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AICO AFRICA 2012 annual report

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AICO AFRICA 2012 annual report

AICO AFRICA 2012 annual report

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  • 1. Contents N otice To Shareholders 2 Proxy Form And Change Of Address Notice 3 Vision, Mission and Value Statements 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 12 Chairman’s Statement 14 Directors’ Responsibility Statement 16 Group Chief Executive’s Report 18 Directors’ Report 20 Independent Auditor’s Report 22 Income Statement 24 Statements Of Comprehensive Income 25 Statements Of Financial Position 26 Group Statements Of Changes In Equity 27 Company Statements Of Changes In Equity 28 Statement Of Cash Flows 29 Group Primary Segment Reports 30 Group Secondary Segment Reports 32 Accounting Policies 34 Notes To The Financial Statements 42 Shareholders’ Analysis 61 Shareholders’ Calendar 61 Corporate Directory 62AICO Africa Limited 2012 1
  • 2. NOTICE TO SHAREHOLDERSNotice is hereby given that the 4th Annual General Meeting of the members of AICO Africa Limited will be held at The Cotton Pavilion,Harare Exhibition Centre, Zimbabwe on Thursday, 30 August 2012 at 1500 hours for the following business:ORDINARY BUSINESS1. FINANCIAL STATEMENTS To receive and adopt the financial statements for the year ended 31 March 2012 together with the reports of the Directors nd the a auditors thereon.2. ELECTION OF DIRECTORS In terms of Article 32.1 of the Companys Articles of Association, Messrs BL Nkomo, P Devenish and LF Preston retire by rotation. The retiring Directors, being eligible, offer themselves for re-election.3. DIRECTORS REMUNERATION To approve the fees paid to the Directors for the the year ended 31 March 2012.4. AUDITORS To appr ove the r emuneration of the auditors and to consider the r e-appointment of KPMG as auditors for the ensuing year . 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 P MANAMIKE COMPANY SECRETARY 27 June 2012 REGISTERED OFFICE 1st FLOOR SAZ BUILDING NORTHEND CLOSE NORTHRIDGE PARK BORROWDALE HARAREAICO Africa Limited 2012 2
  • 3. 4th Annual General Meeting CHANGE OF ADDRESS NOTICE NAME: (In full block letters) NEW ADDRESS: OLD ADDRESS:4th Annual General Meeting PROXY FORMI/We ofbeing the registered holder/holders ofshares in AICO Africa Limited hereby appointOfor failing him, the Chairman of the meeting, as my/our proxy to vote on my/our behalf at the second annual generalmeeting of the Company to be held on Thursday 30 August 2012 at 15:00 hours and at any adjournment thereof.Signed this day of 2012Signature of shareholderNOTE: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-eighthours before the meeting.
  • 4. Stamp Transfer Secretaries AICO AFRICA LimitedFirst Transfer Secretaries (Private) Limited P O Box 11 Harare Zimbabwe Stamp Transfer Secretaries AICO AFRICA LimitedFirst Transfer Secretaries (Private) Limited P O Box 11 Harare Zimbabwe
  • 5. Our VisionTo be a dominant agro-industrial business in our chosen markets.Our ValuesWe believe in honesty and integrity• trust is the foundation of our business.We believe in innovation, teamwork and mutual r espect• together we achieve exceptional results.We are passionate about delivering world class quality pr oducts and services• it is the cornerstone of our success.We cherish our r ole as cr eators and custodians of wealth• it is our legacy for present and future generations.Our MissionTo be the leading producers, processors and marketers of agro-industrial commodities and brands of world-class quality in themarkets we serve. We are dedicated to achieving superior returnsfor our stakeholders and to pursuing gr owth opportunities byoptimising our competencies and leveraging on our resource base.We foster innovation and all round excellence in everything we do. 5 AICO Africa Limited 2012
  • 6. GROUP PROFILEPREAMBLE AICO holds a 50.20% contr olling stake in Seed Co Limited (SeedAICO Africa Limited (AICO) is a diversified agr o-industrial conglomerate. Co). Seed Co develops and markets hybrid maize and other br oad acre crop seeds. Seed Co, in turn, holds a 100% interest in a cottonIt was incorporated in Zimbabwe on 23 July 2008 and subsequently planting seed pr oduction house, Quton Seed Company (Private)reverse listed on the Zimbabwe Stock Exchange on 1 September Limited. These two seed houses make up the Gr oup’s seed operations.2008, in place of The Cotton Company of Zimbabwe Limited (Cottco)through a Group restructuring exercise. AICO has a 75% contr olling stake in a local spinning mill, Scottco (Private) Limited (Scottco), which produces yarn mainly for the exportINVESTMENTS market. This constitutes the spinning operations of the Gr oup.AICO wholly owns Cottco, which, with nine ginneries acr ss Zimbabwe, oconstitutes the Cotton operations of the Group. Cottco is the single AICO also has a 49% stake in Olivine Holdings (Private) Limitedlargest ginner of cotton in Souther n Africa, and is involved in every (Olivine), a major player in the local fast moving consumer goodsfacet of cotton production and sales. This includes the provision of (FMCG) market. Its key products include edible oils and fats, cannedagronomic advisory services, pr oduction and mer chandising of vegetables, soaps, cotton and soya meal. In addition, AICO has aplanting seed, supply of chemicals and fertiliser, ginning, warehousing 100% interest in a frozen foods company, Exhort Enterprises (Private)as well as marketing of lint and cotton seed in global and local Limited (Exhort). Together, these two investments constitute themarkets. Group’s FMCG operations.GROUP STRUCTURE Incorporating 75% 100% 100% 50.20% 100% 49% 100% Cottco Zambrano Investments International (Private) Limited (Proprietary) LimitedPRINCIPAL 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. Development, production and selling of broad acre crop Maize, soya beans, wheat, cotton, Seed Co 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 Olivine Africa soaps, candles as well as canned fruits and vegetables. beans, bath soaps, canned foods etc. Frozen carrots, beans, peas, cauliflower, Exhort Processing of frozen vegetables. Africa sweet corn, broccoli etc. Zambrano Investment vehicle for inflation hedged assets. Quoted shares. ZimbabweNote:i) Operations of Exhort Enterprises (Private) Limited have been closed down, pending disposal.ii) Subsequent to the reporting date, agreement for the sale of Scottco (Private) Limited was reached. The necessary documents have been signed and are awaiting regulatory approval.AICO Africa Limited 2012 6
  • 7. CORPORATE INFORMATIONRegistered Office Company Secretary1st Floor SAZ BuildingNorthend CloseNorthridge ParkBox BW 537 Borrowdale P Manamike HARAREZIMBABWETel: 263-4-853054-6Fax: 263-4-850705Email: info@aicoafrica.comWebsite: www.aicoafrica.comAuditors Transfer Secretaries KPMG Chartered Accountants (Zimbabwe) First Transfer Secretaries Mutual Gardens No. 1 Armagh Avenue 100 The Chase (West) Off Enterprise Road, Eastlea Emerald Hill HARARE HARARE ZIMBABWEZIMBABWE Main BankersAfrican Banking Corporation Limited CBZ Bank Limited 1 Endeavor Crescent 60 Kwame Nkrumah Avenue Mount Pleasant Business Park HARARE HARARE ZIMBABWEZIMBABWE Standard Chartered Bank Zimbabwe Limited African Export-Import BankAfrica Unity Square World Trade Center BuildingSam Nujoma Street 1191 Comiche El NilHARARE CAIRO ZIMBABWE EGYPTStandard Chartered Bank PTA Bank22 Billiter Street 22nd and 23rd FloorsLONDON NSSF BuildingUNITED KINGDOM NAIROBI KENYA L awyers Gill Godlonton & Gerrans Kantor & Immerman Legal Practitioners 19 Selous Avenue Beverly Court HARARE 100 Nelson Mandela Avenue ZIMBABWE HARARE ZIMBABWEAtherstone & Cook7th FloorMercury HouseGeorge Silundika AvenueHARARE ZIMBABWE 7 AICO Africa Limited 2012
  • 8. BOARD OF DIRECTORS Bekithemba was appointed Chairman of AICO on 12 November 2010 having been appointed to the AICO Boar d on 15 August 2008. Prior to that, he had been on the Cottco Boar d since 1 December 2002. He is a prominent businessman and Managing Director of LloydBekithemba Nkomo Corporate Capital (Private) Limited. Bekithemba sits on the boar ds of CABS and African(Non-Executive Director) Sun Limited and is also a Director of Gaskets and Cuttings International (Private) Limited, Willsgrove Ware Pottery (Private) Limited and Rubber Pr oducts Manufacturers (Private) Limited. He holds a Bachelor of Technology degree in Accounting from the University of Zimbabwe and is a certified Business Excellence Assessor with The South African Excellence Foundation. Patrick was appointed to the position of Group Chief Executive for AICO with effect fromPatrick Devenish 1 January 2010. Pat is the former Group Chief Executive of Seed Co Limited, a subsidiary of AICO. Prior to that he was Managing Director of Tobacco Sales Floor Limited. He brings(Group Chief Executive) with him a wealth of experience in management, strategy and business development and is well positioned to lead the Gr oup into the futur e. He is a holder of an MBA fr om the University of Cape Town. Innocent was appointed to the Board on 1 January 2011, and is a partner with AtherstoneInnocent Chagonda & Cook Legal Practitioners. He holds a Bachelor of Laws (Honours ) degree from the(Non-Executive Director) University of Zimbabwe and has over 15 years of commer cial law experience. Innocent also sits on various company boards. Catherine was appointed to the Board on 15 August 2008, and is a partner with AtherstoneCatherine Chitiyo & Cook (Incorporating Wickwar & Chitiyo) Legal Practitioners. Prior to this appointment,(Non-Executive Director) she was a Cottco Board member since 1 December 2002. She holds a Bachelor of Laws (Honours) degree from the University of Zimbabwe and has several years of commer cial law experience. Catherine also sits on various company boards. Albert was appointed to the Board on 15 August 2008. Prior to this appointment, AlbertAlbert Nhau was a Cottco Board member since June 2007. He has vast experience in business and is the Group Chief Executive of Mike Appel Organisation (Private) Limited. He sits on the(Non-Executive Director) boards of Nestle’ Zimbabwe (Private) Limited, RioZim Limited, Beta Holdings (Private) Limited, and is the Chairman of The Cotton Company of Zimbabwe Limited.AICO Africa Limited 2012 8
  • 9. BOARD OF DIRECTORSBernard was appointed to the post of Group Finance Director on 15 August 2008. Prior tothis he was the Finance Director for Cottco since 1 September 2005. He is a fellow of theChartered Institute of Management Accountants and holds an MBA from Nottingham TrentUniversity, United Kingdom. Prior to his appointment, he exer cised his skills in finance, Bernard Mudzimuiremabusiness and strategy development as a consultant. Bernard is a former Finance Director (Group Finance Director)of Zimboard Products (Private) Limited and has worked for several blue chip companiesand groups of companies in Zimbabwe, including Carnaudmetalbox, Unilever (then LeverBrothers), Innscor Africa Limited and PG Industries Zimbabwe Limited. Ber nard also sitson the boards of Seed Co Limited, Olivine Industries (Private) Limited as well as Scottco(Private) Limited.Pious was appointed the Gr oup Company Secretary on 15 August 2008. He joined theGroup in August 2005 after holding various positions in finance and administration for 15 Pious Manamikeyears. He holds a Bachelor of Accountancy (Honours) degr ee from the University of (Company Secretary)Zimbabwe, a Masters in Business Administration degr ee from Midlands State Universityand is a Chartered Secretary.Lawrence has been involved in cotton merchandising for more than 57 years and is currentlythe president of Lawrence Preston Associates, a commodity brokerage and advisory group.Lawrence has considerable experience in international trading having served as presidentof the Liverpool Cotton Association in 1976 and the American Cotton Shippers Association Lawrence Prestonin 1991/2. He also served as Chairman of the Committee for Inter national Cooperation (Non-Executive Director)between Cotton Associations (C.I.C.C.A) fr om 1978 to 1980. He was appointed to theBoard on 15 August 2008. Prior to this appointment he was a Cottco Board member sinceOctober 2000.Farai is a Zimbabwean entrepreneur with significant investments in various sectors of theeconomy including financial services, hospitality, manufacturing, property developmentand mining. Farai is a charter ed accountant by pr ofession having served his articles of Farai Rwodziclerkship with Er nst & Young. He is the founder member of Interfin Holdings Limited (Non-Executive Director)incorporating banking, insurance and stockbroking businesses. He is currently a shareholderand a Director of several listed and unlisted companies.Patrick matriculated at Michaelhouse, Natal. He was articled and obtained CA (SA) and CA(Z) qualifications. Pat was a partner in a firm of Chartered Accountants before joining thecorporate world as Financial Director and later Chief Executive Officer of Delta Corporation Patrick RooneyLimited, where he spent a total of 34 years. A Dir ector of Barclays Bank of Zimbabwe (Non-Executive Director)Limited for 7 years, Pat took a car eer change on leaving Delta Corporation Limited andnow runs an office that oversees five (5) operating companies. 9 AICO Africa Limited 2012
  • 10. GROUP COMPANIES’ BOARD COMPOSITION Subsidiaries Joint Operations The Cotton Company of Zimbabwe Limited Olivine Holdings (Private) Limited AF hau - Chairman N M Ndudzo - Chairman D Machingaidze - Managing Director* P St L Devenish - Deputy Chairman T Chaparamhosva* J Mushangari - Managing Director* CC Chitiyo (Ms) CC Chitiyo (Ms) P St L Devenish O Dangwa (Mrs) F Kembo M Dzinoreva CB Mudzimuirema S Mavende* L Preston S Mazhandu CB Mudzimuirema Scottco (Private) Limited E Mugamu P St L Devenish - Chairman AF Nhau A Kamali - Managing Director* S Bobat CB Mudzimuirema V Patel Seed Co Limited F Rwodzi - Chairman M Nzwere - Group Chief Executive* P St L Devenish D Garwe (Dr) C Kabaghe DEB Long J Matorofa* CB Mudzimuirema MS Ndoro JP Rooney CMB Utete (Dr) Exhort Enterprises (Private) Limited P St L Devenish - Chairman CB Mudzimuirema Zambrano Investments (Private) Limited P St L Devenish - Chairman CB Mudzimuirema * Executive DirectorAICO Africa Limited 2012 10
  • 11. BOARD COMMITTEES AND GROUP MANAGEMENTBoard Committees Group ManagementAudit Committee AICO Africa LimitedCC Chitiyo (Ms) - Chairperson P St L Devenish - Group Chief ExecutiveCB Mudzimuirema CB Mudzimuirema - Group Finance DirectorAF Nhau P Manamike - Group Company SecretaryJP Rooney A Nyakonda - Group Audit ManagerRemuneration Committee The Cotton Company of Zimbabwe LimitedBL Nkomo - Chairman D Machingaidze - Managing DirectorCC Chitiyo (Ms) T Chaparamhosva - Finance DirectorP St L Devenish Seed Co GroupInvestment Committee M Nzwere - Group Chief ExecutiveAF Nhau - Chairman J Matorofa - Group Finance DirectorCC Chitiyo (Ms) G Bwanali - Managing Director, Seed Co ZambiaP St L Devenish D Clements - Managing Director, Seed Co TanzaniaCB Mudzimuirema E Mhandu - Managing Director, Quton Seed CompanyJP Rooney D Phiri - Managing Director, Seed Co Malawi D Zaranyika - Managing Director, Seed Co Zimbabwe Olivine Holdings (Private) Limited J Mushangari - Managing Director S Mavende - Finance Director S Madondo - Supply Chain Director F Mtangadura - Marketing and Sales Director V Nkomo - Human Resources Director C Murove - Operations Director 11 AICO Africa Limited 2012
  • 12. CORPORATE GOVERNANCE STATEMENTThe Group is committed to the principles of ethics, transparency, The Boar d of AICO Africa Limited comprises seven non-responsibility, integrity and accountability in its dealings with executive Directors and two executive Directors. The Chairmanits stakeholders. of the Boar d is a non-executive dir ector. All Dir ectors have access to outside pr ofessional advice through the CompanyThe primary objective of corporate gover nance systems is to Secretary who is r esponsible to the Boar d for ensuring thatensure that Directors, Executives and Management carry out correct procedures are followed.their responsibilities effectively and ef ficiently. The Gr oupsstructures are, therefore, continuously reviewed and updated The Group Chief Executive is r esponsible for the day-to-dayto ensur e compliance with applicable laws and generally management of the Company . Ther e is clear separation ofaccepted corporate governance practices. responsibility between the Boar d and Management.FINANCIAL STATEMENTS ATTENDANCE OF BOARD MEETINGSThe Dir ectors r ecognise that they ar e r esponsible for the The Boar d met six times during the year under r eview. Thepreparation and integrity of the financial statements and related number of Dir ectors meetings and the number attended byinformation contained in the annual r eport in a manner that each Director during the period are: fairly presents the state of affairs and the results of the Groupsoperations. Held Attended BL Nkomo (Chair) 6 5 The annual financial statements have been independently I Chagonda 6 6 examined by the Companys external auditors. Their report is CC Chitiyo 6 6 presented on page 22. P St L Devenish 6 6 CB Mudzimuirema 6 6 INTERNAL CONTROLThe Gr oup has developed and continues to maintain and AF Nhau 6 6 develop systems of internal control. These controls are designed LF Preston 6 4 to provide reasonable, but not absolute, assurance as to the JP Rooney 6 4 reliability of the financial statements and to safeguar d, verify F Rwodzi 6 5and maintain accountability of assets and to prevent and detectmisstatement and loss. The internal auditors have been tasked Board meetings are held at least once every quarter.to ensure compliance with policies, pr ocedures and inter nalcontrols and systems through continuous programmes that are BOARD COMMITTEESdesigned to cover all risks and pr ovide regular feedback to The Board has established committees to assist in dischargingexecutive management and the Audit Committee. The internal its duties as follows:audit function has fr ee and unr estricted access to the AuditCommittee. • Audit Committee; • Executive Committee;BOARD OF DIRECTORS • Remuneration Committee; andAll companies in the Group have unitary board structures. The • Investment Committee.boards meet regularly, retaining full and effective control over Audit Committeethe r espective companies and monitor the performance of The Audit Committee, which includes one executive Director,executive management. consists of four non-executive Directors and is chaired by one of the non-executive Dir ectors. The Audit Committee isTo ensure unity of objectives and pr oper co-ordination, the responsible for:Company elects management r epresentatives to sit on thevarious boards. Each board is responsible for maintaining the • Internal and external audit policy;direction and control of its company through: • R e v i e w i n g t h e p e r f o r m a n c e o f e x t e r n a l a u d i t o r s ; • Reviewing the scope, adequacy and ef fectiveness of the• Setting and playing a prominent role in strategic development internal audit function; as well as determining the strategic direction of the Company • Reviewing and acting on matters r elating to financial and and/or the Group; internal control, fraud, regulatory compliance, accounting • Determining performance targets and the remuneration of policies, financial reporting and disclosure; Executive Management; • Reviewing financial statements prior to publication and• Monitoring management performance against tar gets; adoption by the Board of Directors;• Liaising with internal and external auditors on the financial • Reviewing material financial transactions and projects prior and business affairs of the Company; to adoption by the Board of Directors; and• Reviewing, deciding and acting on material business • Reviewing business risks and the adequacy of the transactions and/or matters; and Companys risk management systems and pr ocesses.• Promoting ethical conduct in business affairs of the Group.The composition of each board ensures a well balanced teamwith a br oad range of business and industry expertise.AICO Africa Limited 2012 12
  • 13. CORPORATE GOVERNANCE STATEMENT (CONTINUED)Both the internal audit function and the external auditors have investment policy and r ecommending to the Boar d anyunrestricted access to the Audit Committee and all of their proposed modifications.significant findings ar e brought to the attention of the AuditCommittee and the Board. The Investment Committee meets, largely, on an ad hoc basis. It met three times during the year. The Audit Committee meets at least once every quarter . Held AttendedThe Committee met six times during the year. Members AF Nhau (Chair) 3 3 attendance of these meetings is shown below: CC Chitiyo 3 3 P St L Devenish 3 3 Held Attended CB Mudzimuirema 3 3 CC Chitiyo (Chair) 4 4 JP Rooney 3 3 I Chagonda 4 3 P Devenish 4 4 Executive Committee CB Mudzimuirema 4 4 The Executive Committee consists of the two executive AF Nhau 4 4 Directors and selected senior executives. JP Rooney 4 3 The Committees functions are:Remuneration CommitteeThe Remuneration Committee consists of two non-executive • Assisting the Gr oup Chief Executive Of ficer in managingDirectors, as well as the Group Chief Executive, and is chaired the Group;by a non-executive Director. • Providing a working link between the Boar d and senior management;The Committees tasks ar e to r eview, assess and make • Ensuring that strategic decisions are effectively implemented; recommendations to the main Board on the following matters: and • Ensuring that management and operations performance are • The Group’s remuneration policies in general; adequately and r egularly monitor ed in-between Boar d• Remuneration packages for top management, especially meetings. Executive Directors;• Incentive schemes including shar e incentive plans; The Committee meets at least once each month.• Measurement criteria for the performance of executive Directors. SHARE DEALINGS BY DIRECTORS, MANAGEMENT AND ST AFF• The development of people and succession planning. The Groups policy concerning dealings in the shares of AICO Africa Limited and its listed subsidiaries, by Dir ectors,The Remuneration Committee met twice during the year . Management, Staff and their immediate families, stipulates theMembers attendance of these meetings is shown below: periods when they can or cannot deal in its shar es. Held Attended DIRECTORS INTERESTS BL Nkomo (Chair) 2 2 The Dir ectors of the Company ar e r equired to disclose, in CC Chitiyo 2 2 writing, any material inter est in any significant contract with P St L Devenish 2 2 the Company that may result in a conflict or potential conflict of interest. No such conflicts wer e reported during the year.Investment CommitteeThe Investment Committee consists of thr ee non-executive EMPLOYEE RELATIONSDirectors and two executive Directors. The Group has formally constituted works councils in each operating company. These deal with issues that af fect theThe Committee is responsible for: employees directly and provide platforms for:• Providing advice to the Board in establishing policies related • Productivity improvements; to investments and making recommendations thereon to • Information sharing and dissemination; the Board for approval; • Enhancing good employer/employee relations;• Reviewing, approving and recommending to the Boar d • Consultation and dispute/conflict resolution; and investment transactions that management may consider • Collective bargaining. within the investment guidelines;• M o n i t o r i n g t h e m a n a g e m e n t o f i n v e s t m e n t f u n d s ;• Evaluating investment performance, taking into account investment policies, guidelines and risk levels;• Monitoring, as required, staffs compliance with guidelines and pr ocesses of the investment policy; and• Reviewing annually the continued appropriateness of the 13 AICO Africa Limited 2012
  • 14. CHAIRMAN’S STATEMENT I am pleased to pr esent my report for the The Cotton business posted a profit for the year ended 31 March 2012. second year running. Nevertheless, this business continues to be weighed down by ECONOMIC OVERVIEW the heavy debt burden. Interest charges for The macr oeconomic envir onment was the year grew to US$18.5 million compared generally stable during the year under review to US$13.6 million last year. This is largely and is likely to r emain the same for the due to the extra borr owing requirements foreseeable future. The economy is showing arising from the rise in seed cotton buying signs of slow but steady growth. GDP growth prices, propelled as they wer e by r ecord to December 2011 is estimated at 8.9% with high lint prices. Intake volumes, however , a further 9% growth expected in the year to fell by 7% to 103,224 tonnes. Aggregate lint December 2012. prices were 104% higher than last year but anticipated benefits were eroded by equally Inflation has remained, and continues to be, higher seed cotton buying prices which, relatively low - within the 5% range year-on- regrettably, did not recede in sympathy with year. However, power tariff increases effected declining global lint prices. Consequently, during the year together with imported revenue rose 44% to US$170.9 million while inflation, especially fr om South Africa, profit before tax r ose by 80% to US$6.1 continue to exert upwar d pressure on the million. Operating costs were, however, 15% countrys inflation outlook. lower than last year. However, concurrent liquidity challenges The FMCG business continues to be affected coupled with problematic access to capital by inadequate working capital and, in remain considerable bottlenecks to recovery particular, liquidity induced supply chain of business and the economy generally. The constraints and inefficiencies. Funding that Euro-debt crisis has not abated as quickly was, in principle, required at the beginning as originally thought. Consequently , and of last year was availed after 16 months - Bekithemba Nkomo together with attendant r eduction in albeit in piecemeal fashion. Consequently, consumption, some commodity prices have sales volumes declined by 35%, while softened. Lint prices that hit record highs of intermittent running of the plant resulted in US$2.20 per pound in Mar ch 2011, fell to suboptimal efficiencies, high unit costs of US$1.00 per pound in Mar ch 2012 before production and loss of margins. Accordingly, Overall, the receding further to US$0.82 per pound at the business recorded a loss before tax of the end of May 2012, and ar e still falling! US$5.8 million (last year: US$5.6 million). Group has very Due to the accumulation of these losses, Power shortages remain a real problem and, coupled with delayed funding of the good prospects in the absence of a sustainable r esolution business, a further capital injection will be of this issue, competitiveness and recovery required to get this business on its feet. We for growth in all of businesses (especially in the are curr ently engaging our counterparty manufacturing sector) will continue to be shareholders in this business with a view to its businesses. retarded. The recent increases in the price ensuring that r equired funding is injected of fuel will exert upward pressure on logistical timeously as a basis of sustainably lifting costs and operating costs generally, the full the fortunes of this business. impact of which is still to be felt. Efforts are still on-going for the sale of the OPERATIONS spinning and frozen vegetables businesses. The Groups operations experienced mixed The spinning business is almost sold and fortunes during the year under r eview. we expect agreements to be signed soon. Interest in Exhort continues to be very strong The Seed business continued to do well and but suitors appear unable to follow through recorded a 9% growth in after tax profits to with required funding due to liquidity issues US$19 .1 million. Sales volumes gr ew by in the local market. 22% over last year to 67,241 tonnes and the new markets in T anzania, Kenya and GROUP FINANCIAL PERFORMANCE Ethiopia continue to grow and should start During the year under r eview, the Boar d contributing to the Gr oups results more approved impairment charges of US$10.9 significantly in the next few years. However, million including US$3.0 million against the the above average seed production over the Groups investment in the Spinning business. last 2 years has r esulted in a build-up of US$5.5 million of these impairments wer e inventories and trade r eceivables, both of charged dir ectly to the Gr oup income which will be managed down in the course statement. The balance of US$5.4 million of the new year. was charged to equity.AICO Africa Limited 2012 14
  • 15. CHAIRMAN’S STATEMENT (CONTINUED)Group sales volumes fell 5% r elative to last Shareholders funds and equity rose by 4% business will depend on striking a competentyear due, mainly, to a decline in sales volumes and 7%, respectively. Capital expenditure for balance between growth in intake volumes,experienced in the Cotton and FMCG the year amounted to US$17.8 million (last seed cotton buying prices and the dynamicsbusiness. Nevertheless, Gr oup revenue of year: US$12.8 million) and total assets of of global lint prices in the first instance.US$293.3 million was 30% higher than last US$312.5 million grew by 24% over last year. Thereafter, the high interest bill will continueyear - courtesy of higher lint prices compared to weigh down this business until the attendantto prior year. Net cash utilised in operations amounted to capital structure issues are resolved. Equally, US$27.4 million. Net increase in loans during concurrent cost r eduction and ef ficiencyGross profit margin fell to 31% (last year: the year amounted to US$17.4 million and is improvements together with a sustainable39%) weighed down by the Cotton and FMCG driven, in the main, by build up of inventory improvement in intake volumes will guaranteebusinesses that recorded gross margins of and trade receivable balances. required operating ef ficiencies and further20% (last year: 30%) and 1% (last year: 8%), improvements in profit.respectively. Mar gin losses in the Cotton Going forward, stock reduction and diligentbusiness were due to inordinately high prices management of the debtors’ book will be Overall, the Group has very good prospectspaid for seed cotton relative to declining global critical in containing growth of aggregate loan for growth in all its businesses. However ,lint prices. The FMCG gr oss mar gin was exposures in the Group. funding issues, especially in the Cotton andaffected, in the main, by inconsistent FMCG businesses, will have to be r esolvedavailability of raw materials, lack of funding TREASURY and timeously executed for this potential toand concomitant supply chain inefficiencies. After about a year of discussions, negotiations be r ealised. Accor dingly, we look to theOverall, gross margin value of US$89.9 million on a transaction that would have seen injection support of our shar eholders and otherwas 1% higher than last year on account of of cash into AICO and, subsequently, other stakeholders as we work on procuring requiredhigher aggregate revenue. Group operations collapsed. Accordingly, the funding for the Group. Board is considering other options for r esolvingGroup operating costs were 1% lower than the funding issues within the Group and will DIVIDENDlast year. Key savings were in non-recurring advise the market of final agr eed proposals Due to the prevailing liquidity challenges, andredundancy costs (US$2.7 million) char ged in due course. in consideration of the need to r educeagainst income last year. borrowing costs throughout the Group, the OUTLOOK Directors have not declar ed a dividend.Group operating profit of US$38.5 million was We expect continued str ong performance16% higher than last year, after accounting from the Seed business underpinned by ACKNOWLEDGEMENTSfor impairment char ges of US$5.5 million. growth of the East African businesses together I wish to extend my sincere appreciation and with establishment of operations in W est that of the Board to the Group Chief Executive,However, profit before tax of US$18.1 million Africa, though this is still at the pr ospective his management team and staf f across thewas 10% behind last year , after char ging stage. entire Group for their invaluable service andinterest costs of US$24.4 million (last year: contribution. I also want to take thisUS$17.2 million), and accounting for pretax Performance in the FMCG business will opportunity to thank my colleagues on thelosses of US$3.1 million for the spinning depend on timely availability of funding and Board for their wise counsel and continuedbusiness and US$5.8 million for the FMCG uninterrupted plant operations. Demand for support.business. Inter est income for the year the companys pr oducts is good butamounted to US$3.1 million (last year: US$1.1 consistent and continuous running of the plantmillion). to ensure lower unit costs will be critical. In turn, this will facilitate better mar gins andConsequently, pr ofit after tax fell 15% to constant shelf presence and, with it, much BL NkomoUS$14.8 million with attributable ear nings improved financial performance. CHAIRMANfalling 31% from US$8.9 million last year toUS$6.2 million this year. Earnings per share Considering present volatility in the global 27 June 2012fell 31% to 1.16 cents per shar e this year. cotton industry, performance in the Cotton 15 AICO Africa Limited 2012
  • 16. DIRECTORS’ RESPONSIBILTY STATEMENT ACCOUNTING RECORDS AND FINANCIAL STATEMENTS In preparing the Group financial statements set, out on pages 24 to The Dir ectors ar e r esponsible for the maintenance of adequate 60 appropriate accounting policies have been applied, as have the accounting records as well as the pr eparation and integrity of the relevant International Financial Reporting Standards, unless otherwise financial statements and related information contained in the annual stated, and ar e supported, wher e necessary, by r easonable and report in a manner that fairly pr esents the state of af fairs and the prudent judgement and estimates. results of the Groups operations. APPROVAL OF FINANCIAL STATEMENTS EXTERNAL AUDITORS ROLE The financial statements for the year ended 31 March 2012 have been The external auditors are responsible for carrying out an independent approved by the Board of Directors and are signed on its behalf by: examination of the financial statements in accordance with International Standards on Auditing and r eporting their findings ther eon. SYSTEMS OF INTERNAL CONTROL The Directors are also responsible for the Groups systems of internal BL Nkomo P St L Devenish financial control. These are designed to provide reasonable, but not CHAIRMAN GROUP CHIEF EXECUTIVE absolute, assurance as to the r eliability of the financial statements and to safeguard, verify and maintain accountability of assets and to 27 June 2012 prevent and detect misstatement and loss. Nothing has come to the attention of the Directors to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year under review. GOING CONCERN After reviewing the Groups budgets and related financial projections, the Directors have no reason, in all material respects, to believe that the Group will not continue to operate in the for eseeable future. Accordingly, these financial statements have been pr epared on a going concern basis. ACCOUNTING POLICIESAICO Africa Limited 2012 16
  • 17. The only way offinding the limits ofthe possible is bygoing beyond theminto the impossible.Arthur C. Clarke
  • 18. GROUP CHIEF EXECUTIVE’S REPORT OVERVIEW unprecedented volatility caused mayhem in FY 2012 was a year of two parts for the AICO the cotton business with the level of defaults Group. Cottco and Seed Co both enjoyed on contracts rising considerably. This was strong but not spectacular gr owth, while one reason for our decline in market shar e Olivine and Scottco put in disappointing where we felt that prices paid by some of performances. our competitors wer e too high. Thanks to shrewd moves by the marketing team, Cottco Political developments in Zimbabwe and the was able to take advantage of the price spike region had significant impacts on the and, to a lar ge extent, was insulated fr om business, both good and bad. The tight the default problem. liquidity situation in Zimbabwe persisted; this is primarily as a result of our Government’s The 2011/2012 cotton-buying season saw a failure to r eengage with the IMF and the lot more discipline amongst ginners and a World Bank. Only a political solution will higher level of enforcement of the statutory resolve this financial problem. In Malawi, the instrument by the authorities. This led to a actions of the late Bingu wa Mutharika were more stable industry, which is encouraging detrimental to the country and to the Seed to investment. Sadly, at the time of writing, Co subsidiary ther e. Fortunately, the new there is turmoil in the industry as Government President, Joyce Banda, has very quickly talks about subsidies, nationalisation of the reengaged with the international community crop and other market bending measures. It and growth in the Malawian economy should seems that these issues will be r esolved, resume soon. The election of Michael Sata somehow, which is critical to the survival and to the Presidency of Zambia on a youth based growth of the industry. platform came as somewhat of a surprise but he has, by and lar ge, maintained the The streamlining and cost cutting measures policies that are allowing Zambia to gr ow. implemented last year have had a very Patrick Devenish President Kikwete of Tanzania continues to positive effect on costs and profit before tax actively drive the Kilimo Kwanza or Agriculture grew from US$3.4 million to US$6.1 million. First policy and this is cr eating gr eat opportunity in this populous country. Even SEED CO Ethiopia, wher e Seed Co is starting to Seed Co had an excellent year, in terms of operate, has a very open appr oach to both volumes and tur nover. Volumes grew investment in agriculture. by 22%, driven in part by an 81% incr ease at the Zimbabwean business unit, which is The global financial situation is of concer n working hard to regain its rightful place in Rainfall patterns have to the whole of Africa and the possibility of the market. Turnover grew by 20% and would Greek and Spanish (among others) debt have been more were it not for discounting a major impact on all defaults has serious implications for business in the Zimbabwe market associated with in Africa. Commodity prices, particularly increased volumes and a general over supply of AICOs businesses cotton, which were very high a year ago, are of seed. Profits grew at a very acceptable now coming down. 9%, again slightly less than anticipated as a and the mid season result of lower selling prices and r esultant Rainfall patterns have a major impact on all gross margins. This tr end is expected to drought in Zimbabwe of AICOs businesses and the mid season reverse next year. drought in Zimbabwe reduced grain yields, reduced grain yields... which would usually translate into increased Investments made last year, such as the new seed sales in the subsequent year . Kenya Zambian factory , new equipment in and Tanzania experienced drought for the Zimbabwe and new plants in Kenya and third year in a row. Tanzania, paid handsome dividends and processing costs ar e coming down OPERATIONS REVIEW substantially. Seed stocks ar e starting to come down as production is rationalised and COTTCO a more manageable level of carryover stock Zimbabwes national cotton crop came down will reduce borrowings and risk. from 268,000 tonnes to 250,000 tonnes. Cottcos intake also declined from 111,000 The main development market of East Africa tonnes to 103,000 tonnes. During the year, is continuing to grow and investments made lint prices climbed from 70USc a pound in will start to pay in the coming years. late 2010 to over 230USc a pound by early Progress in West Africa is gaining momentum 2011 and then declined back to 70USc a and one of the goals is to have Seed Co pound again by June of this year . This seed on the shelf in Nigeria within two years.AICO Africa Limited 2012 18
  • 19. GROUP CHIEF EXECUTIVE’S REPORT (CONTINUED) This will be a very exciting development in of their businesses and as large a portion of this enormous and underserved market. their income as possible comes “below the Management has undertaken some fairly line”. large scale r estructuring as the business grows and r eporting lines change. CORPORATE GOVERNANCE Seed Co showed an after tax pr ofit of AICO believes in “walking the talk” as far as US$19.1 million compared to US$17.4 million corporate gover nance is concer ned. All last year. appropriate structures are in place but more important than this is the commitment of all OLIVINE members of the company to clear , In last year’s r eport we talked about the transparent and auditable systems. Tip-offs injection of capital in June and July 2011, Anonymous is used as a tool to allow people which would have turned the fortunes of the to r eport on inappr opriate behavior . business around. Sadly, due to several issues and the liquidity crisis in Zimbabwe, this OUTLOOK AND STRATEGY money only eventually came in March and The core strategy of AICO r emains to get April of this year by which time serious losses Cottco and Olivine into str ong domestic ...we are had accumulated. There is little doubt that positions and then to take them to the region when the corr ect amount of money is on the Seed Co platform. Cottco has now confident invested in this business at the right time it recorded its second year of pr ofits and will become profitable. However, if this does managements goal is to str engthen its that, with not happen then it will become increasingly balance sheet at which time it can start difficult to save it. Olivine r ecorded a loss moving into neighbouring countries whererecapitalisation, before tax of US$11.8 million. cotton is produced. Olivine is in serious need of r ecapitalisation and this exer cise iswe can take the OTHER underway. Seed Co is executing its regional An offer for Scottco has been received at a growth strategy on an ongoing basis.AICO Group to considerably lower price than originally While the results published this year ar e a envisaged. The Boar d has appr oved this long way below our plans we are confidentwhere it belongs offer and the paper work is currently being that, with recapitalisation, we can take the done. The deal should be finalised by the AICO Group to where it belongs in the world in the world of end of June with an effective date of 1 April of African business. 2012. Exhort is still for sale with severalAfrican business. interested parties who have yet to come up APPRECIATION with the money. This enterprise is costing The AICO Gr oup has a team of very very little to maintain as opposed to Scottco competent managers who, in different ways, which has been incurring losses. have made great achievements over the past year. I would like to extend my appreciation PEOPLE to every member of the team for his or her The development of people at all levels of hard work and for the support they have the or ganisation is viewed as its most given me. AICO and its subsidiary companies important function. Performance assessment have excellent chairmen and boar ds of systems have been implemented at the three directors who ar e highly competent and main companies and these are used to drive supportive of their management teams. I the strategy. Key executives ar e sent on would like to acknowledge this and thank high-level management training courses them. where exposure to their global peers is seen as one of the most important components of the course. Each business has a detailed succession plan that has training plans to P St L Devenish make people better at their existing jobs and development plans to prepare them for their GROUP CHIEF EXECUTIVE next r ole. Management ar e dir ectly incentivised according to the performance 27 June 2012 19 AICO Africa Limited 2012
  • 20. DIRECTORS’ REPORTThe Directors have pleasure in presenting their report together withthe audited financial statements for the year ended 31 Mar ch 2012. 31 March 31 Mar ch PRINCIPAL ACTIVITIES 2012 2011 AICO Africa Limited (AICO) is a diversified agro-industrial conglomerate US$000 US$000with interests in cotton ginning and marketing, spinning, fast movingconsumer goods and production and marketing of planting seed. The Profit before taxation 18,073 20,018 Company was incorporated in July 2008 and was subsequently r everse Income tax expense (2,716) (1,450) listed on the Zimbabwe Stock Exchange on 1 September 2008 in Profit after tax - continuingplace of The Cotton Company of Zimbabwe Limited and thus emer ged operations 15,357 18,568 as the new investment holding entity for the Group. Loss after tax from discontinued operations (509) (1,089) DIRECTORS RESPONSIBILITY STATEMENT Profit for the year 14,848 17,479 The Directors believe that the financial information that has beenpresented fairly reflects the underlying performance of the Group and Attributable to:its entities for the years then ended and its financial position as of Equity holders of the parent 6,156 8,946 those dates. Minority interest 8,692 8,533 14,848 17,479 SHARE CAPITALThe authorised share capital of the Company is 1,500,000,000 ordinary Share capital 5,341 5,313 shares of US$0.01 per share, of which 534,125,676 are issued and Capital reserves 26,515 33,049 fully paid. Retained earnings 51,695 42,233 Equity attributable to equityMovements in the issued share capital for the year were as follows: holders of the parent 83,551 80,595 Non-controlling interest 41,243 35,957 Total equity 124,794 116,552 31 March 31 March 2012 2011 CAPITAL EXPENDITURE Capital expenditure for the year ended 31 March 2012 amounted toIssued share capital US$17.8 million and capital expenditur e for the following year is as at 1 April 2011 531,289,029 531,065,109Share options exercised 2,836,647 223,920 budgeted at US$13.9 million.Issued share capital as at 31 March 2012 534,125,676 531,289,029 TREASURY After about a year of discussions, negotiations on a transaction thatRESERVES would have seen injection of cash into AICO collapsed. Accordingly,The movements in the r eserves of the Gr oup are as shown in the the Board is curr ently considering other options for r esolving thestatement of changes in equity. concurrent funding issues within the Group and will advise shareholders and the investment community of final agreed proposals in due course.DIRECTORS SHAREHOLDINGThe details of Directors shareholding are shown in the shareholder DIVIDENDSanalysis r eport accompanying the financial statements. Due to the pr evailing liquidity challenges and concurr ent funding requirements in the Group, the Directors have not declared a dividend.IMPAIRMENTThe income statement includes impairment losses of US$5.5 million DIRECTORSfor the Group, US$1.8 million of which was in the Cotton business, In terms of Article 32.1 of the Companys Articles of Association,US$0.6 million in the Spinning business, US$2.4 million in the Seedbusiness, whilst US$0.7 million was in the FMCG business. Impairment Messrs BL Nkomo, P Devenish and LF Preston retire by rotation. Thelosses were in respect of trade and other receivables, inventories as retiring Directors, being eligible, of fer themselves for r e-election.well as property, plant and equipment. AUDITORSOPERATING RESULTS Members will be asked to approve the remuneration of the auditorsThe results for the year are summarised below and are set out in for the year ended 31 March 2012 and to consider the reappointmentmore detail in the accompanying financial statements. Commentary of KPMG as auditors for the ensuing year.on these results is also provided in the Chairmans and Group ChiefExecutives reports. For and on behalf of the Board P Manamike COMPANY SECRETARY 27 June 2012AICO Africa Limited 2012 20
  • 21. Do not follow wherethe path may lead.Go instead wherethere is no path andleave a trail.Harold R. McAlindon 21 AICO Africa Limited 2012
  • 22. INDEPENDENT AUDITOR’S REPORT AICO Africa Limited 2011 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 We have audited the accompanying financial statements of AICO Africa Limited (the Company) and its subsidiaries (the Group), set out on page 24 to 60, which comprise the statement of financial position at 31 March 2012 and the statements of comprehensive income, changes in equity and cash flows 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, and for such inter nal control as the Directors determine is necessary to enable the pr eparation of financial statements that are free from material misstatement, whether due to fraud and error. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. W e conducted our audit in accordance with the International Standards on Auditing. 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 pr ocedures to obtain audit evidence about the amounts and disclosur es in the financial statements. The procedures selected depend on the auditors 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 inter nal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the entitys internal control. 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 audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company and Group at 31 March 2012, and the Company and Gr oups financial performance and cash flows for the year then ended in accor dance with the International Financial Reporting Standar ds, and in the manner r equired by the Companies Act (Chapter 24:03) of Zimbabwe. Emphasis of matter Without qualifying our opinion, we draw attention to note 30, which indicates that the Groups joint venture, Olivine Holdings (Private) Limited (Olivine) incurred a loss before tax of US$11,798,783 (2011: US$9,213,203 loss) for the year ended 31 Mar ch 2012 and has been facing working capital challenges. These conditions, along with other matters as set forth in note 30 to the financial statements, indicate the existence of material uncertainty which may cast significant doubt on Olivines ability to continue as a going concern. This note also indicates the basis of preparation of Olivines financial statements. KPMG Chartered Accountants (Zimbabwe) Harare 27 June 2012AICO Africa Limited 2012 KPMG, a Zimbabwean partnership and a member firm of the KPMG network of independent member firms af filiated with KPMG international, a Swiss co-operative.
  • 23. The ultimate measure ofa man is not where hestands in moments ofcomfort, but where hestands at times ofchallenge and controversy.Martin Luther King, Jr. 23 AICO Africa Limited 2012
  • 24. INCOME STATEMENTSfor the year ended 31 March 2012 GROUP COMPANY Restated* 31 March 31 March 31 March 31 March 2012 2011 2012 2011 Notes US$000 US$000 US$000 US$000Continuing operationsRevenue 293,292 225,939 - -Cost of sales 1 (203,442) (136,801) - -Gross profit 89,850 89,138 - -Other operating income 5,424 1,610 3,520 2,055Operating expenses (56,737) (57,503) (9,041) (1,868)Administration expenses (24,498) (25,972) (2,912) (1,857)Distributing and selling expenses (14,339) (17,270) (88) (11)Other operating expenses (17,900) (14,261) (6,041) -Profit/(loss) from operations 1 38,537 33,245 (5,521) 187Investment income 2 3,147 1,066 754 -Other gains and losses 3 752 2,906 - -Interest expense (24,363) (17,199) (1,889) (844)Profit/(loss) before taxation 18,073 20,018 (6,656) (657)Taxation 4 (2,716) (1,450) 1,289 424Profit/(loss) after tax from continuing operations 15,357 18,568 (5,367) (233)Loss from discontinued operations 5 (509) (1,089) - -Profit/(loss) for the year 14,848 17,479 (5,367) (233)Attributable to:Equity holders of the parent 6,156 8,946 (5,367) (233)Non-controlling interest 8,692 8,533 - - 14,848 17,479 (5,367) (233)Basic earnings/(loss) per share (US cents) 6 1.16 1.68 (1.00) (0.04)Diluted earnings/(loss) per share (US cents) 6 1.11 1.62 (0.98) (0.04)* Refer to note 1.3AICO Africa Limited 2012 24
  • 25. STATEMENTS OF COMPREHENSIVE INCOMEfor the year ended 31 March 2012 GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 2011 US$000 US$000 US$000 US$000Profit/(loss) for the period 14,848 17,479 (5,367) (233)Other comprehensive incomeImpairment charge against revaluation reserve (2,374) (2,952) - -Transfer to revaluation reserve (196) (14,618) - -Transfer from revaluation reserve - (3) - -Exchange differences on translating foreign oparations (2,995) (26) - -(Losses)/gains on available for sale investments - - (33,134) 54,739Prior year inventory adjustment - (849) -Income tax related to components of other comprehensive income 662 3,563 3,858 (3,376)Other comprehensive loss for the period (4,903) (14,885) (29,276) 51,363Total comprehensive income/(loss) for the period 9,945 2,594 (34,643) 51,130Total comprehesive income/(loss) attributable to:Equity holders of the parent 2,743 (3,484) (34,643) 51,130Non-controlling interest 7,202 6,078 - - 9,945 2,594 (34,643) 51,130 25 AICO Africa Limited 2012
  • 26. STATEMENTS OF FINANCIAL POSITIONAs at 31 March 2012 GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 2011 Notes US$000 US$000 US$000 US$000 ASSETSNon-current assetsIntangible assets 25 9 - - Property, plant and equipment 7 105,017 104,203 270 441 Investment property 8 332 310 - - Other financial assets 17 268 - - - Deferred tax asset 12 - - 1,970 - Investments held in subsidiaries 9 - - 138,680 174,814 Investment held in joint venture 10 - - 6,825 6,825 Investment held in associate 11 - 39 - - Total non-current assets 105,642 104,561 147,745 182,080 Current assetsBiological assets 13 844 403 - - Inventories 14 80,803 55,304 - - Inputs scheme receivables 15 29,197 21,389 - - Prepayments 7,824 13,975 12 3 Trade and other receivables 16 70,239 42,994 114 3 Other financial assets 17 13 2,956 - - Assets classified as held for sale 26 5,318 2,402 - - Bank and cash balances 18 12,662 7,751 294 759 Balances owed by Group companies 21 - - 19,958 6,944 Total current assets 206,900 147,174 20,378 7,709 Total assets 312,542 251,735 168,123 189,789 EQUITY AND LIABILITIESCapital and reservesShare capital 22 5,341 5,313 5,341 5,313 Capital reserves 22 26,515 33,049 134,997 164,128 Retained earnings/(accumulated losses) 51,695 42,233 (7,019) (1,652) Equity attributable to equity holders of the parent 83,551 80,595 133,319 167,789 Non-controlling interest 41,243 35,957 - - Total equity 124,794 116,552 133,319 167,789 Non-current liabilitiesBorrowings 23 11,659 14,480 - - Deferred tax liabilities 12 16,313 18,793 - 3,202 Finance lease liabilities - third party 25 66 194 - -Total non-current liabilities 28,038 33,467 - 3,202 Current liabilitiesBorrowings 23 66,280 47,377 3,753 - Trade and other payables 24 26,309 19,539 368 120 Finance lease liabilities - third party 25 285 424 - - Taxation payable 4,211 3,365 70 10 Bank overdrafts 18 59,716 30,371 - - Liabilities classified as held for sale 26 2,909 640 - -Balances owed to Group companies 21 - - 30,613 18,668 Total current liabilities 159,710 101,716 34,804 18,798 Total equity and liabilities 312,542 251,735 168,123 189,789 B NKOMO - CHAIRMAN P DEVENISH - GROUP CHIEF EXECUTIVE 27 June 2012 27 June 2012AICO Africa Limited 2012 26
  • 27. GROUP STATEMENTS OF CHANGES IN EQUITY for the year ended 31 March 2012 ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT Non- TOTAL Share Capital Retained Total controlling EQUITY capital reserves earnings interest US$000 US$000 US$000 US$000 US$000 US$000Balance as at 31 March 2010 - 52,536 29,919 82,455 32,117 114,572Changes in equity for 2011 Share-based payment transactions 2 810 - 812 307 1,119Redenomination of share capital 5,311 (7,172) - (1,861) (95) (1,956)Acquisition of interest in foreign subsidiary - 745 576 1,321 (1,129) 192Dividend paid and received within the Group - - 1,352 1,352 - 1,352Dividend paid - - - - (1,321) (1,321)Total comprehensive income for the year (net of tax) - (13,870) 10,386 (3,484) 6,078 2,594Net movement for the year 5,313 (19,487) 12,314 (1,860) 3,840 1,980Balance as at 31 March 2011 5,313 33,049 42,233 80,595 35,957 116,552Changes in equity for 2012 Share-based payments transactions 28 145 735 908 446 1,354Acquisition of interest in foreign subsidiary - - 16 16 16 32Disposal of interest in foreign subsidiary - (1) - (1) (31) (32)Impairment of investment in subsidiary - (3,000) - (3,000) - (3,000)Dividend paid and recieved within the Group - - 2,290 2,290 - 2,290Dividend paid - - - - (2,347) (2,347)Total comprehensive income for the year (net of tax) - (3,678) 6,421 2,743 7,202 9,945Net movement for the year 28 (6,534) 9,462 2,956 5,286 8,242Balance as at 31 March 2012 5,341 26,515 51,695 83,551 41,243 124,794 27 AICO Africa Limited 2012
  • 28. COMPANY STATEMENTS OF CHANGES IN EQUITY for the year ended 31 March 2012 Share Capital Retained Total capital reserves earnings equity US$000 US$000 US$000 US$000Balance as at 31 March 2010 - 118,145 (1,419) 116,726Changes in equity for 2011Share-based payment transactions 2 (69) - (67)Redenomination of share capital 5,311 (5,311) - -Total comprehensive income for the year (net of tax) - 51,363 (233) 51,130Net movement for the year 5,313 45,983 (233) 51,063Balance as at 31 March 2011 5,313 164,128 (1,652) 167,789Changes in equity for 2012Share-based payment transactions 28 145 - 173Total comprehensive loss for the year (net of tax) - (29,276) (5,367) (34,643)Net movement for the year 28 (29,131) (5,367) (34,470)Balance as at 31 March 2012 5,341 134,997 (7,019) 133,319AICO Africa Limited 2012 28
  • 29. STATEMENTS OF CASH FLOWSfor the year ended 31 March 2012 GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 2011 Notes US$000 US$000 US$000 US$000Cash flows from operating activitiesOperating cash flows before reinvesting in working capital 19 48,535 41,732 (794) (358)Movement in working capital 20 (47,001) (44,285) (6,109) 680Interest paid (22,942) (16,562) - (844)Net taxation paid (5,990) (9,842) (20) -Net cash utilised in operations (27,398) (28,957) (6,923) (522)Cash flows from investing activitiesInterest received 2,551 1,042 - -Dividend received 1 - 2,290 1,352Proceeds from disposal of property, plant and equipment 628 5,204 - -Proceeds from sale of investments 2,128 - - -Acquisition of property, plant and equipment (17,822) (12,775) (8) (147)Acquisition of other investments 358 (2,399) - -Net cash (outflow)/inflow from investing activities (12,156) (8,928) 2,282 1,205Cash flows from financing activitiesProceeds from issue of share capital - - - -Proceeds from issue of share options 568 42 423 37Net third party borrowings raised 17,386 13,308 3,753 -Increase in finance lease liabilities (487) (158) - -Dividends paid (2,347) (1,321) - -Net cash inflow from financing activities 15,120 11,871 4,176 37Net (decrease)/increase in cash and cash equivalents (24,434) (26,014) (465) 720Cash and cash equivalentsBalance at the beginning of the year (22,620) 3,394 759 39Cash and cash equivalents at the end of the year 18 (47,054) (22,620) 294 759 29 AICO Africa Limited 2012
  • 30. GROUP PRIMARY SEGMENT REPORTSfor the year ended 31 March 2012 BUSINESS SEGMENT Cotton FMCG Seed Spinning Other Total Group Discontinued Continuing business business business business eliminations Total operations operations31 March 2012 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000Revenue 170,904 19,238 117,708 4,463 - 312,313 (14,558) 297,755 (4,463) 293,292Profit/(loss) from operations 19,212 (1,526) 27,029 (2,469) (5,529) 36,717 1,343 38,060 477 38,537Investment income 4,096 57 891 4 754 5,802 (2,651) 3,151 (4) 3,147Other (losses)/gains 1,267 (2) (175) (4) (340) 746 - 746 6 752Interest expense (18,519) (2,316) (4,289) (633) (1,889) (27,646) 2,651 (24,995) 632 (24,363)Income tax expense (1,106) 1,691 (4,371) 485 1,318 (1,983) (131) (2,114) (602) (2,716)Profit/(loss) for the year 4,950 (2,096) 19,085 (2,617) (5,686) 13,636 1,212 14,848 509 15,357Other informationSegment assets 156,537 24,139 156,940 3,837 167,126 508,579 (196,037) 312,542 (5,190) 307,352Segment liabilities (104,865) (18,527) (75,022) (2,785) (34,124) (235,323) 47,575 (187,748) 2,909 (184,839)Segment net assets 51,672 5,612 81,918 1,052 133,002 273,256 (148,462) 124,794 (2,281) 122,513Capital expenditure 7,414 594 9,802 4 8 17,822 - 17,822 - 17,822Depreciation 3,249 1,719 2,970 216 179 8,333 - 8,333 - 8,333AICO Africa Limited 2012 30
  • 31. GROUP PRIMARY SEGMENT REPORTSfor the year ended 31 March 2012 BUSINESS SEGMENT Cotton FMCG Seed Spinning Other Total Group Discontinued Continuing business business business business eliminations Total operations operations31 March 2011 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000Revenue 119,034 18,507 97,826 6,233 219 241,819 (15,416) 226,403 (464) 225,939Profit/(loss) from operations 14,977 (3,759) 22,751 779 143 34,891 (2,706) 32,185 1,060 33,245Investment income 2,171 - 846 23 5 3,045 (1,974) 1,071 (5) 1,066Other (losses)/gains (136) (6) 2,675 36 330 2,899 - 2,899 8 2,907Interest expense (13,649) (1,803) (2,872) (32) (844) (19,200) 1,974 (17,226) 26 (17,200)Income tax expense 3,467 923 (5,965) (499) 395 (2,049) 229 (1,450) - (1,450)Profit/(loss) for the year 6,830 (4,645) 17,435 307 29 19,956 (2,477) 17,479 1,089 18,568Other informationSegment assets 124,429 29,330 121,885 7,895 192,815 476,354 (224,619) 251,735 (2,293) 249,442Segment liabilities (78,438) (19,713) (52,165) (4,226) (25,024) (179,566) 44,383 (135,183) 640 (134,543)Segment net assets 45,991 9,617 69,720 3,669 167,791 296,788 (180,236) 116,552 (1,653) 114,899Capital expenditure 2,054 368 10,132 73 148 12,775 - 12,775 - 12,775Depreciation 2,825 1,600 2,697 378 150 7,650 - 7,650 - 7,650AICO Africa Limited 2012 31
  • 32. GROUP SECONDARY SEGMENT REPORTS For the year ended 31 March 2012 GEOGRAPHICAL SEGMENT Rest of Europe Discontinued Continuing Zimbabwe Africa and Asia Total operations operations US$000 US$000 US$000 US$000 US$000 US$000 31 March 2012 Revenue from external customers 98,710 96,984 102,061 297,755 (4,463) 293,292 Segment assets 283,640 28,902 - 312,542 (5,190) 307,352 Capital expenditure 9,063 8,759 - 17,822 - 17,822 31 March 2011 Revenue from external customers 111,937 61,050 53,416 226,403 (464) 225,939 Segment assets 200,186 51,549 - 251,735 (2,293) 249,442 Capital expenditure 4,618 8,157 - 12,775 - 12,775 Composition of geographical segments Segment Operating companies Products and services AICO Africa Limited Investment company The Cotton Company of Zimbabwe Limited Ginning of seed cotton and selling of lint and by-products of the ginning process Seed Co Limited Development, production and selling of broad acre crop seeds Zimbabwe Quton Seed Company (Private) Limited Development, production and selling of cotton seeds Scottco (Private) Limited Selling of yarn and woven products Exhort Enterprises (Private) Limited Manufacturing and selling of fast moving consumer goods Olivine Industries (Private) Limited Manufacturing and selling of fast moving consumer goods Zambrano (Private) Limited Investment company Rest of Africa Cottco International (Proprietary) Limited Investment company Seed Co International and subsidiaries Development, production and selling of broad acre crop seeds Europe and Asia None None Sales for segments outside Zimbabwe are made by all Group companies and are not limited to companies operating outside the Zimbabwe geographical segment. Basis of pricing inter-segment sales Inter-segment transfers, segment revenue, segment expenses and segment result include transfers between business segments and geographical segments. Such transfers are accounted for at market prices charged to unaffiliated customers for similar goods and services. Those transfers are eliminated on consolidation.AICO Africa Limited 2012 32
  • 33. A creative man ismotivated by the desireto achieve, not by thedesire to beat others.Ayn Rand
  • 34. ACCOUNTING POLICIES1. 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 2012 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”), and the Groups interest in associate and jointly controlled entity. The principal activities of the Gr oup are: the buying and ginning of seed cotton, 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. BASIS OF PREPARATION The basis of preparation for the financial statements is International Financial Reporting Standards.(a) Statement of compliance The Groups financial statements have been pr epared in accor dance with Inter national Financial Reporting Standar ds (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations. The financial statements were approved by the Board of Directors on 27 June 2012.(b) Basis of measurement The consolidated financial statements have been pr epared 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; and • investment property is measured at fair value. The methods used to measure fair value are discussed further in notes 7, 8, 9 and 10.(c) Functional and presentation currency These consolidated financial statements are presented in United States dollars (US dollars), which is the Gr oups functional currency. All financial information presented in US dollars has been rounded to the nearest thousand.(d) 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. Estimates and underlying assumptions ar e reviewed on an ongoing basis. Revisions to accounting estimates ar e recognised in the period in which the estimates are revised and in any future periods affected. Information about significant areas of estimation uncertainty and critical judgement in applying accounting policies that have the most significant ef fect on the amounts r ecognised in the consolidated financial statements is included in the following notes: Note 1.1 Cost of sales Note 7 Property, plant and equipment Note 8 Investment property Note 9 Investments held in subsidiaries Note 10 Investment held in joint venture Note 13 Biological assets Note 29.4 Share-based payments3. SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies set out below have been applie d consistently by all entities within the Gr oup. The accounting policies adopted by the Gr oup are consistent with those used in the pr eparation of prior year consolidated financial statements.AICO Africa Limited 2012 34
  • 35. ACCOUNTING POLICIES(a) Basis of consolidation Subsidiaries Subsidiaries are those entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtai n benefits from its activities. In assessing control, potential voting rights that are presently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries are in line with those of the Group. Acquisitions from entities under common control Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the date that common control was established. The assets and liabilities acquired are recognised at the carrying amounts r ecognised previously in the Groups consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity. Associates Associates are those entities in which the Gr oup has significant influence, but not contr ol, over the financial and operating policies. Significant influence is pr esumed to exist when the Gr oup holds between 20 and 50 per cent of the voting power of another entity . Associates are accounted for using the equity method (equity accounted investees) and are recognised initially at cost. The consolidated financial statements include the Groups share of the income and expenses and equity movements of equity accounted investees, after adjustments to align accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Groups share of losses exceeds its interest in an equity accounted for investee, the carrying amount of that inter est is reduced to nil, and the r ecognition of losses is discontinued except to the extent that the Gr oup has an obligation or has made payments on behalf of the investee. Jointly controlled entities A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, that is when the strategic financial and operating policy decisions r elating to the activities of the joint ventur e require the unanimous consent of the parties sharing control. Joint venture arrangements that involve a separate entity in which each ventur er has an interest are referred to as jointly contr olled entities. The Group reports its interests in jointly controlled entities using proportionate consolidation. The Groups share of the assets, liabilities, income and expenses of jointly contr olled entities ar e combined with the equivalent items in the consolidated financial statements on a line-by-line basis. Any goodwill arising on the acquisition of the Groups interest in a jointly controlled entity is accounted for in accor dance with the Gr oups accounting policy for goodwill arising on business combinations (see below). Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised gains and losses or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.b) Adoption of new and revised reporting standards At the date of authorisation of the financial statements of AICO Africa Limited for the year ended 31 March 2012, the following standards and interpretations were in issue but not yet effective: Standard/Interpretation Subject Effective date IFRS 7 amendment Disclosures - Transfers of Financial Assets Annual periods beginning on or after 1 July 2011 IFRS 1 amendment Severe Hyperinflation and Removal of Fixed Annual periods beginning on or after 1 July 2011 Dates for First-time Adopters IAS 12 amendment Deferred tax: Recovery of Underlying Assets Annual periods beginning on or after 1 January 2012 IAS 1 amendment Presentation of Financial Statements: Annual periods beginning on or after 1 July 2012 Presentation of Items of Other Comprehensive Income IFRS 10 Consolidated Financial Statements Annual periods beginning on or after 1 January 2013 IFRS 11 Joint Arrangements Annual periods beginning on or after 1 January 2013 IFRS 12 Disclosure of Interests in Other Entities Annual periods beginning on or after 1 January 2013 IFRS 13 Fair Value Measurement Annual periods beginning on or after 1 January 2013 IAS 19 amendments Employee Benefits: Defined Benefit Plans Annual periods beginning on or after 1 January 2013 IAS 27 Separate Financial Statements (2011) Annual periods beginning on or after 1 January 2013 IAS 28 Investments in Associates and Annual periods beginning on or after 1 January 2013 Joint Ventures (2011) IFRS 1 amendment Government Loans Annual periods beginning on or after 1 January 2013 IFRS 7 amendment Disclosures - Offsetting Financial Assets Annual periods beginning on or after 1 January 2013 and Financial Liabilities IFRIC 20 Stripping Costs in the Production Phase of a Annual periods beginning on or after 1 January 2013 Surface Mine 35 AICO Africa Limited 2012
  • 36. ACCOUNTING POLICIES Standard/Interpretation Subject Effective date IAS 32 Offsetting Financial Assets and Financial Annual periods beginning on or after 1 January 2014 Liabilities IFRS 9 (2009) Financial Instruments Annual periods beginning on or after 1 January 2015 IFRS 9 (2010) Financial Instruments Annual periods beginning on or after 1 January 2015 The following revisions, issues and amendments set out below became effective for the current year: • Amended IFRS 1 Removal of Fixed Dates for First-time Adopters • Amended IFRS 7 Disclosures - Transfers of Financial Assets The adoption of these revised standards and interpretations in the current year has not led to any changes in the Group’s accounting policies. These standards do not have any financial ef fect on the r ecognition or measurement of transactions and events, nor the financial position or performance of the Group. Their effects are limited to the nature and extent of disclosure to be made by the Group. c) Property, plant and equipment Property, plant and equipment is measur ed at cost or valuation less accumulated depr eciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labour and any other costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Items of property, plant and equipment are revalued at least once every five years, or earlier if it becomes apparent that their carrying amount has declined below their recoverable amount to a material extent. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The cost of the day-to-day servicing of property, plant and equipment is recognised in profit or loss when incurred. Depreciation is recognised in profit or loss on a straight line basis over the useful life of each item of pr operty, plant and equipment as follows: Buildings 15 - 50 years Plant and machinery 20 - 40 years Mobile equipment 5 - 50 years Motor vehicles 5 - 5 years Office and depot equipment 5 - 10 years Land and capital work in progress are not depreciated. Depreciation methods, useful lives and residual values of items of property, plant and equipment are reassessed at each balance sheet date. Depreciation is not charged when the carrying amount of an item of property, plant and equipment becomes equal to or less than the residual value. d) Research and development costs Research and development costs are recognised in profit or loss in the period in which they are incurred. e) Impairment Financial assets A financial asset is considered to be impaired if objective evidence indicates that one or mor e events have had a negative ef fect on the estimated future cash flows of that asset. An impairment loss in r espect of a financial asset measur ed at amortised cost is calculated as the dif ference between its carrying amount and the pr esent value of the estimated futur e cash flows discounted at the original ef fective inter est rate. An impairment loss in respect of financial assets other than those at amortised cost is calculated as the difference between its carrying amount and its current fair value. Significant financial assets are tested for impairment on an individual basis. The r emaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in profit or loss. An impairment loss is r eversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For available for sale financial assets that are equity securities, the reversalAICO Africa Limited 2012 36
  • 37. ACCOUNTING POLICIES i s recognised directly in equity. For other financial assets the reversal is recognised in profit or loss. Non-financial assets The carrying amounts of the Groups non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the assets r ecoverable amount is estimated. For goodwill and intangible assets that have indefini te lives or that are not yet available for use, the recoverable amount is estimated at each reporting date. n impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash- A generating unit is the smallest identifiable asset gr oup that generates cash flows that lar gely are independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. The recoverable amount of an asset or cash-generating unit is the gr eater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decr eased or no longer exists. An impairment loss is r eversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying am ount that would have been determined, net of depr eciation or amortisation, if no impairment loss had been recognised.f) Investment property Investment property, which is property held for capital appreciation, is measured initially at its cost, including transaction costs. Subsequent to initial recognition, investment property is measured at fair value. Gains and losses arising from changes in the fair value of investment property are included in profit or loss in the period in which they arise.g) Biological assets Biological assets are measured at fair value less costs to sell, with any change ther ein recognised in profit or loss. Point-of-sale costs include all costs that would be necessary to sell the assets. In cases where, upon initial recognition of a biological asset, the fair value of such asset is not available and alter native estimates of fair value are determined to be unreliable, then such a biological asset is measured at cost less accumulated depreciation and accumulated impairment losses. Thereafter, once the fair value of such biological asset becomes r eliably measurable, it is subsequently measured at fair value less costs to sell.h) Inventories and stores Inventories ar e measur ed at the lower of cost and net r ealisable value. Cost is determined on the following bases: Inventory category Basis of valuation Seed cotton Actual weighted average cost. Packaging, stores and consumables At weighted average cost. Lint and ginned seed The proportion that the realised value of each product bears to the weighted average costs of the seed cotton, ginning and other direct production costs. Yarn Actual lint cost, other direct material costs and processing related costs. Planting seed Actual seed cost, other direct material costs and processing related costs. Linters and delinted seed The proportion that the realised sales value of each product bears to the weighted average costs of the ginned seed and other direct mechanical delinting costs. FMCGs Actual weighted average cost. 37 AICO Africa Limited 2012
  • 38. ACCOUNTING POLICIESi) Foreign currencies Foreign currency transactions Foreign currency transactions (which are currencies other than the functional curr ency), on initial recognition, are translated at the exchange rates ruling on the date of the transaction. Subsequent to that, all foreign currency denominated financial assets and liabilities are translated at each balance sheet date, using the exchange rates ruling at that date. Accor dingly, foreign currency denominated income and expenses are recorded at exchange rates ruling on the date of the transaction. Exchange differences are recognised in profit or loss in the period in which they arise. Translation of foreign entities Assets, liabilities, income and expenses of foreign entities, are translated into US dollars at exchange rates ruling at the reporting date. The income and expenses of foreign operations, excluding operations in hyperinflationary economies, are translated to US dollars at exchange rates ruling on the date of the transaction. Foreign currency differences arising from translation of foreign entities are recognised directly in equity as a non-distributable foreign currency translation reserve (FCTR). When a for eign operation is disposed of, in part or in full, the r elevant amount in the FCTR is transferred to profit or loss.j) Financial instruments The Groups financial instruments ar e classified into the following categories: Fair value thr ough profit or loss (FVTPL), held-to- maturity, and loans and receivables. Classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. The Group does not hold or issue derivative financial instruments. Financial assets - recognition and measurement Financial assets are recognised initially at fair value, when the Group has rights or other access to economic benefits. Subsequent to initial recognition these instruments are measured as set out below: Financial assets at fair value through profit and loss (FVTPL) A financial asset is classified as at FVTPL wher e it is held for trading. A financial asset is classified as held for trading if: it has been acquired principally for the purpose of selling in the near future; or it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short term profit taking. Financial assets at FVTPL ar e stated at fair value, with any r esultant gain or loss r ecognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or inter est earned on the financial asset. Financial assets at FVTPL consist of listed securities. The fair value is determined with reference to market prices. Loans and receivables Trade receivables, inputs scheme receivables, loans and other receivables are measured at fair value on initial r ecognition, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when ther e is objective evidence that the asset is impair ed. The allowance r ecognised is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Held-to-maturity debt securities At subsequent reporting dates, debt securities for which the Group has expressed the intention and ability to hold to maturity (held- to-maturity debt securities) are measured at amortised cost using the effective interest rate method, less any impairment losses. An impairment loss is recognised in the profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the investments carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods when an increase in the investments recoverable amount can be related objectively to an event occurring after the impairment was r ecognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised. Cash and cash equivalents Cash and cash equivalents comprises cash balances, call deposits and investments in money market instruments. The carrying amount of cash and cash equivalents approximates their fair value. Any gain or loss arising from marking to market is recognised in profit or loss. Bank overdrafts that are repayable on demand and form an integral part of the Groups cash management strategy are included as a component of cash and cash equivalents.AICO Africa Limited 2012 38
  • 39. ACCOUNTING POLICIES Financial liabilities - recognition and measurement Financial liabilities are recognised when there is an obligation to transfer benefits and that obligation is a contractual liability to deliver cash or another financial asset or to exchange financial instruments with another entity on potentially unfavourable terms. Where these criteria no longer apply, a financial liability is no longer recognised. Financial liabilities are recognised, initially, at fair value. Subsequent to initial recognition, these instruments are measured as set out below: Borrowings Borrowings are recorded at amortised cost and less any payments made. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. Capitalisation of borrowing costs ceases when substantially all activities necessary to pr epare the qualifying asset for its intended use or sale are complete. Trade and other payables Trade and other payables are stated at cost adjusted for payments made to r eflect the value of the anticipated economic outflow of resources. Offset If a legally enforceable right exists to set-off recognised amounts of financial assets and liabilities, which are in determinable monetary amounts and the Gr oup intends to settle on a net basis, the r elevant financial assets and liabilities ar e of fset.k) Prepayments Prepayments are stated at cost. Cost is determined by reference to the actual amount paid.l) Leases Leased assets Leases in terms of which the Gr oup assumes substantially all risks and r ewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the pr esent value of the minimum lease payments. Subsequent to initial r ecognition, the asset is accounted for in accor dance with the accounting policy applicable to that asset. Other leases are operating leases and, except for investment property, the leased assets are not recognised in the Groups statement of financial position. Investment property held under an operating lease is recognised in the Groups statement of financial position at its fair value. Lease payments Payments made under the operating leases ar e recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases ar e apportioned between the finance expense and the r eduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the r emaining term of the lease when the lease adjustment is confirmed. Determining whether an arrangement contains a lease At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset. At inception or upon reassessment of the arrangement, the Group separates payments and other considerations required by such an arrangement into those for the lease and those for the other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently, the liability is r educed as payments ar e made and an imputed finance char ge on the liability is r ecognised using the Groups incremental borrowing rate.m) Provisions A provision is recognised in the statement of financial position when the Gr oup has a legal or constructive obligation as a r esult of a past event, and it is pr obable that an outflow of economic benefits will be r equired to settle the obligation. If the ef fect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risk specific to the liability. 39 AICO Africa Limited 2012
  • 40. ACCOUNTING POLICIESn) Taxation Income tax Income tax comprises curr ent and deferred tax. Income tax is r ecognised in profit or loss except to the extent that it r elates to items recognised directly to equity, in which case it is recognised in equity. Current tax Current tax is the expected tax payable on the taxable income for the year , using rates enacted or substantially enacted at the balance sheet date and any adjustments to tax payable in respect of previous years. Deferred tax Deferred tax is provided using the balance sheet liability method, pr oviding for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not provided for on the initial r ecognition of assets or liabilities that af fect neither accounting nor taxable pr ofit or loss. The amount of deferr ed tax provided is based on the expected manner of r ealisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the unused tax losses and credits can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.o) Employee benefits Pensions Pensions are provided for employees through pension funds to which both the Group and its employees contribute. The schemes include both the Gr oup schemes and the national social security schemes of the r espective countries in which the Gr oup entities operate. The pension fund is a defined contribution plan. Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss as they are incurred. Equity compensation benefits The fair value of any options granted to employees of the Group is determined at the grant date using the Black-Scholes-Merton valuation model. The fair value of shar e options granted to employees is r ecognised as an expense with a corr esponding increase in equity over the period in which the options are expected to vest. The amount recognised as an expense is adjusted to reflect the number of options expected to vest. Termination Termination benefits for employees ar e recognised as a liability and an expense in pr ofit or loss when the Gr oup has a demonstrable commitment to either; terminate the employment of an employee or group of employees before the normal retirement date, or provide termination benefits as a r esult of an offer made in respect of voluntary redundancy. The amount recognised as termination benefits is determined by reference the the actual amount to be paid if this is payable within 12 months of the r eporting date. Where these benefits are payable more than 12 months after reporting date, they are measured at amortised cost.p) Segment reporting A segment is a distinguishable component of the Gr oup that is engaged either in pr oviding products or services (business segment), or providing products or services within a particular economic envir onment (geographical segment), which is subject to risks and r ewards that are different from those of other segments. The Gr oups primary format for segment r eporting is based on the Gr oups business segments.q) Revenue Revenue from the sale of goods is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer and is measured at the fair value of the consideration received or receivable. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, measurement of the associated costs incurred to earn the revenue or the possible return of the goods.AICO Africa Limited 2012 40
  • 41. ACCOUNTING POLICIESr) Intangible assets Goodwill Goodwill is stated at cost less any accumulated impairment losses. Goodwill arising on business combinations represents the excess of the cost of acquisition over the fair value of the net identifiable assets acquired. The excess of the fair value of assets acquired over the purchase consideration is recognised directly in profit or loss on recognition. Goodwill is tested for impairment on an annual basis. Business combinations involving entities under the common contr ol of the Gr oup do not give rise to goodwill in the consolidated financial statements. Instead, surpluses or deficits arising bet ween the fair value of assets acquired and the purchase consideration are recognised directly in equity as a non-distributable reserve.s) Earnings per share The Group presents basic and diluted ear nings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of or dinary shares outstanding during the period. Diluted EPS is determined by adjusting the pr ofit or loss attributable to or dinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees. 41 AICO Africa Limited 2012
  • 42. NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 2012 GROUP COMPANY Restated 31 March 31 March 31 March 31 March 2012 2011 2012 2011 US$000 US$000 US$000 US$0001 Profit/(loss) from operations Profit/(loss) from operations is stated after charging:1.1 Cost of sales 203,442 136,801 - - Inventories consumed 162,961 91,202 - - Other 40,481 45,599 - -1.2 Other costs Staff costs 32,277 28,166 - - Depreciation and amortisation 8,336 7,650 179 150 Loss on derecognition of investment property - 554 - - Impairment losses 5,467 4,812 6,042 - Property, plant and equipment 654 102 - - Trade receivables 3,049 3,585 - - Inputs scheme receivables 1,764 - - - Impairment of inter company balances - - 3,042 - Other financial assets - 1,125 - - Impairment of investment in subsidiary - - 3,000 - Remuneration of directors 912 733 270 179 Fees 645 430 171 102 Other 267 303 99 77 Auditors remuneration 565 461 14 91.3 Restatment of revenue, cost of sales and other income Revenue from sales of inputs in The Cotton Company of Zimbabwe Limited has been reclassified from other operating income to revenue as it more appropriately reflects the nature of the economic activity carried out by the company. Likewise, corresponding costs have been reclassified to costs of sales as these were previously reported on a net basis. Comparative amounts have also been reclassified with a resultant decrease in prior year other operating income amounting to US$3,601,883 and a corresponding increase in revenue and cost of sales amounting to US$15,302,202 and US$11,700,319, respectively. The restatement affects the income statement only. GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 2011 US$000 US$000 US$000 US$0002 Investment income Interest revenue - third party 3,147 1,066 754 - Dividends received - - - - Total 3,147 1,066 754 - Interest received - third party Bank deposits 954 1,057 754 - Other loans and recievables 2,191 9 - - Held-to-maturity investments 2 - - - Total 3,147 1,066 754 - Investment income earned on financial assets analysed by category Loans and receivables including bank and cash balances 3,145 1,066 754 - Held to maturity investments 2 - - - Total 3,147 1,066 754 -AICO Africa Limited 2012 42
  • 43. NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2012 GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 2011 US$000 US$000 US$000 US$0003 Other gains and losses Loss on disposal of property, plant and equipment 3 2,581 - - Foreign exchange losses (48) (66) - - Foreign exchange gains 1,052 - - - Changes in fair value of financial assets and liabilities (161) 215 - - Changes in fair value of investment property (94) 176 - - Total 752 2,906 - - Changes in fair value of financial assets and liabilities Change in fair value of financial assets designated at FVTPL (176) 188 - - Realised gains on financial assets 15 27 - - Total (161) 215 - - 4 Taxation4.1 Charge/(credit) based on profit/(loss) before taxation Current income tax 6,678 5,229 - - Deferred tax (note 12) (4,144) (4,469) (1,315) (424) Residents’ tax on interest 185 615 26 - Capital gains tax (3) 75 - - Net tax charge/(credit) 2,716 1,450 (1,289) (424)4.2 Reconciliation of tax charge/(credit) to profit/(loss) Standard tax on profit/(loss) 4,218 5,306 (1,714) (170) Effect of: - - - - - Revenue that is exempt from tax (2,023) (146) - - - Revenue that is taxed at special rates 222 342 - (348) - Expenses that are not deductable in determining taxable profit 652 1,201 - 56 - Unused tax losses and tax offsets not recognised as tax assets 340 (236) 425 - - Subsidiaries taxed at non-standard rates of tax (486) (764) - - - Permanent differences - - - - - Recognition of previously unrecognised deferred tax losses (207) (4,104) - - - Adjustments recognised in the current year in relation to the current tax of prior years - 38 - 38 Effect on deferred tax balances due to changes in income tax rates - (187) - - Total tax charge/(credit) 2,716 1,450 (1,289) (424) Standard rate of tax 25.75% 25.75% 25.75% 25.75% Effective income tax rate 15.03% 7.24% (19.37%) (64.54%) 43 AICO Africa Limited 2012
  • 44. NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 20125 Discontinued operations In compliance with the requirements of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the assets and liabilities of the discontinued operations amounting to US$5.2 million and US$2.9 million, respectively, have been included in the Group Statement of Financial Position as assets classified as held for sale, and as liabilities classified as held for sale. During the year, discontinued operations recorded a loss of US$0.5 million which has been included in the Group Income Statement as loss from discontinued operations. The analysis of assets, liabilities and performance of the discontinued operations is shown below. Exhort Exhort Total Total Enteprises Enteprises Scottco Scottco Salamax Salamax Discontinued Discontinued (Pvt) Limited (Pvt) Limited (Pvt) Limited (Pvt) Limited (Pty) Limited (Pty) Limited operations operations 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 2012 2011 2012 2011 2012 2011 2012 2011 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$0005.1 Results of discontinued operations Revenue - 244 4,463 - - 220 4,463 464 Other operating income 2,703 16 3 - - 7 2,706 23 Expenses (707) (1,281) (6,935) - (3) (266) (7,645) (1,547) Loss from operations 1,996 (1,021) (2,469) - (3) (39) (476) (1,060) Other income/(expenses) (2) (32) (633) - - 3 (635) (29) Profit/(loss) before tax 1,994 (1,053) (3,102) - (3) (36) (1,111) (1,089) Income tax expense 117 - 485 - - - 602 - Profit/(loss) after tax 2,111 (1,053) (2,617) - (3) (36) (509) (1,089)5.2 Cash flows from discontinued operations Net cash generated from operations (3) 320 (155) - (3) (84) (161) 236 Net cash outflow from investing activities - 55 58 - - 17 58 72 Net cash inflow from financing activities - - - - - (10) - (10) Net (decrease)/increase in cash and cash equivalents (3) 375 (97) - (3) (77) (103) 298 GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 20116 Earnings/(loss) per share US$000 US$000 US$000 US$000 The calculation is based on the following data: Weighted average number of ordinary shares in issue (thousands) For the purposes of basic earnings/(loss) per share 532,673 531,121 532,673 531,121 Add dilutive impact of shares 20,061 22,560 20,061 22,560 For the purposes of diluted earnings/(loss) per share 552,734 553,681 552,734 553,681 Earnings/(loss) per share from continuing operations Earnings/(loss) for the purposes of basic and diluted earnings per share 6,156 8,946 (5,367) (233) Basic earnings/(loss) per share (US cents) 1.16 1.68 (1.00) (0.04) Diluted earnings/(loss) per share (US cents) 1.11 1.62 (0.98) (0.04)AICO Africa Limited 2012 44
  • 45. NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2012 Land and Plant and Capital work buildings equipment in progress Total7 Property, plant and equipment US$000 US$000 US$000 US$0007.1 Group Cost/valuation 1 April 2010 86,396 45,291 1,262 132,949 Additions 6,787 5,574 414 12,775 Disposals (2,467) (1,129) - (3,596) Capitalised during the period 611 - (611) - Transfers in/(out) - - - - Reclassified to investment property - - - - Transfer to assets classified as held for sale - (231) - (231) Revaluation (9,550) (4,046) - (13,596) Exchange rate movements (97) (131) - (228) 31 March 2011 81,680 45,328 1,065 128,073 Additions 1,822 15,624 376 17,822 Disposals - (2,128) - (2,128) Capitalised during the period - - - - Transfers in/(out) 5,453 (4,899) (561) (7) Reclassified to investment property - - - - Transfer to assets classified as held for sale - (2,121) - (2,121) Revaluation - - - - Exchange rate movements (2,656) (1,397) - (4,053) 31 March 2012 86,299 50,407 880 137,586 Accumulated depreciation and impairment 1 April 2010 3,861 12,288 - 16,149 Charge for the year 2,255 5,395 - 7,650 Impairment charges to profit or loss 1,916 1 - 1,917 Impairment reversals from profit or loss - - - - Disposals (236) (841) - (1,077) Transfers in/(out) - (701) - (701) Transfer to assets classified as held for sale - (9) - (9) Revaluation - - - - Exchange rate movements (7) (52) - (59) 31 March 2011 7,789 16,081 - 23,870 Charge for the year 2,043 6,290 - 8,333 Impairment charges to profit or loss - - - - Impairment reversals from profit or loss - 2,374 - 2,374 Disposals - (1,511) - (1,511) Transfers in/(out) - - - - Transfer to assets classified as held for sale - (286) - (286) Revaluation - - - - Exchange rate movements (7) (204) - (211) 31 March 2012 9,825 22,744 - 32,569 Carrying amount at 1 April 2010 82,535 33,003 1,262 116,800 Carrying amount at 31 March 2011 73,891 29,247 1,065 104,203 Carrying amount at 31 March 2012 76,474 27,663 880 105,017 Capital commitments Authorised and contracted for - - - - Authorised and not contracted for 324 2,061 - 2,385 Total 324 2,061 - 2,385 Financing of capital commitments Capital commitments will be financed out of a combination of own resources of the Group and borrowings from both local and offshore financial institutions. Proceeds from insurance payouts There were no material proceeds from insurance payouts during the year. 45 AICO Africa Limited 2012
  • 46. NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 2012 S ignificant estimates and judgements The revalued amount is determined by reference to recent arms length market transactions. Residual values and useful lives of items of property, plant and equipment are reviewed annually at the reporting date. Residual values are determined by reference to an active market of similar items of property, plant and equipment taking into account the operating conditions and expected wear and tear. Where an active market does not exist, the residual value is assumed to be nil at which point the useful lives of affected assets are extended to levels consistent with this assumption. Useful lives of items of property, plant and equipment are determined with reference to expected duration of the assets utility to the Group, taking into account the operating conditions, expected wear and tear and the Group’s asset replacement policy. Encumbrances Refer to note 23. Land and Plant and Capital work buildings equipment in progress Total US$000 US$000 US$000 US$0007.2 Company Cost/valuation 1 April 2010 - 137 88 225 Additions 64 83 - 147 Disposals - - - - Capitalised during the period - - - - Transfers in/(out) 88 - (88) - Reclassified to investment property - 295 - 295 Revaluation - - - - Exchange rate movements - - - - 31 March 2011 152 515 - 667 Additions - 8 - 8 Disposals - - - - Capitalised during the period - - - - Transfers in/(out) - - - - Reclassified to investment property - - - - Revaluation - - - - Exchange rate movements - - - - 31 March 2012 152 523 - 675 Accumulated depreciation and impairment 1 April 2010 - 3 - 3 Charge for the year 72 78 - 150 Impairment charges to profit or loss - - - - Impairment reversals from profit or loss - - - - Transfers in/(out) - 73 - 73 Disposals - - - - Revaluation - - - - Exchange rate movements - - - - 31 March 2011 72 154 - 226 Charge for the year 80 99 - 179 Impairment charges to profit or loss - - - - Impairment reversals from profit or loss - - - - Transfers in/(out) - - - - Disposals - - - - Revaluation - - - - Exchange rate movements - - - - 31 March 2012 152 253 - 405 Carrying amount at 1 April 2010 - 134 88 222 Carrying amount at 31 March 2011 80 361 - 441 Carrying amount at 31 March 2012 - 270 - 270 Capital commitments Authorised and contracted for - - - - Authorised and not contracted for - - - - Total - - - -AICO Africa Limited 2012 46
  • 47. NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2012 GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 20118 Investment property US$000 US$000 US$000 US$000 Balance at 31 March 2011 310 684 - - Loss realised upon derecognition - (554) - - Change in fair value 22 180 - - Balance at 31 March 2012 332 310 - - The investment property comprises a residential property that is leased to a third party. The property has been stated at fair value which has been determined based on valuations performed by CB Richard Ellis, an accredited independent valuer, as at 31 March 2012 and 31 March 2011. The valuation model used is in accordance with that recommended by the International Valuation Standards Committee. COMPANY 31 March 31 March 31 March 31 March 2012 2012 2012 20119 Investments held in subsidiaries US$000 US$000 Name of subsidiary Proportion Principal Place of Proportion of voting of activity incorporation interests power held The Cotton Company of Zimbabwe Limited Ginning Zimbabwe 100.00% 100.00% 36,622 36,622 Seed Co Limited Seed Zimbabwe 50.20% 50.20% 101,360 134,494 Scottco (Private) Limited Spinning Zimbabwe 75.00% 75.00% 11 3,011 Exhort Enterprises (Private) Limited Vegetables Zimbabwe 100.00% 100.00% 5 5 Cottco International (Proprietary) Limited Investment Mauritius 100.00% 100.00% - - Zambrano Investments (Private) Limited Investment Zimbabwe 100.00% 100.00% 682 682 138,680 174,814 The investments in subsidiaries are designated as available-for-sale financial assets. The fair values of the subsidiaries have been determined with reference to their net assets values, save for Scottco (Private) Limited, which was impaired by an amount of US$3.0 million during the year. Seed Co Limited is listed on the Zimbabwe Stock Exchange (ZSE). On 31 March 2012, the market value of the Companys shares in Seed Co Limited amounted to US$101.4 million. On the date the financial statements were approved, the market value of the Companys shares in Seed Co Limited amounted to US$82.8 million. COMPANY 31 March 31 March 31 March 31 March 2012 2012 2012 201110 Investment held in joint venture US$000 US$000 Name of entity Proportion Principal Place of Proportion of voting of activity incorporation interests power held Olivine Holdings (Private) Limited FMCGs Zimbabwe 49.00% 49.00% 6,825 6,825 The investment held in joint venture is designated as an available-for-sale financial asset. The fair value of the joint venture has been determined with reference to the consideration paid on the acquisition date.There are no indications of impairment on the purchase price. Significant judgement The Company holds a 49% shareholding in Olivine Holdings (Private) Limited. The Industrial Development Corporation of Zimbabwe Limited (IDC) holds the other 51%. The Olivine Holdings (Private) Limited board of directors is composed of eleven directors of which four directors are appointed as representatives of the Company, five as representatives of IDC, while two are executive directors appointed by the board of directors. IDC appoints the chairman who is their representative but the chairman does not have a casting vote in boar d meetings. Each shareholder effectively has four voting directors on the board. While there is a management contract that delegates the operational management of Olivine Holdings (Private) Limited to the Company, the strategic, financial and operating decisions rest with the board and mutual consent between the two shareholders is required for all decisions of the board. The Company, therefore, regards Olivine Holdings (Private) Limited as a jointly controlled entity and the Companys proportionate share of the loss for the year was US$4,207,720 after tax. 47 AICO Africa Limited 2012
  • 48. NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 2012 GROUP 31 March 31 March 2012 2011 US$000 US$000 The effect of Olivine Holdings (Private) Limited on the Groups assets and liabilities at the reporting date is given below: Property, plant and equipment 14,181 17,694 Other intangibles 8 - Investment in associate - 39 Inventories 5,542 6,311 Inputs scheme receivables 385 - Prepayments 867 1,112 Trade and other receivables 1,545 1,166 Bank and cash balances 221 - Deferred tax liabilities (1,239) (3,421) Borrowings (6,283) (6,193) Trade and other payables (2,001) (2,061) Finance lease liabilities (219) - Taxation - 55 Overdraft (1,614) (769) Balances owed to Group companies (6,698) (3,268) Net identifiable assets and liabilities 4,695 10,66511 Investment held in associate RBP (Private) Limited - 39 The Group disposed of its 40% interest in RBP (Private) Limited during the current financial year and realised a profit of US$54,000. GROUP Assets Liabilities Net Net 31 March 31 March 31 March 31 March 2012 2012 2012 201112 Deferred tax assets/(liabilities) US$000 US$000 US$000 US$00012.1 Deferred tax assets and liabilities are attributed to the following: Temporary differences Property, plant and equipment - (23,323) (23,323) (27,023) Unrealised exchange gains - (83) (83) - Exchange differences in translating foreign subsidiaries - 1,315 1,315 1,259 Finance leases 49 - 49 - Provisions 199 (9) 190 30 General allowance for doubtful debts - - - - Fair value through profit or loss financial assets 75 - 75 - Prepayments - - - (98) Assessable tax losses 9,301 (261) 9,040 7,765 Unrealised profits in inventories - 130 130 (265) Reversal of impairmant - (331) (331) - Fair value adjustments for available-for-sale investments - (3,375) (3,375) (461) 9,624 (25,937) (16,313) (18,793)AICO Africa Limited 2012 48
  • 49. NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 201212.2 Movement in temporary differences during the year are attributed to the following: GROUP Recognised in Recognised Total Discontinued Continuing 31 March profit or loss in equity 31 March operations operations 2011 2012 US$000 US$000 US$000 US$000 US$000 US$000 Temporary differences Property, plant and equipment (27,023) 2,382 554 (24,087) 570 (23,517) Finance leases - (34) - (34) - (34) Accelerated depreciation for tax purposes - - - - - - Income received in advance - 14 - 14 - 14 Unrealised exchange gains - - - - 2 2 Unrealised profits in inventories (265) 130 - (135) - (135) Exchange difference on foreign subsidiary 1,259 - (26) 1,233 - 1,233 Provisions 30 120 - 150 - 150 General allowance for doubtful debts - - - - (8) (8) Change in fair value through profit and loss - - - - - - Prepayments (98) - - (98) - (98) Reversal of impairment - - - - - - Tax losses 7,765 1,503 - 9,268 - 9,268 Change in tax rate - - - - (121) (121) Change in fair value of available-for-sale investments (461) 29 (2,087) (2,519) - (2,519) Increase in share-based payment reserve - - (105) (105) - (105) (18,793) 4,144 (1,664) (16,313) 443 (15,870) COMPANY Assets Liabilities Net Net 31 March 31 March 31 March 31 March 2012 2012 2012 201112.3 Deferred tax assets and liabilities are attributed to the following: US$000 US$000 US$000 US$000 Temporary differences Property, plant and equipment - (53) (53) (79) Fair value through profit or loss financial assets 154 - 154 (3,702) Prepayments - (3) (3) (1) Assessable tax losses 1,872 - 1,872 580 2,026 (56) 1,970 (3,202)12.4 Movement in temporary differences during the year are attributed to the following: COMPANY Recognised in Recognised Total 31 March profit or loss in equity 31 March 2011 2012 US$000 US$000 US$000 US$000 Temporary differences Property, plant and equipment (79) 26 - (53) Prepayments (1) (2) - (3) Assessable tax losses 580 1,291 - 1,871 Change in fair value of available-for-sale investments (3,702) - 3,857 155 (3,202) 1,315 3,857 1,970 49 AICO Africa Limited 2012
  • 50. NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 2012 GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 201113 Biological assets US$000 US$000 US$000 US$000 Balance at 31 March 2011 403 588 - - Seasonal crops planted - at cost 844 403 - - Harvested plants transferred to inventories (403) (588) - Balance at 31 March 2012 844 403 - - Biological assets consist of certified hybrid seed plantings, gr own for own research purposes in the Seed business and comprise of maize and soya cr ops. No fair valuation of these assets was performed as the biological assets concerned are purely for own consumption. Consequently, these assets are stated at cost. In addition, biological assets also include cotton seed plantings from a small corporate farming pilot project in the Cotton business. These assets were valued at cost as additional costs to harvesting, and therefore costs to sell, could not be accurately nor reliably determined. In addition, volatility of global lint prices, which have been falling persistently, has made it difficult to accurately determine their fair value. The biological assets concerned have, therefore, been stated at cost. All biological assets of the Group are plantings effected in the last five months of the financial year and are expected to grow and be harvested between April 2012 and June 2012. No depr eciation was charged as a result. There were no indications of impairment or potential impairment of biological assets during the year under review. GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 201114 Inventories US$000 US$000 US$000 US$000 Raw materials 59,585 33,553 - - Work in progress 1,598 2,352 - - Finished goods 2,761 3,167 - - Consumable stores 13,136 10,597 - - Bought-in merchandise 3,723 5,635 - - 80,803 55,304 - - Net realisable value provision Opening balance (4,818) (3,159) - - Provision 734 (497) - - Closing balance (4,084) (3,656) - - Inventories charged to profit or loss 162,961 91,202 - - Inventories encumbered by borrowings are disclosed in note 23.15 Inputs scheme receivables Inputs scheme receivables 33,476 25,079 - - Allowance for doubtful debts (4,279) (3,690) - - 29,197 21,389 - - Movement in the allowance for doubtful debts Balance at the beginning of the year (3,690) (7,687) - - Current year (increase)/decrease in provision (589) 3,997 - - Balance at the end of the year (4,279) (3,690) - - Ageing of inputs scheme receivables provided for Year 2012 (1,220) - - - Year 2011 (1,448) (1,448) - - Year 2010 (1,611) (2,242) - - Prior 2009 - - - - (4,279) (3,690) - - Input receivables arise when the Group advances inputs to farmers who grow crops for the Group under contract and these are then recovered from the farmers as they sell their contracted crop. These receivables are seasonal. All past due input receivables were provided for. GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 201116 Trade and other receivablesG US$000 US$000 US$000 US$000 Trade receivables 72,177 49,033 - - Other receivables 3,678 3,828 114 3 Allowance for doubtful debts (5,616) (9,867) - - 70,239 42,994 114 3 Ageing of past due trade and other receivables not provided for 0-30 days 12,359 6,336 - - 30-60 days 4,308 3,391 - - 60-90 days 4,294 2,837 - - +90 days 35,249 5,341 - - 56,210 17,905 - -AICO Africa Limited 2012 50
  • 51. NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2012 GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 201116 Trade and other receivables (continued) US$000 US$000 US$000 US$000 Movement in the allowance for doubtful debts Balance at the beginning of the year (9,867) (6,351) - - Current year decrease/(increase) in provision 4,251 (3,516) - - Balance at the end of the year (5,616) (9,867) - - Ageing of trade and other receivables provided for 60-90 days (77) (455) - - +90 days (5,539) (9,412) - - (5,616) (9,867) - - Trade receivables encumbered by borrowings are disclosed in note 23. All trade receivables in currencies other than the US dollar are listed in note 27. GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 201117 Other financial assets US$000 US$000 US$000 US$000 Financial assets designated at fair value through profit or loss (FVTPL) Non-derivative financial assets designated as FVTPL 34 2,842 - - Held to maturity investments carried at amortised cost Short term money market investments 247 60 - - Available for sale investments carried at fair value Unlisted shares - 54 - - 281 2,956 - - Other financial assets profile Financial assets designated as current 13 2,956 - - Financial assets designated as non-current 268 - - - 281 2,956 - -18 Cash and cash equivalents Bank and cash balances 12,662 7,751 294 759 Bank overdrafts (59,716) (30,371) - - Total (47,054) (22,620) 294 759 Included in the bank overdraft is an amount of US$44.5 million due by Seed Co Limited secured by inventory and accounts receivables. GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 2011 US$000 US$000 US$000 US$00019 Cash flows from operating activities Profit for the period 14,848 17,479 (5,367) (233) Adjustment for: Income tax expense recognised in profit or loss 2,716 1,450 (1,289) (424) Finance costs recognised in profit or loss 24,362 17,199 1,889 844 Investment revenue recognised in profit or loss (2,551) (1,042) - - Dividend received from subsidiaries - - (2,290) (1,352) Gain on sale or disposal of property, plant and equipment (38) (2,686) - - Loss/(gain) on revaluation of investment property 91 (33) - - Loss/(gain) on revaluation of fair value through profit or loss financial assets (22) (351) - - Impairment loss recognised on trade and other receivables - 30 - - Reversal of impairment on trade and other receivables - (747) - - Depreciation and amortisation of non-current assets 8,336 7,650 179 150 Impairment of non-current assets recognised in profit or loss - 1,918 - - Net foreign exchange losses 539 154 - - Expense recognised in profit or loss in respect of equity settled share-based payments 786 1,183 384 657 Impairment of investment in subsidiary - - 3,000 - Impairment of intercompany balances - - 2,700 - Other non-cash items (532) (472) - - 48,535 41,732 (794) (358)20 Working capital movements Change in inventories - (17,916) - - Change in inputs scheme receivables (27,550) (11,543) - - Change in prepayments (7,808) (1,968) (9) 7 Change in intercompany receivables 6,195 - (16,354) (1,021) Change in trade and other receivables (70) (11,008) (111) 60 Change in trade and other payables (27,124) (1,215) 306 81 Change in intercompany payables 9,356 (635) 10,059 1,553 Change in borrowings - third party - - - - (47,001) (44,285) (6,109) 680 51 AICO Africa Limited 2012
  • 52. NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 2012 GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 2011 US$000 US$000 US$000 US$000 21 Group companies Balances owed by Group companies - The Cotton Company of Zimbabwe Limited - - 8,354 4,795 - Exhort Enterprises (Private) Limited - - - 347 - Salamax (Pty) Limited - - 6 5 - Olivine Holdings (Private) Limited - - 11,553 81 - Zambrano Investments (Private) Limited - - - 1,716 - Cottco International (Pty) Limited - - 2 - - Seed Co Limited - - 38 - - Yucatan Holdings (Pty) Limited - - 5 - Total - - 19,958 6,944 Balances owed to Group companies - The Cotton Company of Zimbabwe Limited - - (30,442) (18,612) - Yucatan Holdings (Pty) Limited - - (39) (39) - Zambrano Investments (Private) Limited - - (115) - - Cottco International (Pty) Limited - - (17) (17) - - (30,613) (18,668) Net amounts owed by Group companies - - (10,655) (11,724) Significant transactions with Group companies Interest paid to The Cotton Company of Zimbabwe Limited - - (1,858) (844) Terms and conditions All transactions with related parties are at arms length. 22 Capital and reserves 22.1 Share capital Authorised share capital Number of ordinary shares (000) 1,500,000 1,500,000 1,500,000 1,500,000 Nominal value per share (US dollar) 0.01 0.01 0.01 0.01 Total value of shares in US$000 15,000 15,000 15,000 15,000 22.2 Issued and fully paid Number of shares At the beginning of the year (000) 531,289 531,065 531,289 531,065 Share options exercised (000) 2,836 224 2,836 224 At the end of the year (000) 534,125 531,289 534,125 531,289 Nominal value per share (US dollar) 0.01 0.01 0.01 0.01 Total value of shares in US$000 5,341 5,313 5,341 5,313 The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets. Subject to the right of the shareholders to take up new shares in proportion to their existing holdings and to Section 183 of the Companies Act (Chapter 24:03), unissued shares are under the control of the Directors. GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 2011 22.3 Capital reserves US$000 US$000 US$000 US$000 Capital reserves at the beginning of the period 33,049 52,536 164,128 118,145 Movement for the year (6,534) (19,487) (29,131) 45,983 Balance at the end of the year 26,515 33,049 134,997 164,128 Detailed analysis of movements in capital reserves are shown in the statements of comprehensive income (page 25) and the statements of changes in equity (pages 27 and 28).AICO Africa Limited 2012 52
  • 53. NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2012 GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 201123 Borrowings US$000 US$000 US$000 US$000 Current borrowings Unsecured - at amortised cost - Bank loans 23,758 18,338 3,753 - - Other entities 2,886 177 - - Secured - at amortised cost - Bank loans 39,636 19,929 - - - Other entities - 8,933 - - Total current borrowings 66,280 47,377 3,753 - Non-current borrowings Unsecured - at amortised cost - Bank loans - - - - - Other entities - - - - Secured - at amortised cost - Bank loans 11,659 14,480 - - Total non-current borrowings 11,659 14,480 - - Total borrowings Current Non-current 66,280 47,377 3,753 - Total borrowings 11,659 14,480 - - 77,939 61,857 3,753 Unsecured borrowings - Bank loans 23,758 18,338 3,753 - - Other entities 2,886 177 - - 26,644 18,515 3,753 - Secured borrowings - Bank loans 51,295 34,409 - - - Other entities - 8,933 - - 51,295 43,342 - - Maturity profile of borrowings Due within 1 year 0-3 Months 43,119 41,919 3,753 - 3-6 Months 17,044 438 - - 6-12 Months 6,117 5,020 - - 66,280 47,377 3,753 - Due after 1 year 1 - 2 Years 2,905 - - - 2 - 3 Years 2,905 - - - 3 - 4 Years 2,905 - - - 4 - 5 Years 2,944 14,480 - - 11,659 14,480 - - Total borrowings 77,939 61,857 3,753 - Included in the short term borrowings are the following amounts: • US$49.7 million due by The Cotton Company of Zimbabwe Limited to a syndicate of banks secured as follows: (i) a special notarial covering bond over the companys cotton stocks and receivables worth US$10 million. (ii) a notarial general covering bond over the companys cotton stocks and receivables for US$86.5 million. (iii) a notarial deed of cession of book debts for US$13.5 million. (iv) a cession of the companys insurance policies covering cotton inventories. (v) a pledge of the companys cotton stocks, both present and future, for US$10 million. (vi) sales contracts with a value of US$12 million. • US$15.2 million due by Olivine Holdings (Private) Limited secured by a notarial general covering bond. • US$1.5 million due by Seed Co Limited secured by inventory and accounts receivables. The Company issued limited guarantees to certain banks in r eturn for the advancement of loans to some Gr oup companies as follows: (i) Seed Co Limited - US$9 million (2011: US$9 million). (ii) The Cotton Company of Zimbabwe Limited - US$172.4 milion (2011: US$15 million). (iii) Olivine Holdings (Private) Limited - US$14.1 million (2011: US$11.5 milion). 53 AICO Africa Limited 2012
  • 54. NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 2012 GOUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 2011 24 Trade and other payablesGr US$000 US$000 US$000 US$000 Trade 12,597 6,948 - - Other 13,712 12,591 368 120 26,309 19,539 368 120 The Groups exposure to currency and liquidity risk related to trade and other payables is disclosed in note 27. 25 Finance lease liabilities - third party The Group has entered into commercial leases in respect of certain motor vehicles. These leases have an average life of thr ee years with no renewal option included in the contracts. There are no restrictions placed upon the Group by entering into these leases. Future minimum lease payments under the finance leases together with the present value of the net payments are as follows: GROUP COMPANY 31 March 31 March 31 March 31 March 2012 2011 2012 2011 US$000 US$000 US$000 US$000 Minimum lease payments Within one year 285 473 - - In second to fifth year inclusive 66 195 - - 351 668 - - Less unearned finance expense - (50) - - Present value of minimum lease payments 351 618 - - Allowance for uncollectable lease payments - - - - 351 618 - - Present value minimum lease payments Within one year 285 424 - - In second to fifth year inclusive 66 194 - - 351 618 - - Less unearned finance expense Present value of minimum lease payments 351 618 - - Allowance for uncollectable lease payments - - - - 351 618 - - Included in the financial statements are: Current finance lease payables 285 424 - - Non-current finance payables 66 194 - - 351 618 - - 26 Assets and liabilities classified as held for sale 26.1 Assets held for sale Due to discontinued operations 5,190 2,293 - - Other 128 109 - - Total assets classified as held for sale 5,318 2,402 - - Exhort Exhort Total Total Enterprises Enterprises Salamax Salamax Scottco Scottco Discontinued Discontinued (Pvt) Limited (Pvt) Limited (Pty) Limited (Pty) Limited (Pvt) Limited (Pvt) Limited operations operations 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 2012 2011 2012 2011 2012 2011 2012 2011 US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 26.2 Effects of discontinued operations on the financial position of the Group Property, plant and equipment 1,372 2,223 - - 1,835 - 3,207 2,223 Inventories 14 14 - - 1,592 - 1,606 14 Trade and other receivables 1 56 - - 376 - 377 56 Cash and cash equivalents - - - - - - - - Assets classified as held for sale 1,387 2,293 - - 3,803 - 5,190 2,293 Deferred tax liabilities 444 612 - - - - 444 612 Borrowings - third party - - - - - - - - Trade and other payables 28 28 - - 2,437 - 2,465 28 Bank overdraft - - - - - - - - Liabilities classified as held for sale 472 640 - - 2,437 - 2,909 640 Net assets 915 1,653 - - 1,366 - 2,281 1,653AICO Africa Limited 2012 54
  • 55. NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2012NOTES TO THE FINANCIAL STATEMENTS27 Financial instruments The Group finances its operations by a mixture of retained profits and financial instruments in US dollars and for eign currencies. The Group borrows in both local and international debt markets in US dollars and foreign currencies, mainly at fixed rates of interest. In the normal course of its operations, the Group is exposed to currency, interest rate, liquidity and credit risks. The Group has developed a comprehensive risk management process to control and monitor the risk.27.1 Currency risk The Group undertakes certain transactions denominated in curr encies other than the US dollar , hence exposure to exchange rate fluctuations arise. The currencies giving rise to curr ency risks are primarily the Malawi Kwacha, Kenya Shilling, South African Rand and Eur o. The exposure to foreign currency fluctuations is managed by, where possible, matching foreign liabilities with foreign assets or revenue contracts that generate sufficient foreign currency receipts to provide a hedge against the exposure. The Board of Directors is tasked with managing the foreign currency exposures arising in consultation with the central treasury function. All material purchases and sales in foreign currencies are transacted through the central treasury. The Groups exposure to foreign currency risk was as follows based on notional amounts: GROUP 31 March 31 March 2012 2011 000 000 Trade and other receivables Rand 789 198 Euro - 1,100 Botswana Pula - - Kenya Shilling - - Malawi Kwacha 835,568 - Zambian Kwacha 116,845 24,338 Bank and cash balances Rand 17 305 Euro 1 - Botswana Pula - - Kenya Shilling - - Malawi Kwacha 243,305 - Zambian Kwacha 7,119,377 - Trade and other payables Rand (1,289) (72,527) Euro (2) - Botswana Pula - (1,627) Kenya Shilling - 4,771 Malawi Kwacha (409,652) - Zambian Kwacha (9,723,653) - Borrowings - third party Rand - - Euro - - Botswana Pula - - Kenya Shilling - - Malawi Kwacha (58,800) - Zambian Kwacha (80,639,716) - Net balance sheet exposure Rand (483) (72,024) Euro (1) 1,100 Botswana Pula - (1,627) Kenya Shilling - 4,771 Malawi Kwacha 610,421 - Zambian Kwacha (83,127,147) 24,338 55 AICO Africa Limited 2012
  • 56. NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 2012 27 Financial instruments (continued) 27.2 Sensitivity analysis The Groups assets and liabilities are predominatly in US dollars. The net exposure of the Group to other currencies when expressed in US dollars is insignificant, and has been summarised below. Also summarised is the charge to profit or loss that would r esult in a movement of any of the for eign currencies by 10%. The Company has no foreign currency exposure. GROUP 31 March 2012 31 March 2011 Foreign Foreign currency currency 000 US$000 000 US$000 Rand (483) (60) (72,024) (9,673) Euro (1) (1) 1,100 825 Botswana Pula - - (1,627) (1,091) Kenya shilling - - 4,771 57 Malawi Kwacha 610,421 3,694 - - Zambian Kwacha (83,127,147) (15,957) 24,338 5 (12,324) (9,877) Charge to profit or loss if an exchange rate of any of the above currencies moved by 10% Rand (6) (967) Euro - 82 Botswana Pula - (109) Kenya shilling - 6 Malawi Kwacha 369 - Zambian Kwacha (1,596) 1 (1,233) (987) A change in exchange rate by 10% either way will result in a loss or gain of US$1.2 million dollars. 27.3 Interest rate risk The Group borrows in both local and of fshore markets. Exposure to interest rate risk on borr owings and receivables is managed on a pr oactive basis. The interest rate risk profile of liabilities of the Group by currency, as at 31 March 2012, is: GROUP Total Floating rate Fixed rate 31 March 31 March 31 March 31 March 31 March 31 March 2012 2011 2012 2011 2012 2011 US$000 US$000 US$000 US$000 US$000 US$000 Financial liabilities 77,939 61,857 - - 77,939 61,857 27.4 Credit risk Credit risks arise on cash and cash equivalents, investments and trade receivables. The risk on cash and cash equivalents is managed by only investing with financially sound institutions and by setting prudent exposure limits for each institution. The risk arising on trade receivables is managed through normal credit limits, continual review and exception reporting. Adequate provision is made for doubtful debts. At balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. 27.5 Liquidity risk The Group manages liquidity through the management of working capital and cash flows. A balance between continuity of funding and flexibility is maintained through the use of borrowings from a range of institutions with varying debt maturities. 27.6 Capital management The Board of Directors’ policy is to maintain a strong capital base so as to maintain creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total shar eholders’ equity. Due to the prevailing operating economic conditions, the Boar d of Directors has set any net positive r eturn in each operating period as acceptable in terms of maintenance of capital. There were no changes in the Group’s approach to capital management during the year. The Group is not subject to externally imposed capital requirements. 27.7 Carrying amounts and fair values of financial assets and liabilities as at 31 March 2012 The carrying amounts of financial assets and liabilities are at their fair values.AICO Africa Limited 2012 56
  • 57. NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 201228 Related party transactions Group companies Group companies comprise, The Cotton Company of Zimbabwe Limited, Seed Co Limited, Olivine Holdings (Private) Limited, Cottco International (Proprietary) Limited, Exhort Enterprises (Private) Limited, Scottco (Private) Limited, Zambrano Investments (Private) Limited and Y ucatan Holdings (Proprietary) Limited. Transactions and balances during and at year end have been disclosed in note 21. Key management personnel Bekithemba Nkomo Chairman Pat Davenish Group Chief Executive Bernard Mudzimuirema Group Finance Director Catherine Chitiyo Non-executive Director Albert Nhau Non-executive Director Innocent Chagonda Non-executive Director Lawrence Preston Non-executive Director Patrick Rooney Non-executive Director Farai Rwodzi Non-executive Director David Machingaidze Managing Director (The Cotton Company of Zimbabwe Limited) Terence Chaparamhosva Finance Director (The Cotton Company of Zimbabwe Limited) Morgan Nzwere Group Chief Executive (Seed Co Limited) John Matorofa Group Finance Director (Seed Co Limited) Dennias Zaranyika Managing Director (Seed Co Zimbabwe) Grace Bwanali Managing Director (Seed Co Zambia) Abbas Kamali Managing Director (Scottco (Private) Limited) David Clements Managing Director (Seed Co Tanzania) Edward Mhandu Managing Director (Quton Seed Company (Private) Limited) Dellings Phiri Managing Director (Seed Co Malawi) Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity directly or indirectly. Companies related to Directors and key senior management African Sun Limited; Africom (Private) Limited; Alberta Cr eations (Private) Limited; Altifin Holdings Limited; Anoya Capital Gr oup Limited; Barrow Investments (Private) Limited; Bermud Corporation (Private) Limited; Bermud Steelers (Private) Limited; Beta Coal (Private) Limited; Beta Holdings (Private) Limited; Camisan (Private) Limited; Central African Building Society; Central African Truck and Car Hire (Private) Limited (trading as Europcar); Clampham (Private) Limited; Cockarone (Private) Limited; Cubicle Investments (Private) Limited; Chitiyo Investments (Private) Limited; Crawlsent (Private) Limited (trading as Showmasters (Private) Limited); Decor Design Group; Destiny Electronic; Denegate (Private) Limited; Eldorate (Private) Limited; Endsleigh (Private) Limited; Gaskets & Cutting International (Private) Limited; Gulliver Consolidated Limited; Hikem (Private) Limited; Husky Marketing (Private) Limited; Interfin Holdings; James North Limited; Lawrence Preston Associates Inc; Lima Trading (Private) Limited; Lloyd Corporate Capital (Private) Limited; Mashonaland Turf Club; McHoyse (Private) Limited; Mercury Engineers (Private) Limited; Mike Appel Organisation (Private) Limited; National Seed Company of Zimbabwe Limited; National Social Security Authority; Nestle’ Zimbabwe (Private) Limited; Parkham Enterprises (Private) Limited; Patro Holdings (Private) Limited; Peake Properties Limited; Phoenix Consolidated Limited; Playfair (Private) Limited; Premier Gaskets (Private) Limited; Reacon Services (Private) Limited; Rio Zimbabwe Limited; Rooneys Hire Services (Private) Limited; Sprakmere Investments (Private) Limited; Stanbic Bank Zimbabwe Limited; Willsgr ove Ware Pottery (Private) Limited; Zimbabwe Alloys Limited; WR Edwar ds (Private) Limited; Zimplow Limited; Zimnat Lion Limited; ZITF Company Limited. Transactions with key management personnel Loans to key management personnel During the year, no loans were advanced to key management personnel. Compensation of key management personnel 31 March 31 March 2012 2011 US$000 US$000 Short term employee benefits 652 465 Termination benefits - 97 Share-based payments 384 438 Total compensation paid to key management personnel 1,036 1,000 Companies related to key management personnel Amounts due to/(by) companies related to key management personnel There were no amounts due to or by companies related to key management personnel at the balance sheet date. Transactions with companies related to key management personnel There were no transactions between the Company and companies related to key senior management personnel during the year. 57 AICO Africa Limited 2012
  • 58. NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 2012 TRANSACTION VALUE BALANCES 31 March 31 March 31 March 31 March 2012 2011 2012 2011 Group companies US$000 US$000 US$000 US$000 Cotton Sales to Group companies - AICO Africa Limited - - 29,707 35,692 - The Cotton Company of Zimbabwe Limited - - 3,581 - - Seed Co Limited 3,626 3,349 337 445 - Scottco (Private) Limited 466 970 7 5,823 - Cottco International (Pty) Limited - - 735 772 - Exhort Enterprises (Private) Limited - - - 4,760 - Salamax (Pty) Limited - - 50 - - Olivine Holdings (Private) Limited 2,734 5,725 1,906 13,178 Total 6,826 10,044 36,323 60,670 Purchases from Group companies - AICO Africa Limited - - 7,584 4,031 - Yucatan Holdings (Pty) Limited - - 3,581 2,288 - Seed Co Limited 4,924 4,435 2,341 524 - Scottco (Private) Limited 2,480 937 - 1,114 - Cottco International (Pty) Limited - - 18 18 - Exhort Enterprises (Private) Limited - - - 22 Total 7,404 5,372 13,524 7,997 Other transactions with Group companies Charges to Group companies - AICO Africa Limited 1,869 844 - - - Seed Co Limited - 136 - - - Olivine Holdings (Private) Limited - 567 - - Total 1,869 1,547 - - Charges from Group companies - AICO Africa Limited 756 511 - - - Seed Co Limited - 427 - - Total 756 938 - - Net charges to/(from) Group companies 1,113 609 - - Seed Sales to Group companies - Olivine Holdings (Private) Limited 329 - - - - The Cotton Company of Zimbabwe Limited 4,924 4,435 914 860 Total 5,253 4,435 914 860 Purchases from Group companies - AICO Africa Limited - - 38 - - The Cotton Company of Zimbabwe Limited 3,626 3,349 - 94 Total 3,626 3,349 38 94 Other transactions with Group companies Charges to Group companies - AICO Africa Limited - - - - Total - - - - Charges from Group companies - The Cotton Company of Zimbabwe Limited - 427 - - - AICO Africa Limited 104 - - - Total 104 427 - - Net charges (from)/to Group companies (104) (427) - - FMCG Sales to Group companies - The Cotton Company of Zimbabwe Limited - - - 22 Total - - - 22 Purchases from Group companies - AICO Africa Limited - - 5,603 386 - The Cotton Company of Zimbabwe Limited 2,734 5,725 934 5,609 - Seed Co Limited 329 - 161 - Total 3,063 5,725 6,698 5,995 Other transactions with Group companies Charges to Group Companies - AICO Africa Limited 1,031 94 - - - The Cotton Company of Zimbabwe Limited - 567 - - Total 1,031 661 - - Charges from Group companies - The Cotton Company of Zimbabwe Limited 2,480 937 - 1,114 Total 2,480 937 - 1,114 Net charges (from)/to Group companies (1,449) (276) - (1,114)AICO Africa Limited 2012 58
  • 59. NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2012 TRANSACTION VALUE BALANCES 31 March 31 March 31 March 31 March 2012 2011 2012 2011 Group companies (continued) US$000 US$000 US$000 US$000 Spinning Purchases from Group companies - AICO Africa Limited - - 7 - - The Cotton Company of Zimbabwe Limited 466 970 - 2,912 - Olivine Holdings (Private) Limited - - 341 - Total 466 970 348 2,912 Other Other transactions with Group companies Charges to Group companies - AICO Africa Limited - - - - - The Cotton Company of Zimbabwe Limited 756 511 8,373 4,813 - Yucatan Holdings (Pty) Limited - - 5 - - Seed Co Limited 104 - 38 - - Scottco (Private) Limited 36 - 341 - - Cottco International (Pty) Limited - - 2 - - Exhort Enterprises (Private) Limited - - - 346 - Salamax (Pty) Limited - - 6 5 - Zambrano Investments (Private) Limited - - - 1,716 - Olivine Holdings (Private) Limited 1,031 89 5,661 40 Total 1,927 600 14,426 6,920 Other Charges from Group companies - AICO Africa Limited - - - - - The Cotton Company of Zimbabwe Limited 1,869 - 30,829 18,996 - Yucatan Holdings (Pty) Limited - - 438 433 - Cottco International (Pty) Limited - - 17 17 - Zambrano Investments (Private) Limited - - 115 - Total 1,869 - 31,399 19,446 Net charges to/(from) Group companies 58 600 (16,973) (12,526)29 Employee benefits29.1 Defined contribution plans Contributions to defined contribution pension plans are recognised as an expense in the income statement when incurred.29.2 National Social Security Scheme This is a defined contribution plan enacted under the National S ocial Security Act, 1989. Both the Gr oup companies and the employees contribute to the scheme.29.3 Share-based payment plans The Directors of the Company may allot or grant options up to 52.9 million shares to management and staff. Each set of options is exercisable, over three years, beginning two years after the date the options are granted. The exercise price of the options is based on the middle market share price derived from the Zimbabwe Stock Exchange prices for the trading day immediately preceding the date of the board resolution giving effect to the offer. Share options were last granted in April 2010. No share options were granted in the year to 31 March 2012. The following table illustrates the number and exercise prices of share options granted, as well as the movement in the share options during the year: 31 MARCH 2012 31 MARCH 2011 Number Average Number Average of options price of options price29.4 Number of share options 000 US cents 000 US cents Balance of options at the beginning of the year 21,320 0.21 22,973 0.23 Options granted during the year - - 2,670 0.16 Options exercised during the year (2,836) 0.15 (224) 0.15 Options forfeited during the year (2,987) 0.23 (4,099) 0.24 Balance of options outstanding at the end of the year 15,497 0.20 21,320 0.21 The Group uses the Black-Scholes-Merton model to value share options and, in managements view, this presents a fair basis of valuation for share options. Under this basis of valuation, key variables in determining the fair value of share options are current share price, exercise price, the historical and extrapolated volatility of the share price, the risk free interest rate, time to maturity and expected dividend payout rates during the vesting period of the share options granted. No share options were granted during the year ended 31 March 2012. The current year charge to the income statement amounted to US$786,268 (2011: US$1,007,425). Of this amount, US$401,875 (2011: US$420,777) was charged to and in subsidiaries. 59 AICO Africa Limited 2012
  • 60. NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 March 201230 Going concern - Olivine Holdings (Private) Limited Olivine Holdings (Private) Limited (Olivine), incurred a total loss before tax amounting to US$11,798,793 (2011: US$9,213,203 loss) and has been facing working capital challenges which ordinarily is an indicator of going concer n uncertainty. Olivine has been significantly af fected, and may continue to be af fected for the foreseeable future, by working capital constraints, which have resulted in a stagnation of business activity. These conditions gave rise to a material uncertainty which may cast significant doubt as to Olivines ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the ordinary course of business. However, management have assessed the ability of Olivine to continue as a going concer n and believe that the preparation of the financial statements on a going concer n basis is still appr opriate, as Olivine is expected to impr ove pr ofitability and working capital adequacy as follows: Olivines five year forecasts show that the company is expected to make a pr ofit in future as capacity utilisation incr eases and funding of the business improves. Unit pr oduction costs will decr ease as the fixed overheads will be spr ead over higher volumes and the company will r ealise impr oved margins. In addition, and subsequent to year end, the company received US$5.6 million in equity earmarked to improve working capital. Therefore, the financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that Olivines plans will be ef fective, as well as that the r ealisation of assets and settlement of liabilities will occur in the or dinary course of business.31 Events after the reporting date31.1 Seed Co Limited As at 31 March 2012, Seed Co Limited held money market investments amounting to US$2.8 million with Interfin Banking Corporation Limited and is included in cash and cash equivalents in the financial statements at 31 M arch 2012. Subsequent to year end, on 11 June 2012, Interfin Banking Corporation Limited was placed under recuperative curatorship by the Reserve Bank of Zimbabwe for a period of six months. Directors and management will be engaging the curator to seek full recovery.31.2 Scottco (Private) Limited Agreement for the sale of the Spinning business has been reached. The necessary documents have been signed and are now subject to regulatory approval.AICO Africa Limited 2012 60
  • 61. SHAREHOLDERS ANALYSIS As at 31 March 2012 2012 2011 Shareholders Shares held Shareholders Shares held Number % Number % Number % Number % Shareholders Profile 0-100 3490 25.40 196,191 0.04 3529 24.76 198,625 0.04 101-200 2216 16.13 333,284 0.06 2258 15.84 338,879 0.06 201-500 2895 21.06 884,027 0.17 2971 20.85 911,457 0.17 501-1 000 2268 16.51 1,559,004 0.29 2347 16.47 1,615,511 0.30 1 001-5 000 1856 13.51 4,093,132 0.77 2001 14.04 4,438,415 0.84 5 001-10 000 417 3.03 2,877,811 0.54 471 3.31 3,253,338 0.61 10 001-50 000 357 2.60 7,774,553 1.46 410 2.88 8,980,875 1.69 50 001-100 000 86 0.63 6,080,718 1.14 86 0.60 6,102,173 1.15 100 001-1 000 000 91 0.66 19,745,409 3.70 108 0.76 21,739,545 4.09 1 000 001-10 000 000 16 0.12 11,330,370 2.12 26 0.18 19,465,283 3.66 10 000 001-100 000 000 38 0.28 123,026,450 23.02 34 0.24 97,937,556 18.44 Above 100 000 000 10 0.07 356,224,727 66.69 10 0.07 366,307,372 68.95 Total 13740 100.00 534,125,676 100.00 14,251 100.00 531,289,029 100.00Analysis by CategoryBanks, insurance companies, nominees and pension funds 477 281,717,884 52.74 483 341,326,283 64.24%Local companies 867 43,133,963 8.08 767 72,494,376 13.64%Individuals and trusts 12322 17,142,533 3.21 12,965 49,212,765 9.26%Non-resident investors 74 192,131,296 35.97 36 68,255,605 12.86%Total 13,740 534,125,676 100.00 14,251 531,289,029 100.00% Resident 13666 341,994,380 64.03 14,179 463,033,424 87.14%Non-resident 74 192,131,296 35.97 36 68,255,605 12.86%Total 13,740 534,125,676 100.00 14,215 531,289,029 100.00%MAJOR SHAREHOLDERS NATIONAL SOCIAL SECURITY AUTHORITY 118,379,052 22.16% 118,322,894 22.27%OLD MUTUAL LIFE ASSURANCE CO ZIM LTD 83,798,468.00 15.69% 84,322,595 15.87%BARCLAYS 81,930,801.00 15.34% 48,458,490 9.12%BURKET ASSOCIATES LIMITED NNR 40,266,667 7.54% 40,266,667 7.58%STANDARD CHARTERED 27,193,612 5.09%CAPERAL LIMITED NNR 27,119,370 5.08% 27,119,370 5.10%STANBIC NOMINEES 21,165,096 3.96% 20,813,205 3.92%ZIMCAPITAL LIMITED - NNR 0.00% 11,373,705 2.14%MINING INDUSTRY PENSION FUND 12,025,616 2.25% 10,569,652 1.99%FED NOMINEES 10,065,224 1.88%DATVEST NOMINEES (PRIVATE) LIMITED 8,034,804 1.50% 9,562,687 1.80%MANRIQUE INVESTMENTS (PRIVATE) LIMITED 5,933,334 1.11% 5,933,334 1.12%MSASA NOMINEES (PRIVATE) LIMITED 5,638,370 1.06% 8,286,433 1.56%KENSINGTON ACQUISITIONS LTD - NNR 4,386,077 0.82% 50,000,000 9.41%TAGNEL INVESTMENTS (PRIVATE) LIMITED 4,333,334 0.81% 4,333,334 0.81%EQUIVEST NOMINEES (PRIVATE) LIMITED 3,960,180 0.74% 3,840,001 0.72%EXTERN INVESTMENTS (PRIVATE) LIMITED 3,666,667 0.69% 3,666,667 0.69%REMO NOMINEES (PRIVATE) LIMITED 0.00% 4,223,705 0.79%CRISBIBE INVESTMENTS (PRIVATE) LIMITED 3,333,334 0.62% 3,333,334 0.63%EDWARDS NOMINEES 3,037,750 0.57%LOCAL AUTHORITIES PENSION FUND 2,804,799 0.53% 2,812,328 0.53%TN CAPITAL (PRIVATE) LIMITED 2,778,686 0.52%FIGURENT INVESTMENTS (PRIVATE) LIMITED 2,000,000 0.38%HAMBURGH INVESTMENTS (PRIVATE) LIMITED 2,000,000 0.38%Sub total 469,851,241 87.97% 461,238,401 86.81%Other shareholders 64,274,435 12.03% 70,050,628 13.19%Total 534,125,676 100.00% 531,289,029 100.00%CALENDARAnnual General Meeting August 2012Publication of Interim Results for the 6 months to September 2012 November 2012Publication of Audited full year results for the 12 months to March 2013 June 2013 61 AICO Africa Limited 2012
  • 62. Corporate Directory HEAD OFFICE 1st Floor, SAZ Building, Northend Close, Northridge Park, Borrowdale, Harare. Box BW537, Borrowdale, Harare Tel: 263-4-852795, 853054-6, 853059 Fax: 263-4-850705 Email: info@aicoafrica.com SUBSIDIARIES The Cotton Company of Zimbabwe Limited 1 Lytton Road, Workington, Harare P O Box 2697, Harare Tel: 04-771981-5, 748682-3 Tellular lines: 0912 233 547/8 Fax: 04-753854, 708573, 707203, 748900 Email: cottco@cottco.co.zw www.thecottoncompany.com Seed Co Limited Shamwari Road, Stapleford, Harare P O Box WGT 64, Westgate, Harare Tel: 04-308881-8, 308891-7, Fax: 04-304841 Scottco (Private) Limited 3 Gleneagles Road, Southerton, Harare P O Box ST521, Southerton, Harare Tel: 04-620026/7, 666835, 666537, Fax: 04-620028 Exhort Enterprises (Private) Limited Corner Mutiti Drive/J. Tongogara Road, Ruwa Tel: 073-2491/2, 073-2744, Fax 073-2251 Cottco International (Proprietary) Limited Ebene House, 3rd Floor, 33 Cybercity, Ebene, Mauritius Tel: +230 467 4693, F ax: +230 466 8443 JOINT OPERATIONS Olivine Holdings (Private) Limited 36 Birmingham Road, Southerton, Harare P O Box 797, Harare Tel: 04-754568, 757100, 754556AICO Africa Limited 2012 62