comprises the following:Interest expense (461 364)Advance interest costs paid (118 562)Interest income on bank deposits 3 718Net interest paid 576 208The amount of US$118 562 represents advance interest payments on short term loans. This interest has not been expensed but netted off againstborrowings due to application of the effective interest rate method.
59. Notes to the Consolidated Financial Statements 59for the year ended 30 september 200925. INCOME TAX 2009 US$Deferred tax:Origination and reversal of temporary differences 1 002 760Income tax credit 1 002 760The tax on the Groups profit before tax differs from the theoretical amount that would arise usingthe weighted average tax rate applicable to profits of the consolidated entities as follows:Loss before tax (5 367 659)Tax calculated at domestic tax rates applicable to profits in the respective countries 1 857 207Tax effects of:– Associate results reported net of tax (16 781)– Income not subject to tax 24 025– Expenses not deductible for tax purposes (582 593)– Tax losses for which no deferred income tax asset was recognised (279 098)Tax credit 1 002 76026. EARNINGS PER SHARE(a) BasicBasic earnings per share is calculated by dividing the loss attributable to equity holders of thecompany by the weighted average number of ordinary shares in issue during the year excludingordinary shares purchased by the company and held as treasury shares.Loss attributable to equity holders of the company (4 364 899)Weighted average number of ordinary shares 688 822 294Basic loss per share:cents (0.63)(b) DilutedDiluted earnings per share is calculated by adjusting the weighted average number of ordinaryshares outstanding to assume conversion of all dilutive potential ordinary shares.Profit attributable to equity holders of the company (4 364 899)Weighted average number of ordinary shares 688 822 294Adjustments –Weighted average number of ordinary shares for diluted earnings per share 688 822 294Diluted loss per share: (0.63)
60. Notes to the Consolidated Financial Statements 60for the year ended 30 september 200927. CASH GENERATED FROM OPERATIONS 2009 US$Loss before tax (5 367 659)Adjustments for:- Depreciation and hotel equipment usage 1 741 875- Profit on sale of property, plant and equipment (9 727)- Amortisation 43 470- Profit on sale of investments (119 154)- Gain on acquisition of subsidiary (884 568)- Finance costs – net 382 922- Share of loss from associate 54 307Changes in working capital- Increase in inventories (627 545)- Increase in trade and other receivables (1 247 650)- Increase in trade and other payables 5 277 377- Effect of change in functional currency (3 617 248)Cash used in operations (4 373 600)
61. Notes to the Consolidated Financial Statements 61for the year ended 30 september 200928. BUSINESS COMBINATIONSOn 1 May 2009 the Group acquired 100% of the share capital of Hotelserve Holdings (Private) Limited for US$1.2 million. At that date, the fair valueof the net assets and liabilities in Hotelserve Holdings (Private) Limited equalled US$2,084,568 million and consequently a gain of US$884,568 wasrecognised in the statement of comprehensive income. The acquired business contributed revenue of US$2,084,864 to the Group for the period from1 May 2009 to 30 September 2009. 2009 2009 US$ US$Details of net assets acquired and goodwill are as follows:Purchase considerationFair value of shares issued, net of issuance costs 1 200 000The fair value of the shares issued was based on the published share price(1 May 2009).The assets and liabilities as of 1 May 2009 arising from the acquisition are as follows: Fair value Acquirees carrying amount US$ US$Cash and cash equivalents 19 500 19 500Inventories 385 532 385 532Trade and other receivables 885 701 885 701Available-for-sale investments 5 392 5 392Property, plant and equipment 336 249 336 249Distributorship agreements 940 524 –Trade and other payables (290 830) (290 830)Short term loan (197 500) (197 500)Fair value of net assets 2 084 568 1 144 044Gain recognised in statement of comprehensive income (884 568)Total purchase consideration 1 200 000 –There were no acquisitions in the year ended 30 September 2008.
62. Notes to the Consolidated Financial Statements 62 for the year ended 30 september 2009 29. RELATED-PARTY TRANSACTIONS AND BALANCES The following transactions were carried out with related parties: 2009 US$ (a) Purchase of goods and services Dawn Properties Limited Rent paid 291 814 African Sun Limited owns 17.72% (17.72%:2008) of the shares in Dawn Properties Limited. All commercial transactions with Dawn Properties Limited were at arms length. (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 shown below: Salaries and other short term employee benefits 1 370 268 Termination benefits 42 476 Post employment benefits 44 089 1 456 833 (c) Year end balances arising from transactions with related parties Dawn Properties Limited: - Payables (rentals) 498 419 The payables to related parties arise mainly from monthly rentals. The payables bear no interest. - Receivables (loans and advances to key management) 35 551 30. COMMITMENTS30.1 Operating lease commitments The Group leases all its hotels under non-cancellable operating lease agreements. The lease terms are between five and ten years, and all the lease agreements are renewable at the end of the lease period at market rates. The minimum lease payments under the operating leases are as follows: Not later than 1 year 4 841 530 Later than 1 year and not later than 5 years 14 294 473 Later than 5 years 7 136 384 26 272 38730.2 Capital commitments Authorised by Directors and contracted for 3 196 538 Authorised by Directors but not contracted for 22 100 316 25 296 854 The capital expenditure is to be financed out of operations and long term borrowings.
63. Notes to the Consolidated Financial Statements 63for the year ended 30 september 200931. OFF BALANCE SHEET TRANSACTIONS AND BALANCESAssets under managementAt 30 September 2009, the Company held 28 618 220 Dawn Properties Limited shares on behalf of Ekody investments (Private) Limited valued at US$400655 (US1.4c per share). These shares will be sold to cover future Ekody projects costs. Ekody is a subsidiary of Dawn Properties Limited; with whom theGroup has entered into a project management agreement.32. OPERATING ENVIRONMENTThe Groups Zimbabwe operations have been significantly affected, and may continue to be affected by the challenging economic environment.The Directors have assessed the ability of the Group to continue operating as a going concern at 30 September 2009 (see note 4 (f)).33. EVENTS AFTER THE REPORTING PERIOD(a) Share capital redenominationAt an Extraordinary General Meeting held on 13 November 2009, the company was granted approval by the shareholders to redenominate the par value ofthe ordinary shares to US1c and reallocate the non-distributable reserve to share premium. On 15 January 2010, the Registrar of Companies approved theredenomination of the par value of the ordinary shares to US1c.The effects of this is shown below: Share capital Share premium Amount awaiting Total allotment US$ US$ US$ US$At 30 September 2009 – – 21 690 721 21 690 721Transfer to share capital and share premium 6 892 497 14 798 224 (21 690 721) –Balance as at 15 January 2010 6 892 497 14 798 224 – 21 690 721(b) Equity transactionsOn 13 November 2009, the Group undertook a Rights Offer to raise funds for refurbishment of existing hotels as well as funding regional expansion. Anadditional 125 223 168 million shares were issued at US8c per share, on the basis of 10 for every 56 ordinary shares held. The rights offer was officiallyclosed on 11 December 2009.The effects of this is shown below: ORDINARY SHARES Number of shares Share capital Share premium Total US$ US$ US$At 30 September 2009 689 249 739 6 892 497 14 798 224 21 690 721Arising from the rights issue 125 223 168 1 252 232 8 765 622 10 017 854At 11 December 2009 814 472 907 8 144 729 23 563 846 31 708 575Ordinary shareholders subscribed for 61.5% of the rights offer shares with the remaining 38.5% being taken by the underwriter. All issued shares are fullypaid. The total authorised number of ordinary shares remained unchanged at 1,5 billion with a par value of US1c.(c) BorrowingsThe Group repaid its short term loans amounting to US$3.5 million by 31 December 2009.
64. Notes to the Consolidated Financial Statements 64 for the year ended 30 september 2009 34. INVESTMENTS IN SUBSIDIARIES COMPANY 2009 US$ African Sun Limited PCC (Mauritius) 100% Investment 682 000 Shareholders loan 1 676 000 Total investment in African Sun Limited PCC (Mauritius) 2 358 000 African Sun Zimbabwe (Private) Limited 100% Investment 4 630 991 Shareholders loan 4 630 991 Total investment in African Sun Zimbabwe (Private) Limited 9 261 982 Hotelserve Holdings (Private) Limited Investment 1 200 000 Total investment in subsidiaries 12 819 982 35. RECEIVABLES Amounts due from related parties 863 598 Other receivables 2 954 866 552 36. PAYABLES Amounts due to related parties 517 679 Other payables 42 533 Provisions (note 36.1) 103 128 663 34036.1 Provisions Leave pay 89 768 Bonus 13 360 103 128
65. Notes to the Consolidated Financial Statements 65for the year ended 30 september 200937. DEFERRED TAXATION COMPANY 2009 US$Deferred taxation is calculated in full on temporary differences under the liability methodusing a principal tax rate of 30.9% (2008:30.9%)Deferred income tax liabilityAccelerated wear and tear on property, plant and equipment 507 187Assessed tax losses (53 794) 453 393The movement on the deferred income tax liability is as follows:Deemed balance at 1 February 2009 580 086Credit to the income statement (126 693)Balance at 30 September 2009 453 393
66. Group Supplementary Information 66for the year ended 30 september 2009SHARE PERFORMANCE (CENTS) 2009Loss per shareBasic earnings (0.63)Fully diluted earnings basis (0.63)Net asset value per share 3.06Market price per share 9.00Share informationIn issue 689 249 739Market capitalisation $: 62 032 477ZSE industrial index 158RATIOS AND RETURNSRevenue generationRoom occupancy % 31Sales mix - domestic (%) 62 - export (%) 38ProfitabilityReturn on equity (%) (21)Income after taxation to total capital employed (%) (9)Taxed operating return (%) (12)Pretax return on total assets (%) (12)SolvencyFinancial gearing ratio (%) 22Interest cover (times) (11)Total liabilities to total shareholders funds (%) 75LiquidityCurrent assets to interest-free liabilities and short term borrowings 0.5ProductivityTurnover per employee ($) 14 646Turnover to payroll (times) 3OtherNumber of employees 2 250Number of shareholders 8 868
67. Group Supplementary Information 67for the year ended 30 september 2009DEFINITIONSTaxed interest payable Diluted earnings per shareThis is calculated by taxing interest payable at the standard Diluted earnings per share are calculated by dividing therate of taxation. profit/(loss) by the adjusted weighted average number of ordinary shares, assuming conversion of all dilutive potentialInterest cover times ordinary shares.This is the ratio which the aggregate of operating income,non recurring items and equity accounted earnings bears to Financial gearing ratiointerest payable (including capitalised interest). This represents the ratio of interest bearing debt, less cash to total shareholders equity.Net assetsThese are equivalent to shareholders equity. Revenue Per Available Room (RevPAR) This represents total rooms revenue divided by total roomsPre-tax return on total assets available.This is calculated by relating to closing total assets,operating income plus dividend income and equity accounted Average Daily Rate (ADR)earnings. This represents total rooms revenue divided by total rooms sold.Taxed operating returnThis is calculated by relating to closing total capital employed, Occupancyincome after taxation plus taxed interest payable. This represents total rooms sold divided by total rooms available.Basic earnings per shareThe calculations are based on the earnings attributable EBITDAto ordinary shareholders. Account is taken of the number This is earnings before interest, tax, depreciation andof shares in issue for the period during which they have amortisation.participated in the income of the Group. Elephant Hills Resort, Victoria Falls
69. Shareholders Profile 69 for the year ended 30 september 2009 Shareholder profile as at 30 September 2009 by type (summarised) Shareholder Type Public 8563 96.56 305 789 714 44.37 Directors 6 0.07 281 179 632 40.80 *Other Non-Public 299 3.37 102 280 393 14.84 8 868 100 689 249 739 100 • Non-public include the African Sun 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 means Company Directors who hold shares in the Company directly and indirectly. SHARE PRICE INFORMATION Mid-Market Price at: Wednesday 31 December 2008 ZSE Closed for Trade Tuesday 31 March 2009 US 5.98 cents Tuesday 30 June 2009 US 10.00 cents Wednesday 30 September 2009 US 9.00 cents Price Range Highest: 24 July 2009 US 20.00 cents Lowest: 31 March 2009 US 5.98 centsNairobi, Kenya Accra, Ghana Johannesburg, South Africa Cairo, Egypt Harare, Zimbabwe
70. Group Structure 71 AFRICAN SUN LIMITEDAFRICAN SUN ZIMBABWE DAWN PROPERTIES RCI (ZIMBABWE) HOTELSERVE HOLDINGS AFRICAN SUN (PRIVATE) LIMITED LIMITED (PRIVATE) LIMITED (PRIVATE) LIMITED LIMITED PCC (MAURITIUS) 100% 17.72% 24% 100% 100% SHAREHOLDER STRUCTURE Riustrix Investments (Private) Limited Old Mutual Msasa Nominees Public Investors African Sun Limited Employee Share Participation Trust 37.17 25.60 1.18 12.65 23.40
71. Holiday Inn Accra Airport, Ghana
72. BUSINESS COMPOSITION 73The company operates in the hospitality and leisure industrythrough a number of hotels, resorts, casinos and timeshareoperations throughout Zimbabwe, two city hotels in SouthAfrica, three resorts in Nigeria, a hotel in Ghana and a lodgein Zambia.South AfricaThe Grace in RosebankThe Lakes Hotel and Conference CentreNigeriaObudu Mountain ResortNike Lake ResortAmber TinapaGhanaHoliday Inn Accra AirportZambiaRoyal Chundu Zambezi River LodgeZimbabweCrowne Plaza MonomotapaExpress by Holiday Inn BeitbridgeHoliday Inn BulawayoHoliday Inn HarareHoliday Inn MutareTroutbeck ResortCaribbea Bay ResortGreat Zimbabwe HotelElephant Hills ResortHwange Safari LodgeThe Kingdom at Victoria FallsThe Victoria Falls Hotel Partnership (50%)Fothergill Island SafariSun CasinosCaribbea Bay Sun CasinoMakasa Sun CasinoHarare Sun CasinoBulawayo Sun CasinoRedcliff Sun CasinoSun VacationsKingfisher Cabanas - KaribaBlue Swallow Lodges - Nyanga
73. Board of Directors 74 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 twenty five 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 a successful businessman in his own right, Mr Chiganze sits on several boards which include a financial institution, an engineering company, an insurance organisation, andDIRECTORATE a pharmaceutical company.T N ChiganzeChairman BEKITHEMBA LLOYD NKOMOB L NkomoDeputy Chairman Deputy Chairman Mr Bekithemba Nkomo was appointed as Deputy Chairman on 1 August 2009 having joined the African Sun Limited Board on 21S A Munyeza November 2004.Group Chief Executive Mr Nkomo worked for various companies at senior and executive management level before establishing his own business. He has over sixteen years experience in financial management and general management. He acquired a manufacturing business ten years agoD W Birch and he is the current Managing Director. He sits on various boards which include the following sectors:E Chitiga financial, manufacturing, and marketing.Y E JohnstonV LaphamN MangwiroChief Finance Officer SHINGIRAI ALBERT MUNYEZA Group Chief ExecutiveF Rwodzi Mr Shingi Munyeza is an accomplished business leader and currently holds the reins at the fastest growing hospitality group in sub-Saharan Africa, African Sun Limited. He holds a balanced portfolio of experience which has more than adequately prepared him for this role. 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 IPMZ (Institute of People Management Zimbabwe) and has received the Zimbabwe Tourism Authority Personality of the Year Award for four years running. Mr Munyeza played an instrumental part 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, including the Zimbabwe Tourism Authority where he is Chairman. In keeping with his diverse nature, Shingi‘s leadership is not limited to the business sector. His passion for community transformation has resulted in the initiation of sustainable youth programmes in disadvantaged communities in Zimbabwe, targeted at young people through a community church where he plays a leading role.
74. Board of Directors Continued 75 DAVID WILLIAM BIRCH Non Executive Director Mr David Birch joined the Board of African Sun Limited on 21 November 2004. He is a seasoned insurance practitioner whose experience spans over thirty years at senior and executive management level. He held operational and executive management positions culminating in his appointment as the General Manager, Managing Director, Regional Director and as a Consultant after retirement, for a leading insurance broker in Zimbabwe. In addition to the African Sun Limited board, he sits on the boards of a financial institution and three insurance companies. He is the past Chairman of Zimbabwe Insurance Brokers Association and Chairman of the Board of Trustees of Junior Achievers in Zimbabwe. ELIZABETH CHITIGA Non Executive Director and Chairman – African Sun Zimbabwe (Private) Limited Ms Elizabeth Chitiga joined the African Sun Limited Board on 1 October 2002 and was appointed to head the Board for the Zimbabwean subsidiary African Sun Zimbabwe (Private) Limited on 8 April 2005. She is an internationally respected business woman, having been selected by KPMG Chartered Accountants (Zimbabwe) as one of the top fifty world class executives in 1996, Global leader for Tomorrow by the World Economic Forum in 1997 and as one of the twenty-five most powerful business women by “Marie Claire”, a French Magazine, in 1997. Her experience in financial management, economics, general management at senior level resulted in her assuming the following roles: Economist for the Reserve Bank of Zimbabwe, Deputy Chief Executive and Chief Executive (first female in Zimbabwe to assume this role) for a minerals marketing entity. She sits on the boards of companies in the mining sector. YVONNE ELIZABETH JOHNSTON Non Executive Director Ms Yvonne Johnston joined the African Sun Limited Board on 1 July 2009 and serves as the current Chair of the Board Marketing Committee. She has a long and successful business and fashion career with over twenty years spent in the field of marketing and advertising, where she held various senior management and directorship positions. Of her many notable achievements, Ms Johnston served as the Chief Executive Officer of the International Marketing Council, for seven years from 2001-2008, a body established by the South African President to create and market Brand South Africa. A marketing guru in her own right, she was been invited by Harvard Business School to speak on the African Brand in February 2009, voted best speaker by two organizations and is frequently invited to share her wealth of experience in the marketing field. She sits on various boards including South Africa Tourism and is a Director of Valued Citizens NGO and a founder member of “Action For a Safe South Africa”.
75. Board of Directors Continued 76 VERNON WRIGHT LAPHAM Non Executive Director Mr Vernon 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 ICAZ Award for being the top student in Financial Management, Financial and Management Accounting. A former partner with Ernst and Young, Mr Laphams area of expertise is in corporate finance and he was instrumental in setting up a new service offering with Ernst and Young and subsequently recommended the disposal of this entity to a well established Merchant Bank in Zimbabwe. Mr Lapham is the current Group Chief Executive of MedTech Holdings, a public company listed on the Zimbabwe Stock Exchange and trades under the healthcare sector. He has managed to refocus the Group, and the company is on the recovery path. He also sits on the Zimbabwe Pharmaceuticals board. NIGEL MANGWIRO Chief Finance Officer Mr Mangwiro joined the African Sun Limited Board on 24 February 2006. A Chartered Accountant, Nigel Mangwiro has served as Finance Director at three companies where he was instrumental to 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 Chief Finance Officer at African Sun, Mr Mangwiro plays a pivotal role in capital raising and expansion initiatives for the entire group covering Zimbabwe, South Africa, Nigeria and Ghana. In addition to the African Sun Limited boards, Mr Mangwiro sits on various boards including Flavour Burst (Private) Limited and Pulse Pharmaceuticals (Private) Limited. FARAI RWODZI *Non Executive Director and Chairman of African Sun Limited PCC (Mauritius) Mr Farai Rwodzi joined the African Sun Limited Board on 1 October 2002 and was appointed to head the Board for the Mauritian entity, African Sun Limited PCC, on 18 April 2005. A seasoned Chartered Accountant whose strength and expertise lies in structuring business transactions and implementation thereof, and over fifteen years’ experience, Mr Rwodzi has diverse business experience at senior and executive level. A businessman in his own right, he established an investment banking organisation which is one of the leading Merchant Banks in Zimbabwe. In addition to African Sun Limited, Mr Rwodzi sits on the boards of companies in the financial, insurance, and engineering sectors. *Note Mr Farai Rwodzi resigned with effect from 1 December 2009
76. Corporate Information 77DIRECTORATE BOARD COMMITTEESChairman Risk and Audit CommitteeT N Chiganze B L Nkomo (Chairman) D W BirchDeputy Chairman S A MunyezaB L Nkomo N MangwiroExecutive Directors Human Resources and Remuneration CommitteeS A Munyeza - Group Chief Executive D W Birch (Chairman)N Mangwiro - Chief Finance Officer V W Lapham S A MunyezaNon Executive DirectorsE Chitiga Finance and Investments CommitteeF Rwodzi V W Lapham (Chairman)D W Birch B L NkomoV W Lapham F RwodziY E Johnston S A Munyeza N MangwiroCompany SecretaryE T Shangwa Marketing Committee Y E Johnston (Chairman) B L Nkomo S A Munyeza AUDITORS PricewaterhouseCoopers Chartered Accountants (Zimbabwe) Building Number 4, Arundel Office Park Norfolk Road Mount Pleasant P Box 453 .O. Harare BANKERS MBCA Bank Limited 16th Floor, Old Mutual Centre Third Street Harare LEGAL ADVISORS Dube, Manikai & Hwacha Legal Practitioners 6th Floor, Gold Bridge Eastgate Complex Robert Mugabe Road Harare
77. management 78EXECUTIVE COMMITTEES A Munyeza Group Chief ExecutiveN Mangwiro Chief Finance OfficerT Madziwanyika Managing Director – African Sun Zimbabwe (Private) LimitedE Cameron Managing Director – African Sun Limited PCC (Mauritius)E T Shangwa Company Secretary/Finance Director – Zimbabwe OperationsM S Manyumwa Director – Hospitality Training AcademyG Taputaira Development DirectorT Maswiswi Human Resources DirectorI Rukweza Financial Director – African Sun Limited PCC (Mauritius)C Nyahunda Operations Director – West AfricaA Chinhara Managing Director – Hotelserve Holdings (Private) LimitedOTHER EXECUTIVESF Mangwende Corporate Communications ManagerD Mudyirwa Internal Audit ManagerU Nleya Group Marketing ManagerS Marware Group Sales ManagerD Bunyard Channel and Revenue DirectorT Hwingwiri Operations Manager – African Sun Zimbabwe (Private) LimitedHOTEL AND RESORT GENERAL MANAGEMENTProperty General ManagersSouth AfricaB Frohlich The Grace in Rosebank – JohannesburgG Manyumwa The Lakes Hotel and Conference Centre – JohannesburgNigeriaP Kavanagh Obudu Mountain ResortD Kanyandu Nike Lake ResortJ M Patterson Amber TinapaGhanaB Potter Holiday Inn Accra AirportZambiaA Johnson Royal Chundu Zambezi River LodgeZimbabweK Snater The Victoria Falls Hotel PartnershipD Hayward Elephant Hills ResortD Kung The Kingdom at Victoria FallsK Mupfigo Troutbeck ResortB Chimanga Caribbea Bay ResortM Zulu Great Zimbabwe HotelC Yapp Hwange Safari LodgeA Johnson Fothergill Island SafariI Kasozi Crowne Plaza MonomotapaI Katsidzira Holiday Inn HarareT Mutyandasvika Holiday Inn BulawayoS Dube Holiday Inn MutareC Mulinde Express by Holiday Inn BeitbridgeSun CasinosR Choto General ManagerP Munodawafa Bulawayo Sun CasinoN Matebwe Makasa Sun CasinoB Chiutare Harare Sun CasinoP Fumhanda Caribbea Bay CasinoC Gochera Redcliff Sun Casino
78. Notice of Annual General Meeting 79Notice is hereby given that the Thirty-Eighth Annual General Meeting of members of African Sun Limited will be held in the Great Indaba at CrownePlaza Monomotapa, 54 Park Lane, Harare on Thursday 18 March 2010 at 10h00 for the following purposes:ORDINARY RESOLUTIONS1. To receive and adopt the financial statements for the year ended 30 September 2009, together with the report of the Directors and Auditors therein.2. To appoint Directors. During the year Mr Eben M Makonese and Dr Leonard T Kapungu resigned. Mr Vernon W Lapham and Ms Yvonne E Johnston were appointed to the Board on 1 July 2009. Mr Vernon W Lapham and Ms Yvonne E Johnston retire at the end of their interim appointments. All being eligible, they will offer themselves for re-election at the Annual General Meeting, Messrs Shingirai A Munyeza and David W Birch, and Ms Elizabeth Chitiga retire by rotation. All being eligible, they will offer themselves for re-election at the Annual General Meeting.3. To determine the Auditors’ remuneration for the past audit. PricewaterhouseCoopers have indicated their willingness to continue in office.SPECIAL RESOLUTIONS1. Directors Fees To review fees payable to the Chairman and Non Executive Directors for the year ending 30 September 2010.2. Share Option Scheme-2010 To approve the “African Sun Limited Share Option Scheme-2010” and to authorise and empower the Directors to grant options to Executive Directors and senior executives in full time employment, provided that such grants do not exceed 35 062 487 (thirty-five million, sixty-two thousand, four hundred and eighty-seven) ordinary shares.3. Amendment of Memorandum and Articles of Association That the Memorandum and Articles of Association of the Company be amended to allow the Company to buy back its ordinary shares in accordance with the Companies Act (Chapter 24:03) and the Zimbabwe Stock Exchange Listing Requirements.4. Share Buy-Back That the Company be authorised to purchase at a price not greater than 5% above the weighted average of the market 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 and 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 Company’s 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 BoardEDWIN SHANGWACompany SecretaryAfrican Sun Limited17th Floor, Crowne Plaza Monomotapa54 Park Lane, HarareZimbabwe
79. Shareholders Diary 81Full Year Results 2009 January 2010Annual Report 2009 Published January 2010Thirty-Eighth Annual General Meeting March 2010INTERIM REPORTS ANTICIPATED DATEHalf Year Results 2010 May 2010Full Year Results 2010 November/December 2010Thirty-Ninth Annual General Meeting February 2011 When deeds speak, words are nothing. – African Proverb
80. Contact Information 82African Sun LimitedIncorporated in the Republic of Zimbabwe. Registration number: 643/1971Registered Office Transfer Secretaries17th Floor - Office No. 1708 Corpserve (Private) LimitedCrowne Plaza Monomotapa, 54 Park Lane 2nd Floor, ZB Bank CentreP Box CY 1211 .O. Cnr Kwame Nkrumah Avenue/First StreetCauseway P Box 2208 .O.Harare, Zimbabwe Harare, ZimbabweTelephone: +263 4 250501–7 or +263 4 700521–4 Telephone: +263 4 email@example.com firstname.lastname@example.orgInvestor RelationsWeb: www.africansuninvestor.comTelephone Numbers for Reservations:Central Reservations Office Johannesburg (PACRO) +27 11 442 0488Central Reservations Office Harare (HACRO) +263 4 700521–4 or +263 4 250501–7 or +263 4 705110/94Corporate Headquaters +263 4 250501–7 or +263 4 700521–4Regional Office Johannesburg +27 11 447 9369Resort HotelsThe Victoria Falls Hotel Partnership +263 13 44751/60 or +263 13 44203/5Elephant Hills Resort +263 13 44793/9Obudu Mountain Resort +234 803 550 6257 or +234 803 364 8209 or +234 803 550 6252 or +234 803 472 9327The Kingdom at Victoria Falls +263 13 44275/80 or +263 13 42358/62Troutbeck Resort +263 298 881 or +263 298 883/6 or +263 912 132 138/9Nike Lake Resort +234 803 762 2200 or +234 802 536 6655 or +234 805 755 7000Caribbea Bay Resort +263 61 2452–7/2913Great Zimbabwe Hotel +263 39 265427 or +263 39 264187 or +263 912 132 136/7Safari LodgesRoyal Chundu Zambezi River Lodge +27 11 442 0488Hwange Safari Lodge +263 18 331/6Fothergill Island Safari +263 61 2454/2455/3008City HotelsThe Grace in Rosebank +27 11 280 7200The Lakes Hotel and Conference Centre +27 11 421 5310Amber Tinapa +234 703 898 2498 or +234 803 417 5376 or +234 704 178 0853 or +234 805 462 1550Crowne Plaza Monomotapa +263 4 704501/30Holiday Inn Accra Airport +233 21 785324Holiday Inn Harare +263 4 251200/14 or +263 4 795610/38Holiday Inn Bulawayo +263 9 257211 or +263 9 252460/9Holiday Inn Mutare +263 206 4431/64 or +263 206 2065 or +263 206 5981Express by Holiday Inn Beitbridge +263 286 23002 or +263 286 23374 or +263 286 23201
81. PROXY FORM FOR THE ANNUAL GENERAL MEETINGFor use at the Thirty-Eighth Annual General Meeting to be held on Thursday 18 March 2010 at 10h00 in the GreatIndaba at Crowne Plaza Monomotapa, 54 Park Lane, Harare.I/We, the undersignedOfBeing registered holder/s of ordinary sharesHereby appointOr failing him,Or failing them, the Chairman of the meeting as my/our proxy to act for me/us and vote for me/us on my/ourbehalf as indicated below at the Annual General Meeting of the company to be held on Thursday 18 March 2010 at10h00 and at any adjournment thereof.PROXY(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 proxy must be lodged at the registered office of the Company at least forty-eight hours before the time appointed for holding the meeting.Signed at this day of 2010Signature of ShareholderPLEASE NOTEIf the address on the above envelope of this letter is incorrect, please fill in the correct details below and return tothe Company SecretaryNameAddress
82. The Company Secretary African Sun Limited 17th Floor – Office 1708 Crowne Plaza Monomotapa Hotel 54 Park Lane, Harare PO Box CY 1211, Causeway Harare, Zimbabwe +263 4 250501/7 or +263 4 700521/4 Email: email@example.com Corporate Head Office African Sun Limited 17th Floor – Office 1708 Crowne Plaza Monomotapa 54 Park Lane, HararePO Box CY 1211, Causeway, Harare, Zimbabwe +263 4 250501/7 or +263 4 700521/4 www.africansunhotels.com