AICO 2009 annual report

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For the year ended 31 March 2009

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AICO 2009 annual report

  1. 1. Contents NOTICE TO SHAREHOLDERS 2 PROXY FORM/CHANGE OF ADDRESS 3 ORGANISATIONAL VISION 5 GROUP PROFILE 6 CORPORATE INFORMATION 7 BOARD OF DIRECTORS 8 GROUP COMPANIES’ BOARD COMPOSITION 10 BOARD COMMITTEES AND GROUP MANAGEMENT 11 CORPORATE GOVERNANCE STATEMENT 13 CHAIRMAN’S STATEMENT 16 DIRECTORS’ RESPONSIBILITY STATEMENT 19 GROUP CHIEF EXECUTIVE’S REVIEW 20 DIRECTORS’ REPORT 24 INDEPENDENT AUDITOR’S REPORT 26 INCOME STATEMENTS 28 BALANCE SHEETS 29 STATEMENTS OF CHANGES IN EQUITY 30 GROUP SEGMENT REPORT 31 ACCOUNTING POLICIES 33 NOTES TO THE FINANCIAL STATEMENTS 41 SHAREHOLDERS’ ANALYSIS 57 SHAREHOLDERS’ CALENDAR 57 CORPORATE DIRECTORY 58 AICO Africa Limited Annual Report 2009 1
  2. 2. Notice to Shareholders Notice is hereby given that the first Annual General Meeting of the members of AICO Africa Limited will be held at The Cotton Pavilion, Harare Exhibition Centre, Zimbabwe on Friday, 14 August 2009 at 14:30 hours for the following business: 1. FINANCIAL STATEMENTS To receive and adopt the financial statements for the period ending 31 March 2009 together with the reports of the Directors and Auditors thereon. 2. ELECTION OF DIRECTORS In terms of Article 32.1 of the Company’s Articles of Association, all the Directors retire at the first Annual General Meeting. All retiring Directors, namely, Ms C Chitiyo, Messrs H Mapara, B Mudzimuirema, AF Nhau, B Nkomo, L Preston and P Sithole, being eligible, offer themselves for re-election. 3. DIRECTORS’ REMUNERATION To approve the fees paid to the Directors for the period ending 31 March 2009. 4. AUDITORS To approve the remuneration of the Auditors and to consider the re-appointment of KPMG as Auditors for the ensuing year. 5. ANY OTHER BUSINESS To transact such other business as may be transacted at an Annual General Meeting. NOTE: A member entitled to attend and vote at the meeting may appoint any person or persons to attend and speak in his stead. A proxy need not be a member of the company. Proxies must be lodged with the Secretary at least 48 hours before the time of holding the meeting. BY ORDER OF THE BOARD REGISTERED OFFICE 1 LYTTON ROAD WORKINGTON HARARE P. Manamike COMPANY SECRETARY 23 July 2009 2 AICO Africa Limited Annual Report 2009
  3. 3. 1st Annual General Meeting 1st Annual General Meeting Proxy Form Change of Address Notice I/We of NAME: (In full block letters) being the registered holder/holders of Shares in AICO Africa Limited hereby appoint NEW ADDRESS: Of or failing him, the Chairman of the meeting, as my/our proxy to vote on my/our behalf at the first annual general meeting of the Company to be held on Friday 14 August at 14:30 hours and at any adjournment thereof. OLD ADDRESS: Signed this day of 2009 Signature of shareholder NOTE A member entitled to attend and vote at the meeting may appoint any person or persons to speak in his stead. A proxy need not be a member of the Company. Proxies must be lodged with the Secretary at least forty-eight hours before the meeting. Annual Report 2009 Annual Report 2009
  4. 4. Stamp Stamp Transfer Secretaries Transfer Secretaries AICO AFRICA Limited AICO AFRICA Limited First Transfer Secretaries (Private) Limited First Transfer Secretaries (Private) Limited P O Box 11 P O Box 11 Harare Harare Zimbabwe Zimbabwe Annual Report 2009 Annual Report 2009
  5. 5. Vision • Values • Mission Our Vision To be a dominant agro-industrial business in our chosen markets. Our Values We believe in honesty and integrity - trust is the foundation of our business. We believe in innovation, teamwork and mutual respect - together we achieve exceptional results. We are passionate about delivering world class quality products and services - it is the cornerstone of our success. We cherish our role as creators and custodians of wealth - it is our legacy for present and future generations. Our Mission To be the leading producers, processors and marketers of agro-industrial commodities and brands of world-class quality in the markets we serve. We are dedicated to achieving superior returns for our stakeholders and to pursuing growth opportunities by optimising our competencies and leveraging on our resource base. We foster innovation and all round excellence in everything we do. AICO Africa Limited Annual Report 2009 5
  6. 6. Group Profile PREAMBLE AICO holds a 50.86% controlling stake in Seed Co Limited (Seed Co). Seed Co develops and markets AICO Africa Limited (AICO) is a diversified agro- hybrid maize and other broad acre crop seeds. Seed industrial conglomerate. Co, in turn, holds a 100% interest in a cotton planting seed production house, Quton Seed Company It was incorporated in Zimbabwe on 23 July 2008 (Private) Limited. These two seed houses make up and subsequently reverse listed on the Zimbabwe the Group’s seed operations. Stock Exchange on 1 September 2008, in place of The Cotton Company of Zimbabwe Limited (Cottco) AICO has a 75% controlling stake in a local spinning through a Group restructuring exercise, details of mill, Scottco (Private) Limited, which produces yarn which are on page 20. mainly for the export market. This constitutes the spinning operations of the Group. INVESTMENTS AICO wholly owns Cottco, which, with nine ginneries AICO also has a 49% stake in Olivine Holdings (Private) across Zimbabwe, constitutes the ginning operations Limited, a major player in the local fast moving of the Group. It is the single largest ginner of cotton consumer goods (FMCG) market. Its key products in Southern Africa, and is involved in every facet of include edible oils and fats, canned vegetables, soaps, cotton production and sales. This includes the cotton and soya meal. In addition, AICO has a 100% provision of agronomic advisory services, production interest in a frozen foods outfit, Exhort Enterprises and merchandising of planting seed, supply of (Private) Limited. Together, these two investments chemicals and fertiliser, ginning, warehousing as well constitute the Group’s FMCG operations. as marketing lint and cotton seed in global and local markets. GROUP STRUCTURE PRINCIPAL ACTIVITIES COMPANY PRINCIPAL ACTIVITIES PRODUCTS MARKETS Ginning of seed cotton and selling of lint and by products Lint, ginned seed, delinted seed and linters Africa, Asia and Europe Cottco of the ginning process. Seed Co Development, production and selling of broad acre crop Maize, soya beans, wheat, cotton, Africa seeds. sorghum and a variety of other crop seeds. Scottco Selling of yarn and woven products. Cotton yarn and grey cloth Africa and Europe Manufacturing of edible oils and fats, jams and marmalades, Cooking oil, margarine, candles, baked Africa Olivine soaps, candles as well as canned fruits and vegetables. beans, bath soaps, canned foods, etc Exhort Processing of frozen vegetables. Frozen carrots, beans, peas, cauliflower, Africa sweet corn, broccoli, etc Zambrano Investment vehicle for inflation hedged assets. Quoted shares and investment property Zimbabwe 6 AICO Africa Limited Annual Report 2009
  7. 7. Corporate Information Registered Office Company Secretary 1 Lytton Road, Workington, Harare Tel: (+263-4) 750706, 751736, P Manamike 771981-5 Fax: 707203, 753854, 703296 Email: info@aicoafrica.com Auditors Transfer Secretaries KPMG Chartered Accountants (Zimbabwe) First Transfer Secretaries Mutual Gardens 4th Floor, Goldbridge 100 The Chase (West) Eastgate Emerald Hill HARARE HARARE ZIMBABWE ZIMBABWE Main Bankers African Banking Corporation CBZ Bank Limited 1 Endeavor Crescent 60 Kwame Nkrumah Avenue Mount Pleasant Business Park HARARE HARARE ZIMBABWE ZIMBABWE Standard Chartered Bank Zimbabwe African Export and Import Bank Africa Unity Square World Trade Center Building Sam Nujoma Street 1191 Comiche El Nil HARARE CAIRO ZIMBABWE EGYPT Standard Chartered Bank 22 Billiter Street LONDON UNITED KINGDOM Lawyers Gill Godlonton & Gerrans Kantor & Immerman Legal Practitioners 19 Selous Avenue Beverly Court HARARE 100 Nelson Mandela Avenue ZIMBABWE HARARE ZIMBABWE AICO Africa Limited Annual Report 2009 7
  8. 8. Board of Directors From left to right: Happymore Mapara (Group Chief Executive), Patison Sithole (Chairman), Bekithemba Nkomo, Catherine Chitiyo, Albert Nhau, Bernard Mudzimuirema (Group Finance Director), Pious Manamike (Company Secretary) and Lawrence F. Preston (absent from the photo) Patison Sithole (Chairman) Bekithemba Nkomo (Director) Patison was appointed Chairman of the AICO Board Bekithemba was appointed to the AICO Board on 15 on 15 August 2008. Until his appointment to this August 2008. He has been on the Cottco Board since position, he had served as the Chairman of the Cottco 1 December 2002. He is a prominent businessman Board since 22 February 2006. A former president of and Managing Director of Lloyd Corporate Capital the Confederation of Zimbabwe Industries, Patison (Private) Limited. Bekithemba sits on the boards of has vast experience in business, and is the Group CABS and African Sun Limited and is also a director Chief Executive of Starafrica Corporation Limited and of Gaskets and Cuttings International (Private) Limited, Chairman of Red Star Holdings Limited, both of which Willsgrove Ware Pottery (Private) Limited and Rubber are listed on the Zimbabwe Stock Exchange. He also Products Manufacturers (Private) Limited. He holds sits on the boards of ABC Zimbabwe Limited, Sugar a Bachelor of Technology in Accounting degree from Industries (Proprietary) Limited in Botswana and the University of Zimbabwe and is a certified Business Consolidated Sugar Industries (Proprietary) Limited Excellence Assessor with The South African Excellence in Namibia. Patison was voted Zimbabwe Institute of Foundation. Management, Manager of the year in 2004. He holds a Bachelor of Accountancy (Honours) degree from Catherine Chitiyo (Director) the University of Zimbabwe, a Masters in Business Catherine was appointed to the Board on 15 August Leadership from University of South Africa, and is a 2008, and is a partner with Atherstone & Cook Chartered Accountant. (Incorporating Wickwar & Chitiyo) Legal Practitioners. Prior to this appointment, she was a Cottco Board Happymore Mapara (Group Chief Executive) member since 1 December 2002. She holds a Bachelor Happymore, a Chartered Secretary by profession, of Laws (Honours) degree from the University of joined the Group in 1995. After a successful tenure Zimbabwe and several years of commercial law as Group Treasurer, he became Executive Assistant experience. Catherine also sits on various company to the Managing Director in 2002 while overseeing boards. the Group’s cotton operations. Happymore was appointed to the position of Managing Director of The Cotton Company of Zimbabwe Limited (Cottco) in October 2004 and subsequently Group Chief Executive in May 2005. He is also the Chairman of Cottco, Seed Co Limited, Scottco (Private) Limited, Olivine Industries (Private) Limited, and the Deputy Chairman of Olivine Holdings (Private) Limited. 8 AICO Africa Limited Annual Report 2009
  9. 9. Board of Directors (continued) Albert Nhau (Director) Pious Manamike (Company Secretary) Albert was appointed to the Board on 15 August Pious was appointed the Group Company Secretary 2008. Prior to this appointment, Albert was a Cottco on 15 August 2008. He joined the Group in August Board member since June 2007. He has vast 2005 after holding various positions in finance and experience in business and is the Group Chief administration for 15 years. He holds a Bachelor of Executive of Mike Appel Organisation (Private) Limited. Accountancy (Honours) degree from the University He sits on the boards of Nestle Zimbabwe (Private) of Zimbabwe, a Masters in Business Administration Limited, Riozim (Private) Limited and is the chairman degree from Midlands State University and is a of National Social Security Authority (NSSA) and Beta Chartered Secretary. Holdings (Private) Limited. Lawrence F. Preston (Director) Bernard Mudzimuirema (Group Finance Director) Lawrence has been involved in cotton merchandising Bernard was appointed to the post of Group Finance for more than 56 years and is currently the president Director on 15 August 2008. Prior to this he was the of Lawrence Preston Associates, a commodity Finance Director for Cottco since 1 September 2005. brokerage and advisory group. Lawrence has He is a fellow of the Chartered Institute of Management considerable experience in international trading having Accountants and holds a Masters in Business served as president of the Liverpool Cotton Association Administration from Nottingham Trent University, in 1976 and the American Cotton Shippers Association United Kingdom. Prior to his appointment, he in 1991/2. He also served as chairman of the exercised his skills in finance, business and strategy Committee for International Cooperation between development as a Consultant. Bernard is a former Cotton Associations (C.I.C.C.A) from 1978 to 1980. Finance Director of Zimboard Products (Private) He was appointed to the Board on 15 August 2008. Limited and has worked for several blue chip Prior to this appointment he was a Cottco Board companies and groups of companies in Zimbabwe, member since October 2000. including Carnaudmetalbox, Unilever (then Lever Brothers), Innscor Africa Limited and PG Industries Zimbabwe Limited. Bernard also sits on the boards of Seed Co Limited, Seed Co Zambia International (Private) Limited, Olivine Industries (Private) Limited as well as Scottco (Private) Limited and Exhort Enterprises (Private) Limited. AICO Africa Limited Annual Report 2009 9
  10. 10. Group Companies’ Board Composition SUBSIDIARIES JOINT OPERATIONS The Cotton Company of Zimbabwe Limited Olivine Holdings (Private) Limited H Mapara - Chairman M Ndudzo - Chairman B Mudzimuirema H Mapara - Deputy Chairman J Chindaya J Mushangari - Managing Director T Wicks S Mavende C Chitiyo (Ms) Scottco (Private) Limited H Mapara - Chairman O Dangwa (Mrs) F Badat - Managing Director M Dzinoreva S Bobat S Mazhandu B Mudzimuirema B Mudzimuirema V Patel E Mugamu A Nhau Seed Co Limited H Mapara - Chairman P Devenish - Chief Executive DE Long J Matorofa B Mudzimuirema F Rwodzi JP Rooney C Utete Exhort Enterprises (Private) Limited H Mapara - Chairman S Manyonda (Mrs) - Managing Director B Mudzimuirema Zambrano Investments (Private) Limited H Mapara - Chairman B Mudzimuirema T Wicks 10 AICO Africa Limited Annual Report 2009
  11. 11. Board Committees and Group Management BOARD COMMITTEES GROUP MANAGEMENT Audit Committee AICO Africa Limited B Nkomo - Chairman H Mapara - Group Chief Executive C Chitiyo (Ms) B Mudzimuirema - Group Finance Director B Mudzimuirema P Manamike - Group Company Secretary A Nhau The Cotton Company of Zimbabwe Limited Remuneration Committee Managing Director - Vacant P Sithole - Chairman B Mudzimuirema - Group Finance Director H Mapara J Chindanya - Director, Crop Procurement and Inputs B Nkomo T Wicks - Director, Ginning and Marketing Investment Committee Seed Co Group B Nkomo - Chairman P Devenish - Group Chief Executive H Mapara J Matorofa - Group Finance Director C Chitiyo (Ms) D Zaranyika - Managing Director, Seed Co Zimbabwe B Mudzimuirema D Clements - Managing Director, Seed Co Zambia A Nhau R Jarvis - Managing Director, Quton Seed Company Exhort Enterprises (Private) Limited S Manyonda - Managing Director Scottco (Private) Limited F Badat - Managing Director Olivine Holdings (Private) Limited J Mushangari - Managing Director S Mavende - Finance Director V Nkomo - Human Resources Director S Madondo - Procurement Director AICO Africa Limited Annual Report 2009 11
  12. 12. Corporate Governance Statement CORPORATE GOVERNANCE STATEMENT Each board is responsible for maintaining the direction The Group is committed to the principles of ethics, and control of its company through: transparency, responsibility, integrity and accountability in its dealings with stakeholders. • Setting the strategic direction of the company, • Establishing goals for Executive Management, The primary objective of corporate governance • Monitoring management performance against goals, systems is to ensure that Directors, Executives and • Determining the remuneration of Executive Management carry out their responsibilities effectively Management, and efficiently. The Group’s structures are, therefore, • Liaising with internal and external auditors on the continuously reviewed and updated to ensure financial and business affairs of the company, and compliance with applicable laws and generally • Reviewing, deciding and acting on material business accepted corporate governance practices. transactions and/or matters. FINANCIAL STATEMENTS The composition of each board ensures a well- The Directors recognise that they are responsible for balanced team with a broad range of business and the preparation and integrity of the financial statements industry expertise. and related information contained in the annual report in a manner that fairly presents the state of affairs The Board of AICO Africa Limited comprises five non- and the results of the Group’s operations. executive directors and two executive directors. The Chairman of the Board is a non-executive director. The annual financial statements have been The Group Chief Executive is responsible for the day- independently examined by the Company’s external to-day management of the Group. There is clear auditors. Their report is presented on page 25. separation of responsibility between the Board and Management. All Directors have access to outside INTERNAL CONTROL professional advice through the Company Secretary The Group has developed and continues to maintain who is responsible to the Board for ensuring that systems of internal control. These controls are correct procedures are followed. designed to provide reasonable, but not absolute, assurance as to the reliability of the financial ATTENDANCE OF BOARD MEETINGS statements and to safeguard, verify and maintain The Board and its committees met twice since the accountability of assets and to prevent and detect sanctioning of the Group restructuring exercise by misstatement and loss. The internal auditors have shareholders on 15 August 2008. The number of been tasked to ensure compliance with policies, Directors’ meetings and the number attended by each procedures, internal controls and systems through Director during the period are: continuous programmes that are designed to cover all risks and provide regular feedback to Executive Board Meetings Management and the Audit Committee. The internal Held Attended audit function has free and unrestricted access to the Audit Committee. C Chitiyo 2 2 H Mapara 2 2 BOARD OF DIRECTORS B Mudzimuirema 2 2 All companies in the Group have unitary board A Nhau 2 2 structures. The boards meet regularly, retaining full BL Nkomo 2 2 and effective control over the respective companies LF Preston 2 2 and monitor the performance of executive P Sithole 2 2 management. Board meetings are held at least once every quarter. To ensure unity of objectives and proper co-ordination, the Company elects management representatives to sit on the various boards. AICO Africa Limited Annual Report 2009 13
  13. 13. Corporate Governance Statement (continued) BOARD COMMITTEES Remuneration Committee The Board has established committees to assist in The Remuneration Committee consists of two non- discharging its duties as follows: executive directors, as well as the Group Chief Executive, and is chaired by a non-executive director. • Audit Committee, • Executive Committee, The committee’s tasks are to review, assess and make • Remuneration Committee, and recommendations to the main Board on the following • Investment Committee. matters: Audit Committee • The Group’s remuneration policies in general, The Audit Committee, which includes one executive • Remuneration packages for top management, director, consists of three non-executive directors especially executive directors, and is chaired by one of the non-executive directors. • Incentive schemes including share incentive plans, The Audit Committee is responsible for: • Measurement criteria for the performance of executive directors. • Internal and external audit policy, • Reviewing the performance of external auditors, Remuneration • Reviewing the scope, adequacy and effectiveness Committee Meetings of the internal audit function, Held Attended • Reviewing and acting on matters relating to financial H Mapara 2 2 and internal control, fraud, regulatory compliance, BL Nkomo 2 2 accounting policies, financial reporting and P Sithole 2 2 disclosure, • Reviewing financial statements prior to publication The Remuneration Committee meets at least once and adoption by the Board of Directors, every quarter. • Reviewing material financial transactions and projects prior to adoption by the Board of Directors, Investment Committee and The Company established an Investment Committee • Reviewing business risks and the adequacy of during the course of the year. The committee consists the company’s risk management systems and of three non-executive directors and two executive processes. directors. Both the internal audit function and the external The committee is responsible for: auditors have unrestricted access to the Audit Committee and all of their significant findings are • Providing advice to the Board in establishing policies brought to the attention of the Audit Committee and related to investments and recommending these the Board. to the Board for approval, • Reviewing, approving and recommending to the Audit Committee Meetings Board investment transactions that management Held Attended may consider within the investment guidelines, C Chitiyo 2 2 • Monitoring the management of investment funds, B Mudzimuirema 2 2 • Evaluating investment performance, taking into BL Nkomo 2 1 account investment policies, guidelines and risk A Nhau 2 2 levels, • Monitoring, as required, staff's compliance with The Audit Committee meets at least once every guidelines and processes of the investment policy, quarter. • Reviewing annually the continued appropriateness of the Investment Policy and recommending to the Board any proposed modifications. 14 AICO Africa Limited Annual Report 2009
  14. 14. Corporate Governance Statement (continued) SHARE DEALINGS BY DIRECTORS, Investment Committee MANAGEMENT AND STAFF Meetings The Group’s policy concerning dealings in the shares Held Attended of AICO Africa Limited and its listed subsidiaries, by C Chitiyo 1 1 Directors, Management, Staff and their immediate B Mudzimuirema 1 1 families, stipulates the periods when they can or H Mapara 1 1 cannot deal in its shares. BL Nkomo 1 1 A Nhau 1 1 DIRECTORS’ INTERESTS The Directors of the Company are required to disclose, The Investment Committee meets, largely, on an ad in writing, any material interest in any significant hoc basis. contract with the Company that may result in a conflict or potential conflict of interest. No such conflicts were Executive Committee reported during the year. The Executive Committee consists of two executive directors and selected senior executives. EMPLOYEE RELATIONS The Group has formally constituted works councils The committee’s functions are to: in each operating company. These deal with issues • Assist the Group Chief Executive Officer in that affect the employees directly and provide managing the Group, platforms for: • Provide a working link between the Board and senior management, • Productivity improvements • Ensure that strategic decisions are effectively • Information sharing and dissemination implemented, • Enhancing good employer/employee relations • E ns u re t h a t m a n a g e men t a n d oper ation s • Consultation and dispute/conflict resolution, and performance are adequately and regularly • Collective bargaining. monitored in between Board meetings. The committee meets twice each month. AICO Africa Limited Annual Report 2009 15
  15. 15. Chairman’s Statement “Recent policy changes coupled with the use of fairly stable currencies present a real opportunity for economic recovery.” Patison Sithole CHAIRMAN OPERATING ENVIRONMENT led to significant liquidity constraints. I am pleased to present my first report for AICO Africa The world’s major economies were adversely affected Limited following the successful group restructuring in by the global financial crisis, which ultimately led to a September 2008. recession. Global commodity prices fell drastically relative to prior year resulting in both regional and local The year under review was an extremely difficult one. commodity prices falling, negatively affecting viability of exports out of Zimbabwe. In addition, credit lines The first half of the year saw an extraordinary became increasingly difficult to access. acceleration in inflation that peaked at an estimated 600% a day in October 2008. This led to a FINANCIAL PERFORMANCE rapid loss of value in the local currency and significant loss of liquidity for most businesses as well as a severe Change in functional currency shortage of cash across the economy. As a result, the During the year, the Group changed its functional second half was characterised by a rapid loss of currency from the Zimbabwe dollar to the United States confidence in the local currency as a mode of payment dollar (US dollar). The effective date of this change was which, in turn, led to widespread 1 October 2008. However, this was informal use of multiple currencies, and “The introduction of the rolled back to 1 April 2008 for practical barter trade. “zero duty regime” on basic r e a s o n s . C o n s e q u e n t l y, t h e accompanying financial information is Controls over basic commodity prices commodities also adversely presented in US dollars. and exchange r a t e s p e r s i s t e d affected the profitability of throughout the year, hurting the local businesses already During the year the Group entered into profitability of the Group’s local transactions in different currencies, reeling from the effects of operations. In addition, the introduction including the Zimbabwe dollar. of the “zero duty regime” on basic excessive hyperinflation, Transactions have been recorded based commodities also adversely affected low capacity utilisation and on the originating US dollar values or the profitability of local businesses shortages of power, coal by converting the original currency already reeling from the effects of values to US dollars using the average excessive hyperinflation, low capacity and water.” market exchange rates applicable in utilisation and shortages of power, coal and water. the month of the transaction. Due to these distortions, suppliers adopted multiple The year under review was characterised by acute pricing depending on the mode of payment. movements in the Zimbabwe dollar exchange rate Furthermore, the distortions gave rise to significant relative to the US dollar. While care has been taken to arbitrage opportunities which propelled further growth identify the underlying value of all transactions that of the informal sector. These developments led to have been converted from Zimbabwe dollars to US excessive pricing and unnecessary increases in the dollars, there could still be some distortions relating to cost of production, while at the same time, price controls these conversions, particularly in the income statement. were maintained on most of the Group’s products. Comparatives In February 2009, the economy was liberalised. The Prior year figures have not been presented. It is the use of multiple currencies was officially sanctioned by view of the Directors that converting transaction sets Government. Price controls were dropped while dated twelve to twenty-four months back may result exchange controls were substantially relaxed. However, in potentially misleading information and resultant inadequate foreign currency inflows into the country comparative information would not meet the objective 16 AICO Africa Limited Annual Report 2009
  16. 16. Chairman’s Statement (continued) of International Financial Reporting Standard 1 circumstances prevailing in the Zimbabwe economy paragraph 1 (c), which is to generate high quality, over the last twelve months have made it impossible transparent information at a cost that does not exceed to provide meaningful financial reporting in respect of the benefits to users. Consequently a cash flow the year. statement, which is dependent on this comparative information, has not been presented as it would also Financial performance be potentially misleading as a result. Due to the absence of comparative information, the Directors will restrict their accompanying analyses and Revaluation of property, plant and equipment commentaries to volumes, except to record that Group The Group’s property, plant and equipment as at 31 revenue for the year amounted to US$120.7 million March 2009, was valued by independent external while profit before tax was US$16.8 million. Attributable valuers. In addition, a Directors valuation amounting earnings for the year were US$7.8 million. to US$5.9 million was carried out as of the same date. DIVIDEND Impairment Due to concurrent operating challenges and attendant The income statement includes impairment losses of uncertainties in the economy, the Directors are of the US$19.0 million for the Group, US$14.5 million of which opinion that it is not appropriate to declare a dividend was in the Ginneries business and US$3.2 million in for the year ended 31 March 2009. the Seed business. Impairments were in respect of input scheme receivables, trade receivables, inventories PROSPECTS as well as property, plant and equipment. Recent policy changes coupled with the use of fairly stable currencies present a real Cost of sales “In the short term, the opportunity for economic recovery. During the year, the Ginneries business Group will focus on However, due to concomitant liquidity bought seed cotton at an underlying constraints, the envisaged recovery improving its producer price of US21 cents converted may be long, slow and painful. at applicable exchange rates. Upon competitiveness, volumes Significant improvement in the conversion of actual local currency and capacity utilisation. operating environment will only be amounts paid to growers to US dollars, The likely recovery of achieved once substantial foreign and due to violent fluctuations in currency flows into the country. world commodity prices exchange rates on a day to day basis, the resultant producer price was brings with it better In the short term, the Group will focus understated. Upon review of this, the prospects for the Group.” on improving its competitiveness, Directors were of the view that this neither volumes and capacity utilisation. The correctly nor fairly represented the cost of buying seed likely recovery of world commodity prices brings with cotton during the year. Accordingly the Directors effected it better prospects for the Group. an adjustment to cost of sales whose effect was to increase cost of sales by US$15.0 million and reduce ACKNOWLEDGEMENTS profit before tax by the same amount. I wish to extend my sincere gratitude and appreciation and that of the Board to the Group Chief Executive, Directors’ responsibility statement his management team and staff for the dedication and While the income statement audit opinion may be commitment during extremely challenging times. I also modified on account of some distortions therein want to extend my gratitude to my colleagues on the and/or the unique circumstances prevailing in Zimbabwe Board for their invaluable contribution. Special mention during the year, in the opinion of the Directors the goes to the team of advisors and company staff who financial information presented in US dollars herein worked on the AICO Africa restructuring exercise. fairly represents the underlying performance of the Group and its entities for the year ended 31 March For and on behalf of the Board 2009 and its financial position as of that date. Accordingly, this will form an appropriate accounting base for the reporting of results in future periods. Audit opinion P. Sithole The audit opinion on the financial statements is modified CHAIRMAN on the basis that they do not present a true and fair view of the financial status of the Group. The unique 17 June 2009 AICO Africa Limited Annual Report 2009 17
  17. 17. Directors’ Responsibilty Statement ACCOUNTING RECORDS AND FINANCIAL GOING CONCERN STATEMENTS After reviewing the Group’s budgets and related The Directors are responsible for the maintenance of financial projections, the Directors have no reason, adequate accounting records as well as the in all material respects, to believe that the Group will preparation and integrity of the financial statements not continue to operate in the foreseeable future. and related information contained in the annual report Accordingly, these financial statements have been in a manner that fairly presents the state of affairs prepared on a going concern basis. and the results of the Group’s operations. ACCOUNTING POLICIES EXTERNAL AUDITORS’ ROLE In preparing the Group financial statements set out The external auditors are responsible for carrying out on pages 28 to 56 appropriate accounting policies an independent examination of the financial statements have been applied, as have the relevant International in accordance with International Standards on Auditing Financial Reporting Standards, unless otherwise and reporting their findings thereon. stated, and are supported, where necessary, by reasonable and prudent judgment and estimates. SYSTEMS OF INTERNAL CONTROL The Directors are also responsible for the Group’s APPROVAL OF FINANCIAL STATEMENTS systems of internal financial control. These are The financial statements for the year ended 31 March designed to provide reasonable, but not absolute, 2009 have been approved by the Board of Directors assurance as to the reliability of the financial and are signed on its behalf by: statements and to safeguard, verify and maintain accountability of assets and to prevent and detect misstatement and loss. Nothing has come to the attention of the Directors to indicate that any material P. Sithole H. Mapara breakdown in the functioning of these controls, CHAIRMAN GROUP CHIEF EXECUTIVE procedures and systems has occurred during the year under review. 17 June 2009 AICO Africa Limited Annual Report 2009 19
  18. 18. Group Chief Executive’s Review “Performance for the Group was retarded by perennial shortages of water, power, coal and price controls on key product lines for the first nine months of the year, as well as impairment losses.” Happymore Mapara GROUP CHIEF EXECUTIVE OVERVIEW Results for the year were achieved under an extremely Subsequent to this transaction, effective control of difficult and volatile operating environment. The first the shareholders and their voting rights remained half saw an unprecedented acceleration in inflation unchanged. The total net assets of the Group also resulting in loss of confidence in the local currency remained unchanged. unit. The fourth quarter witnessed the formation of the Government of National Unity as well as the GROUP RESULTS adoption of multiple currencies in the economy. This Despite extensive price controls in the local market resulted in a more stable economic environment, and a consequent decline in volumes the Group although liquidity challenges persisted. recorded revenue of US$120.7 million and profit before tax of US$16.8 million. The Group benefited Performance of the Group was retarded by perennial significantly from the Seed business’ regional shortages of water, power, coal and “In the medium term, we operations which contributed US$11.9 price controls on key product lines million to Group profit before tax, for the first nine months of the year, expect a more even underlining the effectiveness of the as well as impairment losses. distribution of revenue and Group’s diversification strategy of the Going forward, we expect improved earnings between the three last few years. revenue and earnings performance main Strategic Business particularly on the back of the The Cotton business contributed removal of price controls and the Units (SBUs) – Cotton, Seed US$3.2 million to Group profits before liberalisation of the economy in and FMCG, with around 5% tax after charging impairment losses general. The Group’s infrastructure coming from the of US$14.5 million. The FMCG remains solid and intact and will be business was the hardest hit by price leveraged to underwrite economies Spinning SBU.” controls and did not contribute to of scale as a basis of re-establishing dominance of profits. key businesses in the local market. In the medium term, we expect a more even GROUP RESTRUCTURING distribution of revenue and earnings between the Following our progressive growth, the Group was three main Strategic Business Units (SBUs) – Cotton, restructured resulting in the acquisition of the entire Seed and FMCG, with around 5% coming from the issued capital of The Cotton Company of Zimbabwe Spinning SBU. Limited (Cottco) by a newly established holding company AICO Africa Limited (AICO). Subsequently, OPERATIONS REVIEW AICO was reverse listed on the Zimbabwe Stock Exchange, thus constituting Cottco as a wholly owned Cotton Business subsidiary of AICO. Shareholders were allotted 2 Though national crop production fell to 230,000 tonnes AICO shares for every 3 Cottco shares held. As part this year (from 254,000 last year), seed cotton crop of the scheme, Cottco, now a wholly owned subsidiary purchases (intake) amounted to 122,000 tonnes (last of AICO, then transferred all its investments in year: 119,000) representing a 2.5% growth over last subsidiaries and joint venture to AICO. The operative year. As a result market share rose to 53% (last year: date of the scheme was 1 September 2008. 47%). 20 AICO Africa Limited Annual Report 2009
  19. 19. Group Chief Executive’s Review (continued) Nevertheless, Ginnery sales volumes were 26% lower resilient business and should continue to operate than last year due to the low domestic lint and ginned profitably in future. Resurgence in commodity prices seed offtake. 23,935 tonnes of ginned seed, 5,415 will assist in improving earnings performance. tonnes of delinted seed and 8,804 tonnes of lint were carried forward into the new financial year. FMCG Business Fast moving consumer goods volumes decreased by International lint prices declined from a high of US80 71%. Price controls and the attendant effects on cents per pound to US49 cents per pound in liquidity, working capital adequacy and inconsistent December 2008 though this had recovered somewhat availability of supplies restricted the ability of this to US55 cents per pound by March 2009. Supply and business stream from operating at significant demand fundamentals are likely to result in better capacities. Consequently, a right sizing exercise was prices going forward. carried out during the year. This resulted in a reduction of staff numbers from 1,600 to 800 employees. The Cotton SBU will continue with its contract farming strategy as a way of underwriting crop establishment Significant plant rehabilitation work was carried out and crop intake volumes, with particular emphasis during the year and capacity utilisation improved from on enhancing both on-farm yields and input scheme 8% to 20%. Going forward we expect plant throughput recoveries. to increase significantly. Seed Business “The Group’s infrastructure Both local and regional demand for Planting seed volumes were 46% this SBU’s products and brands remains solid and intact lower than last year due to lower remains strong. Consequently, the production in Zimbabwe. This was and will be leveraged to SBU is targeting 60% capacity caused mainly by grower apathy and underwrite economies of utilisation by March 2010 and in the the unavailability of key inputs. scale as a basis of absence of price controls, customers Overall, seed sales volumes for the can expect to see more consistent year were 42,345 tonnes compared re-establishing dominance availability and shelf presence of key to 83,131 tonnes last year. Zimbabwe of key businesses in the brands. Overall, we expect seed sales volumes were 13,751 local market.” considerable increase in volumes tonnes relative to prior year sales from this SBU. volumes of 37,634 tonnes, a decline of 63%. ISO CERTIFICATION The regional operations continued to grow and operate Work is underway to upgrade the current ISO profitably. The Seed businesses in East Africa are still 9001:2000 to 9001:2008. growing and volumes sold indicate that they will soon be ready to be taken to the next stage of development. CORPORATE SOCIAL RESPONSIBILITY Development work in Angola and The Democratic The Group continued ploughing back into various Republic of Congo is also encouraging. sections of the communities that its companies operate in. Following the liberalisation of the economy and the removal of price controls in particular we expect the Support in the form of cash and/or kind was given to resurgence in the Zimbabwe operations with seed Jairos Jiri Association, St Giles Children’s Home, crop production volumes for maize climbing back Bumhudzo Old People’s Home, New Start Children’s gradually to 30,000 tonnes of seed over the next three Home, Isheanesu Multipurpose Centre for Disabled years. Children, Tariro House of Hope, Harare Children’s Home, Mberengwa Orphanage and Vulnerable Spinning Business Children’s Home, Breast Cancer Awareness and the This SBU continued to be dogged by coal and power Cancer Association. shortages, while local sales were heavily affected by price controls. As a result yarn sales volumes declined The Group sponsored the Cottco Schools’ Rugby by 20% while weaving declined by 65%, both as a Festival which is now a major national sports event. result of low domestic sales offtake and price controls. It drew thousands of spectators over its six days and there were over 1,900 boys who competed Nevertheless, the spinning SBU remains a strong and representing schools from all around Zimbabwe. Other AICO Africa Limited Annual Report 2009 21
  20. 20. Group Chief Executive’s Review (continued) sports events supported to varying degrees by the During the year under review, there were no Group included the Zimbabwe Chess Tournament, work-related fatal accidents reported. The Group has the Zimbabwe National Youth Games, a soccer and continued with its HIV and AIDS awareness and netball tournament for six schools in the Muzarabani wellness programmes in the work place. This includes area, a Zimbabwe Amateur Golf Association provision of anti-retroviral drugs (ARV’s) to participating tournament, and a golf charity day supporting the employees. Salvation Army. STRATEGY The Group donated text books, soya beans and maize The Company’s thrust is to consolidate the Group seed to the agriculture classes of Zinatsa High School and exploit Group synergies. Primary sources of in Chivhu. The Group also paid tuition for twenty-one growth will be from existing businesses. Key focus disadvantaged students at St Marnocks Secondary areas will be recovery of trade volumes in domestic and Primary School in Stapleford. operations and enhancement of capacity utilisation and economies of scale, streamlining Also, the Group supports “The Group is in a working capital management and re- improvements in policing through fundamentally strong establishing and/or re-affirming the sponsoring the Zimbabwe Republic dominance of the three key SBU’s in position, well positioned to Police annual awards to individual the local market. police officers for performance maintain and grow current e x c e l l e n c e ; i m p ro v e m e n t s i n levels of business OUTLOOK jour nalism standards through The Group is in a fundamentally strong volumes.” sponsorship of the Agricultural position, well positioned to maintain Reporter of the Year Award; support for entomological and grow current levels of business volumes. studies at Chibero Agricultural College, and, support Enhancing capacity utilisation across the Group will and encouragement for young designers in textiles remain a key focus area, as will diligent management and artists in general through staging the Cotton of costs. Fashion Fair and the Fine Arts, Crafts and Textiles Exhibition. The Harare Agricultural Show is also APPRECIATION supported by the donation of prizes for the agriculture I would like to express my gratitude to the Board of produce sector. Directors, for the continued guidance, and to management and staff at all levels across the Group STAFF for their effort and loyalty during what has been an The Group has enjoyed a good industrial relations incredibly difficult period. climate with its employees. Critical skills have been retained through various retention schemes. The Group will continue with its training programmes with emphasis on increasing productivity and customer care. H. Mapara HEALTH, SAFETY AND ENVIRONMENT GROUP CHIEF EXECUTIVE The Group continues to review on a regular basis, its work environment to ensure a safe working environment in compliance with the regulatory 17 June 2009 requirements. All employees are well appraised of the Group’s health, safety and environment policies. Incidences are investigated and corrective action taken to minimise recurrence in the event of occurrence. 22 AICO Africa Limited Annual Report 2009
  21. 21. Directors’ Report The Directors have pleasure in presenting their report RESERVES together with the audited financial statements for the The movements in the reserves of the Group are as year ended 31 March 2009. shown in the Statement of Changes in Equity. PRINCIPAL ACTIVITIES DIRECTORS’ SHAREHOLDING AICO Africa Limited (AICO) is a diversified agro- The details of Directors’ shareholding are shown in industrial conglomerate with interests in cotton ginning the shareholder analysis report accompanying the and marketing, spinning, fast moving consumer goods, financial statements. and production and marketing of planting seed. The Company was incorporated in July 2008 and was REVALUATION OF PROPERTY, PLANT AND subsequently reverse listed on the Zimbabwe Stock EQUIPMENT Exchange on 1 September 2008 in place of The The Group’s property, plant and equipment as at 31 Cotton Company of Zimbabwe Limited and thus March 2009 was valued by independent external emerged as the new investment holding entity for the valuers. In addition, a Directors’ valuation amounting Group. to US$5.9 million was carried out as of the same date. LIMITATIONS TO FINANCIAL REPORTING The uncertainties in the adverse Zimbabwean IMPAIRMENT economic environment during the year have resulted The income statement includes impairment losses of in limitations in financial reporting. The nature and US$19.0 million for the Group, US$14.5 million of consequences of these limitations are detailed in note which was in the Ginneries business and US$3.2 25. million in the Seed business. Impairment losses were in respect of input scheme receivables, trade DIRECTORS’ RESPONSIBILITY STATEMENT receivables, inventories as well as property, plant and While the income statement audit opinion is modified equipment. on account of some distortions therein and/or the unique circumstances prevailing in Zimbabwe during COST OF SALES the year, in the opinion of the Directors the financial During the year, the Ginneries business bought seed information presented in US dollars herein fairly cotton at an underlying producer price of US21 cents represents the underlying performance of the Group per kilogram converted at applicable exchange rates. and its entities for the year ended 31 March 2009 and Upon conversion of actual local currency amounts its financial position as of that date. Accordingly, this paid to growers to US dollars, and due to violent will form an appropriate accounting base for the fluctuations in exchange rates on a day to day basis, reporting of results in future periods. the resultant producer price was understated. Upon review of this, the Directors were of the view that this SHARE CAPITAL neither correctly nor fairly represented the cost of The authorised share capital of the Company is buying seed cotton during the year. Accordingly, the 1,500,000,000 ordinary shares, of which 530,511,663 Directors effected an adjustment to cost of sales are issued and fully paid. At the time the shares were whose effect was to increase cost of sales by US$15.0 issued, the nominal value per share was 1 Zimbabwe million and reduce profit before tax by the same dollar. Between the date of issue and 31 March amount. 2009, the Zimbabwe dollar was debased by removing twenty-two zeros. The nominal value of these OPERATING RESULTS shares in Zimbabwe dollars is now virtually zero. The The results for the year from continuing operations nominal value of the issued share capital at 31 are summarised below and are set out in more detail March 2009, when converted to US dollars is US$61. in the accompanying financial statements. Commentary on these results is also provided in the 31 March 2009 Chairman’s and Group Chief Executive’s Reports. Issued share capital as at 1 April 2008 529,701,277 Share options exercised 810,386 Issued share capital as at 31 March 2009 530,511,663 24 AICO Africa Limited Annual Report 2009
  22. 22. Directors’ Report (continued) DIRECTORS 31 March 2009 In terms of Article 32.1 of the Articles of Association, US$’000 all Directors retire and, being eligible, offer themselves for re-election. Group Profit before taxation 16,845 AUDITORS Income tax expense (1,519) Members will be asked to approve the remuneration Profit for the year 15,326 of the auditors for the year ended 31 March 2009 and to consider the reappointment of KPMG as auditors Attributable to: to the Company for the ensuing year. Equity holders of the parent 7,774 Minority interest 7,552 15,326 For and on behalf of the Board Retained earnings 33,512 Equity attributable to equity holders of the parent 85,655 P. Manamike Minority interest 29,621 COMPANY SECRETARY Total equity 115,276 17 June 2009 CAPITAL EXPENDITURE Capital expenditure for the year ended 31 March 2009 amounted to US$5.0 million and capital expenditure for the following year is budgeted at US$15.4 million. DIVIDENDS Due to concurrent operating challenges and attendant uncertainties in the economy, the Directors are of the opinion that it is not appropriate to declare a dividend for the year ended 31 March 2009. No interim dividend was declared during the year. AICO Africa Limited Annual Report 2009 25
  23. 23. Independent Auditor’s Report KPMG Telephone +263 (4) 303700 Mutual Gardens +263 (4) 302600 100 The Chase (West), Emerald Hill Fax +263 (4) 303699 P O Box 6, Harare Zimbabwe To the Members of AICO Africa Limited Report on the financial statements We have audited the accompanying financial statements of AICO Africa Limited (the ‘Company’) and its subsidiaries (the ‘Group’) as set out on pages 28 to 56, which comprise the balance sheets at 31 March 2009, and the income statements, the statements of changes in equity for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes. Directors’ responsibility for the financial statements The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act (Chapter 24:03) of Zimbabwe. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing, except for the modifications to the auditor’s report, as set out in the guidance and recommendations issued jointly by the Public Accountants and Auditors Board, the Zimbabwe Stock Exchange and the Zimbabwe Accounting Practices Board in July 2009. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, 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 unqualified audit opinion on the financial position of the Company and Group and our adverse opinion on the financial performance and cash flows. KPMG, a Zimbabwean partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG international, a Swiss co-operative. 26 AICO Africa Limited Annual Report 2009
  24. 24. Independent Auditor’s Report Basis for and adverse opinion on financial performance and cash flows Note 25 indicates that the financial statements are not prepared in conformity with IAS 29 (Financial Reporting in Hyperinflationary Economies) and IAS 21 (The Effects of Foreign Exchange Rates). Cost of sales As indicated in note 1.2 to the financial statements, the Directors effected an adjustment which increased the cost of seed cotton procured during the year. We were unable to verify the cost per kilogram of seed cotton applied in computing the adjustment. Accordingly, we were unable to obtain sufficient appropriate audit evidence regarding the accuracy of cost of sales. In our opinion, because of the significance of the matters described in the preceding paragraphs, the financial statements do not give a true and fair view of the Company and Group financial performance and cash flows for the year ended 31 March 2009 in accordance with International Financial Reporting Standards. Unqualified opinion on financial position In our opinion, the financial statements give a true and fair view of the financial position of the Company and Group at 31 March 2009 in accordance with International Financial Reporting Standards. Report on legal and other regulatory requirements In our opinion, the financial statements have been properly prepared, in all material respects, in accordance with the accounting policies set out on pages 33 to 40, and comply with the disclosure requirements of the Companies Act (Chapter 24:03) of Zimbabwe and the relevant Statutory Instruments (SI 33/99 and SI 62/99). Other matter In our opinion, the Group has also complied, in all material respects, with the draft guidance issued by the Public Accountants and Auditors Board and the Zimbabwe Accounting Practices Board. This guidance was issued to assist preparers of financial statements in converting their financial statements from Zimbabwe dollars into their new functional currency in a manner that is consistent with the principles of International Financial Reporting Standards, in as far as is practicable, in the Zimbabwean economic environment, at the date of the change of the presentation and/or functional currency. The modifications to the auditor’s report are those adopted from the guidance and recommendations referred to in the first paragraph under the heading Auditor’s responsibility. These modifications do not take account of the potential interaction of the multiple uncertainties, as described in note 25 to the financial statements, and their cumulative effect on the financial performance and cash flows in the Zimbabwean economic environment. KPMG Chartered Accountants (Zimbabwe) Harare 17 June 2009 AICO Africa Limited Annual Report 2009 27
  25. 25. Income Statements For the year ended 31 March 2009 31 March 2009 31 March 2009 Notes US$'000 US$'000 Group Company Revenue 120,677 - Cost of sales 1.2 (51,600) - Gross profit 69,077 - Other operating income 6,448 - Operating expenses (48,639) (441) Administration expenses (26,285) (441) Distributing and selling expenses (9,296) - Other operating expenses (13,058) - Profit/(loss) from operations 1 26,886 (441) Investment income 2 275 - Other gains and losses 3 (1,350) - Interest expense (8,966) (734) Profit/(loss) before taxation 16,845 (1,175) Income tax expense 4 (1,519) - Profit/(loss) for the year 15,326 (1,175) Attributable to: Equity holders of the parent 7,774 (1,175) Minority interest 7,552 - 15,326 (1,175) Basic earnings/(loss) per share (US cents) 5 1.47 (0.22) Diluted earnings/(loss) per share (US cents) 5 1.42 (0.21) 28 AICO Africa Limited Annual Report 2009
  26. 26. Balance Sheets As at 31 March 2009 31 March 2009 31 March 2009 Notes US$'000 US$'000 ASSETS Group Company Non-current assets Property, plant and equipment 6 132,770 - Investment property 7 1,141 - Investments held in subsidiaries 8 - 113,537 Investment held in joint venture 9 - 6,825 Investment held in associate 10 65 - Total non-current assets 133,976 120,362 Current assets Biological assets 12 777 - Inventories 13 29,624 - Inputs scheme receivables 14 5,206 - Prepayments for current assets 6,205 - Trade and other receivables 15 30,788 - Other financial assets 16 583 - Assets classified as held for sale 51 - Bank and cash balances 17 5,700 - Balances owed by Group companies 18 - 5,678 Total current assets 78,934 5,678 Total assets 212,910 126,040 EQUITY AND LIABILITIES Capital and reserves Share capital 19 - - Capital reserves 52,143 111,946 Retained earnings/(loss) 33,512 (1,175) Equity attributable to equity holders of the parent 85,655 110,771 Minority interest 29,621 - Total equity 115,276 110,771 Non-current liabilities Borrowings 20 189 - Deferred tax liabilities 11 39,589 - Total non-current liabilities 39,778 - Current liabilities Borrowings 20 35,020 - Trade and other payables 21 15,646 - Taxation 1,724 - Bank overdrafts 17 5,466 - Balances owed to Group companies 18 - 15,269 Total current liabilities 57,856 15,269 Total equity and liabilities 212,910 126,040 P. SITHOLE - CHAIRMAN H. MAPARA - GROUP CHIEF EXECUTIVE 17 June 2009 17 June 2009 AICO Africa Limited Annual Report 2009 29
  27. 27. Statements of Changes in Equity For the year ended 31 March 2009 ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT MINORITY Total Share Capital Retained Total INTEREST Equity capital reserves earnings Group US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Balances as at 31 March 2008 - 83,642 25,738 109,380 17,486 126,866 Changes in equity for 2009 Share based payment transactions - 3,980 - 3,980 99 4,079 Revaluation of property, plant and equipment - 91 - 91 8,611 8,702 Deferred taxation on items recognised in equity - 618 - 618 (2,465) (1,847) Exchange differences arising from change in functional currency - (32,197) - (32,197) (739) (32,936) Exchange differences arising from translation of foreign subsidiaries - (3,991) - (3,991) (923) (4,914) - 52,143 25,738 77,881 22,069 99,950 Profit for the year - - 7,774 7,774 7,552 15,326 Balances as at 31 March 2009 - 52,143 33,512 85,655 29,621 115,276 Share Capital Retained Total Company capital reserves earnings equity US$'000 US$'000 US$'000 US$'000 Balances as at 31 March 2008 - - - - Changes in equity for 2009 Issue of shares on restructuring - 193,651 - 193,651 Share based payment transactions - 3,879 - 3,879 Exchange differences arising from change in functional currency - (1,881) - (1,881) Net change in fair value of available-for-sale financial assets - (83,703) - (83,703) - 111,946 - 111,946 Loss for the year - - (1,175) (1,175) Balances as at 31 March 2009 - 111,946 (1,175) 110,771 30 AICO Africa Limited Annual Report 2009
  28. 28. Group Segment Report For the year ended 31 March 2009 BUSINESS SEGMENT Ginning FMCG Seed Spinning Other Total Primary Segment Report business business business business US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 31 March 2009 Revenue 78,806 2,636 53,850 4,931 469 140,692 Inter-segment revenue (14,570) (4) (5,269) (172) - (20,015) Revenue from external customers 64,236 2,632 48,581 4,759 469 120,677 Profit/(loss) from operations 12,803 (1,112) 16,477 811 (2,093) 26,886 Investment income 252 4 1 12 6 275 Other (losses)/gains (1,355) - 885 (4) (876) (1,350) Interest (expense)/income (8,475) 143 (622) (2) (10) (8,966) Income tax expense 778 205 (2,879) 265 112 (1,519) Profit/(loss) for the year 4,003 (760) 13,862 1,082 (2,861) 15,326 Other information Segment assets 81,170 40,069 82,128 7,482 2,061 212,910 Segment liabilities (52,883) (12,005) (29,370) (2,489) (887) (97,634) Segment net assets 28,287 28,064 52,758 4,993 1,174 115,276 Capital expenditure 2,738 195 2,063 18 16 5,030 Depreciation 5,365 992 868 623 2 7,850 AICO Africa Limited Annual Report 2009 31
  29. 29. Group Segment Report For the year ended 31 March 2009 32 AICO Africa Limited Annual Report 2009
  30. 30. Accounting Policies 1. REPORTING ENTITY AICO Africa Limited (the “Company” or “AICO”) is a limited liability company incorporated in Zimbabwe and is listed on the Zimbabwe Stock Exchange. The consolidated financial statements of the Company as at, and for the year ended 31 March 2009, comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”), and the Group’s interest in associate and jointly controlled entity. The principal activities of the Group are: the buying and ginning of seed cotton, and the marketing of cotton lint and ginned seed, the production and selling of crop planting seeds, the production and selling of fast moving consumer goods (“FMCGs”), the procurement and selling of crop inputs and the production and selling of cotton yarn. 2. SCHEME OF ARRANGEMENT Following the Group's progressive growth, the Group was restructured resulting in the acquisition of the entire issued capital of Cottco by a newly established holding company, AICO. Subsequently, AICO was reverse listed on the Zimbabwe Stock Exchange, thus constituting Cottco as a wholly owned subsidiary and establishing AICO as the holding company. Shareholders were alloted 2 AICO shares for every 3 Cottco shares held. As part of the scheme, Cottco, now a wholly owned subsidiary of AICO, then transferred all its investments in subsidiaries and joint venture to AICO. The operative date of the scheme was 1 September 2008. Subsequent to this transaction, effective control of all shareholders and their voting rights remained unchanged. The total net assets of the Group also remained unchanged. 3. BASIS OF PREPARATION (a) Statement of compliance The financial statements have been prepared in conformity with International Financial Reporting Standards promulgated by the International Accounting Standards Board (IASB) and interpretations issued by the Standing Interpretations Committee of the IASB with the exception of the following: • International Accounting Standard (IAS) 1 – Presentation of Financial Statements; • IAS 2 – Inventories; and • IAS 21 – The Effects of Changes in Foreign Exchange Rates. International Financial Reporting Standards (IFRS) include standards and interpretations approved by the IASB as well as International Accounting Standards and Standing Interpretations Committee (SIC) interpretations issued under previous constitutions. IAS 1 – Presentation of Financial Statements Comparative financial information and a cash flow statement have not been presented as part of the Group results. Although IAS 1 defines a complete set of financial statements as including a statement of cash flows and requires that comparatives be presented for all financial information disclosed, management concluded that compliance with the requirements of this standard would be so misleading that it would conflict with the objective of fair presentation in accordance with the Framework for the Preparation and Presentation of Financial Statements. Consequently, a cash flow statement, which is dependant on this comparative information, has not been presented as it would also be potentially misleading as a result. IAS 2 - Inventories Inventories have not been valued at the lower of cost or net realisable value in accordance with IAS 2. In certain instances the original cost of inventories could not be ascertained. These inventories were then valued at the lower of, latest invoice cost or net realisable value. Again, the financial effects of non-compliance with IAS 2 could not be formally established. IAS 21 – The Effects of Changes in Foreign Exchange Rates Income statement balances were converted to United States dollars using average monthly exchange rates. IAS 21, which permits the use of an average exchange rate in converting income statement transactions, states that the use of an average exchange rate is inappropriate where exchange rates fluctuate significantly. Exchange rates were highly volatile during the financial year, and numerous exchange rates emerged where the variations were dependent on the mode of settlement used (cash, bank transfer or cheque). AICO’s transactions were settled using these various means, which resulted in varying AICO Africa Limited Annual Report 2009 33
  31. 31. Accounting Policies nominal amounts being recorded in Zimbabwe dollars for similar transactions. Use of an average exchange rate, therefore, represents a departure from the requirements of IFRS. The financial effects of this departure could not be formally established. The financial statements were approved by the Board of Directors on 17 June 2009. (b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for the following: • property, plant and equipment held at valuation • financial instruments at fair value through profit or loss are measured at fair value • available-for-sale financial assets are measured at fair value • biological assets are measured at fair value less estimated point-of-sale costs • investment property is measured at fair value. The methods used to measure fair value are discussed further in notes 6, 7, 8, 9 and 12. (c) Functional and presentation currency These consolidated financial statements are presented in United States dollars (US dollars), which is the Group’s functional currency. All financial information presented in US dollars has been rounded to the nearest thousand. (d) Change in functional currency With effect from 1 October 2008, the Group changed its functional currency from Zimbabwe dollars to US dollars. The change was applied in the current year and, as a result, financial information prior to the effective date of change has been adjusted retrospectively to effect the change as of 1 October 2008. This change occurred on the basis of the evaluation that the United States dollar better represents the currency of the primary economic environment in which the Group operates. Opening balances included in these financial statements and corresponding figures have been converted from Zimbabwe dollars to US dollars using the Old Mutual Implied Rate (OMIR) at the balance sheet date. Monetary assets and liabilities have been carried forward from the prior year by converting the various currency balances at the exchange rates on balance sheet date. The following exchange rates were applied in converting balances to the new functional currency: Average exchange rates ZWD ZAR EURO Closing rate as at 31 March 2008 49,235,794 8.1364 0.6411 April 2008 109,253,712 7.9782 0.6394 May 2008 497,373,909 7.6890 0.6415 June 2008 33,352,575,671 7.7175 0.6418 July 2008 342,806,692,975 7.7610 0.6372 August 2008 9,228,192,500,000 7.6668 0.6574 September 2008 1,346,734,950,000,000 7.9218 0.6810 October 2008 56,208,272,337,816,600,000,000 9.1675 0.7351 November 2008 66,026,208,271,000,000,000,000,000 10.0650 0.7801 December 2008 131,940,000,000,000,000,000,000,000 10.0394 0.7637 January 2009 131,940,000,000,000,000,000,000,000 10.1375 0.7648 February 2009 131,940,000,000,000,000,000,000,000 10.0446 0.7814 March 2009 131,940,000,000,000,000,000,000,000 9.7960 0.7586 Closing rate as at 31 March 2009 131,940,000,000,000,000,000,000,000 9.6490 0.7301 Ten zeros were removed from the Zimbabwe dollar currency in August 2008. A further twelve zeros were removed from the Zimbabwe dollar currency in February 2009. For the purposes of the above table, all these zeros have been reinstated to aid comparison. Details of the methodology applied to all financial statement captions are provided in the relevant notes. (e) Use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. 34 AICO Africa Limited Annual Report 2009

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