OK Zimbabwe 2011 annual report


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OK Zimbabwe 2011 annual report

  2. 2. REGISTERED OFFICEO HOUSE K7 Ramon RoadGranites~dePO Box 3081 ..HarareZimbabweTelephone: 263 4 75731119Telefax: 263 4 757028139Deloitte &ToucheCharteredAccountants (Zimbabwe)1 Kenilworth RoadNewlandsPO Box 267 ..HarareZimbabweBANKERSStandard Chartered Bank Zimbabwe UmitedAfrica Unity Square Branch -code 5140Corner Nelson Mandela Avenue / Sam Nujoma StreetPO Box 2472 ..HarareZimbabweLAWYERSWlntertonsBeverley CornerCorner Third Street /Selous AvenuePO Box 452 ..HarareZimbabweTRANSFER SECRETARIESCorpserve (Private) Limited2nd FloorZ Centre BCorner Fim Street / Kwame Nkrumah AvenueRO. Box 2208HarareZlmbabwe
  3. 3. BOARD OF DIRECTORSCha~rman D.B. LakeChief Executive Officer V.W. Zireva*Chief Operating Officer A.R. Katsande*Finance Dlreetor A.E. Siyavora* W. N. Alexander F.T Kembo M. C. Jennings (alternate) M.T. Rukuni (Mrs) M. Tapera R van Solt .* ExecutiveGroup Secretary L. MurindaAUDIT COMMITTEEChairperson M.T. Rukuni (Mrs) F.T. Kembo M. Tapera R. van Solt V.W. ZirevaGroup Secretary L. MurindaREMUNERATION COMMITTEEChairman M. Tapera D.B. Lake W. N. Alexander V.W. ZirevaMANAGEMENTCOMMITTEEChief Executive Officer V.W. ZirevaChief Operating Officer A.R. KatsandeFinance Director A.E. SiyavoraHuman Resources Executive M.Z. ChimbghandahProcurement Executive M.R. ChingairaBusiness Information Executive J. MadondoOperations Executive A. Munodawafa
  5. 5. I &reanisatianal Vision 1 COREVALUES VISION STATEMENT Discipline, honesty and integrity OKwill bethedominant retailer inZimbabwe. We believe in discipline, honesty and integrity. Our actions will, at all times, be ethical and fair. These OKwill register presence in the region. principles, which are fundamental t o everything we do, will be constantly applied and will not becompromised. We aim t o achieve real growth in turnover and profitability. Respectfor the individual We believe in, and have respect for, the individual be We will benchmark with world-class retailers t o set the hefshe an employee, a customer, a supplier, a standardsforquality retailing. shareholder oranyotherstakeholder. We will strive t o retain and grow our customer base Teamwork through t h e provision o f satisfying shopping We believe that our goals will be achieved best through experiences. teamwork. Wewill always think"weland notSI". MISSIONSTATEMENT Qualltysewice We have pride in the quality of our service and are Our business is general retailing, providing quality committed t o excellence of quality in product and merchandise and service while offering value for money service. toour customersin all market segmentsinZimbabwe. Continuous improvement We are comm~tted o the development and welfare of t We beiteve In the prlnc~ple continuous Improvement of ouremployees and wlth thls we embrace total quallty management, facll~tyImprovement and technological advancement Wew~llach~eveanoptlmumreturnonlnvestment Weencourage tngenultyand lnnovatlon and aboveall we promotethedevelopment ofourstaff We will strlve t o bulld long-term relat~onsh~ps our wlth suppl~ersandthecommun~ty Good corporatecitizenship We are fully cognlsant of our responslbll~ty o soclety t and, through our contrlbut~ons, sponsorship, env~ronmentalconcern and other such practices, will always beagood corporatecltlzen
  6. 6. For the year ended 3 1 MarchRevenueEBITDAProfit before taxProfit for the yearHeadline earningsTotal assetsMarket capitalisation
  7. 7. OVERVIEW :GROWTH IN A CHALLENGING and Harare. This will provide the Group with anENVIRONMENT opportunity to grow its business by operating in a different market segment. Trading under the OK MartThe macro-ecohomlc environment was stable brand started on 31 March 2011 with an offering of athroughoutthe periodunder review.TheGross Domestic wide range of products. The purchaseconsiderationwasProduct IS estimated to have grown by more than 8% settled by an issue of shares in the Group, representingwhilst average annual inflation was about 3%. However, 0.5%ofthetotal shares inissue.tight liquidity and undercapitallsation of mostcompanies i n the economy restricted local GROUPPERFORMANCEmanufacturing of goods while low disposable incomesconstrained consumer spending, especially in high Revenue generated for the period under reviewmarginproducts. amounted to USS257.4 million compared to USS187.5 million for the same period In 2010. profit beforeLocal manufacturing remained low relative t o demand. taxation was USS5.3 million compared to USS1.2 millionThe Group therefore continued to import with the bulk in 2010. Net operating expenses increased fromof products coming fmm South Africa. All the Groups USS13.7 million In prior year to USS19.9 milllon instores were adequatelystocked throughoutthe financial current year. The increase was caused mostly byyear, although the Import ban of ch~ckens and da~ry marketingexpensesthat were minimal in prior year Theproducts affected performance in the flrst half of the Group also engaged external securityto replace internalyear. As most ofthe productswere importedfrom South personnel as one of many ways to combat shrinkage. InAfrica, the apprec~ation the Rand against the United addition, agelng refrigeration plants, generators and ofStates Dollar had the adverse effect of causmg increases C C N equipment nezessttated agn~f~cant repalrs andinthe pricesofsome goods. maintenance. The wst of finance was USSO.1 m~llion compared to US$1.3 milllon during the same period inThe successful recapitalisationof the Group at the start the prior year. Capital expenditureduringtheperiod wasof the financtal year enabled the Group to embark on a USSg.4 millioncomparedto US$1.5 million last year.Thisstore refurbishment programme. OK Masvingo which expenditure was in respect of refurbishment ofhad been destroyed by fire was rebuilt wh~le OKMNekwe branches, replacement of computer equipment,and Bon Marche Belgravia were refurbished t o world replacement of plant and equipment, purchase ofstandards. Sales were lost in Chiredri as the shop was generators, and on overhauling the operations anddestroyed by fire on 29 November 2010, but the distribut~on vehicle fleet.modernisedshopwasre-openedearly May 2011. DIVIDENDThe Groups performance improved significantly whencompared with the previous year, Sales were ahead of The Directors declared a dividendof 0.21 cents per sharebudget and profits were higher than the year before, out of the profits of the Gmup for the year ended 31althoughthe marginswereth~nner. Attheend of thelast March2011.financial year, we reportedon the adverse Impactof veryh i levels of stock shrinkage and unusual markdownsresultingfromprice competition as well as fridge failuresemanating from power cuts. It is pleasingto report that The economy is expectedto continuegrowing though atthe Groups e m w e controls in these areas have a slow pace and the low employment levels and tightresulted in both shrinkage and mark-downs being liquidity in the market are likely to persist. Disposablemanageddownto below industrylevel. incomes are expected to remain low but improvingwith the forecastgrowth in Gross Domestic Product. Imported I am pleased to announce that the Group acquired the products will continue to dominate the market as localassets of MakroZimbabwe, paidgoodwill of US900 000 manufacturers battle to re-capitaliseso as to increaseandtookoverthe leasesofthetwo premisesinBulawayo production.
  8. 8. The Group will continue with the store refurbishmentprogram t o upgrade its stores in orderto enhanceservicedelivery t o customers.The new look OK Queensdale andOK Avonlea re-opened for trade in April and early May2011 respectively. Major refurbishment work is plannedfor OK Marimba, OK Fife Avenue and Bon MarcheAvondale, while some renovations will be undertaken infour other branches. A new Bon Marche outlet will beopeningsooninthe Westgateshopping Complex.The Board and management will continue in theirendeavour, using the Groups strong brands, t o growshareholdervaluethrough growth in sales, improvementin profitability and strengthening marketshare.D. 0. LAKECHAIRMAN3 June 2011
  9. 9. INTRODUCTION While sales grew by 38%, overheads increased by aThe Group was generally adequately stocked duringthe higher percentage of 43%. The higher Increase inyear. However, we Imported most of the products we overheadswas mainly as a result of marketingexpensessold as the tight liquidity in the economy and the that were minimal in prior year, outsourcingof externalundercapitalizationof most local companies continued securitytoreplaceinternal securityin branchesasoneofto limit manufacturers capacity to meet demand. the measures to combat shrinkage, and maintenanceofLimited disposable Incomes constrained consumer generators as well as h~gher fuel usage rn the b~ggerspending, but the Group managedto grow salesthrough generators that were procured to ensure provision ofinitlatives such as:- adequatepower lnthestores.* ensuring that the product offering to our customers OPERATIONS. wasadequate and at a competitive price, providinggoodcustomer servicetotheconsumers, embarking on a major store upgrade programmeto The Group closed the financial year with 51 outlets comprising 37 O stores, 6 Bon Marche stores, 6 O K K improve the facilities and ambience as well as Express stores and 2 O Mart stores following the K rebuildingtwo outlets wh~ch been burnt had Groups acquisition of the business assets of Makm. down, and engaglng in focused promotional activities to attract feet intothestore. Zimbabweinthelastquarterofthefinancialyear.TheOK Man stofes operated for only one day in the financial period. The Group converted and rebranded all PaxGross Profit marginswerethinnerthan prior year dueto Cash & Carry stores toOKstoresdur~ngthe course of thecompetitionand customers bias towards consumption year, and these form part of the 51 outlets ment~onedof low margin basic products. However, we managedto above.grow profitabilitybytakingthefollowingacti:-. reduced stock shrinkage and mark-downs to below industryievels. An ultramodern stow was rebuilt and opened at O Masvingo. O Kwekwe was refurb~shed the same K to levelsin terms of offeringand ambiencewhile OKSecond K using funds raised through the rights issue to pay Street was refurbishedand re-branded to a Bon Marche off expensive borrowings. store. O Uliredzi store which was gutted by fire on 30 K November 2010 has since been rebuilt and opened forThe outcome of these actions and the sales growth business In May 2011. O Queensdale and O Avonlea K Klnltlatlves mentioned earher was posting a set of were refurblshed to our new generation store offerlngfinancial results that reflectsignificantimprovementon and imaging and re-opened in April and May 2011prlor years performance and whrch management respectively. Varlous items of equipment werebelieve establish a good base from which to grow the upgradedand/or replacedto improvefacilities, while theGroupsopemons. distributionfleet was beefed up to improve movement of productfromthecentralwarehousetothe branches. The bulk of the productscontinued to be ImportedfromThe key results, ratiosandstatisticsfoi yea1 the other countries as the local market had no capacity to 2011 meet demand. Although there were importationbansof some productsin the earllerpartofthe financial year, all Revenue(mill~ons) Group storesweregenerallywell stocked. Operatinglnwme(miliions) EBlTW (millions) In the prior year we reported on the high levels of Attributableearnings (m~lllons) shrinkage that was experienced. Controls in this area Gross margin have been stgnificantly improvedand the shrinkage as a Overheadstosales percentage of sales has been brought down to below Operating profit to sales industry levels. The purchase of bigger generators with Stockturn (times) adequate capacity to run all equipment including Current ratio in refr~geration the stores also ass~sted reduce the to Employeebenefitstonetsales% level of markdownsof spoiled products.
  10. 10. HUMAN RESOURCES means of enhancing sewice delivery and offering customersaddedconvenience.Duringthe course of the financial year under review, theGroup progressively increased the staff complement inresponse to Increased busmess activity and In order toenhance service delivery to customers. The headcount Our corporatesocial responsibilityprogramcontinuestoas at 31 March 2011 was 3 063 compared to 2 475 focus on senior citizens lnitlatives, educatron, HIV/AIMemployees in the prior year. The Group took over 207 and children in difficult circumstances. In line with theemployees of the former Makro stores and these were soc~al respons~b~lityprogram, report~ngperiod a the sawtaken through the formal OK induction program. The numberofcharityfundsandotherselected beneficiariesGroup continuedwith the managementgraduatetrainee receiving donat~ons part of our corporate soc~al asprogramas part of itssuccessionplanningstrategy. responsibilityefforts. These Include HelpAge, Manhinga Village and Jairos Jiri Association. The donations wereThe industrial relat~ons climate remalned peaceful and processed malnly through Shop Easy Cards t o fdcil~tatecordial durlng the reporting period despite the various the~rgroceryshopp~ngaswell a s h toassistthemwith aschallenges faced by employeesin the difficult economic administrativecostsenvironment The Group continued with the health andwellness program for staff members across the Groups The Group was awarded the Zlmbabwe Nationalbranch network focusing on health awareness, peer Chamber of Commerce Award for the Best Corporateeducat~onsupportandcounsel~ng. Social Responslbillty Program for its Internal HIVIAIDS Awareness program run from the Groups clinlc. The Group was commended for conducting thls unique program which has impactedthe tives of employees andThe Group isworkingon connectingmore of its branches theirfamiliespositively.to fibre optic links offered by Powertel to ensure highnetwork speed and enhance network stability and CORPORATEGOVERNANCEreliability. Atthe end of the reportingper~od, installat~onof fibre optic links had been completed in respect of 33 The Group is committed to principlesof good Corporatebranches. The Groups core appl~cations remaln In the Governance and best practlces, w h ~ endorse a culture hMach 4system althoughwork is In progressto migrateto of business ethics, openness, transparency, integrityanda new and improved system In response to shifts in accountab~lity itsdeallngswith all itsstakeholders.The intechnology. The Mach 4 back office system and the Groups structures, operations, policies and proceduresStoreline point of sale system were installed in OK Mart are continuously assessed and updated for compliancestoresto replacetheformer Makrosystems. w ~ t h law and generally accepted standards of good the corporate governance. Our current practlces arePROMOTIONS consistent with the standards set by regulatory authorities and are covered in detail elsewhere in thisThe Group successfully ran the 23rd edltlon of the O K report.Grand Challenge Jackpot Promotion and the promottonwas well received by thecustomers and suppliers aftertwo years of absence on the retail calendar. Otherpromotional activities carried out during the reportingperiodincludedthe Mega Value Expo Promotionand the The Group operates a formalized and thorough process70th Anniversary Promotion which ran across all store of identifying, monitoringand managtng business risks.brands. Concerted efforts were made to promote the This is aimed at protecting assets and earnings againstShop Easy Card for both Eon Marche and O stores as a K exceptional financial losses and legal liabiliies. The
  11. 11. Board reviews all business risks on a quarterly basis and Ensuring adequate availability of stock and a wideensures that action plans or strategies have been put inplacetomanageIdentifiedrisks.The Group constitutedaRisk Management Committee t o spearhead the . rangeof productsonoffer Cost containment, improved productiv~ty and efficiency in all areas of operationsimplementation of the Enterprise-wide Risk Upgrading and expanding the store network toManagement systems and work is in progress to fully enhance customer convenience and increase brandimplementrisk-based management practicesand audits visibilityand loyaltyintheGroup. Continuous staff training and retention for superior customer service provisionOperational rlsks are managed through formalisedprocedures and controls, well-trained personnel and Iwish to express my grat~tude all Group management toInformation Technology back-up facildle~.Emphasls is and staff for their contribution during the flnanc~al yearplaced on continuous review and improvement of justended. I also wish to thankour customers, suppliers,systems and procedures as well as specific internal and business partners and other stakeholderr for theirexternal audits. Sufticient resources and manpower are continued support.made available at all units to continually monitor andreport on risk. The installation of CCTV cameras in thefew remaining outlets is part of the program for theensuingyearas this IS seen as a critically important partin risk management The environment we operate in is ina state of flux and therefore the process of r~skmanagement has become a vital component of themanagement process.FUTUREOUTLOOKThe prevailing macro-economic stability is expected tomaintainalthough the economy will continue to grow ata slow pace. Liquidity challenges are likely to continuewhile d~sposable incomes will remain generally low inthe near future. Product supply will be adequate V.W.ZIREVAalthough the bulk of merchandise will continue to be CHIEF MECUTWEOFFICERimported since local manufacturers are yet to increaseproduction capacity to adequate levels. The Group willcontinue with strategies to grow the business andincreaseshareholdervaluethrough:
  12. 12. MANAGEMEMSTRUCTUREO Zimbabwe Llm~tedwas flrst incorporated as KSprlngmaster Corporation In 1953. In 1984, the name The Group is controlled by a Board of Directors andwas changed to Deltrade Llmlted and th~swas In turn, managed by a Management Committee, comprlslngsubsequentlychanged tothecurrentnamein July2001. seven departmental executives (including three Executive Directors), whlch reportstothe Board.The inaugural branch opened at OK First Street (Harare)~n1942 and the second branch In Bulawayo In 1952. A HEALTHAND SAFETYfurther flve outlets were opened across the country bytheend of 1960. The Group continues to prov~de both preventative and curative health dellvery services to its employees.In 1977, Delta Corporation acqu~red the business Outreach programmestofamilymembersofthes~ckandoperatlons In Springmaster Corporation (now OK bedr~dden employees revealed a growlng need forZlmbabwe Limited), which they held until the de-merger generic as well as systematiccounselling services, whlchin October 2001. were prov~ded through professionals.O Zimbabwe Llm~ted has established Itself as a EDUCATION Kc u s t o m e r - o r ~ e n t e dorganlzatlon p r o v ~ d ~ n gcomprehens~veaccesstoa broad range of retall products Staff developmentIS oneof ourcorevalues.Asubstant~aland allied servlces developed in response to ~ t s number of our employees are enrolled on varlouscustomersrequ~rementsforconven~enceandvalue educat~onand tralnlng programmes at tertlary and profess~onal levels. These programmes prov~de succession mater~al for technical and manager~al posltlonsInthe Group.The Group is a leading supermarket retailer whosebusmess covers three major categories, comprising TRAININGgrocerles, basic clothing and textiles and house wareproducts. The grocerles category Includesdry groceries, The Retall Management Development Programmebutchery, delicatessen, takeaway, bakery, provisions and comprising the Internal Management Trainees andfruit and vegetable sections. The baker~es f r u ~and Graduate Management Trainees remalns the and tvegetable operatlons are currently outsourced to cornerstone of our management developmentlnnscor and Favco, respectively.Anotherspecialistareais endeavors. For the general staff our focus has been onschoolwear. thesharpen~ngofsk~llsandcompetencles.O Z~mbabwe hm~tedtrades under three h~ghly K CORPORATESOCIALRESPONSIBILITYrecognizedbrand names, OK stores, Bon Marchestores,O Express stores and a new brand OK Mart was K O Zlmbabwe Llmited has shown commitment to the Kintroduced at the end of the flnanc~al year. The community by sponsoring or donating to causes in thediversifled distribution channel allows the Group to areas of health, educat~on, students employment,target all segments of the deslred market. In this regard, sportsandtheenvlronment. Childrens Homes, charlt~es,the Group has specifically profiled its stores In terms of Old Peoples Homes, Hospice Centres and D~sableddesign, product range, services and other offerings in a Peoples Associations are amongst the beneficlanes ofway that effectively caters for the spec~f~crequirements OKZ~mbabwes Soc~al Responstbilltyefforts.Through ~ t sin the low, middleand high incomeconsumercategories. networkof branches, OKZimbabweLim~ted lnvolved in IS various local community activities. The branches areOKZlmbabwe Lmited has maintained ~ t pos~tion one s as proud to be able to make a positwe contr~but~onthe toof the domlnant supermarket retallers In the countlys communltlesln whlch they operate.competltlve retall sector, desplte the effect of llqu~dltyconstraints and low disposable Incomes. The Group hasdeveloped ~ t s own brands through the O Pot 0 Gold, KOKValueandBon MarcherPrem~erCho~ce labels.
  13. 13. The Directors have pleasure in presentingtheir Tenth Annual Report and the Audited Financial Statements of theGroupfortheyear ended 31March2011.YEARS RESULTSRetamedrncomefortheyearandearningsattributable shareholders toFWDASSETSCapitalexpenditurefortheyearto31March 2Olltotaled US$9.4million.SHARECAPITALThe authorized share capital of theGroup was US$2OO,OWmade upof 2,000,000,000 ordinary shares of US$O.OWleach whilethe issuedshare capitalwas US$10155481madeup of 1015548101ordinarysharesof US$0.0001each.RESERVESThe movementsin the ReservesoftheGroup areshown inthe Statement of Comprehensive Incomeand in the Notestothe FinancialStatements.DIRECTORSMr. D. 8. Lake and Mr. FT Kembo retire by rotation in accordance with Article 100 of the Attlcles of Association and, .beingeligible,offerthemselvesfor re-election.AUDITORSMemberswill be askedtoapprovethe auditorsfeesforthepastfinancialyear and to appoint auditorsoftheGroupfortheensuingyear.ANNUALGENERALMEETiNGThe Tenth Annual General Meetingof the Group will be held a t 1000hours onThursday, 28luly 2011at OK House, 7RamonRoad,Grantteside, Harare.B ORDER OF THE BOARD Y .. ...... ....,e... .......D.B. LAKE V.W. ZIREVA L.MURINDAChairman Chief ExecutiveOfficer Group Secretary
  14. 14. INTRODUCTION Any service rendered by Directors and all Directors interests in OK Zimbabwe are required to be conductedThe pnmary objective of any system of corporate on an arms length basis. Full disclosure of any suchgovernance is to ensure that directors, executives and arrangementsby all current executiveandnon-executivemanagers, to whom stewardshlp of companies is Directors must be made in accordance with legalentrusted by the shareholders, carry out their requirements. Each year, Directors are required toresponsibilitiesfaithfully,effectivelyandefficiently. submit in writing whether they have any interest in any contract of significancewith theGroup, whichcouldgiveThe Board is committed to principles of corporate riseto a conflict of interest.governance and best practices which endorse a cultureof business ethics, openness, transparency, integrity and AUDITCOMMITTEEaccountability in its dealings with all stakeholders. TheGroups structures, operations, policies and procedures The Commmee consists of four Nan-Executive Directorsare continuously assessed and updated for compliance and thechief Executive Officer, with the Finance Directorwith the law and generally accepted standards of good attending as ex-officio. The internal and externalcorporategovernance. auditors attend the meeting and have unrestricted access to the Chairman of the Committee. TheBOARDO DIRECTORS F Committee meets at least twice a year. The function of the Audit Committeeis to advisethe b a r d on all mattersThe Groups Articles of Association provide for the relatingto corporate governance and regulatory issues.appointment of independent directors. The Board In particular, i t monitors financial controls, accountingcurrently comprises three Executive Directors and six poiicies, accountingsystems and assessesthe processesNon-Executive Directors who were chosen fortheir wide for identifying, monitoringand managing business risks.range of professional and commercial competencies. It reviewsanysignificantabnormalmnsactions, ensuresThechairmanofthe Boardisa non-executivedirector there are no restrictions on external auditors work and follows up matters reported or unresolved with theThe Board of Directorse responsible for giving direction auditors. It reviews the Groups budget, financialt o the Group through the setting of the overall strategy, statements andextemal auditfeesbefore submissiontokey policies and risk parameters. It is also responsible for the Board for consideration and approval. The Auditapprovingstrategic and operational budgets, significant Committee monitors the Internal Audit Charter, plans,acquisitions and disposals and interim and annual programs, reports and recommendstheappointment ofoperating results. The implementation of the overall externalauditors.strqtegy, policies and the management of risk aremonitored using key performance indicators and best REMUNERATIONCOMMITTEEpractice benchmarks. Executive management presentsstructured reports, t o allow the Board to monitor The Committee consists of three Non-Executiveperformance. The Board has constituted Audit and Directors and the Chief Executive Officer. TheRemunerationCommittees to assist itin the discharge of Remuneration Committee is responsible for makingits responsibilities. recommendations on all major policy issues, including Board appointments and the remuneration policy ofin terms of the Groups Articles of Association, Directors Executive Directors and senior management. Theare not predudedfrom entering into or being interested objectiveofthe policyistoensurethatthe rightcaliberofin contractsorarrangementswith theGroup. However, a management is recruited and retained. The CommitteeD~rectorwhors any way, whether directlyor indirectly, in also considers, at Board level, remuneration levels andinterestedin a contract or proposed contract which has conditionsof sewiceof staff to ensurethattheseare fair,been or is to beenteredinto by the Group, is requiredto appropriate and in line with the market and the Groupsdeclare the nature and extent of this interest. A Director remunerationphilosophy.is not permitted to vote in respect of any contract orarrangement inwhich heorshe binterested.
  15. 15. ETHICSDirectors and employees are required to observe thehighest ethical standards ensuring that businesspractices are conducted in a manner which, in allreasonable circumstances, is beyond reproach. In thisregard, the Group has a detailed code of ethics for alllevelsof employees.In line wlth the Z~mbabweStock Exchange Llst~ngRequirements, the Group observes a closed period priorto the publication of its rnterlm and year-end financ~alresults, during which period directors, officers andemployees may not deal in the shares of the Group.Where appropriate, this restriction is also extended toincludeothersensitive periods.The Group is committedto providingequalopportunitiesbritsemployeesreffdrdlessofrace,tribe, placeof origin,polit~cal op~n~on, colour, creed orsex.The Group recognizes the need for orderly consultationand discussions through workers committees, workscouncils, departmental and liaison meetings and othercollective bargaining bra. These structures, which aredes~gned consultationwithemployee representatives, inare intended to achieve good employer/employeerelat~ons well as promoting productiv~ty,safety and asloss control.SAFETY, HEALTHAND ENVIRONMENTThe Group aims to create wealth and to contr~bute todevelopment by operating ~ t s bus~nesswith due regardfor economrc, social, cultural and environmental issues.Safety, health and environmental issues, therefore,receivespecialattention.
  16. 16. OK Zimbabwe Limited is dedicated to achievingmeaningful and respons~ble reporting throughcomprehensive disciosure and explanation o? itsfinancial results. This is done to assist objectivecorporateperformance measurement,to enable returnson investmenttobe assessed againsttherisks inherent intheir ach~evement to fac~lltate and appraisal of the fullpotentialoftheGroup.The core determinant of meaningful presentation anddisciosure of information is its vaitdii in supportingmanagements decision making process. While theaccounting philosophy encourages the pioneering ofnew techniques, it endorses the fundamental conceptsunderlying both the financial and managementaccountingdisciplines as enunciated by the institute ofChartered Accountants of Zimbabwe, the InternationalAccounting Standards Committeeand the internationalFederationof Accountants.The Group is committedto regular reviewsof accountingstandardsand to the development of new and improvedaccounting practices. Th~sis done to ensure that theinformation reported t o the management andstakeholders of t h e Group continues t o beinternationallycomparable, relevant and reliable. Thisincludes, wherever it is consideredappropriate, the earlyadoption of accountingstandards. However, where theadoption of accounhng standards is seen to befundamentally inappropriate, the Group is willing tochallengethevalidity of such adoption.
  17. 17. I DirectorsJResaonsibililhr far Financial Re~omins IOK Z~mbabwe Limiteds directors are required by the comprehens~ve programme of internal audits. InCompanies Act (Chapter 24:03) to maintain adequate addition, the Groups external auditors review on a testaccounting records and to prepare financial statements bass aspects of the Internal f~nancialcontrol systemsfor each financial period, which present a true and fair that they deem relevant during the course of theirview of the state of the affairs of the Group at the end statutoryexam~nation the Group. ofof the reportlng period and of the profit and cash flowsfor the period. In preparingthe accompanyingfinancial The Audit Committee meets regularly with the Groupsstatements, generally accepted accountrng practices Internal and external aud~torsand executivehave been applied, accounting policies have been used, management to review accounting, auditing, internaland reasonable and prudent judgments and estimates control and reportingmatters.have been made. The financial statements incorporatefull and responsible d~sclosure line with the In The financial statementswere reviewed bythe Board ofaccounting philosophyof the Group. Directors and are approved and signed on their behalf by:The Directors have reviewed the Groups budget andcash flow forecast fortheyear to 3 1March2012. On thebasis of this review, and in the light of the currentfinancial position and existing borrowing facilities, the ............. ... ...... ...... . .. . .. . ....... . . . . . .. ... .. . .. . . . .. . .Directors are sat~sfied that OK Z~mbabwe Lim~ted a is D. LAKE V W. ZIRNA .going concern and has continued to adopt the going Chairman Chief ExecutiveOMcerconcern bass in preparingthe financial statements. TheGroups external auditors, Deloitte & Touche, haveaud~ted the financial statements and the~r reportappears on page 19.The Board recognlses and acknowledges ~ t sresponsibil~tyforthe Groupssystem of ~nternalfinanc~alcontrol, polrcy on busmess conduct, which covers ethicalbehaviours, compliances with legislation and soundaccountrng practice, underpins the Groups Internalfinancialcontrol policies and procedures, clearly definedl~nes accountab~l~ty delegation of authority, and of andcomprehensive financial reportlng and analysis againstapproved budgets. The respons~bil~ty operating the forsystem is delegatedto the Executive Directonand senlormanagement who confirm that they have rev~ewed itseffect~veness.They cons~derthat ~tIS appropr~atelydes~gnedto prov~de reasonable, but not absolute,assurance that assets are safeguarded against mater~alloss or unauthorized use and the transactions areproperly author~zed recorded. The effectiveness of andthe internal financial control system is monitoredthrough managementrevlews, representationletters oncompl~ance s~gned the Chief Executive Officer and a by
  18. 18. We have audited the accompanying consolidated financial statements of OK Zimbabwe Limited and its subsidiaries(togetherrthe Group") asset out on pages 20 to44, which comprise the consolidated statement of financial positionat 3 1 March 2011, and theconsolidatedstatement of comprehensive income, theconsolidatedstatement of changesin equity and the consolidated statement of cash flows for the year then ended, and the notes to the consolidatedfinancialstatements, which includeasummary ofsignificant accountingpol~ciesandother explanatory notes.DIRECTORSRESPONSIBILITY FORTHECONSOLIDATEDFINANCIALSTATEMENTSThe Directors are responsible for the preparation and falr presentation of these consolidated financial statements Inaccordance with International Financial Reporting Standards (IFRS)and in the manner required bythe Companies Act(Chapter 24:03) and the relevant Statutory Instruments (SI 33/99 and 51 62/96). Thls responsibility includes:designing, implementing and maintaining Internal control relevant t o the preparation and fair presentatlon ofconsolidated financial statements that are free from material misstatement, whether due to fraud or error; selectingand applying appropriate accounting policies; and making accounting estimates that are reasonable in thecircumstances.Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Weconducted ouraudit in accordance with lnternationalStandardsonAuditing.ThoseStandards requirethatwe complywith ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidatedfinancialstatementsarefreeof material misstatement.An audit involves performing procedures to obtain audit evidence aboutthe amounts and disclosures in the financialstatements. The procedures selected depend on the auditors judgment, Including the assessment of the r~sks ofmaterial misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,the auditor considers Internal control relevant to the entitys preparation and falr presentatlon of the financialstatements in orderto design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinlon on the effectiveness of the entitys internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management,as well asevaluatingthe overall presentation ofthe financial statements. We believe that the audit evidence we haveobtained issufficientand appropriateto provldea basisfor our auditopinion.OPINIONIn ouropinlon, theconsol~datedfinancialstatementspresentfairly, inall materlal respects, thefinancial position of OKZimbabwe Limited at 3 1 March 2011, and its financial performance and its cash flows for the year then ended inaccordance with lnternatlonal Financial Reporting Standards and In the manner requlred by the Companies Act(Chapter24:03) and the relevant Statutory lnstruments (SI33/99 and SI 62/96).REPORTON OTHER LEGALAND REGULATORYREQUIREMENTSIn our opinlon, the financial statements have, in all material respects, been properly prepared in compliance wlth thedisclosure requirements of the Companies Act (Chapter 24:03) and the relevant Statutory Instruments (SI 33/99 andS162/96).DELOITTE&TOUCHEChartered AccountantsHarare, Zimbabwe
  19. 19. I Consolidated Statement of Comnrehensive Income IFor the year ended 31 March 2011 2010 NOTE US5RevenueChanges in trade inventoriesMerchandise and consumablesusedEmployee benefits expenseDepreciation expenseShare option expenseNet operating expenseFinance costsProfit before taxationTaxationProfit for the yearOther comprehensive incomeGains on revaluations of property, plant and equipmentFair value adjustment on available for sale equity investmentsIncome tax relating to components of other comprehensive incomeOther comprehensive income for the year net of taxTotal comprehensive income for the yearWeighted average number of ordinary shares in issueShare performance :cents : attributable earnings : headline earnings basis : dividends per share : net asset value per share
  20. 20. As at 3 1 March 2011 2010 2009 US$ US$ US$ NOTE (restated1 (restated1AssetsNon-current assetsProperty, plant and equipmentGoodwillLong-term investmentsCurrent assetsInventoriesTrade and other receivablesShort-term loansCash and cash equivalentsCurrent tax assetsTotal assetsEquity and LiabilitiesEquityShareholdersequityNon-current liabilitiesDeferred taxationCurrent liabilitiesTrade and other payablesShort-term borrowingsCurrent tax liabilitiesTotal current liabilitiesTotal equity and liabilitiesFor and on behalf of the Board: D.B. Lake V.W. Zireva L. Murinda(Chairman) (Chief Executive Officer) (Group Secretary)3 June 2011
  21. 21. I Consolidated Statement of Chanees in Shareholders EauitvFor the year ended 3 1 March NOTE 2011Shareholders equity at the beginningof year as previouslyreportedPrior year adjustment 20Shareholders equity at the beginning of year (restated)Changes in share capitalArising from share issueShare capital awaitingallotmentArising from rights issue expensesArisingfrom share buybackChanges in non-distributable reservesImpairment of property, plant and equipmentArising from share optionsChanges in distributable reservesProposeddividendRetained income for the yearShareholders equity at the end of the year
  22. 22. For the year ended 31 March 2011 2010 NOTE US$ US$Cash generated from operating activitiesCash generated from trading 19.1 8 943 885 5 478 585Working capital changes 19.2 (2 975 952) (4 994 922)Cash generated from operating activities 5 967 933 483 663Net finance costs 19.3 (83 538) ( 1 311 073)Taxation paid 19.4 (920 037) (854 257)Net cash generated from /(utilised in) operating activities 4 964 358 ( 1 681 667)Cash utiiised in investment activitiesinvestment t o maintain operations :Replacementof property, plant and equipment (8 127 334) ( 1 146 785)Proceeds from disposal of property, plant and equipment 42 259 1042 (8 085 075) ( 1 145 743)Investment t o expand operations:Additions t o property, plant and equipment (1139 833) (351 549)Net cash investedFinancing activities(Decrease) / increase in borrowingsProceeds from rights issueRights issue expensesShare buy-backProceeds from share optionsNet financing raisedNet increase in cash and cash equivaientsCash and cash equivaients at beginning of yearCash and cash equivaients at the end of year
  23. 23. I Notes to the Consolidated Financial SbtetnentsForthe year ended 31 March 20111. Generalinformation OKZimbabwe Lim~tedisa llsted Group reglsteredand conductingbusinessinZ~mbabwe.TheGroup a leading IS supermarket retailer whose businesscovers three major categories, comprisinggroceries, basic clothingand textlles and house-ware products. At the reporting date, the Group was operating from f ~ f t yone shops countryw~de, one wholly ownedsubs~d~aryandjo~ntownersh~pofa had boat.2. Adoption of newand revisedStandardsandinterpretations2.1 New and revised IFRSswitha material effect on current yearfinancial reporting In the current year, the Group adopted the followlng new lFRSs that had a material effect on the financial statements. IFRS 1 First-time Adoption of International Financial Reporting Standards (issued December 2010): replacement of fixed dates for certain exceptions with the date of transition to IFRSs, and additional exemption for entltles ceaslngto suffer from severe hyper~nflation, effectlve for annual per~ods all beglnnlng on or after 1July 2011. The revised standard accepts use of the fair values for assets and liab~lit~es the as deemed cost at the date of change of funct~onal currency, and requlresthe followlng to be presented In the entitysfirst IFRSfinanciaistatementsfollow~ng severe hyperinflat~on; three statementsof financial posltlon, two statements of comprehensive Income, two statements of cash flows and two statements of changes in equlty and related notes, lncludlngcomparative ~nformat~on. Group has dec~ded early adopt, w ~ t the The to h follow~ngeffects the current yearfinanc~al on reportlng; I. Threestatementsoffinancial posit~on have been presentedshowingtheopeninglFRSstatementasat 1 Aprll2009 wrth deemed amounts, the closing balances as at 3 1 March 2010 and the cioslng balances asat 31March2011; 11. Two statements of comprehensive Income, two statements of changes In equlty and two statements of cash flows have been presentedforthe periodst031 March2OlOand 2011; ~ii. preparing ~ t s in openlng IFRS statement of flnanaal posltlon, the Group has not adjusted amounts prev~ousiy reported on the date of change in funct~onalcurrency In 2009 as the methods used in determlnlng the amount In those reports are in llne wlth the amended IFRS 1 As amounts have not changed, reconc~l~at~ons of changes to reported amounts as required by the standard have not been presented;and IV. Comparat~venotesfortheopen~nglFRSstatementoffinanc~alpos~tion.2.2 New and revised iFRswithno material effect oncurrent year reportlng In the current year, the Group adopted the following new and revised IFRSr wlth no material effect on the flnanclalstatements IFRS 1First-timeAdoption of International Financial ReportingStandards (revised July 2009): amendments relatingto oil and gas assets and determiningwhether an arrangement contains a lease. The amendments provideexemptions when adoptingIFRSsfor the firsttime related to 011 gas assets and the determination and of whether arrangements contain leases. IFRS 2 Share-based Payment (issued June 2009): amendments relatingto Group cash-settledshare-based paymenttransactions.The amendments clarlfythe scope of IFRS 2 as well as the accountlngforGroupcash- , senledshare basedpaymenttransactions In separate (or ~ndividual)financiai statementsofan entityreceivlng thegoodsorserviceswhenanotherGroupentityorshareholder hasanobligationtosettle theaward. IFRS3 Businesscombinations(revised2008) Comprehensiverevisiononapplyingtheacquisitionmethod.
  24. 24. For theyear ended 31 March 2011 IFRS 5 Nonzurrent Assets Held for Sale and Discontinued Operations (issued April M09): amendments resulting from April 2009 Annual improvements to IFRSs. The amendments clarify that the disclosure requirementsin IFRSs other than IFRS 5 do not apply to non-current assets or disposal Groups classified as heldforsaleordiscontlnuedoperationsunlessthose IFRS make certain specific requirements. IFRS8OperatingSegments(issuedAprll200S):.amendments resultingfromApril 2009 Annual Improvements to IFRSs. Increases the level of disclosures for the measure of profit and assets and llablllties for each reportablesegment. IAS 1Presentation of Financial Statements (revised April 2009): amendments resulting from Apnl 2009 Annual lmprovementsto IFRSs.The amendments clarify that the potentialsettlementof a liability bytheissue of equityis not relevanttoitsdassification ascurrent or non-current. IAS 7 Statement of Cash How (revised April 2009): amendments resulting from April 2009 Annual lmprovementsto IFRSs. The amendments specify that only expenditures that result in a recognizedassets in the statementof financial positioncan be classified as investingactivitlesin thestatementof cash flows. IA5 17 Leases (revised April 2009): amendments resulting from April 2009 Annual lmprovementsto IFRSs. Requiresseparationofland and buitdingelementsforleasesthat includeboth landandbuildingsforseparate classifications as operating or finance leases, and reassessment of the classification of land elements of unexpired leasesatthedateofadoptlngtheamendments. IAS 36 Impairment of Assets (revised April 2009): amendments resulting from April 2009 Annual lmprovements to IFRSs. For purposes of impairment testing, each unit or Group of units to which goodwill arisingon a businesscombinationIS allocated should, amongothermditions, not be largerthanan operating segmentasdefinedin lFRS8. IAS33financial Instruments: RecognitionandMeasurement(revisedApril 2009): amendmentsresultingfrom April 2009 Annual lmprovementsto IFRSs. The amendments prowde clarification on two aspects of hedge accounting: identifyinginflatlonas a hedgedriskor portion, and hedgingwith options.2.3 New and revisedIFRSsinIssue, but not yeteffective Atthe dateof authorizationof these financial statements, thefollowingStandardsandlnterpretationswerein issuebut not yet effectivenorapplledbythe Group: IFRS 1 First-timeAdoption of lnternational Financial Reporting Standards (Revised January 2010): limited exemption from comparative IFRS7 Disclosuresfor First-timeAdopters, effectlwforannual periodsbeginning on orafterlJuly2010. IFRS 1 Fim-time Adoptitipn of InternationalFinancialReportingStandards (issued May 2010): amendments resulting from May 2010 Annual lmprovementsto IFRSs, effective for annual periodsbeginningon or after 1 January2011. IFRS 1First-time Adoption of lnternational Financial Reporting Standards (revised) January 2010: limited exemptionfrom comparative lFRS7 Disclosuresfor First-time Adopters, effecttveforannualperiods beginning on orafterlJuly2Oll IFRS 1First-time Adomon of lnternational Financial Reporting Standards (issued December 2010): replacement of fixed datesfor certaln exceptions with the date of transition t o IFRSs, effective for annual penodsbeginnlngonorafter1July2011. IFRS 3 Business Comblnatlons (iosued May 2010): amendments resulting from May 2010 Annual
  25. 25. I Nntps tn t h e Cnnsnlidated Financial StatementsFor the year ended 31 March 2011 lmprovementsto IFRSs, effective for annual perlods beginnlng on or after 1 July 2010. Provldes clarification that the measurement choice regarding non-controllinginterestsatthe date of acquisition is only available in respect of non-controlling interests that are present ownership Interests and that entltle thew holders to a proportionateshareoftheentitys net assetsin theevent of Ilquidation. IFRS 7 FinancialInstruments: Disclosures(issued May and October 2010): amendments resultingfrom May 2010 Annual lmprovements to IFRSs, effectlve for annual periods beginning on or after 1January 2011. Provides clarification on the required levelof disclosureaboutcredlt rlskand collateralheldand provides relief from disclosures previously requlred regarding renegotiated loans. Increasesthe disclosure requlrementsfor transactions lnvolvlngtransfersoffinanc~alassets. IFRS 7 Financial Instruments: Diclosures (issued October 2010): amendments enhanong disclosures about transfersoffinancial assets, effectiveforannual periods beginningonor after lJulyZO11. IFRS 9 Financial Instruments (issued November 2009, amended October 2010): new requirementsfor the classification and measurement of financial assets and liabilities and for derecognition, effective for annual periods beginningonorafterl January2013. IFRS 10 ConsolidatedFinancial Statements (original issue May 2011): effective for annual periods beginnlng on orafterlJanuary2013. IFRS 1 Joint Arrangements (original issue May 2011): effective for annual periods beginning on or after 1 1 January2013. IFRS 12 Disclosure of interest in Other Entities (original issue May 2011): effective for annual perlods beglnnlngonorafterlJanuary2013. IFRS 13 Fairvalue measurement(original issueMay2011): effectiveforannual periods beginningonorafter 1 January2013. IAS1Presentationof FinancialStatemenb(revisedMay2010):amendmentsresultingfromMay 2OlOAnnual lmprovements to IFRSs, effectlve for annual periods beglnnlng on or after 1January 2011. Provldes clarification that an entlty may choose to present the required anaiysls of items of other comprehensive Income elther In the statement of comprehensive Income or In the statement of changes In equlty or In the notes IAS 12 lncome Taxes (revised December 2010): limited scope amendment (recovery of underlying assets), effectivefor annual periodsbeginningon or after lJanuary2012. IAS19 Employee benefits (issuedJune 2011): amendedstandard resultingfrom the past employment benefit and termmation benefits projects, effectiveforannual periodsbeginningonor after lJanuary2013. IAS 24 Related P a m Disclosures(revised November2009): revised deflnltlon of related parties, effectivefor annual periods beginning on or after 1January 2011. Modifies the definition of a related party, and simplifies disclosuresforgovernmentrelatedentities. IAS27Consolidatedand Separate Financial Statements(revisedMay 2010): amendments resultingfrom May 2010 Annual lmprovementsto IFRSs, effective for annual periods beginningon or after 1July 2010. Increases ordecreases in ownership interestsaredealtwith inequity, with noimpact ongoodwill orprofit or loss. 1AS 27 Consolidated and Separate Financial Statement (issued May 2011): reissued as IAS 27 Separate Financial(asamendedin 2011,effectiveforAnnual periods beginning on orafter lJanuary2013.
  26. 26. For the year ended 31March 2011 IAS 28 lmronmentsin Associates [issued May 2011): reissued as 1AS 28 Investments in Associates and Joint Venturesfas amendedin 20111), effectiveforAnnual periodsbeginningonorafter 1 January2013 IAS 32 Financiallnmuments: Presentation (revised 2009): amendments relatingto classificatton of rights issues, effective for annual periods beginning on or aftet 1February2010. Clarifiesthe tlassifioation of rfghts issues denominatedInforeigncurrency as either an equity instrument orafinancialliability. IAS 34 Interim Financial Reporting (revised May 2010): amendments resulting from May 2010 Annual Improvementsto IF&, effectiveforannual periodsbeginningon or afterlJanuary2011. IFRlC 13 Customer Loyalty Programmes (mvised 2010): amendments result~ng from May 2010 Annual ImprowmentstoIFRJs,effeEtiveforannualperiods beginningon orafterllanuary 2011. IFRICl4, W 19 The Umiton a DefinedBenefltAsset, Minimum FundingRe~uirernentsand their lntenalon (revised 2009): amendments with respect to voluntary prepaid contributions, effective for annual periods beglnningonor after 1January 2011. IFRIC19ExtingulshlngFinancialliabilities with Equlty Instruments: effectivefor annual periodsbeginningon or after 1 2010. Provides guidance regardingthe accountingforthe extinguishmentof a financial liability July bytheissueofequityinstruments.33 Basisof preparation The Groups financ~al statwnents have been prepared in accordance with lnternatlonal Flnancial Reporting Standards ("IFRSs"). The financial statementshave been prepared on the historical cost basis except forthe fairvaluation of certain nonsurrent assets and financial instruments.Histoiiealcost isgenerallybasedon the fair value of the considerationgiven in exchange for assets. The principal acwunting pollcies of the financial statements,setoutbelow, havebeencons~stentlyfollowed all materialrespects. In3.3 Basisofwnsolidation The consolidared financial statements incorporate the financial statements of the Group and entities contmlted by the Group (its subsidiaries). Control is achieved where the Gmup has the power to govern the financial and operatingpoliciesof ah entiiyso asto obtainbenefltsfrombactivities. Where necessary, adjustments are made to the financial statementsof substdiariesto bringthelr accounting policies intolinewith those used byothermembersoftbeGroup. Ail intra-gmuptransactions, baiances, incomeandexpenses are eliminatedInfull on consolidation.3.4 Budwacombinatkns Acquisitionsof subsidiariesand businessesareacwunted for usingtheAcquisition Method.The wnsideration for each acquisition is measured at the aggregete of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree.Acquisition-relatedcortsarerecogni~edin profitor lossasmcurred. Where appleable, the wnsideration for the acquisition includes any asset or IiaMlity resulting from a contingent considerationarrangement, measured at its acquisition-datefair value. Subsequent changes in such fair values are adjusted ageinst the cost of acquisition where they qualify as measurement period adjustments(see below). All othersubseqwnt changesin thefalrvalue of cont~ngentconsideration clasified as an asset or liability are accounted for in accordance with relevant IF&. Changes in the fair value of eohtlngentconsideration classifiedasequltyarenot recognised.
  27. 27. For the year ended 3 1 March 2011 Where a business combination is achieved in stages, the Groups previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resultlnggain or loss, if any, is recognised in profit or 1oss.Amounts arisingfrom interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatmentwould be appropriate ifthat interest were disposed of. The acquirees identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 (2008) are recognised at theirfairvalueat theacquisition date, except that: . deferred tax assets or liabilities and liabilities or assets related t o employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits . respectively; liabilities or equity instruments related to the replacement by the Group of an acquirees share-based . paymentawardsaremeasured inaccordance with IFRS2Share-basedPayment;and assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordancewiththat Standard. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, t o reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised asofthatdate. The measurement period is the period from the date of acquisition t o the date the Group obtains complete information aboutfactsand circumstances that existed asoftheacquisitiondate and issubjecttoa maximum ofone year.3.5 Interests i njoint ventures A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject t o joint control (i.e. when the strategic financial and operating policy decisions relating totheactivitiesofthejointventure requirethe unanlmousconsent ofthe parties sharingcontrol). When a group entity undertakes its activities under joint venture arrangements directly, the Groups share of jointly controlled assetsand any liabilities incurred jointly with other venturersare recognised in the financial statements of the relevant entity and classified according to their nature. L~abilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Groups share of the output of jointly controlled assets, and its share of joint venture expenses, are recognised when i t is probable that the economic benefits associated with thetransactions will flowto/fromtheGroupand theiramountcan be measured reliably. When a group entity transacts with a jointly controlled entity of the Group, unrealised profits and losses are eliminatedtotheextentofthe Groups interest inthe jointventure.3.6 Goodwill Goodwill arising on acquisition of assets is initially measured and recognized at cost as determined on the acquisition date. This goodwill is subsequently reviewed for impairment at least on an annual basis and any resultingimpairmentisrecognizedimmediately inthestatement ofcomprehensiveincome.3.7 Foreign currencytransactionsand balances While the Groups records are maintained in United States Dollars, some of its transactions are conducted in
  28. 28. I IUnt~5 the Cnnsnlidat~d tn Finanrial 5 t a t ~ r n e n i - rFor the year ended 31 March 2011 other majorforeign currencies. Foreignassets and l~abilit~es converted to Un~tedStates are Dollarsatthe rates of exchange ruling at the end of the financ~alperiod. Transactions in foreign currencies are translated to Un~ted States Dollan at rates of exchange ruling at the time of the transactions. Transaction and translation gains or losses arisingon conversionor settlement are dealt with in the statementof comprehensiveincome in thedeterminat~on oftheoperat~ng ~ncome.3.8 Borrowingcosts Borrowingcosts directly attributable to the acqu~sition, constructionor production of qualifyingassets, which are assets that necessarilytake a substant~al per~od time to get ready for their Intended use or sale, are of added to the cost of those assets, until such time as the assets are substantially ready fortheir intended use or sale, All other borrowing costs are recognisedin Statement of Comprehensive Income in the period in which they are incurred.39 . Properm.plantandequipment Property, plant and equipment arestated in thestatement of financial position atcost or revalued amount less any subsequentaccumulateddeprec~at~on impa~rment. and Methodsofvaluat~on usedare asfollows: Industrialland and buildings open marketvalue Residentiallandand buildings openmarketvalue Other property, plantand equipment costand directonvaluation Revaluationsare performed with sufficient regularity such that the carryingamounts do not differ materially from those thatwould bedetermined us~ngfairvaluesatthe ofthe reporting period. end Any revaluation Increase arlslng on the revaluat~onof such land and bulldings is recogn~sed other In comprehensive income, except to the extent that it reverses a revaluat~on decrease for the same asset prev~ously recogn~sed profit or loss,in wh~ch in casetheincreaseiscred~tedto profit or loss to the extent ofthe decrease previously expensed. A decrease in the carryingamount arising on the revaluationof such land and buildings is recognisedin statementof comprehensiveincometothe extentthat it exceeds the balance, if any, heldin thepropertles revaluationreserverelatingtoa previous revaluationofthatasset. rn Deprec~atlonon revalued bu~ld~ngs recogn~sed the statement of comprehensive income. On the is subsequent sale or retirement of a revalued property, the attributable revaluationsurplus rema~ning the in properties revaluat~on reserve is transferred d~rectly retalned earnlngs. No transfer a made from the to revaluationreserveto retamedearnlngsexcept when an asset IS derecognised. Properties in thecourse of constructionfor production, supply or adm~nistrative purposes, or for purposesnot yet determined, are carried at cost, less any recognised ~mpairment.Cost includes professional fees and, for qualifying assets, borrowing costs cap~tallsed accordance with the Groups accounting policy. Depreciation in of these assets, on the same basis as other property assets, commenceswhen the assets are ready for their intended use. Freehold landisnotdepreciated. Plant, motor vehicles, fixtures and equipment are stated at cost less accumulated depreciation and accumulatedimpa~rment.These assets are depreciatedoverthe~restimated useful lives, which are asfollows: Freehold property 20 years Leaseholdimprovements leasetenure Plantandequipment 5 to 10years
  29. 29. I Mates ta the CansaltdatedFinancial State~mentsFor the year ended 3 1 March 2011 Motorvehicles 5 years Depreciation IS recognised so as t o wrlte off the cost or valuation of assets (other than freehold land and properties under construction) less their resldual valuesovertheir useful lives, uslngthe stra~ght-l~nemethod The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effectofany changesin estimate accountedfor ona prospective basis. Thegaln or lossar~s~ngon thedisposal orretirementof an Item of propem/. plant and equipment ~sdeterm~ned as the difference between the sales proceeds and the carrylng amount of the asset and IS recognlsed In statement of comprehensiveincome.3 1 Inventories .0 Inventories are valued atthe lower of cost and net realizablevalue. Merchandise and consumable stores are valuedat the landed cost on afint-ln first-out basls. Net reallsablevalue represents the estimated sellingprice for inventories lessall estimated costs necessaryto makethesale.3 1 Financial instruments .1 Financial assets The Groups principal financial assets are trade and other receivables, loans and cash and cash equivalents. Listedsharesregardedasavailableforsalefinancialassets,forwhichfairvaluecan bereliablydetermlnedwith referencet o an active market, are initially recognlsedat fair valueand subsequentlystated at a falrvalue wlth thechange invalue beingcredltedordebited t o reserves. Tradeand other recelvablesand loansarestated attheir nomlnalvalue as reduced by allowancesfor estimated irrecoverable amounts. Cash and cash equivalents comprlse cash on hand and demand deposits, and other short-term highly llquld investments that are readlly convertible t o a known amount of cash and aresubjectto an ~ns~gnificantr~skofchange Invalue. Financial liabilities Financial lhabilltles are classified according t o the substance of the contractual agreement entered into. Significant financial llabllltles of the Group are trade payables, shortterm borrowings and other payables and these are measured at fair value net of transactlon costs. Where the Group has flnanclal Instruments whlch have a legally enforceable rlght of offset and the Group intends t o settle them on a net basls or to realize the asset and liab~litys~multaneously, thefinancial asset and l~abilltyand related revenuesand expensesareoffset and the net amount reported in the statement of financial posltion and statement of comprehensive income, respectwely. Equityinstruments An equltyinstrument IS any contractthatev~dencesa resldual Interest In the assetsolan entltyafterdeduct~ng all of ~ t s Ilabllltles. E q u g Instruments Issued by the Group are recorded at the amount of proceeds received, net ofdlrectissue costs.3.12 Revenuerecognition Revenuecomprisessales, rentals, interestand dividend revenue. Revenuefrom thesaleof goodsis recognised at the falr value of the conslderatlon received or receivable when the rlsk and rewards of ownership have passedtothe customer. Interest income is accrued on a tlme baas, by referencet o the principal outstanding andattheeffectwe Interest rateapplcable. Rentalincome ~srecognisedon accrual basls. Dlvldend Income an from lnvestmentsisrecogn~sed when theshareholden rightsto receivepayment have been established
  30. 30. I Notes €0the Consolidated Finandall StatementsFor the year ended 3 1 March 20113.13 Taxation income taxexpense representsthe taxcurrently payableand deferred tax Current tax Thetaxcurrently payableis based on taxable profitfortheyear.Taxable profit differsfrom profit as reported in thestatementof comprehensiveincome because of Items of Income or expense thatare taxable or deduct~ble In other years and Items that are nevertaxable or deductlble. TheGroups llabllltyfor current tax is calculated usingtax ratesthat have beenenacted orsubstantively enacted bytheend ofthe reportingper~od. Deferred tax Deferred tax 1 recognlsedon temporary d~fferences s between the carrylng amounts of assets and llabilitles in the financial statements and the corresponding tax bases used In the computation of taxable profit. Deferred tax liabilities are generally recognisedfor all taxable temporary differences. Deferred tax assets are generally recognlsedfor all deductlble temporary d~fferenceso the extent that it is probable that taxable profits will be t available against which those deductible temporary differences can be utilised Such deferred tax assets and llabllltles are not recognlsedf the temporary difference arlses from assets and liabilltles In a transaction that affectsne~therthetaxableprofit northeaccountlngprofit. The carryingamount of deferred tax assets is reviewed atthe end of each reporting period and reduced t o the extentthat it is no longer probablethatsufficienttaxable profitswill beavailableto allowall or partoftheasset t o be recovered. Deferredtaxassetsand llabllltiesare measuredatthetaxratesthatareexpected toapply In the perlod lnwhlch the l~abllity settled or the asset reallsed, based on tax rates (and tax laws) that have been enacted or is substantively enacted bytheend ofthe reportlngperlod. The measurement of deferred tax llabllities and assets reflects the tax consequences that would follow from the manner In which the Group expects, at the end of the reporting period, t o recover or settle the carrylng amount of its assetsandIlabillties. Deferred taxassetsand liabilitiesare offsetwhen there isa legallyenforceable rlght toset off currenttaxassets against current tax liabilities and when they relate t o income taxes levied bythe same taxation authority and theGroupintendstosettleitscurrenttaxassetsand liabilitieson a net basis. Current and deferred taxforthe period Current and deferred tax are recognlsedas an expense or Income In profit or loss, except when they relate t o Itemsthat are recognisedoutslde profit or loss (whether In othercomprehensive Income or directly In equlty), In whlch casethetax~s recogn~sedouts~de also profltorloss3.14 Retirement benefitcosts Contributionsto defined contr~bution retirement benefit plans are recognisedas an expense when employees have rendered service entitlingthem t o the contributions. Retirement benefits are provided for Group employees through the OK Zimbabwe Pension Fund, which is a defined contribution fund, and through the National Social Security Authority (NSSA) which 1 also a defined s contribution scheme. Contributionsto both arechargedtothestatement ofcomprehensive income. The NSSAschemeis a defined contribution scheme promulgated underthe National Social SecurityAuthority Act (1989). The Groups obligations under the scheme are limited t o speclfic contributions legislated from timetotime.
  31. 31. I Mates ta the Cansaltdated Financial State~mentsFor the year ended 3 1 March 20113.15 Provisions Provisions are recognisedwhen the Group has a present legal or constructiveobligation as a result of a past event, it is probablethat an outflow of resources embodyingeconomlcbenefits will be required to settle the obligationand a reliableestimateoftheamountofobligation can be made. The amount recognisedas a pmvlslon IS the best estlmate of the cons~derat~on requlred to settle the present obl~gation the reporting per~od at taklng into account the risks and uncertainties surrounding the obllgatlon. Wherea provlslonis measureduslngcashflowsestlmatedtosettlethe present obl~gat~on, ~tscarry~ngamount sthe presentvalueofthosecashflows. The provision for contingent lease payments is recognised when agreed set sales targets with respective lessorsaremet. Employee entitlements to annual leave are recognisedwhen they accrue to employees. A provis~on made is fortheestimated liabilityfor annual leave as a resultof services rendered by employees upto the statementof financial position.3.16 Operatingleases The Group operates in leased premises In some of the locations. Leases under whlch the risk and benefits of ownersh~p effectively retalned by the lessor are class~f~edoperating leases. Obligations incurred under are as operatingleases arechargedto the statementof comprehensive income Inequal installmentsoverthe period of the lease, except when an alternative method IS more representative of the tlme pattern from which benefits are derned. Contungent rentals arlslng under operating leases are recognlsed as an expense In the perlodin whichthey areincurred.3.17 Share-based payments The Group issued share optlons to certaln employees. The cost of share optlons to exlstlngshareholders IS measuredat falr value at date of grant. The fair value so determined is expensed on a s t a r thevesting periodbased on theGroupsestimateofsharesthatwill eventually vest. Fair value is measured using the Black-Schoiespricing model. The expected life used in the model has been adjusted, based on managements best estimate, for the effects of non-transferability, exercise restrictions and behav~ouralconsiderations.3.18 lmpairmentoftangiblea$sets At each statement of financial posit~on date, the Group revlews the carrylng amounts of ~ t s tangible and intang~bleassetsto determlne whetherthere IS any lnd~catlon thatthose assetssufferedan Impairment If any such lndlcat~onexlsts, the recoverable amount of the assets IS estlmated In order to determlne the extent of the impalrment ( ~any). Where ~t not possibletoestimatetherecoverableamount of an Individualasset, the f IS Groupest~matesthe recoverableamountofthe cash generatlngun~ttowhichthe asset belongs. Recoverable amount is the higher of fairvalue less costs to sell and value in use. In assessingvalue in use, the estlmated 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 for which the estlmatesoffuturecashflows have not been adjusted. If the recoverable amount of an asset IS estlmatedto be less than its carrying amount, the carrylngamount of the asset is reduced to its recoverable amount. An impairment is rewgnised as an expense Immediately, unless the relevant asset is carried at a revalued amount, in which case the impalrment IS treated as a revaluat~on decrease. Where an impairment subsequently reverses, the carrying amount of the asset is increased to the revised
  32. 32. I Notes to the Consolidated Financial SbtetnentsFor the year ended 31 March 2011 estlmate of ~ t s recoverable amount, but so that the increasedcarrylng amount does not exceed the carrylng amount that would have been determined had no lmpalrment been recognlsedfor the asset in prlor years. A reversal of an lmpalrment IS recognised as Income ~mmed~ately, unless the relevant asset is carried at a revalued amount, in whichcase the reversalofthelmpalrment istreatedasa revaluationIncrease4. Key sources of estimation uncertainty The following are the cr~t~caljudgements, apartfrom those ~nvolv~ngest~mat~ons,that the directorshave made In the process of applylng the Groups accounting pollc~es that have the most s~gn~f~cant on the and effect amounts recogn~sed theflnanc~alstatements. In4.1 Shrinkageofinventories Actual shrinkage is accounted for after every inventory count. In the past inventory counts were conducted fourtlmes in any financial year. Thls has been changed to monthly counts In order to improve controls over inventoryaccounting Shrinkageof USS2.2 mill~on whosesaievaluetranslatesto 1%of sales hasexceededtheGroups targetof 0.8%. No adjustmentto the d~sclosure normal and abnormalshrinkage has been made as the directors are still to of determ~newhatthe normal shrinkageforthe businessshouldbe in the multi-currencyenvironment.4.2 Assessment of impairment of property, plant andequipment Determining whether property, plant and equipment is impalred requires an estlmatlon of the value in use. The value In use calculation requlres the d~rectors estlmatethe future cash flows expected and a sultable to discount rate in order to calculate presentvalue. The directors believe that the carryingamount of property, plant and equipment at the end of the reporting periodwas USS27 288949and an impairment of USS170858was recognised.4.3 Usefullivesand residualvaluesof property,plant andequipment The residual values were assessedthrough comparison of prices of new and aged assets on a sample basis for each asset category tog~ve lnd~catlve an recovery rate. The useful lives are setout in note 3 9 and no changes . tothese useful lives have been cons~derednecessaryduringtheyear.4.4 Valuatlonof shareoptions Someofthe assumptions used Inthevaluat~on the share optlons, lncludlngthe Inputs Into the ElackScholes of model, are those that have been carr~ed forward from the hyperlnflatlonaryZlmbabwe dollar era and are yet to be fully establ~shed tested In the more stable multl- currency environment. The alternative method of and determlnlng the lntrlnslcvalue of the shares by uslng the relat~onsh~p between the str~keprlce and the share prlce ofthe option on grant date, based on slm~larl~stedentltles In the retall ~ndustryln ne~ghborlng countries whlch havea morestablecurrency,has beenassessedas lnapproprlateslnce marketcond~t~onsared~fferent In the respectlve countries. The amount charged to the statement of comprehensive income IS therefore the Groups bestestlmate Referto note8.3fortheassumptlonsappl1ed rnthe model
  33. 33. I Notes t o the Consolidated Financial Statements 1For the year ended 31 March5 Revenue Sales Lease and sub-lease income Interest income6 Profit before tax Profit before tax takes into account the following:6.1 Other operating expenses/(income) Shrinkage Markdowns Loss /(profit) on sale of property, plant and equipment6.2 Depreciation expense Property Plant and equipment6.3 Auditors remuneration Current year audit fees and expenses6.4 Net leasing expense :Minimum lease payments :Contingent lease payments Lease and sub-lease income received has been Included in notgf. Net future lease commitments Lease payments: Payable within one year Payable in two to five years Payable thereafter The Group leases most of ~ t shops under operating lease. The average lease term entered Into 1 5 years. s s
  34. 34. I Notes to the Consolidated Financial Sbtetnents mFor the year ended 3 1 March7 Taxation7.1 Taxation charge Income tax Current : Standard Aids Levy Withholding tax on interest earned Deferred : Credit t o statement of comprehensive income Reversal due t o tax rate reduction Total income tax expense7.2 Reconciliation of taxation charge Standard rate Adjusted for : Depreciation in excess of capital allowances Disallowed expenses and provisions Consumables and prepayments Interest taxed at special rates Profit on disposal of property, piant and equipment Tax rate adiustment Deferred taxation Effective rate of tax The statutory tax rate was revised downwards from 30.9% to 25.75% effective 1January 2010.8 Share capital8.1 Share capital Authorized: 2 000 000 000 ordinary shares of USS0.0001 each Issued and fully paid: 1015 548 101 ordinary shares of USS0.0001each Share Capital is shown in United States Dollars. The redenomination of share capital t o ordinary shares of USS0.0001 nominal value eachfrom Zimbabwe Dollarswas approved bythe Registrarofcompanieson 29June 2010.8.2 Shares underoption The Directors are empowered t o grant share options t o certain employees of the Group. These options are granted for a period of between three and six years at a price determined by the middle market price ruling on the OKZimbabweLimited Stock Exchange. Each employeeshare option converts into one ordinary shareofOK Zimbabwe Limited on exercise. The number of shares subject to option is approved by the shareholders in AnnualGeneral Meetings.
  35. 35. For the year ended 3 18.2 Sharesunderoption (continued) Subscription Numberof Price Shares ZOO8 Scheme Date of grant 14 November 2008 Movementsfortheyearunderthe2008 scheme:- At 3 1 March 2010 Newoptionsgranted (lJune2010) Optionsexercised Optionsforfeited Options not yet exercised At 3 1March 2011 Subscription Number of Pdce Shares ZOlOScheme Dateofgrant (5AugZO10) Total optionsgranted still tovest Some of the options for 2008 and all options for the 2010 scheme are yet t o be exercised. The vesting period will be satisfied from 1 November 2011 and 1 1 June 2012 forthe 2008 scheme and from 5 August 2013 forthe 2OlOscheme.8.3 Share-based payment computation The options outstanding at 3 1 March 2011 had a weighted average exercise price of USS0.011 and a weighted average remainingcontractual lifeof nineteen months. The inputs into the Black-Scholes model in respect of the options granted during the current and prior years were asfollows: Share price atgrant (2008scheme) US$O.Ol Share price atgrant (2008scheme) USS0.06 Share price atgrant (2010scheme) US$0.08 Weighted average grant price USS0.04 Expectedvolatility 64% Expected life 19 months Average riskfree rate 0.4% Dividendyield 10% At the time of the grant, on 14 November 2008, after the collapse of the Zimbabwean Dollar, there was no market information with which t o determine all the inputs into the model. The Group declared a dividend after year end and thus previous experience was therefore applied in respect of dividend yield, while the risk- free interest rate applicable in the United States of America money markets was used. The expected volatility of the share price was measured for the period from the introduction of multi-currency t o the end of the financial year.The resultant expenseso determined can therefore only be consideredan estimateofthecost of share-based paymentsto theshareholders.