Your SlideShare is downloading. ×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Introducing the official SlideShare app

Stunning, full-screen experience for iPhone and Android

Text the download link to your phone

Standard text messaging rates apply

Phoenix 2011 Annual Report

439
views

Published on

Phoenix 2011 Annual Report

Phoenix 2011 Annual Report

Published in: Investor Relations, Business

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
439
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Contents PHOENIX CONSOLIDATED INDUSTRIES LIMITEDCorporate Information 2Notice of the Annual General Meeting 3Report of the Directors 4Corporate Governance 6Chairman’s Statement 7Financial Highlights 8Company Awards 9Independent Auditor’s Report 10Statement of Financial Position 11Statement of Comprehensive Income 12Statement of Changes in Equity 13Statement of Cash Flows 14Notes to the Financial Statements 15Shareholders’ Analysis and Calendar 44 1
  • 2. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDCorporate Information PHOENIX CONSOLIDATED INDUSTRIES LIMITEDPHOENIX CONSOLIDATED INDUSTRIES LIMITEDThe Company is a public limited company, which is incorporated and domiciled in Zimbabwe and islisted on the Zimbabwe Stock Exchange. The Company is involved in the manufacture, distributionand sales of plastics and allied products and steel and allied products in Bulawayo and Harare. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDCompany’s StructurePlastics and Allied Products Steel and Allied ProductsWilliam Smith and Gourock division Scandia Wire divisionPhoenix Brushware division J W Searcy division Precision Grinders division McMeekan divisionPOSTAL ADDRESS DIRECTORATEP.O Box 647, Harare M D Frudd (Chairman) F J Rodrigues (Chief Executive)REGISTERED OFFICE T N Chiganze (Non-Executive)Stand 3332, being 25 Birmingham Road A B C Chinake (Non-Executive)Southerton, Harare W G Khumalo (Non-Executive) F Rwodzi (Non-Executive)SECRETARIES T N Sibanda (Non-Executive)Apex Management Services (Private) Limited AUDIT COMMITTEEAUDITORPricewaterhouseCoopers T N Sibanda (Chairman)Chartered Accountants (Zimbabwe) M D FruddBuilding No. 4, Arundel Office Park T N ChiganzeNorfolk Road, Mount PleasantHarare REMUNERATION COMMITTEEPRINCIPAL BANKERS A B C Chinake (Chairman)FBC Bank Limited F RwodziMBCA Bank LimitedTRANSFER SECRETARIESApex Management Services (Private) Limited2
  • 3. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notice of the Annual General Meeting PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotice is hereby given that the twelfth Annual General Meeting of the members of the Company willbe held on Thursday 29 March 2012 at 12pm in the offices of the Company, Stand 3333 being25 Birmingham Road, Southerton, Harare, for the purpose of transacting the following business: Ordinary Business1 To receive, consider and adopt the annual financial statements for the year ended 31 October 2011, together with the report of the auditor.2 To approve the remuneration of the auditor for the past audit and elect auditor for the current year.3 To approve the directors’ fees and remuneration for the past year.4 To confirm the re-appointment of Messrs T N Chiganze, W G Khumalo and F J Rodrigues, who retire by rotation in accordance with Article 94 of the Company’s Articles, and being eligible, offer themselves for re-election.By order of the BoardApex Management Services (Private) LimitedSecretariesHarare14 March 2012NOTE: A member entitled to vote at the above meeting is entitled to appoint a proxy to attend, vote and speak in his or herstead. A proxy need not be a member. John W Searcy Harare: 100 Simon Mazorodze Road. Tel 263 4 665928-9, 665938-9 Fax 263 4 667628. Email jwsearcy@mweb.co.zw John W Searcy has four divisions and focuses on servicing the manufacturing, mining and agricultural sectors, as well as Local Authorities in Zimbabwe and the wider region. PUMPS DIVISION: Supplies and services EQUIPMENT DIVISION: John W Searcy Flygt Submersible pumps and mixers supplies and services the all-terrain Mof- (since 1957) as well as the Brisan range of fett Mounty truck-mountable forklift truck. borehole pumps. Varieties of other pumps We also service all other types of forklifts are also supplied for the agricultural in- including the Mitsubishi range. dustry and domestic use. SUD CHEMIE (BHT) WATER TREATMENT SCREENS DIVISION: Manufactures mild DIVISION: The division provides boiler/ steel and high tensile woven wire screens cooling and drinking water treatment and supplies perforated plate, weld mesh, chemicals. Superior technology, highly stainless steel fine screens, expanded met- skilled personnel and support from our 3 al and polymer screens. Our manufactur- Principals, make our products and service ing facilities are ISO 9001-2008 certified. second to none.
  • 4. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDReport of the Directors The directors have pleasure in submitting their report to the shareholders, together with the audited financial statements for the year ended 31 October 2011.1 SHARE CAPITAL Authorised: As at 31 October 2011, the authorised share capital of the Company remained at 160 million (2010: 160 million) ordi- nary shares. Issued: As at 31 October 2011, the issued share capital was 87 475 000 (2010: 87 475 000) ordinary shares. Directors Interest As at 31 October 2011, the directors held directly and indirectly 2 207 561 shares, being 2.52% (2010: 2.52%) of the issued share capital of the Company. This holding is detailed in note 12 to the financial statements. No change in the interests of the directors have taken place between the financial year-end and the date of this report.2 RESERVES Share premium and non-distributable reserves There is no movement in the share premium and the non-distributable reserves during the year ended 31 October 2011. Distributable reserves Movements in the distributable reserves are set out in the statement of changes in equity in the financial statements on page 13.3 FINANCIAL RESULTS Results for the year ended 31 October 2011 are summarised below: 2011 STATEMENT OF COMPREHENSIVE INCOME US$000 Revenue 11 582 Operating profit before depreciation 904 Depreciation (518) Net finance cost (226) Fair value adjustment 2 Profit before income tax 162 Income tax expense (14) Total comprehensive income 148 Shares in issue 87 475 000 Basic earnings per share (US cents) 0.17 Fully diluted earnings per share (US cents) 0.174
  • 5. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Report of the Directors continued PHOENIX CONSOLIDATED The profit attributable to shareholders for the year LIMITED INDUSTRIES ended 31 October 2011 was dealt with as follows: 2011 US$000 Retained earnings as at 31 October 2010 59 Profit for the year 148 Retained earnings as at 31 October 2011 207 Pacprint (Private) Limited was disposed of in the prior year.4 PLANT, EQUIPMENT & MOTOR VEHICLES Capital expenditure for the year ended 31 October 2011 was US$565 000 (2010: US$79 680). Capital expenditure for the year ended 31 October 2012 has been authorised at US$905 000 (2010: US$812 000), none of which had been committed as at 31 October 2011.5 PENDING LITIGATION The directors are not aware of any material litigation outstanding or any claims of any material importance pending or threatened against the Company, which have not been disclosed in this report.6 CONTINGENT LIABILITY At the date of this report, no asset of the Company had been pledged as security for the liabilities of any other organisation since the end of the financial year. No contingent liability or any other liability has become enforceable or is likely to become enforceable within the succeeding period of twelve months which will or may substantially affect the ability of the Company to meet its obligations as and when they fall due. At the date of this report there are no contingent liabilities which have arisen since the end of the financial year and there are no circumstances not otherwise dealt with in this report or the financial statements which render any amounts stated in the financial statements misleading.7 DIRECTORATE In accordance with article 94 of the Company’s Articles of Association, Messrs T N Chiganze, W G Khumalo and F J Rodrigues retire by rotation, but being eligible, offer themselves for re-election.8 DIVIDEND The directors have decided not to declare a dividend this year (2010: US$nil).9 AUDITOR The auditors Messr, PricewaterhouseCoopers hold office until conclusion of the Annual General Meeting, at which members will be asked to re-appoint them as auditor for the ensuing year.10 FINANCIAL STATEMENTS The directors are responsible for the preparation and integrity of the financial statements and related financial information of the Company disclosed in this report. The financial statements of the Company have been drawn up in accordance with International Financial Reporting Standards (“IFRS”) and in the manner required by the Zimbabwe Companies Act (Chapter 24:03) and the relevant Statutory Instruments (“SI”) SI 33/99 and SI 62/96. The directors are satisfied that the financial statements present fairly the results of the operations for the year ended 31 October 2011. The financial statements have been approved by the Board of Directors.11 ANNUAL GENERAL MEETING The Annual General Meeting of the Company will be held at 12pm on Thursday 29 March 2012 at No. 25 Birmingham Road, Southerton, Harare.By order of the BoardApex Management Services (Private) LimitedSecretariesHarare 514 March 2012
  • 6. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDCorporate GovernanceIntroductionPhoenix Consolidated Industries Limited is committed to a code of corporate practices and conduct based on the principleslaid down in the King Report and the Principles of Corporate Governance in Zimbabwe as laid out in the manual of BestPractice. The directors recognise the need to conduct the affairs of the Company with principles of transparency, integrityand accountability in accordance with generally accepted corporate practices, in the interests of its shareholders, employeesand other stakeholders. All directors and senior personnel are required to declare any interests that could materially affectthe Company.DirectorateThe Board of Directors presently comprises of seven members, six of whom are non-executive. A non-executive directorchairs the Board, which meets at least four times per annum.Audit CommitteeThe Audit Committee of the Board deals, inter-alia, with matters of compliance, internal controls and risk management. Itconsists of three non-executive directors. The committee meets at least twice a year with the external auditors, who, in anyevent, have unimpeded access to the Committee.Remuneration CommitteeThe Remuneration Committee consists of two non-executive directors. The Committee’s responsibility is to measure, com-pare and review the remuneration of the Chief Executive, Non-executive Directors, Finance Executive and the operating unitChief Executives and act in accordance with the Board’s terms of reference.Directors’ RemunerationDetails are disclosed under note 19 in the financial statements of this report.Directors’ Responsibility StatementThe directors are responsible for:1 Presenting the shareholders with a balanced and understandable assessment of the Company’s financial position and financial performance and cash flow at the end of each financial year.2 Ensuring that the Company maintains accounting records which disclose, with reasonable accuracy, the financial position and financial performance and cash flows of the Company and which enable them to ensure that the financial statements comply with relevant statutes.3 Taking steps to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.4 Selecting appropriate accounting policies which comply with International Financial Reporting Standards and moni- toring compliance with legislation and regulations. MD Frudd F J Rodrigues Chairman Chief Executive 14 March 20126
  • 7. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Chairman’s Statement PHOENIX CONSOLIDATEDThe Board is pleased to advise that Phoenix achieved a net profit for the year. Furthermore, despite the tight liquidity bor- INDUSTRIES LIMITEDrowings increased only marginally.ProfitabilityPhoenix achieved a trading profit of US$904 000 which translated to a retained profit of US$148 000 after depreciation,finance costs and tax.Turnover increased by US$3.5 million of which the new units, McMeekan and Precision Grinders contributed US$1.5 million.Other units increased turnover by US$2 million, an increase of 25% over 2010. Reduced margins, finance costs and lossesarising from the new units has resulted in profits being in line with 2010 despite the increased turnover.OPERATIONSPlastic and Allied (Incorporating William Smith & Gourock and Phoenix Brushware)Volumes increased by 20% but increased costs and competitive pricing resulted in reduced profitability. William Smith &Gourock were especially affected by market related pricing on PVC products. The division however remained profitable andcash positive. The current strong demand will ensure a profitable first quarter.Steel and Allied (Incorporating Scandia Steel & Wire, J W Searcy, McMeekan Foundries, Precision Grinders)Turnover increased by US$3.1 million of which US$1.5 million related to the new units. Scandia experienced a 37% increasein turnover despite severe raw material supply disruptions from South Africa for four months of the year. Scandia was themost profitable unit in the Company and this performance is expected to continue in 2012. J W Searcy has experiencedincreased demand since October 2011 and looks forward to increased activity in the mining industry.McMeekan and Precision Grinders were purchased to take advantage of their alignment to the agriculture and mining in-dustries which are expected to experience significant growth going forward. These units have required significant financeand skill inputs which have led to an improvement in quality and efficiency. Current forecasts indicate that these improve-ments will result in a return to profitability in the coming year.OutlookAll units are forecasting an improved 2012 based on a marginal improvement in the economy and liquidity not worsening.Borrowings are forecast to remain at current levels.Financial PositionFixed assets remained virtually unchanged at US$6.5 million. Current assets exceed current liabilities by US$1.5 million, acurrent ratio of 1.4 times. Borrowings have increased by US$1.3 million, with working capital increasing by US$1.6 millionand US$0.7 million relating to the purchase and funding of McMeekan Foundries and Precision Grinders. Shareholder fundsimproved by US$148 000 to US$6.4 million.Corporate GovernancePhoenix is committed to the principles of good Corporate Governance and best practice. The Company’s policies andprocedures are continually reviewed for compliance with accepted standards. The main board comprises a majority ofnon-executive directors and it and its sub committees meet on a quarterly basis.Declaration of DividendThe board has decided not to declare a dividend.MD FruddChairmanHARARE 714 March 2012
  • 8. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDFinancial Highlights 2011 2010INCOME STATEMENT US$000 US$000Turnover 11 582 8 059Operating profit before depreciation 904 687Profit after tax attributable to equity holders of the Company 148 197STATEMENT OF FINANCIAL POSITIONTotal equity 6 378 6 230Total assets 12 069 10 600STATEMENT OF CASH FLOWSNet cash used from operating activities (932) (144)Cash and cash equivalents at the year end (1 469) (130)SHARE INFORMATIONNumber of ordinary shares 87 475 000 87 475 000Number of ordinary shareholders 2 298 2 341Year end share price (US cents) 2.50 3Net asset value per share (US cents) 7.3 7.2Earnings per share (US cents) 0.17 0.22FINANCIAL STATISTICSCurrent assets to current liabilities 1.4 1.6Return on shareholders’ equity (%) 2.3 3.1Precision Grinders Engineers55 Craster Road, Southerton, Harare. Tel: 263 (0)773 253 946/956, (0)773 252 123Email: sales@precisiongrinders.co.zw, nyamunama@precisiongrinders.co.zw Precision Grinders Engineers has been in operation since 1946 and supplies its products in the SADC and COMESA regions. The agricultural engineering division is well known for its famous HIPPO brand of hammer mills, dehullers, peanut butter making machines, stockfeed mixers, augers, solar dryers, shellers, precleaners and decorticator plants. Small scale gold processing plants, ball mills, concentrators, mine car wheels and axles, diamond pans and granby cars constitute the mining division. The structural steel division is involved in the design, manufacture and rigging of towers, steel sheds, grain silos, balustrades and carports.8
  • 9. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Company Awards PHOENIX CONSOLIDATED INDUSTRIES LIMITED Top division Profitibility and Revenue Bulawayo: 14 and 15 Wolverhampton Road, BelmontTel: 263 (9) 462607, 471485-9, 471122, 470009. Fax 462608 Email: sales@scandia.co.zw Harare: 62 Douglas Road Workington Tel/Fax: 263 (4) 664456, 662484 Email: premscan@gmail.com Scandia Steel and Wire manufacture and supply a broad range of wire associated products for domestic, industrial and agricultural use, such as security fencing, building and concrete reinforcing. Scandia has expanded their product range in order to continue to be competitive in an ever changing market environment. In addition to the traditional bird, chicken, pig netting diamond mesh and tying wire, the range now includes barbed and razor wire, farm gates, fencing posts and standards, reinforcing screens, brick-force and a variety of nails. Top Unit Cash Resources Harare: 100 Simon Mazorodze Rd. Tel: 263 (4) 667621-7. Fax: 667629. Email: williamsmith@wsg.co.zw, wsgsales@wsg.co.zw Bulawayo: 11 Falcon St. Tel: 263 (9) 465642-3. Email: wsg@mweb.co.zw William Smith and Gourock is one of the leading manufacturers of Tarpaulins and Tents in the SADC region. The Flexible PVC Coating line produces a wide range of products which include PVC Coated Polyester ranging from 180 - 1200 grams per square metre for use in protective clothing, rainwear, tarpaulins, canopies and bakkie covers. The Canvas Bitumised Tarpaulins manufactured are approved by SAZ for grain storage. The Tentage range stretches from large marquees in canvas or PVC for private functions to a lightweight backpack tent. Flags for the World, manufactures and prints vitually every type and size of flag or banner to international standards. The Paints range includes PVA, gloss, fabric and poster paints, tinters for fibre glass and PVC products as well as distributing a range of Oxides and Pigment Powders. Best performing Chief Executive Officer Mike Biddlecombe 9
  • 10. Independent Auditor’s ReportTo the shareholders ofPHOENIX CONSOLIDATED INDUSTRIES LIMITEDWe have audited the financial statements of Phoenix Consolidated Industries Limited (the “Company”) which comprise thestatement of financial position as at 31 October 2011, and the statements of comprehensive income, changes in equity andcash flows for the year then ended, and a summary of significant accounting policies and other explanatory information seton pages 11 to 44.Directors’ responsibility for the consolidated financial statementsThe directors of the Company are responsible for the preparation and fair presentation of these financial statements in ac-cordance with International Financial Reporting Standards and in the manner required by the Zimbabwe Companies Act(Chapter 24:03) and the relevant Statutory Instruments, (“SI”), SI 33/99 and SI 62/96, and for such internal control as thedirectors determine necessary to enable the preparation of financial statements that are free from material misstatementwhether due to fraud or error.Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted out audit in ac-cordance with International Standards on Auditing. Those standard require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether the financial statements are free from materialmisstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial state-ments. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material mis-statement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considersinternal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the con-solidated financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at31 October 2011, and of its financial performance and its cash flows for the year then ended in accordance with Interna-tional Financial Reporting Standards and in the manner required by the Zimbabwe Companies Act (Chapter 24:03) and therelevant Statutory Instruments SI 33/99 and SI 62/96.PricewaterhouseCoopersChartered Accountants (Zimbabwe)Harare14 March 2012PricewaterhouseCoopers, Building No. 4, Arundel Office Park, Norfolk Road, Mount PleasantP O Box 453, Harare, ZimbabweT: 263 (4) 338362-8, F: 263 (4) 338395, www.pwc.comT I Rwodzi - Senior PartnerThe Partnership’s principal place of business is at Arundel Office Park, Norfolk Road, Mount Pleasant, Harare, Zimbabwe where a list of the Partners’names is available for inspection.Page 10
  • 11. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Statement of Financial Position PHOENIX CONSOLIDATED INDUSTRIES LIMITED As at 31 October 2011 Notes 2011 2010ASSETS US$000 US$000Non-current assetsPlant, equipment and motor vehicles 6 6 451 6 409Non-current receivable 7 - 124 6 451 6 533Current assetsInventories 8 2 389 1 675Trade and other receivables 9 3 070 1 965Financial assets at fair value through profit or loss 10 61 59Cash and cash equivalents 11 98 368 5 618 4 067Total assets 12 069 10 600EQUITY AND LIABILITIESCapital and reservesOrdinary shares 12 9 9Share premium 12 60 60Non-distributable reserve 6 102 6 102Retained earnings 207 59Total equity 6 378 6 230Non-current liabilitiesDeferred income tax 14 1 544 1 618Long term liability 17 - 189 1 544 1 807Current liabilitiesTrade and other payables 15 2 504 1 979Current income tax liability 76 86Short term borrowings 16 1 567 498 4 147 2 563Total liabilities 5 691 4 370Total equities and liabilities 12 069 10 600MD Frudd F J RodriguesChairman Chief Executive 1114 March 2012
  • 12. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDStatement ofComprehensive IncomeFor the year ended 31 October 2011 2011 2010 Notes US$000 US$000Revenue 5.1 11 582 8 059Cost of sales (7 678) (5 547)Gross profit 3 904 2 512Distribution costs (985) (673)Administrative expenses (2 739) (1 961)Other income 18 208 199Profit adjustment of subsidiary - 124Operating profit 388 201Finance income 20 - 1Finance expense 20 (226) (73)Net finance expense (226) (72)Profit before income tax 162 129Income tax(expense)/credit 21 (14) 68Profit for the year 148 197Other comprehensive income - -Total comprehensive income 148 197Attributable to:Equity holders of the Company 148 197Non-controlling interest - - 148 197McMeekan Founders and Engineers45 Tilbury Road/Willowvale Road , Harare. Tel. + 263 (04) 611341-4, 611361-4.Fax.+ 263 4 611365. Mobile. +263 (0)772 277 523, (0)772 316 917Email: mcmeekan.meekan@gmail.com McMeekan Founders & Engineers was founded in 1940. The division consists of a Foundry, Machine shop & Engineering shop. McMeekan’s products are marketed locally and regionally and include the following: - Millballs - Impellors - Brake drums - Liners - Hubs - Tractor Nose Weights - Fire Bars - Hydrant Makers - Wagon Wheel Hubs12 - Manhole covers - Spigot shaft - Half shaft - Vee-Pulleys - Water meters - Cocopan wheels - Pump Bodies - & any other products made to customer specification.
  • 13. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Statement of Changes in Equity PHOENIX CONSOLIDATED INDUSTRIES LIMITED For the year ended 31 October 2011 (Accumulated Non losses)/ Share Share distributable retained Total capital premium reserves earnings equity US$000 US$000 US$000 US$000 US$000Year ended 31 October 2010As at 1 November 2009 - 20 6 111 (138) 5 993Share premium - 40 - - 40Profit for the year - - - 197 197Redenomination of share capital 9 - (9) - -As at 31 October 2010 9 60 6 102 59 6 230Year ended 31 October 2011As at 1 November 2010 9 60 6 102 59 6 230Profit for the year - - - 148 148As at 31 October 2011 9 60 6 102 207 6 378 Phoenix Brushware Phoenix Brushware has been operating for over 65 years and is the largest brush manufacturer in Zimbabwe. Intially, all man-made fibres were imported but in 1992 Phoenix commissioned an extrusion line for the manufacture of monofilament and has since become a net exporter through the SADC region. The Packaging Division specialises in rigid packaging for cosmetics. All products are marketed locally and regionally. To ensure effective market penetration, products are distributed through hardware stores, dealers, supermarkets, wholesalers, DIY stockists, distributors and directly to industrial users. Product Line Yard Brooms, Soft Sweeping Brooms, Floor Mops, Sanitary Brushes, Floor Polishers, Scrubbing Brushes, Household and Industrial Plasticware, Shoe Brushes, Paint Brushes, Household and Industrial Hoover Brushes. Harare: 25 Birmingham Rd, Southerton. Tel: 263 (4) 754593/7. Fax: 754599. Email: brushsales@pcigroup.co.zw Bulawayo: Tamworth St, Donnington. Tel: 263 (9) 467367, 474391. Fax: 474391 Email: phoenixb@iwayafrica.co.zw 13
  • 14. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDStatement ofCash ended 31 October 2011For the year Flows Notes 2011 2010 US$000 US$000Cash flows from operating activities:Profit before income tax 162 129Adjustments for non cash items:Depreciation 6 517 486Profit on loss of control of subsidiary - (124)Impairment allowance 5 -Foreign exchange loss 12 -Rental income (48) -Extinguishment of liabilities (175) -Gain on extinguishment of liability - (191)Share options expense - 40Profit on disposal of plant, equipment and motor vehicles (5) 1Fair value gains on financial assets at fair value through profit or loss (2) ( 9)Finance costs- net 226 72Net cash generated by operating activities before changes in working capital 692 404Changes in working capital:Increase in inventories (404) (257)Increase in trade and other receivables (660) (1 041)Increase in trade and other payables (236) 836Net cash used in operating activities (608) (58)Interest received - 1Interest paid (226) (73)Income tax paid (98) (14)Net cash used in operating activities (932) (144)Cash flows from investing activities:Acquisition of plant, equipment and motor vehicles 6 (167) (80)Acquisition of net assets of Precision Grinders and McMeeken, net of cash acquired (251) -Proceeds from the disposal of plant, equipment and motor vehicles 11 2Net cash used in investing activities: (407) (78)Cash flows from financing activities: - -Net decrease in cash and cash equivalents (1 339) (222)Cash and cash equivalents at beginning of the year (130) 92Cash and cash equivalents at end of the year 11 (1 469) (130)14
  • 15. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements PHOENIX CONSOLIDATED1 GENERAL INFORMATION INDUSTRIES LIMITED Phoenix Consolidated Industries Limited (“the Company”) has manufacturing plants and operations in Zimbabwe. The Company is a limited liability company incorporated and domiciled in Zimbabwe. The address of its registered office is 25 Birmingham Road, Southerton, Harare, Zimbabwe. The Company is listed on the Zimbabwe Stock Exchange. The financial statements are reported in thousands of the United States of America dollars (“US$000”). The financial statements were authorised for issue by the Board of Directors.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial statements of the Company, which are set out below are. These policies have been consistently applied to all the years presented unless otheriwse stated.2.1 Basis of preparation The Company’s financial statements have been prepared in accordance with International Financial Reporting Stand- ards, (“IFRS”), IFRIC interpretations and in the manner required by the Zimbabwe Companies Act (Chapter 24:03) and the relevant Statutory Instruments (“SI”) SI 33/99 and SI 62/96. The financial statements are based on statutory records that are maintained under the historical cost convention as modified by the revaluation of property, plant and equip- ment and financial assets at fair value through profit or loss and the discounting of non-current assets and long term liability to present value. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting esti- mates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4.2.1.1 New standards, amendments and interpretations issued but not effective for the financial year beginning on or after 1 January 2010 and are currently relevant to the Company Improvements to IFRS Improvements to IFRS were issued in April 2009 and May 2010. They contain numerous amendments to IFRS that the International Accounting Standards Board (“IASB”) considers non-urgent but necessary. ‘Improvements to IFRS’ com- prise amendments that result in accounting changes for presentation, recognition or measurement purposes, as well as terminology or editorial amendments related to a variety of individual IFRS standards. Most of the amendments are effective for annual periods beginning on or after 1 January 2011, with earlier application permitted. No material changes to accounting policies are expected as a result of these amendments.2.1.2 New standards, amendments and interpretations to existing standards that are not effective and were early adopted in the prior year by the Company Amendments to IFRS 1, ‘First time adoption’ on hyperinflation and Fixed Dates’. The first amendment replaces refer- ences to a fixed date of ‘1 January 2004’ with ‘the date of transition to IFRSs’, thus eliminating the need for companies adopting IFRSs for the first time to restate derecognition transactions that occurred before the date of transition to IFRSs. The second amendment provides guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subjected to severe hyperinflation. With an effective date of 1 July 2011, this amendment was early adopted in 2010.2.1.3. New standards, amendments and interpretations mandatory for the first time for the financial year beginning on or after 1 January 2010 but not currently relevant to the Company The following new standards, amendments and interpretations have been published and are mandatory for the Com- pany’s accounting periods beginning on or after 1 January 2010 or later periods, but are not relevant to the Company: 15
  • 16. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements continued • IFRS 2 (amendments), ‘Group cash-settled share-based payment transactions’, effective from 1 January 2010. In ad- dition to incorporating IFRIC 8, ‘Scope of IFRS 2’, and IFRIC 11, ‘IFRS 2 - Group and treasury share transactions’, the amendments expand on the guidance in IFRIC 11 to address the classification of group arrangements that were not covered by that interpretation. • IAS 32 (amendment), ‘Classification of rights issues’ issued in October 2009, effective from 1 February 2010. Earlier application is permitted. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment applies retrospectively in accordance with IAS 8 ‘Accounting policies, changes in accounting estimates and errors’. • IFRIC 19, ‘Extinguishing financial liabilities with equity instruments ’, effective 1 July 2010. The interpretation clari- fies the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity is- suing equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity swap). It requires a gain or loss to be recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished.2.1.4 New standards, amendments and interpretations to existing standards issued but not yet effective for the financial year beginning on or after 1 January 2011, not early adopted by the Company The following standards, amendments to existing standards and interpretations have been published but are not yet effective and are relevant to the Company’s operations • IAS 12, ‘Income Taxes’ effective 1 January 2012. Currently IAS 12, ‘Income taxes’, requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40, ‘Investment Property’. Hence this amendment introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. As a result of the amendment, SIC 21, ‘Income taxes- recovery of revalued non-depreciable assets’, would no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC 21, which is accordingly withdrawn. • IAS 24 (revised), ‘Related party disclosures’, issued in November 2009, effective 1 January 2011. It supersedes IAS 24, ‘Related party disclosures’, issued in 2003. IAS 24 (revised) is mandatory for periods beginning on or after 1 January 2011. Earlier application, in whole or in part, is permitted. The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government related entities to disclose details of all transactions with the government and other government-related entities. • Amendment to IFRS 7 Disclosures - Transfer of financial assets, effective 1 July 2011. The amendments are in- tended to address concerns raised during the financial crisis by the G20, among others, that financial statements did not allow users to understand the ongoing risks the entity faced due to derecognised receivables and other financial assets. • IFRS 9, ‘Financial instruments ’, issued in November 2009, effective date has been deferred to 1 January 2015. This standard is the first step in the process to replace IAS 39, ‘Financial instruments: recognition and measurement’. IFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect the Com- pany’s accounting for its financial assets. The standard is not applicable until 1 January 2015 but is available for early adoption.16
  • 17. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements continued PHOENIX CONSOLIDATED IFRS 13, ‘Fair Value Measurement’, effective 1 January 2013. Improves consistency and reduces complexity by provid- INDUSTRIES LIMITED ing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use accross IFRSs.2.1.5 Interpretation and amendments to existing standards that are not yet effective and not relevant to the Com- pany’s operations The following standards, amendments to existing standards and interpretations have been published and are not relevant to the Company’s operations Application for the financial year Standard/Interpretation Content beginning on/after IFRIC 14 (amendment) Prep-payments of a Minimum Funding Requirement 1 November 2011 IFRS 10 Consolidated Financial Statements 1 November 2013 IFRS 11 Joint Arrangements 1 November 2013 IFRS 12 Disclosure of Interests in Other Entities 1 November 2013 IAS 27 (Revised) Separate Financial Statements 1 November 2013 IAS 28 (Revised) Investments in Associates and Joint Ventures 1 November 2013 IFRIC 20 Stripping Costs in the Production Phase of a Mine 1 November 20132.2 Going concern The Company’s operations have been significantly affected, and may continue to be affected by the challenging economic environment. The Directors have assessed the ability of the Company to continue operating as a going concern and believe that the preparation of these financial statements on a going concern basis is still appropriate. However, the Directors believe that under the current economic environment, a continuous assessment of the ability of the Company to continue to operate as a going concern will need to be performed to determine the continued appropriateness of the going concern assumption that has been applied in the preparation of these financial state- ments.2.3 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing per- formance of the operating segments, has been identified as the Group Chief Executive Officer who makes strategic decisions.2.4 Foreign currency translationa) Functional and presentation currency Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The financial statements are presented in the United States of America dollar, (“US$”), which is the Company’s functional and presentation currency.b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income. The translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. 17
  • 18. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotes to the Financial Statementscontinued2.5 Common control transactions. A combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the busi- ness combination and that control is not transitory and is excluded from the scope of IFRS 3 Business Combinations. Management made a policy choice to use predecessor accounting for common control transactions. No assets or liabilities are restated to their fair values. Instead, the acquirer incorporates predecessor carrying values. These are the carrying values that are related to the acquired entity. They are generally the carrying amounts of assets and liabilities of the acquired entity from the consolidated financial statements of the highest entity that has com- mon control for which consolidated financial statements are prepared. These amounts include any goodwill recorded at the consolidated level in respect of the acquired entity. If no consolidated financial statements are produced, the values used are those from the financial statements of the acquired entity. The acquired entity’s results and statement of financial position were incorporated prospectively from the date on which the business combination between entities under common control occurred. Consequently, the financial state- ments do not reflect the results of the acquired entity for the period before the transaction occurred. The correspond- ing amounts for the previous year are also not restated.2.6 Plant, equipment and motor vehicles Plant, equipment and motor vehicles are shown at valuation, based on periodic, but at least triennial, valuations, less subsequent accumulated depreciation. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All other items of plant, equipment and motor vehicle, furniture and fittings are stated at historical cost less accumulated de- preciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. Increases in the carrying amount arising on revaluation of plant, equipment and motor vehicles are credited to other reserves in shareholders’ equity. Decreases that offset previous increases of the same asset are charged against other reserves directly in equity; all other decreases are charged to the statement of comprehensive income. Depreciation on plant, equipment and motor vehicles is calculated using the straight-line method to allocate their revalued amounts to their residual values over their estimated useful lives, as follows: Plant and machinery 15 years Motor vehicles 5 years Furniture, fittings and equipment 5 - 10 years The assets residual values and useful lives are reviewed and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recog- nised in the statement of comprehensive income. When revalued assets are sold, the amounts included in revaluation reserves are transferred to retained earnings.18
  • 19. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements continued PHOENIX CONSOLIDATED2.7 Financial assets INDUSTRIES LIMITED2.7.1 Classification The Company classifies its financial assets in the following categories: loans and receivables and financial assets at fair value through profit or loss. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.a) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Company provided goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except for maturities greater than 12 months after the reporting date. These are classified as non-current assets. The Company’s loans and receivables comprise trade and other receivables and cash and cash equivalents disclosed in notes 9 and 11 respectively.b) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Assets in this category are classified as current assets.2.7.2 Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date - the date on which the Company commits to purchase or sell the asset. Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets at fair value through profit or loss are initially carried at fair value and transaction costs are expensed to the statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership. Financial assets at fair value a through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effec- tive interest method. Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are presented in the statement of comprehensive income in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income as part of other income when the Company’s right to receive payments is established. The Company assesses at each balance sheet date whether there is objective evidence that a financial asset is im- paired. Impairment testing of trade receivables is described in note 2.9.2.8 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported on the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. 19
  • 20. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotes to the Financial Statementscontinued2.9 Impairment of financial assets Assets carried at amortised cost The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment loss- es are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtor or group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carry- ing amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the statement of comprehensive income. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Company may measure impairment on the basis of an instrument’s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the statement of comprehensive income.2.10 Inventories Inventories are stated at the lower of the cost and estimated net realisable value. The cost is based on a first in, first out basis calculated as follows: - Raw materials and consumable stores - landed cost. - Finished goods and work in progress - direct raw materials and labour costs, other direct costs and related produc- tion overheads (based on appropriate operating capacity) and, where applicable, excise duty paid. Net realisable value is the estimate of the selling price in the ordinary course of business, less applicable variable costs of completion and selling expenses.2.11 Cash and cash equivalents Cash and cash equivalents comprise cash on hand, deposits held on call with banks, other short term highly liquid investments with original maturities of three months or less and bank overdrafts.2.12 Share capital and dividends Ordinary shares are classified as equity. Incremental cost directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Ordinary shares with discretionary dividends are classified as equity. Dividend distribution to the Company’s share- holders is recognised as a liability in the Company’s financial statements in the period in which the dividends are declared.20
  • 21. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements continued PHOENIX CONSOLIDATED2.13 Trade payables INDUSTRIES LIMITED Trade payables are obligations to pay for goods or services that have been acquired or rendered in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). lf not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.2.14 Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is rec- ognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.2.15 Current and deferred income tax The income tax expense for the year comprises current and deferred income tax. Tax is recognised in the statement of comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respec- tively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in Zimbabwe. Management periodically evaluates positions taken in tax returns with respect to situ- ations in which applicable tax regulation is subject to interpretation. lt establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided for in full using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts. However if the deferred income tax arises from the initial recognition of an asset or liability in a transaction other than a business combination that affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or liability settled. Deferred income tax assets are recognised to the extent that is it probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax as- sets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. 21
  • 22. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotes to the Financial Statements continued2.16 Employee benefitsa) Pension obligations The Company has a defined contribution plan. A defined contribution plan is a pension plan under which the Compa- ny pays fixed contributions into a separate entity. The Company has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. For defined contribution plans, the Company pays contributions to privately administered pension plans on a manda- tory basis. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. The Company and its employees also contribute to the National Social Security Authority Scheme. This is a social security scheme which was promulgated under the National Social Security Statutory Instrument 393 of 1993. The Company’s obligations under the scheme are limited to specific contributions as legislated from time to time. The contributions are recognised as employee benefit expenses in the statement of comprehensive income when they are due.b) Bonus plans The Company recognises a liability and an expense for bonuses based on a formula that takes into consideration the profit attributable to the Company’s shareholders after certain adjustments. The Company recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.2.17 Share based payments The Company operates an equity-settled, share-based compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the Company. The fair value of the employee ser- vices received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted: - including any market performance conditions; - excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and - excluding the impact of any non-vesting conditions (for example, the requirement for employees to save). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the statement of comprehensive income, with a corresponding adjustment to equity. When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributa- ble transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Company is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertak- ings, with a corresponding credit to equity.22
  • 23. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements continued PHOENIX CONSOLIDATED2.18 Provisions INDUSTRIES LIMITED Provisions are recognised when: the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is deter- mined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.2.19 Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Company’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Company. The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Company’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Company bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.a) Sale of goods Revenues from the sale of goods is recognised when the Company has delivered products to the customer, the cus- tomer has full discretion over the channel and price to sell the products and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery does not occur until the products have been deliv- ered to the specified location, the risks of obsolescence and loss have been transferred to the customer and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.b) Interest income Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired, the Company reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument and continues unwinding the discount as interest income.c) Dividend income Dividend income is recognised when the right to receive payment is established.2.20 Leases As lessee Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight-line basis over the period of the lease. As lessor Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Receipts earned under operating leases (net of any incentives given to the lessor) are recognised in the statement of comprehensive income on a straight-line basis over the period of the lease. 23
  • 24. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotes to the Financial Statementscontinued3 FINANCIAL RISK MANAGEMENT3.1 Financial risk factors The risk management function within the Company is carried out in respect of financial risks. Financial risks are risks arising from financial instruments to which the Company is exposed during or at the end of the reporting period. Financial risks comprise market risk (including currency, interest and other price risks), credit risk and liquidity risk. The primary objectives of the financial risk management function are to establish risk limits and then ensure that exposure to risks stays within limits. Risk management is carried out by the Board of Directors, (the “Board”). The Board identifies and evaluates financial risks in close cooperation with the operating units. The Board provides written principles for overall risk management. Key risk management reports are produced monthly at operating unit level and provided to the key management personnel of the Company. (a) Market risk Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in the market prices. The Company’s market risks arise from open positions in (a) foreign currencies and (b) interest bearing assets and liabilities, to the extent that these are exposed to general and specific market movements as at 31 October 2011. (i) Foreign exchange risk Foreign exchange risk arises from recognised assets and liabilities and future commercial transactions that are de- nominated in a currency that is not the entity’s functional currency. Foreign exchange risks arise in respect of those recognised monetary financial assets and liabilities and future commercial transactions that are not denominated in the functional currency of the Company, (“US$”) as at 31 October 2011. The Company trades internationally and is exposed to foreign exchange risk arising from various currencies and the main exposure is primarily with respect to the South African rand, (“ZAR”). Exports to other regional countries are mainly denominated in US$. Total As at 31 October 2010 ZAR$000 US$000 Financial assets - loans and receivables Equivalent - Trade receivables from third parties 1 251 177 Financial liabilities at amortised cost - Trade payables to third parties (5 692) (805) Net exposure (4 441) (628) As at 31 October 2011 Financial assets - loans and receivables - Trade receivables from third parties 1 555 210 Financial liabilities at amortised cost - Trade payables to third parties (4 191) (524) Net exposure (2 636) (314) The Company’s primary method of managing foreign currency risk is to match the Company’s principal cash outflows to the currency in which the principal cash inflows are denominated. This is generally achieved by converting all currencies received into US$.24
  • 25. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotes to the Financial Statements continued PHOENIX CONSOLIDATEDThe Company is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to INDUSTRIES LIMITEDthe South African Rand (“ZAR”). Foreign exchange risk arises from future commercial transactions and recognised as-sets and liabilities.As at 31 October 2011, if the US$ weakened by 10% against the ZAR with all other variables held constant, post-taxprofit for the year would have been US$21 000 (2010: US$42 000) lower, mainly as a result of foreign exchange gains/(losses) on translation of ZAR-denominated trade receivables and creditors. Profit is more sensitive to movement inUS$/ZAR exchange rates in 2011 than 2010 because of the increased amount of ZAR-denominated trade creditors.As at 31 October 2011, if the US$ strengthened by 10% against the ZAR with all other variables held constant, post-taxprofit for the year would have been US$21 000 (2010: US$42 000) higher , mainly as a result of foreign exchange gainson translation of ZAR-denominated trade receivables and creditors.(ii) Price riskThe Company is exposed to equity securities price risk because of investments held by the Company and classifiedon the statement of financial position as financial assets at fair value through profit or loss. At year end, the Companywas not exposed to commodity price risk. To manage the price risk arising from investments in equity securities, theCompany uses an asset manager whose mandate is to hold a diversified portfolio. The equity securities are listed onthe Zimbabwe Stock Exchange (“ZSE”).The tables below summarises the impact of decreases of the ZSE index on Company’s post-tax profit for the year andon equity. The analysis is based on the assumption that the equity index, had decreased or increased by 10% withall other variables held constant and all the Company’s equity instruments moved according to historical correlationwith the index. Impact on post-tax profit 2011 2010 US$000 US$000ZSE index 4.2 4.1Post-tax profit for the year would decrease as a result of losses on equity securities classified as at fair value throughprofit or loss.(iii) Cash flow and fair value interest rate riskThe Company’s interest rate risk arises from short term borrowings. Borrowings issued at variable rates expose theCompany to cash flow interest rate risk which is partially offset by cash held at variable rates.The Company analyses its interest risk exposure on a dynamic basis. Various scenarios are simulated taking into con-sideration refinancing, renewal of existing positions and alternative financing. Based on these scenarios, the Com-pany calculates the impact on the profit or loss of a defined interest rate shift. The scenarios are run only for liabilitiesthat represent the major interest-bearing position.Based on the simulations performed, the impact on post-profit of a 10% shift would be a maximum increase ofUS$18 300 (2010: US$5 500). The simulation is done on a yearly basis to verify that the maximum loss potential iswithin the limit given by management.Trade receivables and payables are interest free and have settlement dates within one year. 25
  • 26. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotes to the Financial Statementscontinued (b) Credit risk Credit risk is the risk that one party to a transaction will cause financial loss to another party by failing to discharge an obligation. Credit risk is managed on a Company basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum credit risk rating are accepted. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rat- ing, management assesses the credit quality of the customer’s banks and financial institutions taking into account their financial position, past experience and other factors. Individual risk limits are based on internal ratings in accord- ance with limits set by the management. The utilisation of credit limits is regularly monitored. Such risks are subject to a quarterly review. Cash balances are held only with financial institutions with sound capital adequacy cover. The Company’s maximum exposure to credit risk by class of financial asset is as follows: 2011 2010 US$000 US$000 Trade receivables, net of impairment allowance: - Receivables from third parties 2 004 1 454 - Receivables from related parties 23 23 - Loans to related parties 317 17 - Other financial assets excluding prepayments - 91 Cash and cash equivalents 98 345 2 442 1 930 Analysis by credit quality of financial assets is as follows: Trade receivables, gross Neither past due nor impaired - Receivables from large companies 654 267 - Receivables from small or medium sized companies 207 433 Total neither past due nor impaired 861 700 Past due but not impaired - less than 30 days past due 395 411 - 30 to 90 days past due 748 313 Total past due but not impaired 1 143 724 There is no significant concentration of credit risk with respect to cash and cash equivalents as the Company holds cash accounts with large financial institutions with sound financial and capital bases. (c) Liquidity risk Prudent liquidity risk management principles implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. Due to the dynamic nature of the underlying businesses, Company treasury maintains flexibility in funding by maintaining availability under committed credit lines. The Company’s policy is to negotiate borrowing facilities with approved financial institutions based on the existing asset base of the Company sufficient for its purposes.26
  • 27. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements continued PHOENIX CONSOLIDATED The borrowing powers of the Company are limited LIMITED of Association (Section 59). The unutilised facilities INDUSTRIES by the Articles available to the Company are set out below: 2011 2010 Borrowing limits US$000 US$000i) Maximum permissible year end borrowings 12 756 12 574 Committed borrowing facilities (3 500) (400) Unutilised borrowing capacity 9 256 12 174ii) Committed borrowing facilities 3 500 400 Actual borrowings comprise: - Current bank borrowings (1 567) (498) - Bank and cash balances 98 368 Unutilised committed borrowing capacity 2 031 270 The memorandum and articles of association stipulate that the maximum permissible borrowings be no more than twice the shareholders equity.iii) Undiscounted contractual maturity The table below analyses the Company’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. A maturity analysis of financial instruments as at 31 October 2011 is as follows: On demand and less From From From From From than one 1 to 3 3 to 6 6 to 9 9 to 12 2 to 5 month months months months months years Total US$000 US$000 US$000 US$000 US$000 US$000 US$000 Assets Cash and cash equivalents 98 - - - - - 98 Trade and other receivables 861 897 211 - 340 - 2 309 Total assets 959 897 211 - 340 - 2 407 Liabilities Trade and other payables 1 915 228 - - - - 2 143 Social security and other taxes, including income tax (statutory liabilities) 437 - - - - - 437 Short term borrowings - 1 069 - - - - 1 069 Bank overdraft 498 - - - - - 498 Total liabilities 2 850 1 297 - - - - 4 147 Liquidity gap (1 891) (400) 211 - 340 - (1 740) Cumulative gap (1 891) (2 291) (2 080) (2 080) (1 740) (1 740) - 27
  • 28. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotes to the Financial Statementscontinued A maturity analysis of financial instruments as at 31 October 2010 is as follows: On demand and less From From From From From than one 1 to 3 3 to 6 6 to 9 9 to 12 2 to 5 month months months months months years Total US$000 US$000 US$000 US$000 US$000 US$000 US$000 Assets Cash and cash equivalents 368 - - - - - 368 Trade and other receivables 1 236 336 244 149 - - 1 965 Non current receivable - - - - - 250 250 Total assets 1 604 336 244 149 - 250 2 583 Liabilities Trade and other payables 689 592 338 188 - 5 1 812 Social security and other taxes, including income tax (statutory liabilities) 253 - - - - - 253 Non current liability - - - - - 380 380 Bank overdraft 98 - - - - - 98 Short term borrowings - - - 400 - - 400 Total liabilities 1 040 592 338 588 - 385 2 943 Liquidity gap 564 (256) (94) (439) - (135) (360) Cumulative gap 564 308 214 (225) (225) (360) - The Company has sufficient head room on its committed borrowing facilities to meet its operational cash needs, if own cash resources are inadequate.3.2 Capital risk management The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell asset to reduce debt. 2011 2010 US$000 US$000 Total borrowings (note 16) (1 567) (498) Less cash and cash equivalents 98 368 Net debt (1 469) (130) Total equity 6 378 6 230 Gearing ratio 23% 2%28
  • 29. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements continued PHOENIX CONSOLIDATED3.3 Fair value hierarchy INDUSTRIES LIMITED IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources and unob- servable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair value hierarchy; Level one - Quoted prices (unadjusted) in active market for identical assets or liabilities. This level includes listed equity securities. Level two - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level three - Inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components. This level includes non-listed equity investments. The hierarchy requires the use of observable market data when available. The Company considers relevant and observable market prices in its valuations where possible. The Company had financial assets at fair value through profit or loss that are carried at level one fair value as at 31 October 2011 amount to US$61 000 (2010: US$59 000) and had no financial assets or liabilities are carried at level two or three.4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated and are based on historical experience and other factors, includ- ing expectations of future events that are believed to be reasonable under the circumstances.4.1 Critical accounting estimates and assumptions The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of caus- ing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.a) Income taxes The Company recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income and deferred income tax liabilities in the period in which such determination is made.b) Useful lives of plant, equipment and motor vehicles The Company’s management determines the estimated useful lives and related depreciation charges for its plant, equipment and motor vehicles. This estimate is based on projected product life cycles of these assets. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Man- agement will increase the depreciation charge where useful lives are less than previously estimated lives, or it will write off or write down technically obsolete or non-strategic assets that have been abandoned or sold. 29
  • 30. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements continued5 SEGMENT ANALYSIS For the financial year ended 31 October 2011, segment reporting by the Company was prepared in accordance with IFRS 8 ‘Operating segments’. Following the management approach of IFRS 8, operating segments are reported in accordance with the internal reporting provided to the Company Chief Executive Officer (the Chief operating decision-maker), who is responsible for allocating resources to the reportable segments and assesses its performance. All the operating segments used by the Company meet the definition of a reportable segment under IFRS 8. The Company has two main business segments • Plastics and Allied • Steel and Allied All revenue allocated to the segments is from external customers who are domiciled in Zimbabwe and in the SADC region. There were no revenues from transactions with a single external customer that amounted to 10% or more of the Company’s revenues.5.1 Segment results of operations The segment information provided to the Company Chief Executive Officer is as follows: Segments for year ended 31 October 2011 Plastics and Allied Steel and Allied Total US$000 US$000 US$000 Revenue: Sale of goods Local 3 693 6 840 10 533 Exports - 1 049 1 049 3 693 7 889 11 582 Other profit or loss disclosures Depreciation 281 207 488 Interest expense - 138 138 Profit before income tax 261 228 489 Unallocated: - Interest expense (88) - Depreciation (29) - Other unallocated head office costs (196) - Income tax expense (14) Profit before income tax as per statement of comprehensive income 162 Assets Capital additions 452 113 565 Total assets 4 988 7 007 11 995 Unallocated: - Equipment 13 - Financial assets at fair value through profit and loss 61 Total assets as per statement of financial position 12 069 Liabilities Total liabilities 1 384 2 665 4 049 Unallocated: - Deferred income tax 1 544 - Short term borrowings 98 Total liabilities as per statement of financial position 5 69130
  • 31. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotes to the Financial Statements continued PHOENIX CONSOLIDATED INDUSTRIES LIMITED Plastics and Allied Steel and Allied Total US$000 US$000 US$000Segments for year ended 31 October 2010Revenue:Sale of goodsLocal 3 035 4 621 7 656Exports - 403 403 3 035 5 024 8 059Other profit or loss disclosuresDepreciation 266 220 486Interest expense - 64 64Profit before income tax 541 41 582Unallocated:- Interest expense (8)- Other unallocated head office costs (485)- Depreciation (28)- Income tax credit 68Profit before income tax as per statement of comprehensive income 129AssetsCapital additions 3 77 80Total assets 5 280 5 115 10 395Unallocated:- Equipment 22- Financial assets at fair value through profit and loss 59- Non-current receivable 124Total assets as per statement of financial position 10 600LiabilitiesTotal liabilities 710 1 360 2 070Unallocated:- Deferred income tax 1 618- Long term liability 189- Short term borrowings 493Total liabilities as per statement of financial position 4 370 31
  • 32. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotes to the Financial Statementscontinued6 PLANT, EQUIPMENT AND MOTOR VEHICLES Plant and Motor Furniture machinery vehicles and fittings Total US$000 US$000 US$000 US$000 Year ended 31 October 2010 Cost or valuation As at 1 November 2009 6 722 294 124 7 140 Additions 75 5 - 80 Disposals - (3) - (3) As at 31 October 2010 6 797 296 124 7 217 Depreciation As at 1 November 2009 305 11 6 322 Charge 447 31 8 486 As at 31 October 2010 752 42 14 808 Net book amount as at 31 October 2010 6 045 254 110 6 409 Year ended 31 October 2011 Cost or valuation as at 1 November 2010 6 797 296 124 7 217 Acquisition of plant and equipment of McMeekan 197 - 17 214 Foundries at net book values Acquisition of plant and equipment of Precision 164 - 20 184 Grinders at net book values Additions 100 67 - 167 Disposals - (6) - (6) As at 31 October 2011 7 258 357 161 7 776 Depreciation As at 1 November 2010 752 42 14 808 Charge 459 42 16 517 As at 31 October 2011 1 211 84 30 1 325 Net book amount as at 31 October 2011 6 047 273 131 6 45132
  • 33. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements continued PHOENIX CONSOLIDATED INDUSTRIES LIMITED 2011 20107 NON CURRENT RECEIVABLES US$000 US$000 Amount in respect of disposal of subsidiary 124 124 Set off against amount payable in respect of acquisition of plant, equipment and (124) - motor vehicles - 124On 9 September 2010, Phoenix Consolidated Industries Limited disposed of its sole subsidiary Pacprint (Private) Limited toInterprint Holdings (Private) Limited for a cash consideration of US$250 000. This consideration is receivable after 5 years.The amount receivable from Interprint Holdings (Private) Limited in respect of purchase of subsidiary, Pacprint (Private)Limited was set off against the amount payable to Pacprint (Private) Limited in respect of purchase of plant, equipment andmotor vehicles. There is valid agreement by the Company, Interprint Holdings (Private) Limited and Pacprint (Private) Limitedto set off the long term receivable and the long term liability.8 INVENTORIES Raw materials, packaging and consumable stores 992 751 Work in progress 382 143 Finished goods 1 015 781 2 389 1 675 The cost of inventories recognised as expense and included in ‘cost of sales’ amounted to US$5 733 000 (2010: US$3 949 000)9 TRADE AND OTHER RECEIVABLES Trade receivables 2 004 1 454 Less: allowance for impairment of trade receivables (35) (30) Trade receivables - net 1 969 1 424 Receivables from related parties (note 26) 23 23 Loans to related parties (note 26) 317 17 Prepayments and other receivables 761 501 3 070 1 965 All receivables are due within twelve months from the reporting date. The fair values of trade and other receivables are as follows: Trade receivables 1 969 1 424 Receivables from related parties (note 26) 23 23 Loans to related parties (note 26) 317 17 Prepayments and other receivables 761 501 3 070 1 965 Total current 3 070 1 965 Total non-current receivables - - The estimated fair values of receivables are the discounted amount of the estimated future cash flows expected to be received and an approximate value of their carrying amounts. Expected cash flows are discounted at current market rates to determine fair values. 33
  • 34. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotes to the Financial Statementscontinued The aging of trade receivables as at 31 October 2011 in as follows: Gross Impairment Net US$000 US$000 US$000 Fully performing 861 - 861 Past due 31-60 days 395 - 395 Past due 61-90 days 353 - 353 Past due 91 - 120 days 360 - 360 More than 120 days 35 (35) - 2 004 (35) 1 969 The aging of trade receivables as at 31 October 2010 in as follows: Gross Impairment Net US$000 US$000 US$000 Fully performing 700 - 700 Past due 31-60 days 411 - 411 Past due 61-90 days 194 - 194 Past due 91 - 120 days 119 - 119 More than 120 days 30 (30) - 1 454 (30) 1 424 As at 31 October 2011, trade receivables amounting to US$860 503 (2010: US$700 000) were fully performing. 2011 2010 US$000 US$000 As at 31 October 2011, trade receivables amounting to US$1 108 000 (2010: US$724 000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows: Past due 31-60 days 395 411 Past due 61-120 days 713 313 1 108 724As at 31 October 2011, trade receivables amounting to US$35 000 (2010: US$30 000) were impaired and provided for. Theamount of the allowance was US$35 000 (2010: US$30 000). The individual impaired receivables mainly relate to mediumscale clients who either are experiencing financial difficulties or have defaulted. The ageing of these receivables is as follows: Past due 91 - 120 days - - More than 120 days 35 30 35 30 Movements on the Company’s allowance for impairment of trade receivables are: As at 1 November 30 - Allowances for receivables impairment 5 30 As at 31 October 35 30The creation and release of the allowance for impaired receivables has been included in ‘operating expenses’ in the state-ment of comprehensive income.The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables mentioned above. TheCompany does not hold any collateral securityThe other classes within trade and other receivables do not contain impaired assets.34
  • 35. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements continued PHOENIX CONSOLIDATED10 INDUSTRIES LIMITED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 2011 2010 US$000 US$000 Financial assets at fair value through profit or loss comprise investments in the eq- uity of listed companies. Listed equity securities- held for trading 61 59 Reconciled as follows: Fair value as at 1 November 59 50 Fair value adjustments through profit and loss 2 9 Fair value as at 31 October 61 59 Financial assets at fair value through profit or loss are presented within operating activities’ as part of changes in working capital in the cash flow statement. The fair value of all listed equities is based on their current bid prices in an active market the Zimbabwe Stock Ex- change (“ZSE”). Changes in the fair value of financial assets at fair value through profit or loss is recognised in the statement of comprehensive income. 2011 201011 CASH AND CASH EQUIVALENTS US$000 US$00011.1 Cash and cash equivalents included the following for the purposes the of statement of financial position: Cash at bank 94 365 Cash on hand 4 3 Cash equivalents (excluding bank overdraft) 98 36811.2 Cash and cash equivalents included the following for the purposes of the cash flows statement: Cash and bank balances 98 368 Local bank borrowings (1 567) (498) Cash and cash equivalents (1 469) (130) 35
  • 36. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotes to the Financial Statementscontinued12 SHARE CAPITAL 2011 2010 Number of Number of 2011 2010 shares shares US$000 US$000 Authorised share capital Ordinary share of US$0,0001 160 000 000 160 000 000 16 16 Issued share capital As at 1 November Ordinary share of US$0,0001 87 475 000 85 450 000 9 9 Issued during the years Ordinary share of US$0,0001 - 2 025 000 - - As at 31 October 87 475 000 87 475 000 9 9 A special resolution was passed on 24 March 2010 in terms of Section 133(3) 1 of the Zimbabwe Companies Act, Chapter (24:03) to redenominate the nominal value of the ordinary shares from ZW$0,0001 to US$0,0001. The resolu- tion was filed on 4 August 2010 and was endorsed by the Registrar of Companies on 19 August 2010. 8 million shares are under the control of the directors subject to the limitations imposed by the Articles of Association and Zimbabwe Companies Act, (Chapter 24:03) and the ZSE listing requirements and 64 525 000 shares are under the control of the shareholders. 2011 2010 US$ 000 US$ 00012.1 Share premium As at 1 November 60 20 Movement for the year - 40 As at 30 October 60 6012.2 Directors’ shareholding Directors interest As at 31 October the directors interests in ordinary shares held directly or indirectly 2011 2010 were as follows: shares shares T N Chiganze 9 521 9 521 W G Khumalo 12 205 12 205 T N Sibanda 20 000 20 000 F J Rodrigues 2 165 835 2 165 835 2 207 561 2 207 561Except as stated above, no other director, or his nominee, had any beneficial interests in the share capital of the Company.36
  • 37. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements continued PHOENIX CONSOLIDATED12.3 Non distributable reserve INDUSTRIES LIMITED The non distributable reserve arose as the net effect of restatement in US$ of assets and liabilities previously denomi- nated in Zimbabwe dollars on 1 February 2009.13 SHARE BASED PAYMENTS Share options are granted to management. The exercise price of the granted options is equal to the market price of the shares on the date of the grant. Options are conditional on the employee completing one year’s service (the vest- ing period). The options are exercisable from the grant date only if the Company achieves its targets of profitability and sales growth. The options have a contractual option term of three years. The Company has no legal or construc- tive obligation to repurchase or settle the options in cash. Movements in the number of share options outstanding and their related weighted average exercise prices are as follows: 2011 2010 Average Average exercise price exercise price in US cents Options in US cents Options As at 1 November 2010 Granted during the year - - 1 2 025 000 Forfeited - - - - Exercised - - (1) (2 025 000) Expired - - - - As at 31 October 2011 - - - - All of the options were exercised by the end of the year. The fair value of options granted was determined using the intrinsic value method. 2011 201014 DEFERRED INCOME TAX US$ 000 US$ 000 Deferred income tax assets and liabilities are offset when there is a legally enforce- able right to offset tax assets against tax liabilities and when the deferred income taxes relate to the same fiscal authority. Deferred income tax assets - - Deferred income tax liabilities - Deferred income tax liability to be covered after more than 12 months 1 544 1 618 - Deferred income tax liability to be covered within 12 months - - 1 544 1 618 Deferred income tax liabilities (net) 1 544 1 618 The gross movement on the deferred income tax account is as follows: - At beginning of year 1 618 1764 - Statement of comprehensive income charge (note 21) (74) (146) End of the year 1 544 1 618 37
  • 38. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotes to the Financial Statementscontinued The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction is as follows: Deferred income tax liabilities Accelerated tax Revaluations Other Total US$ 000 US$ 000 US$ 000 US$ 000 As at 1 November 2010 (97) 1 715 - 1 618 Charged to the income statement (74) - - (74) As at 31 October 2011 (171) 1 715 - 1 544 2011 201015 TRADE AND OTHER PAYABLES US$ 000 US$ 000 Trade payables 1 004 935 Social security and other taxes 361 167 Accrued expenses 1 139 877 2 504 1 979 All trade and other payables are due within twelve months of the reporting date.16 BORROWINGS Current Bank overdrafts 498 98 Bank borrowings 1 069 400 Total borrowings 1 567 498 Committed borrowing facilities Interest rate Unsecured global facility 19.5% per annum 1 000 400 Secured, by general notorial covering bond 14% per annum 1 000 - Unsecured 15% per annum 500 - Unsecured overdraft facility 18% per annum 400 - Unsecured loan 18% per annum 600 - 3 500 40038
  • 39. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements continued PHOENIX CONSOLIDATED INDUSTRIES LIMITED 2011 201017 NON-CURRENT LIABILITY US$ 000 US$ 000 Undiscounted amounts 189 380 Extinguishment of liability arising from substantial modification of term (124) (191) Transfer to deferred income (65) - - 189 The amount payable to Pacprint (Private) Limited in respect of purchases of plant, equipment and motor vehicles was set off against the amount receivable from Interprint Holdings (Private) Limited, the holding Company of Pacprint (Private) Limited, in respect of the purchase of Pacprint (Private) Limited shares held by the Company. The balance of the amount due to Pacprint (Private) Limited will be set off against rental fees for the use of equipment leased to Pacprint (Private) Limited by the Company and therefore has been recognised in other liabilities as deferred income.18 OTHER INCOME - NET Gains from discounting long term - 191 Extinguishment of liabilities 175 - Sale of scrap 4 - Fair value gain on financial assets at fair value through profit or loss. 2 9 Rental income from lease of plant and machinery (note 25) 48 - Profit/(loss) on disposals of plant, equipment and motor vehicles 5 (1) Foreign exchange loss (12) - Other losses (14) - 208 19919 EXPENSES BY NATURE Raw materials and consumables used 5 733 4 771 Staff costs 2 852 1 568 Depreciation charges 517 486 Transportation expenses 78 35 Advertising costs 68 24 Audit fees 87 53 Pension costs 200 57 Directors remuneration: - fees 72 50 - emoluments 24 19 Other expenses 1 771 1 118 Total cost of sales, distribution costs and administrative expenses 11 402 8 181 39
  • 40. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotes to the Financial Statementscontinued20 FINANCE AND INCOME COSTS 2011 2010 US$000 US$000 Finance expense Interest expense on bank borrowings (226) (73) Finance income - 1 Net finance costs (226) (72) 2011 201021 INCOME TAX EXPENSE US$000 US$000 Current income tax on profits for the year 88 78 Deferred income tax (note 14) (74) (146) Income tax expense/(credit) 14 (68) The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the Zimbabwe tax rate as follows: % % Current income tax rate (25.75) (25.75) (Including 3% AIDS levy payable Computed current income tax at a corporate tax rate of 25% (2010: 25%) Tax effect of: Expenses not deductible for tax purposes 0.83 - Profit adjustment of subsidiary - 96.17 Other tax differences 16.00 (18.02) Effective rate of tax (8.92) 52.4022 EARNINGS PER SHARE a) Basic Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held as treasury shares. Profit attributable to equity holders of the Company (US$000) 148 197 Weighted number of ordinary shares in issue (000) 87 475 86 294 Basic earnings per share (US cents) 0.17 0.2240
  • 41. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements continued PHOENIX CONSOLIDATED b) Diluted INDUSTRIES LIMITED 2011 2010 As at year end there were no arrangements (convertible debt and share options) US$000 US$000 with potential dilutive effect on the ordinary shares. Profit attributable to equity holders of the Company (US$000) 148 197 Weighted average number of ordinary shares in issue (000) 87 475 86 294 Adjustments for: Share options - - Weighted average number of ordinary shares for diluted earnings per share 87 475 86 294 Diluted earnings per share (US cents) 0.17 0.2223 DIVIDENDS PER SHARE No dividend was declared for the year ended 31 October 2011 (2010: US$nil).24 BUSINESS COMBINATION NET ASSETS ACQUIRED AT PREDECESSOR CARRYING AMOUNTS The Company acquired 100% of the net assets of Precision Grinders and McMeeken, for a cash consid- eration of US$100 000 and US$230 000 respectively on 1 March 2011 from Apex Corporation of Zimba- bwe Limited, the parent company. Precision Grinders McMeeken Total US$000 US$000 US$000 Details of net assets acquired are as follows: Cash paid (230) (100) (330) Direct cost relating to the acquisition – charged in the income statement - - - Net assets 230 100 330 Goodwill - - - The assets and liabilities arising from the acquisition carried at predeces- sor carrying values were as follows: Property plant and equipment 184 214 398 Inventory 224 87 311 Trade receivables 255 79 334 Other receivables 46 70 116 Cash and bank 78 - 78 Trade and other payables (557) (350) (907) Net assets acquired at predecessor carrying amounts 230 100 330 41
  • 42. PHOENIX CONSOLIDATED INDUSTRIES LIMITEDNotes to the Financial Statementscontinued 2011 201025 OPERATING LEASE RENTAL INCOME US$000 US$000 Operating rental income 48 - The period of leases whereby the Company leases out its plant and equipment under operating leases is three years. Lease rental recognised as income was US$48 000 (2010: nil). The future aggregate minimum rentals receivable under operating leases are as follows: No later than 1 year 48 - Later than 1 year 96 - 144 -26 RELATED PARTY TRANSACTIONS The Company is controlled by Apex Corporation of Zimbabwe Limited (incorpo- rated in Zimbabwe) which owns 46.68% of the Company’s shares. The remain- ing 53.32% of the shares are widely held. The following transactions were carried out with related parties: Related party transactions are a normal feature of business and are disclosed in terms of International Accounting Standard (“IAS”) 24 - Related Parties. These transactions are entered into in the normal course of business under terms that are no more favourable than those arranged with third parties. i) Purchases of services: - an entity where key management personnel have interest 5 4 - the immediate parent (management services) - - The entity where key management personnel have interest is a company where Mr F Rodrigues is a non-executive director. ii) Year-end balances arising from sales/purchases of goods/services Current account with the holding company, Apex Corporation Limited. 23 23 The current account with the holding company is non-interest bearing, unse- cured, and has no fixed repayment terms, which is used to account for recharges of utilities or services rendered to or by the holding company.42
  • 43. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Notes to the Financial Statements continued PHOENIX CONSOLIDATED INDUSTRIES LIMITED iii) Key management compensation 2011 2010 Key management includes directors (executive), the divisional chief executives US$000 US$000 and the group finance executive. The compensation paid or payable to key management for employee services is shown below: Salaries and other short-term employee benefits 180 35 Share-based payments - - 180 35 No impairment allowances were made against any related party balance for the year ended 2011. iv) Loans to related parties Loans to key management of the Company: As at 1 November 17 14 Loans advanced during year 299 9 Loan repayments received (3) (8) Interest charged 4 2 Interest received - - As at 31 October 317 17 Interest is charged on these loans and advances at 16% per annum and payable within 1 year.27 CONTINGENT LIABILITIES The Company does not have any contingent liabilities (2010: US$nil).28 COMMITMENTS Capital commitments Plant, equipment and motor vehicles - authorised but not contracted 905 81229 EVENTS AFTER THE REPORTING PERIOD There were no events that occurred between the end of the reporting period and the date when the financial state- ments were authorised for issue, that require adjustment to be effected on the reported amounts or disclosure to be made in this annual report. 43
  • 44. PHOENIX CONSOLIDATED INDUSTRIES LIMITED Shareholders’ AnalysisSHAREHOLDERS’ ANALYSIS Number of % Number of % Shareholders Shares0 - 5 000 2 107 91.69% 655 981 0.75%5 001 - 20 000 91 3.96% 847 527 0.97%20 001 - 100 000 61 2.65% 2 735 567 3.13%100 001 - 1 000 000 29 1.26% 9 324 521 10.66%1 000 001 - 50 000 000 10 0.44% 73 911 404 84.49%Total number of shareholders 2 298 100% 87 475 000 100%SHAREHOLDER TYPE ANALYSISLocal 2 205 95.95% 85 664 892 97.93%Non-resident 93 4.05% 1 810 108 2.07% 2 298 100% 87 475 000 100%Companies 127 5.53% 66 026 096 75.48%Individuals 2 171 94.47% 21 448 904 24.52% 2 298 100% 87 475 000 100%TOP 10 SHAREHOLDERS1. Apex Holdings (Private) Limited 40 831 657 46.68%2. Scaiflow Investments (Private) Limited 7 440 184 8.51%3. Setma (Private) Limited 6 512 113 7.44%4. Apex Pension Fund 5 351 312 6.12%5. Nailcare (Private) Limited 4 581 900 5.24%6. Angwa Properties (Private) Limited 3 097 083 3.54%7. F J Rodrigues 1 694 450 1.94%8. Edwards Nominees (Pvt) Ltd 1 619 990 1.85%9. M G Biddlecombe 1 417 000 1.62%10. TFS Nominees (Pvt) Ltd 1 365 715 1.56% Remaining shareholders 13 563 596 15.51%Total 87 475 000 100%CALENDARAnnual General Meeting 29 March 2012Interim results for six months ended 30 April 2011 and dividend declaration June 2012Payment of dividend -Annual results for year ended 31 October 2011 plus dividend declaration January 201244