Seed Co 2011 annual report


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Seed Co Limited 2011 annual report for the year ended 31 March 2011

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Seed Co 2011 annual report

  1. 1. ContentsContents ContentsBoard of DlmtctrsGroup AdminWatTonChalmronb StatememG m p ChW E-raerutW5RwW of qperatfonsRcpert d h DtnctoTS teC o r p m m G ~ c eDlra6tnn~pprOML Cimup Financial Stittemnts. dh d e p e n w h ar a p r tr a w uosCmmUdated Income Statem-twrsdldakl S -t of Anamtal BosltlonC6nroIied Statement of Cash nowENow to the H m m c I a t ~ ~ t t tAnelysis of SherehBLdcmNotlee to the ShamhddmOur RmdsSeed 6 3 fn the Community The African S a d Company
  2. 2. BOARD OF DIRECTORS 1 - Farai Rwodzi Chairman Seed Co Limited Farai is a leading entrepreneur with interests in various rectors including financial services, hospitality. manufacturing,industrial, property developmentand mining. Farai sewed his artides of clerkship with Emst &Young and qualified as a Chartered Accountant in 19%. Upon leaving Ernst & Young, he worked for Delta Corporation Limited and RealAfrica Durolink (Private) Limited in executive roles. He left in October 1999 t o spearheadthe founding o Interfin Merchant Bank o Zimbabwe Limit, f f ("hterf,n8) He relinquishedhis executive role in the Interfin Group towards the end of 2003 to focus on his larger business interests. He is currently a director and significant shareholder in various listed and unlisted companies. - Morgan Nzwere Cmup Chief Executive Morgans career began in 1989 when hejoined Pricewaterhousefor his training in Articles of Clerkship. He qualifted as a Chartered Accountant in 1991. He moved t o Anglo American Corporationwhere he worked as the Treasury and Investmentanalyst for three years before moving to Willowvale Motor Industriest o take up the post of Financial Controller between March 1995 and May 1998. Morganjoined Seed Co Limited In June 1998 as Group Finance Director. He worked for 8 years before leavingSeed Co in December2006 for a three year stint with a Botswana conglomerate. Morgan rejoined Seed Co Limited in January 2010 as the Group Chief Executive. He holds a Bachelor of Accounting degree (honours) and a Masters in Business Leadership from the University of South Africa. - Patrick S t L Devenish Non-Executive Director Pat has been In agriculture h s whole worbng life startlng out as an auctioneer at Tobacco Sales Floor In 1978 He spent three years working for Auct~on Hold~ngr Malaw, in 1983-1985 and rejo~ned ~n Tobacco Sales Floor an 1986 becom~ng Dlredw In 19% He war there untll hejo~ned Manag~ng Seed Ca as Group Ch~ef Executive In 2002 In January 2010 Pat war promoted to Group CEO of AlCO Ahlca bmtted, which is the holding company that owns Cottco (100%) a cotton glnnlng company. Seed Co (51%) and also Ol~vine lndustnes (49%) a FMCG company focused on c w b n g o~ls,margarones, bakers fats and canned foods Pat s~ts the board of Z~mplow on L~mited e a Trunee of Blackfordby College of Agriculture He holds an MBA fmm the UCT Graduate School and of Burlnesr The African Seed Company
  3. 3. - 1 - JohnMatorofa Gmup Finance Director and Company Secretary John is the Groups Finance director and Company secretary. He joined Seed Ca in 2004 as Finance director of the Zimbabwe operations. Subsequently, in 2007, he was pmmoted t o Group Finance Director. Before joining Seed Co. john held senior financial management roles with a number of leadingorganisations He earned his Bachelorof Accountancydegreeat the University of Zimbabwe in 1991, and his Masterof Busines Administration from the University of Noningham UK in 2008. He is a qualified CharteredAccountant with the Institute of Chartered Acmuntants havingtrained with Deloitte &Touche. - Dahlia Garwe Non-Executive Director Dahliajoined the Gmup board in July 2OlO.She is a holder of a Phd from the University of CapeTom on the thesis "The characterization of XVSAP1, a gene irolated from the resurrection plant Xemphyfa viscosa Baker. and its expression in transgenic plants". She also holds an MSc degree in Biotechnology from the University of Zimbabwe as well as a BSE Honoursin Biochemistryfrom the same University. Dahlias areasof expeltis indudeCMO screening and testing, malecubr charxtehtion and diagnostics, Implementation and enforcementof 150 17025 Q u a l i Management System and tissue culturetechniques She has held various in researchinaimions in Zimbabwe and i c u m the arsirtant General mamger for the s Tobacm Research Board Chance Kabaghe - Non-Executive Director Chance chairs the Board of Seed Co Zambia and he joined the Group Board in 2010. He holds directorships and shareholding in a number of Zambian registeredcompanies that includes Choice Nuts Limited, Choice Insurance, ACE Limited. Multi Agric International,HarmoniousHaven and Freshpikt Limited. Chance also serves on the boards of UMPALM and Capital FisheriesLimited. He is a former Deputy Minister of Agriculture of the Government of the Republic of Zambia and was recently appointed Project Director for theFood S e c u i i Projectwhich is a USAiD funded project Chance chain ZAMACE (ZambianAgriculture Commodity Exchange) and has held various leadership positions in the Zambian agricultural rector. - David E.E Long - Non-Fkecutlve Director David is the former Chairman and Chief Executive of Lyons Africa Holdings which operates diversified A FMCG businesses in Zimbabwe and Zambia. Currently he is involved in consulting with emphasis on strategic planning, change management initiatives as well as corparate finance transactions. His work also involves arbitration, mediation and high-end mentoring. He was educated at the Universitiesof Rhodesia and Cape Town obtaining degrees in Law [Bachelor of Law] and Masters in Business Administration [MBA]. He undenook further studies through Sundridge Park Wharton, Harvard and Regents College. David is a member of the Chartered Institute of Arbitrators, a Fellow of the Institute of Directon, and past president of the Confederation of Zimbabwe Industries. He has slved as director of several quoted and unquoted companies. David chairs the Malawi Board as well as Gmup RenumerationCommittee. A SEED40 u- The A M u n Seed Company
  4. 4. Bernard Mudzimuirema- Non-Executive DirectorBernard war appointedto the port of Financial Director of AlCO Africa Limited (then the Cotton Company ofZimbabwe Limited) on 1September2005. He is a Fellow of the Chartered Institute of ManagementAccountantsand holds a Master of Business Admtnistration from Nottingham Trent University in UK.Prior to his appointment,he exercised his skills in finance, business and strategy developmentas a consulta~tBernard is a former Finance Director of Zimbaard Pmdum (Private) Limited.Michael S.Ndoro - Non-ExecutiveDirectorMichael Ndam is a Director of lmara Capital Zimbabwe (Private) Limited, the lmara Africa SecuritiesLimited and theAfrican Opportunities Fund. He is the Managing Director of lnterfwds (Pvt) Limited. Zimbabwe.After graduatingwith a degree in Agricultural Economics. Michaelspent much of his industrial careerwith the Coca-Cola Companyof Southern Africa. He joined in 1995 with responsibility for marketing in the region and in ZOO2 was appointedto the position of Managing Director of Sdnveppes Zimbabwe. in 2M)4 Michael became Chief Executive ofTedm Limited, a furniture company listed an the Zimbabwe Stock Exchange. Later that year he bought intoInterfoods, a fruit and canningbusiness. Michaelhas alsoservedas a Non ExecutiveDiredor of InterfreshLimited,a company listed on the Zimbabwe Stock Exchange.He has recently been appointed t o the Board of WilliamBain &Company, a brge equipment and agricultural implements manufacturerand distributor. Michael is amember of the lwtitute of Directorsof Southern Africa.Pat was a partner in a firm of C h m k ~ Accountants beforejalnmg the corporate world as Flnanctal Director dand subsequently becom~ng CEO of Delta Corporat!on, where he spent 34 years He war also a dorenor ofBardays Bank of Zlmbabwe Ltd for 7 yearsPat took a career change on leaving Delta Corporattonand now runs an office that wewaes five (5) operatingcornpanoes representong h ~famolys Interests rHe is the Group Audit Committee Chairman for Seed Co Limited and Seed Co Zambia. Mr Rooney is a membe~of the Institutes of Chartered AccountantsZimbabwe and South Africa.Dr. Charles M.B Utete - Non-ExecutiveDirectorCharles is a Director in 6 compania and serves as Board Chairman in 5 of them. in his early working careerCharles Lectured at the Universityof Dar es Salaam and Univerrity of Zimbabwe. He served as a Professorof Comparative and International Politics at Montclair State University, New Jersey.U.S.A. Charles is a formetsenior civil servant. The African Seed Company
  5. 5. GROUP ADMINISTRATIONBOARPcMmTEEs Qutonnudlt Commlct#, M Nzwere (Chairman)J P Rooney(Chalrman),D E B Long,P St L Devenlsh P St L DevenlshM S Ndoro RJ a ~ l sRemuneration Committee D MachingaidzeD E B Long (Chalrman),P St L Deven~sh,Dr.C. Utete J MatorofaJ P Rooney E E MhanduN ~ o n ~ guQnm=ni.F Rwodzl (Chairman) M Nmere (Chalrman)P St L Deven~sh D ClementsJ P Rooney R Jarvls J MatorofaSUBSIDIARY BOAUDS EEMhandu$.ed Co Zimbabwe ATaibC Utete (Chairman)R DavenportP St L Deven~shC FamblsalE Havazv~dlK MafuhdzeJ Matomfa G Bwanal~ - M Nzwere Group Ch~ef ExecubveOfficer -Managing D~rector Zamb~aM NzwereT Taylor --- D Clements ManaglngDirectorTanzanla J Matomfa Gmup Flnance Dlredor EE Mhandu Managlng Dlrector QutonM WanjowaD Zaranylka D Phln - Managlng D~rector Malaw1 - D Zarany~ka Managlng Director ZlmbabweS e Co Zambia ed SENIOR MANAGEMENTC Kabaghe (Chalrman)G Bwanal~ J Glenn - Reglonal DevelopmentManagerD Clements E Havazv~d~- Gmup Research ManagerP St L Deven~sh - R Jarv~s Group Technical Servlces ManagerJ Matorofa - C Mugadza Group Marketing ManagerM Nmere - L Mutunga Group Accounting ManagerG Roblnson D Ncube - Regional Internal Audit Manager - F Ndawi Group Treasury ManagerJ P RooneyE Rupende K %no - Country Manager Kenya E Rupende -Group Techn~cal ManagerC S~chingwa - N TraRord Group Process~ng ManagerSeed Co Malawi - M Wanjowa Finance Director ZimbabweD E B Long (Chalrman)A Barmn flEUlaR CROP B- RP St L Devenlsh - Ma~ze M J Caulfield, PG RupendeJ Lungu - Wheat E K HavazvldlJ Matorofa - Soyabeans J S TlchagwaM NmereD W Phlr~ Aunms Emst & Young, P 0 Box 702, Harare, Zimbabwew laT1MnW TRANSFER GEUU3MlESMNMre Corpsewe, P 0 Box 2208, Harare,ZimbabweD Clements Tel+263 4 758551J Matorofa Reoransreo~ 1st flow StandardsAssociation of Zimbabwe BulldingSeed Co international Northend Close, Northridge ParkN Armstrong (Chalrman) BorrowdaleP St L Devenish Harare im.Dr Q Masire ZlmbabweJ Matorofa Tel: +263 4 8824851851962M Nzwere Email: Website:w.seedwgroup.wm The African Seed Company
  6. 6. I would like to salute my fellow directors, nanagement and staff for their hard work, determination and dedication, which has ~rought about these leasing results, and which n turn distin uishes eed Co from the rest of the f lack in the A rican seed sector. We have great P *eason to feel pleased and to look ahead with zonfidence."The Croup continues t o pursue leading edge technologies and has been engaged in discussions with Monsanto t o enter into beneficialbilateral technology transfer agreements. Our breeding team continues t o be exposed to best practice methods from across the world.New varieties were released this year, including SC727, the highest-yielding maize variety for high potential areas in the region. Newsoyabean varieties will also be released soon and this will position us well, given the buoyancy of world commodity prices.FUTURE PROSPECTSProduction challenges are now, thankfully, a thing of the past, which means the Group can focus on developing new markets in themainstream seed maize business and the seed cotton business. High lint prices on the world markets are generating a great deal ofinterest in cotton and we are looking at spreading our model across the region. West Africa presents interesting prospects and effortswill be intensified t o take advantage of these opportunities.The Group will also continue to scan the environment for activities complementary t o the seed business and, if deemed attractive, workon exploiting these opportunities.ACKNOWLEDGEMENTSI would like t o salute my fellow directors, management and staff for their hard work, determination and dedication, which hasbrought about these pleasing results, and which in turn distinguishesSeed Co from the rest of the pack in the African seed sector.We have great reason to feel pleased and to look ahead with confidence. Chairman 16June 2011
  7. 7. - . REVENUE Up by 27% to $97.8million I ROFIT BEFORETAX Up by 31% to S23.4million I PROFITAFTER TAX Up by 4.0million (30%) to $17.4m I S L S VOLUMES AE Up by 15%Margins:Gross marginswent up from 43% in prior year to 51% due t o lower production costs. Prior years production costs were severelyaffected by the spike in commodity costs, particularly fertilizer owing to shortage of this commodity.Ovaheads:Continued Investment In brand development and researchactlvltles In all markets saw overheads Increaset o USS27,9m Also ~ncludedIn t h ~ s amount 1 a USS4m pmvlslon for cred~t s losses on long outstand~ng debts that are slowly be~ng recoveredFinanceCharges:Finance costs went up from 1% of turnover to 2% due t o increased levels of borrowings that were secured to fund the increasedproduction. Group borrowing costs averaged 8% during the year.Profit After TaxGroup profits after tax were up by 30% to USSl7.4m. Included in this is USSZm profit realized on disposalof the Makeni Property inZambia and the provision of credit losses highlighted in overheads above.
  8. 8. "Iam privileged and honored to be leading teams of men and women across Africa who have a assion to breed,seed,feed and lead in Africa. thank them all for their dedication, commitment and f inspiration to drive growth in our industry."New Business DevelopmentMarket development work is continuing in Ghana and Nigeria and we are collaborating with various regional research organizationsincluding IITA, WACCI. ICRIS and WASAIn Ethiopia our pilot production was very successful and we are now working on increasingthe hectarage under our seed crops.PeopleThe Croup continues to invest heavily in human resources with a number of senior managers having been put through the SuccessMotivation Institute as well as various other leadership courses.The Croup continues to enjoy harmonious labour relations with no significant industrial action having been recorded across auoperations. Labour turnover remains insignificant with more new people looking t o join the company.Outlwlc . With a mid-season drought having been reported in most parts of Zimbabwe, we expect demand in the outlook period to be strong. In East Africa ,with the massive seed shortage experienced in the season thats just gone by, we are positioning ourselves to exploit the lack of carryover seed by moving our strategic reserves very early into the retail network. In Zambia the Government input program is expected t o increase significantly. Demand for soyabean and cotton seed is expected to be buoyant with the prevailing high commodity prices.I am privileged and honored t o be leading teams of men and women across Africa who have a passion to breed, seed.feed and leadin Africa. I thank them all for their dedication, commitment and inspiration to drive growth in our industry. QJM NzwereCroup Chief Executive16 June2011
  9. 9. REPORT OF THE DIRECTORSThe Directorsrubmittheir report t o shareholdersfor theyear ended 31 March 2011SHARE CAKrALAuthorired .-The authorised share capital of the company remained unchanged at USSZlO OW.The issued and fully paid share capital increased duringthe year as fallowslrsued and fully paid at 31 March 2010Issued during the yearShare option schemeIssued and fully paid at31 March 2011At 31 March 2011,16991 815 unissued shares were under the contrnl of the directors of which4610 OW were committed t o the share optionscheme.At 31 March 2011 options for a total of 3 873 Wshares had not been exercised or forfeitedFlNANaAL STATEMENTS AND DNIDENDAccounting P o l l d aThe financial statements have been prepared both in accordancewith International Financial ReportingStandards and in compliance withprovisions of the CompaniesM (Chapter 24.03) and the relevant regulationsthere-under.Years ResultsThe annexed Financial Statementsadequately disclose the resultsof the companys operationsduring the year and financial position as at31 March ZO11.They should be read in conjunction with the Chairmans statement and Chief Executivesreview of operations.DNIDENDThe board recommended a dw~dend 2 35 cents per share (2010 139 US cents) ofCapital ExpenditureGroup caprtalexpendtturefor the year t o 31 March 2011 totalled US510.132.863 (2010 US53.559,788). USSS,922,678 pertains to theconsmaton of the new offlce and factoty ~ndustnalpark Zamb~aCapltal expend~ture in forthe year to 31 March 2012 is planned at 55,368,709DiRECTORATEDuringthe year, Dr. D. Garwe and Messers M.S. Ndoro, and C. Kabaghe were appointedto the Group Board of Directorswhile Mr. BL Nkomo resignedfrom the board to take up the rnle of Group Board Chairman of AICO.RISK MANAGEMENTThe group taker a proactiveapproach to risk managementThe board is responsible for ensuringthat risks, and also opportunities are identifiedon a timely basis and that the Groups objectives are aligned with the risks and opportunities identified.DIRECTORS INTERESTSAt 31 March 2011. the directors held beneficialinterests in 675 589 (2010 - 603 622) shares in the Company as disclosed in note 16.5 t o thefinancial statements.DIRECTORS FEESMemberswill be asked to appmve the payment of Directors Fees amounting t o $199.366 in respect of the year ended 31 March 2010 (31March 2010 5154.W6)AUDITORSMembers will be asked to re-appoint Emst &YoungasAuditors of the company forthe ensuingyear.For and on behalf of the Directorsj MATOROFACOMPANY SECRETARY16 June 2011 The African Seed Company
  10. 10. CORPORATE GOVERNANCEThe directorsof Seed Co Ltd are wmmitted to the principlesof good Comprehensive management reports, including the annual budgetcorporategovernance. The Boardis responsibletotheshareholders are presented to the Board regularly Performance is revlewedfor the performance of the gmup, its strategy, values and againstthe budgetand revisedforecasts.governance. The Board is also wmmitted to actingwith utmostgoodfaith in % dealingswith all stakeholders.Thecompanyhas adopted a s .Corporate Governance Manual that sets out in detail, the basic AUDK COMMITEEwrporategovemanceprinciples thatwiii be pursued by Seed Co Ltd. The Board delegates certain of B responsibilities to the Audit sin addition, all Senior employees of the Group are requiredto agree Committee, which is wmposedofthree non-executivedirectors.Theto and sign the Gmups Conflictof interestpolicy. Audit Mmmittee iiaises with the companys external auditors on accounting, internal mntmi and financial reporting matters. The Gmups financi* statements, including certain disclosures areDIRECTORS reviewed bytheAuditCommitteepriortotheiradoption theBoard byThe Board iswmposed ofelevendirectors.themajorityof whomare and publication.nonexecutive. The Chairman of the Board is a Non-ExecutiveDirector. Board meetings are held at least quarterly to monitor the The Committee reviewsthe effectivenessof internalwntml systemsperformanceof executive management and deliberate on issues of and nskmanagementprocesseswithinthe Gmup and has set up ancompany strategy and policy. The Board is responsibie for the internal audit unit to ensure compliancewith rules, regulations andselection and appointment ofthe Chairman, Directorsand the Chief policies.Exewtiveandtheirremunerat~on. REMUNERATION COMMnTEE The Board has a remunerationCommittee comprisingof three non- executive diredors. The Committee meets when required and setsMr M Nzwere the remuneration of executive Directors and senior management.Mr F Rwodzi includingthegranting ofshareoptions.Mr J P RooneyMD Long IDr C Utete NOMNAlWN COMMITTEMr 8 Mudzirnuirema The Nominations Committe is made uo of a Non-Executive ChairmanMr P St L Devenish and two Non-ExecuuveDtrecmrs it a sts wltn lhe ldenufcatlon and s ;Mr J Matomfa D recnmmendaton of potent~ai rectors to the BoardDr D GaweMr M.S. NdoroMr 0.L Nkorno ENVIRONMENTMr C Kabaghe Seed Go Ltd believesthattheprotectionof theenvironment is critical to the long-term sustainablefuture of the region and its people. TheFWANCUL STATEMENT6AND MANAGEMENTREPORTINO company is committed to acting responsibly in resped of health,The Board IS responslble for the preparation of the financial safelyandenvironmental issues.statements and other tnformat~on presentedIn the annual report ~nabalancedand unoenlanaabe form. The Board e also responslbieforensuringlhattne Gmupsacco,nt ng poitc;es are appmpr ateandadhere toaccountlng standards and thatsupportingjudgementsandestimatesmadearereasonableandprudent. Thw African Seed Company
  11. 11. DIRECTORS APPROVAL OF CROUP FINANCIAL STATEMENTS~hedirectorsof the company are responsible forthe preparation and integrity of the annual financialstatements and . .related information contained in this reoort. The Grouo and the Comoanv financialstatements are reouired bv law , *and IFRSs t o present fairly the financial position of the group and the parent company and the performance for thatperiod.The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at anytime the financial position of the Group and enable them t o ensure that its financialstatements comply with theCompanies Act. They have general responsibility for taking such steps as are reasonably open t o them t o safeguardthe assets of the Group and t o prevent and detect fraud and other irregularities.C m n p l l a m withcanpanics Act (Chapter M03)and Statutory Instruments (51 =Wand S 62/94)These financialstatements w h i i have been prepared underthe historicalcost wrwention are in agreement with theunderlying books and records and have been properly prepared in accordance with the accounting policies set out innote 2 of the financialstatements, and comply with the disclosure requirements of the Companies Act (Chapter2403) and the relevant regulations made there under.C m n p l l a m w i t h iFRSsThe financialstatements comply with the requirements of the International Financial Reporting Standards(1FRS).New and amended IFRS and IFRlC interpretationsThe group has adopted the new and amended IFRS and IFRlC interpretations as at 1April 2010: lFRS 1 First-timeAdoption of International Financial Reporting Standards (Amendment): Severe Hyperinflation and Removal of FixedDates for First time Adopters, issued in December 2010 and effective for periods on or after 1 July 201 1, earlyadoption permitted.IFRS 1First-time Adoption o f International Financial Reporting StandardsThis standard allows the use of deemed cost in determining carrying amounts of assets and liabilities on thenormalisation date t o create an opening IFRS statement of financial position after period of severe hyperinflation.The corresponding adjustments are posted directly into retained earnings or an other appropriate component ofequity. IFRS 1 requires that the entitys first IFRS financial statements shall include at least three statements offinancial position, two statements of comprehensive income, two separate income statements (if presented),two statements of cashflows and two statements of changes in equity and related notes, including comparativeinformation.The group has early adopted the amendments t o IFRS 1 issued at the end of 2OlO.The adoption will not result inrestatement of any prior year balances since the company adopted the Financial Reporting Guidance issued jointlyby the Public Accountants and Auditors Board, Zimbabwe Accounting Practices Board and The Zimbabwe StockExchange in 2009.This guidance was endorsed by IFRS 1amendments. An additional statement of financial position.the opening IFRS statement of financial positionat the currency normalisation date, has been presented in the financialstatements.These abridged financial statements include three statements of financial position, two income statements,two statements of comprehensiveincome, two statements of cashflow and two statements of changes i n equity.Gdng -nThe Directors have assessed the ability of the company t o continue operating as a going concem and believe thatthe preparation of these financial statements on a going concem basis is still appropriate.SIgnlflant~mpUoraand estlmatim mceytainties relatingtoasets and Liabilitiess r r i e d at fairvalueThe significant assumptions and the estimation uncertainties pertaining t o items that are carried at fairvalue havebeen disclosed in note 2 t o these financialstatements.These financialstatements have been approved by the board of directors and are signed on its behalf by:-d"F Rwodzi M Nzwere16 June 2011 16June 2011 The African Seed Company
  12. 12. %3$k%yerere wayI Kwame Nkmmah Avenue P.0 Box 62 o r 702 Harare Tel: +263 4 750905 1 750979 Fax: +263 4 750905 1773842 E-mall: admin@gw.ey.comIndependent Auditors Report To The Shareholders Of Seed Co LimitedWe have audited the accompanying consolidated and company financial statements of Seed Co Limited, which comprise theconsolidated and company statim&ts of financial position as at 31 March 2011,and the consolidatedand company statementsof comprehensive income, statements of changes in equity and statements of cash f l o w for the year then ended,and a summ-ary of ;ignificant accounting policies and o t h ~ e x p l a n e t o ~ information as setout on pages 18tls2.Directors responsibility f o r t h e financial statementsThe groups directors are responsible for the preparation and fair presentation of these financial statements in accordance withInternational FinancialReportingStandards (IFRS) and in the manner required by the CompaniesAct (Chapter 24:03).This respon-sibility also includes: designing, implementing and maintaining internal controls relevant t o the preparation and fair presentationof financial statements that are free from material misstatement,whether due to fraud or ermr;selecting and applying appropri-ate accounting policies and making accounting estimates that are reasonable in the circumstances.Auditors responsibilityOur responsibility is t o express an opinion on these consolidatedfinancialstatements basedon our auditwe conducted our auditin accordance with International Standards on Auditing.Those standards require that we comply with ethical requirements andplan and perform the audit t o obtain reasonable assurance about whether the consolidated financial statements are free frommaterial misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.The procedures selected depend on the auditors iudgment, including the assessment of the risk of material misstatement of thefinancial statements, whether due to fraud or Lrror. In making t h & e risk assessments, the auditor considers internal control - .relevant t o the entitvs oreoaration and fair oresentation of the financial statements in order t o desien audit ~rocedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internalcontrol.An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by the directors, as well as evaluating the werall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.In our opinion, the consolidated and company financial statements present fairly, in all material respects, the financial positionof Seed Co Limited as at 31 March 201 1. and its financial oerformance and its cash flows for the vear then ended in accordancewith lnternational FinancialReportingStandards.Report on other legal and regulatory requirementsIn our opinion, the consolidated and company financial statements have, in all material respects, been properly prepared in comp-liancewith the disclosure requirements of the CompaniesAct (Chapter 24:03) and the relevant Statutory Instrumem.CHARTERED ACCOUNTANTS (ZIMBABWE)Harare29June 201 1
  13. 13. CONSOUDATED INCOMESTATEMENTSFORTHEYEAR ENDED 31 MARCH 2011 GROUP COMPANY 2011 2010 2011 2010 Notes US$ US$ US$ us$Cost of salesGmrs pmfitOther incomeOperatingexpensesSelling and distribution costsAdministrativecornResearch costslmpainnent of assetsOperating pmfit!(bu)Finance incomeFinance costsProfit beforetaxIncome tax expenseProfiff(lors) for the yearAttributable t . oEquity holders of the parentNon-urntrolling interestPmfitl(loss) attributable to shareholdersEarnings per shareBasrc earnings pershare for profit forthe year antibuttable to .wuitv holders of the oarent - cents > 16.6Diluted eamtngs per share far profit far the year attrnbutable t o -equlty holders of the parent cents 166CONSOUDATED STATEMENTS OF COMPREHENSIVEINCOMEFORTHEYEAR ENDED 31 MARCH 2011 GROUP COMPANY 2011 2010 2011 2010 Notes US$ US$ US$ US$Pmflff(lors) for the yew 17,435,140 13.398.884 3,754,043 (1W.614)Other comprehensiveincomeExchange differences on translation of foreign operationsIncome tax effectImpairmentof revalued propeq, plant and equipmentincome tax effect for t-Other comprehensive(Lo~)Iincome hTotal comprehensiveincomel(lorr) far the yearAtributable to:Equity holders of the parentNon-controlling interest
  14. 14. CONSOUDATED STATEMENTS OF FINANCIAL POSITIONM A T 3 1 MARCH 2011 Gmup 2010 1 April 20m 411 US1 US$ US5ASSETSNohcummarretlPmpelfy.plantand equlpmem1n"esmern prop*Defend fax a.refInvermDmr in rvbaidlanerGoodwlUOthernon*um"t hnam,alar$eeA m u r n w e d by group C O ~ P P P P PslologlcalaseeTrade and ofher rerrlvablerTotal -r tEQUITYAND LIABILITIESNo"-contmumng ,ntcrSlTotal equityNon-mmnf tiabiliticrDeferredfaxbabihtyFlnancc l e e ltab81rtytongterm loanscummliabilairBank bonowingrTrade and mher payabbrFsnanrr l e e liab8lityCumnt tax papbleShortterm loamTotal tiabilities F Rwodzi M Nzwere Chairman Cmup Chief Executive Officer 16June2011 16June2011 The African Seed Company
  15. 15. CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE PERIOD ENDED 31 MARCH 2011 Group 2011 2010 Notes US$ US$Operating activitiesProfit before taxNon-cash adjustment to reconcile profit before tax t o net cash flows:DepreciationShare based payments expense(Loss)lProfit on disposalof property plant and equipmentUnrealised exchange gains and lossesFair value adjustment of investmentsFair value adjustment of investment propertyFinance incomeFinance costOperating surplus before working capital changesWorking capital adjustments:lncrease in inventorieslncrease in trade and other receivable(Increase)/decrease in seed grower advancesDecrease in prepaymentslncrease in trade and other payablesCash used in operationsIncome tax paidNet cash flows (used in)/ from operating activitiesInvesting activitiesProceeds from sale of property, plant and equipmentPurchase of investment propertyPurchase of property, plant and equipmentPurchase of other non-current financial assetsAcquisition of minority interestlnterest receivedNet cash flows used in investing activitiesFinancing activitiesDividend paidProceeds from issue of share capitalShort term loan receivedShort term loan a ~ dF nance lease .la! llr~eslnterest paidNet cash flows used i n financing activitiesNet (decrease)/ increase in cash and cash equivalentsEffects of exchange rate changesCash and cash equivalents at beginning of yearCash and cash equivalents a t end of year The African Seed Company
  16. 16. CONSOLIDATEDSTATEMENTS OF CHANGES IN EQUITYFORTHE PERIOD ENDED 31 MARCH 2011 Attributable t o owners of the parent Share Non-distributable Retained Changes in onwership Non-controlling Total capital reserves earnings reserve Total interest equity (note 16) (note 17) US$ US$ US$ US$ US$ US$As at 31 March 2009 29,509,496 22,528,968 52.038.464 2.236.323 54,274,787Profit for the year 12.823.326 12,823,326 575.558 13,398,884Other comprehenr~ve tncome (8,408,1061 (8,408,106) 331.135 18.076.9711Total comprehens~ve lncome 21,101.390 35.352.294 56.453.694 3,143.016 59.596.7MlDepreaabonbanskrfor pmpwty, plant and equipment - (248,801) 248,801Dividends (289,449) (289.449)Share based paymena 74,706 74,706 74,706Acqulsltlon of additional merest a rubr~dlary n 218.757 217,986 436.743 (436,743)Asat 31 March 2010 21,146,052 35,813,081 56.965.133 2.416.824 59.381.957Profit for the year 17.435.140 17,435,140 17.435.140Other comprehenr~ve cncome (4,630,525) (4,630,5251 (4,630,525)Total comprehenr~ve income 16,515.527 53.254.221 69,763,748 2.416.824 72.186.572Dividends paid during the year - (2.672.569) (7,672,569) (2,677,569)Depreaatkonbanskrfor pmpwty, plant and equipment - (896,710) 896.710Redenomination of share capital 192.271 (192,271)Share options exerclsed 737 4.64 5.381 5,381 ofReclarslfication NDR to retamed earnings (218,757) 218,757Share based payments 302.514 302.514 302.514Premium paid i n acquirltlon of addttional interest - 192.777 192.777 192.777Acquisitron of additional interest in subsidiary 1,281,786 1.135.038 2.416.824 12,416,824)Asat 31 March 2011 193.008 16,796,733 52,832.157 192,777 70,014,675 70,014,675Changes in ownership reserve a used t o recognlse the difference between falr value o f additional interests acquired and the consideration paid.Company statement of changes in equityfor the year ended march 2011. Share Non-distributable Retained <.pita[ reserves earnings Total (note 16) (note 17) US$ US$ US$ US$As a t 31 March 2009Loss for the year*=F=P==Asat31 MabZOlOProf t for tne per oaTotal comprehens~ve IncomeRedenommation of rhare cap~talDwdends Reallrationof revaluat~onreserveShare bared paymentlrrue of rhare caplmlAsat31 March 2011
  17. 17. Notes t o t h e Financial Statements 1. Corporate information Seed Co Limited is a company which is incorporated and domiciled in Zimbabwe and is listed on the Zimbabwe Stock exchange, acts as a holding company for a group of companies domlclled in Botswana. Kenya. Malawi. Zambia and Zimbabwe whose principal activities are the processing of agricultural seed on a commercial basis The consolidated financial statements of Seed Co Limited for the year ended 31 March 201 1 were authorised for issue in accordance with a resolution of the directors on 16 June 201 1. 2. Accounting policies The financial statements are based on the statutory records that are maintained on the historical cost convention. except for property, plant and equipment and financial assets at fair value through p r o f ~and loss which are t measured at fair value. 2.1 Basis of preparation Statement of compliance The Groups financial statements have been prepared in accordance with International Financial Reporting Standards. (IFRS) and the lnternatlonal FinancialReporting Interpretations Commlttee. (IFRIC) Interpretations. Transition t o IFRS The Group IS resuming presentation of IFRS financial statements after early adoption of Revlsed IFRS 1 First-time Adoption of International Financial Reporting Standards issued on 20 December 2010. The relevant amendment providesguldance for entities emerging from severe hyperinflation t o resume presenting IFRS financial statements. An entity can elect to measure assets and liabilities at fair value and t o use the fair value as the deemed cost in its opening IFRS statement of financial position. The Group elected t o use the severe hyperinflation exemption The Groups previous functional currency, the Zimbabwe dollar (ZWS), was subjected to severe hyperinflation before the date of transition to IFRS because it had both of the following characteristics: (a) a reliable general price Index was not available to all entities with transactions and balances in the ZWS; and (b) exchangeability between the ZWS and a relatively stable foreign currency did not exist. The Group changed ~ t sfunctional and presentation currency from the ZWS to the United States dollar (USS) with effect from 1 October 2008. The Group failed to present IFRS financial statements for the financial year ended 31 March 2010 due to the following: . The effects of severe hyperinflation as defined in Revised IFRS 1 meant that financial statements previously reported in ZWS could not be translated to US$ for use as comparatives as these would not have been IFRS compl~ant; and The IFRS 1 requirement that an entitys first IFRS financial statements shall include at least three statements of f~nanc~al position could not be complied w ~ t h o prov~de t the information included under "Comparative financial information" below. The African Seed Company
  18. 18. Notes to the Financial Statements (continued)Deemed cost exemptionThe Group elected to measure all assets and liabilities at fair value and to use the fair value as the deemed cost in the openingIFRS statement of financial position at 1 April 2009.Comparative financial informationThe financial statements comprise three statements of financial position, two income statements, two statements ofcomprehensive income, changes in equity and cash flows as a result of the retrospective application of the Amendments toIFRS 1.Reconciliation of previously prepared t o IFRS compliant financial statementsIn preparingits opening IFRS statement of financial position as at 1 Aprll2009, the Group has not adjusted amounts previouslydetermined as these were in accordance with IFRS principles. As amounts have not changed, reconciliations from previousprepared to IFRS compliant financial statements are have not been presented.Basis o f consolidationThe consolidated financial statements comprise the financial statements of Seed Co Limited and its subsidiaries as at 31March 201 1 together with the appropriate share of post acquisition results.Subsidiaries are fully consolidated from date of acquisition, being the date that the Group obtains control and continue to beconsolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the samereporting period as the parent company, uslng consistent accounting policies. All intra-group balances, Income and expensesand unrealised gains and losses and dividends resulting from intra-group transactions are eliminated in full.A change in the ownership interest of a subsidiary, without a change in control, is accounted for as an equity transaction.Losses are attributable to non-controlling Interest even if that results in a defic~tebalance.If the Group losses control over a subsidiary, it: Derecognisesthe assets (including goodwill) and llabillties of the subsidiary Derecognisesthe carrying amount of any non-controlling interest Derecognisesthe cumulative translation differences, recorded in equity Recognises the fair value of the consideration recelved Recognisesthe fair value of the investment retained Recognisesany surplus or deficit in profit or loss Reclassifies the parents share of components previously recognised in other comprehensive income to profit or lossBasis of consolidation prior t o 1April 2009In comparison to the above mentioned requirements which were applied on a prospective basis, the following differencesapplled:Non-controlling interests represented the portion of profit or loss and net assets that were not held by the group and werepresented separately In the consolidated income statement and w~thin equity In the consolidated statement of financialposition, separately from the parent shareholders equity. Acquisitions of non-controlling interest were accounted for usingthe parent entityextension method, whereby, the difference between the consideration and the book value of the shareof the net assets acquired were recognised in goodwill.Losses incurred by the Group were attributable to the non-controlling interest until the balance was reduced to nil. Anyfurther excess were attributable to the parent, unless the non-controlling Interest had a blnd~ng obllgatlon to cover these.
  19. 19. Notes t o the Financial Statements (continued) Basis of consolidation prior to 1April2009(continued) Upon loss of control, the Group accounted for the investment retained at its proportionate share of net asset value at the date control was lost.2.2 Changes in accounting policies and disclosures The accounting policies adopted are consistent with those of the previous financial year Amendments resulting from Improvements to IFRSs to the following standards did not have any impact on the accounting policies, financial position or performanceof the Group: IFRS 2 Share-based Payment: Group Cash-settledShare-based Payment Transactions effective 1 January2010 IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended) effective 1 July 2009. includ~ng consequentlalamendmentsto IFRS 2. IFRS 5 IFRS 7, IAS 7, IAS 21. IAS 28, IAS 31 and IAS 39 IAS 39 FinancialInstruments: Recognitionand Measurement- Eligible Hedged ltems effective 1 July 2009 IFRlC 17 Distributions of Non-cash Assets t o Owners effective 1 July 2009 IFRlC 18. Transfers of assets from customers Improvements to IFRSs (May 2008) lmprovements to IFRSs (April 2009) The adoption of the standards or interpretations is described below: IFRS 2 Share-based Payment (Revised) The IASB ~ssued amendment t o IFRS 2 that clarified the scope and the accounting for Group cash-settled share-based an payment transactions The standard is not relevant to the Group and did not impact on the financial position or performanceof the Group. IFRS 3 Business Combinations (Revised) and IAS 27 Consolidatedand Separate FinancialStatements (Amended) IFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after 1April 2009. Changes affect the valuation of non-controlling Interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs and future reported results. IAS 27 (Amended) requires that a change in the ownership Interest of a subsidiary (without loss of control) is accountedfor as a transaction with owners In their capaclty as owners. Therefore, such transactions will no longer give rise t o goodwill, nor will it give rise to a gain or loss. Furthermore,the amended standard changes the accounting for losses incurred by the subsidiary as well as the Loss of control of a subsidiary. The changes by IFRS 3 (Revised) and IAS 27 (Amended) affect acquisitions or loss of control of subsidiaries and transactions with non-controlling interests after 1 January2010. IAS 39 FinancialInstruments. Recognitionand Measurement - Eligible Hedged ltems The amendment clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as a hedged item. This also covers the designation of Inflation as a hedged risk or portion in particular situations. The Group has concluded that the amendment will have no impact on the financial positlon or performance of the Group, as the Group has not entered into any such hedges. The Afrlcan Seed Company
  20. 20. Notes to the Financial Statements (continued)IFRlC 17 Distribution o f Non-cash Assets to OwnersThis interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets toshareholders e~ther a d~stribution reserves or as dividends. The interpretatlon has no effect on either, the financial posltion as ofor performance of the Group.IFRlC 18 Transfers o f assets from customersIFRlC 18 was issued in January 2009. I t clarifies how to account for transfers of items of property, plant and equipment byentities that receive such transfers from their customers. The interpretation also applies t o agreements in which an entityreceives cash from a customer when that amount of cash must be used only to construct or acquire an item of property, plantand equipment, and the entity must then use that Item to provide the customer with ongoing access to supply of goods andlorservices. The Group is not impacted by applying IFRlC 18.Improvements to IFRSsIn May 2008 and April 2009, the IASB issued omnibus of amendments to its standards, primarily with a view to removinginconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of thefollowing amendments where relevant resulted in changes t o accounting policies but d ~ d have any Impact on the f~nanc~al notposition or performance of the Group.Issued i n May 2008 IFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations: clarifies that when a subsidiary is classified as held for sale, all its assets and liabilities are class~fied held for sale, even when the entity remains a non-controlling Interest as after the sale transaction. The amendment is applied prospectively and has no impact on the financial position nor financial performanceof the Group.Issued i n April 2009 IFRS 5 Noncurrent Assets Held for Sale a n d Discontinued Operations: clarifies that the disclosures required in respect of non-current assets and d~sposal Groups classified as held for sale or discontinued operations are only those set out in IFRS 5. The disclosure requirements of other IFRSs only apply if specifically required for such non-current assets or discontinued operations.The amendment did not impact the financial position or performance of the Group.. IFRS 8 Operating Segments: clarifies that segment assets and liabilities need only be reported when those assets and liabilities are included in measures that are used by the chief operating decision maker. As the Croups chief operating decis~on maker does reviewsegment assets and liabil~ties~theGroup has continued to disclose this information in Note 28 IAS 7 Statement of Cash Flows: States that only expenditure that results in recognisingan asset can be classifiedas a cash flow from investing activities. This amendment will impact amongst others, the presentation in the statement of cash flows of the contingent consideration on the business combination completed in 2010 upon cash settlement. IAS 36 Impairment of Assets: The amendment clarif~es that the largest unit permitted for allocating goodwill, acquired in a business combination, is the operating segment as defined in IFRS 8 before aggregation for reporting purposes. The amendment has no impact on the Croup as the annual impairment test is performed before aggregation.Other amendments resultingfrom lmprovements to lFRSs to the following standards did not have any impact on the accountingpolicies, flnanclal positlon or performance of the Group:lssued i n April 2009. IFRS 2 Share-based Payment. IAS 1 Presentation o f Financial Statements IAS 17 Leases The Ahlsan Seed Company
  21. 21. Notes t o the FinancialStatements (continued) IAS 34 Interim Financial Reporting IAS 38 Intangible Assets IAS 39 Financial Instruments: Recognition and Measurement IFRlC 9 Reassessment o f Embedded Derivatives - ERIC 16 Hedge o f a Net Investment in a Foreign Operation2.3 Standards and interpretations in issue not yet effectiveStandards issued but not yet effective up t o the date of issuance of the Groups financial statements are listed below. This listingisof standards and interpretations issued, which the Group reasonably expects t o be applicableat a future date.The Group intendsto adopt those standards when they become effective.IAS 12 Income taxes (Amendment)The amendment is effective for annual periods beginningon or after 1 January2012 and introduces a rebuttable presumption thatdeferred tax on investment properties measured at fair value will be recognised on a sale basis, unless an entity has a businessmodel that would indicate the investment property will be consumed in the business If consumed a use basis should be adopted.The Group does not expect any impact on its financial position or performance.IAS 24 Related PartyDisclosures (Amendment)The amended standard is effective for annual periods beginning on or after 1 january 2011. I t clarified the definition of a relatedparty t o simplify the identification of such relationships and t o eliminate inconsistencies in its application. The revised standardintroduces a partial exemption of disclosure requirements for government related entities. The Group does not expect any impacton its financial position or performance.IAS 32 Financial Instruments: Presentation - Classification o f Rights Issues (Amendment)The amendment t o IAS 32 is effective for annual periods beginning on or after 1 February 2010 and amended the definition of afinancialliability in order to classify rights issues (and certain options or warrants) as equity instruments in cases where such rightsare given pro rata t o all of the existing owners of the same class of an entitys non-derivative equity instruments, or to acquire afixed number of the entitys own equity instruments for a fixed amount in any currency. This amendment will have no impact onthe Group after initial application.IFRS 9 Financial Instruments: Classification a n d MeasurementIFRS 9 as issued r e f l e a the first phase of the IASBs work on the replacement of IAS 39 and applies to classification andmeasurement of financial assets and liabilities as defined in IAS 39. The standard is effective for annual periods beginning on orafter 1 January 2013. In subsequent phases, the Board will address impairment, derecognition and hedge accounting. Thecompletion of this project is expected during 2011. The adoption of the first phase of IFRS 9 will primarily have an effect on theclassification and measurement of the Groups financial assets. The Group is currently assessing the impact of adopting IFRS 9,however, the impact of adoption depends on the assets held by the Group at the date of adoption, it is not practical to quantifythe effect.IFRS 10 Consolidated FinancialStatements; IFRS 11 joint Arrangements; IFRS 12 Disclosure o f lnterest in Other EntitiesIFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting forconsolidated financial statements. I t also includes the issues raised in SIC 12 Consolidation -Special Purpose Entities. IFRS 10establishes a single control model that applies to all entities. The changes will require managementto make significant judgementto determine which entities are controlled and therefore required to be consolidatedby the parent. Therefore, IFRS 10 may changewhich entities are with~n group. aIFRS 11 replaces IAS 31 lnterest in Joint Ventures and SIC 13 Jointly Controlled Entities - Non-monetary Contributions byVentures. IFRS 11 uses some of the terms that were used in IAS 31 but with different meanings which may create some confusionas to whether there are significant changes. IFRS 11 focusses on the nature of the rights and obligations arising from thearrangementcomparedto the legal form in IAS 31.I S 11 uses the pr~nciple control in IFRS 10 todeterminejoint control which ofmay change whether joint control exists. IFRS 11 addresses only two forms of joint arrangements; joint operations where theentity recognises its assets, liabilities, revenues and expenses and/or its relative share of those items and joint ventures which isaccounted for on the equity method (no more proportional consolidation).
  22. 22. Notes to the FinancialStatements (continued)IFRS 12 includes all the disclosures that were previously in IAS 27 related to consolidated financialstatements as well as all of thedisclosures that were previously included in IAS 31 and IAS 28 Investments in Associates. A number of new disclosures are alsorequired.The Group will need t o consider the new definition of control t o determine which entities are controlled or jointly controlled andthen to account for them under the new standards. IFRS 10.11 and 12 will be effective for the Group 1 july 2013.IFRS 13 Fair Value MeasurementIFRS 13 establishes a single framework for all fairvalue measurementwhen fair value is required or permitted by IFRS, IFRS 13 doesnot change when an entity is required to use fair value but rather describes how to measure fair value under IFRS when it isperm~tted required by IFRS. There are also consequentialamendments to other standards t o delete speciflc requirements for ordetermining fair value. The Group will need t o consider the new requirementsto determine fair values going forward. IFRS 13 willbe effective for the Group 1 july 2013.IFRlC 14 Prepayments of a minimum funding requirement (Amendment)The amendment t o IFRlC 14 is effective for annual periods beginning on or after 1 January 2011 with retrospective application.The amendment provides guidance on assessingthe recoverable amount of a net pension asset. The amendment permits an entityt o treat the prepayment of a minimum funding requirement as an asset. The amendment is deemed t o have no impact on thefinancial statements of the Group.IFRlC 19 Extinguishing Financial Liabilities with Equity InstrumentsIFRlC 19 is effective for annual periods beginningon or after 1 july 2010. The interpretation clarif~es equity instruments issued thatt o a creditor to extinguish a financial liability qualify as consideration paid. The equity Instruments issued are measured at theirfairvalue. In case that this cannot be rellably measured,the instruments are measured at the fairvalue of the liability extinguished.Any galn or loss is recogn~sed immediately in profit or loss. The adoption of this interpretation will have no effect on the financialstatements of the Group. Improvements to IFRSs (issued in May 2010) The IASB issued lmprovements to IFRSs, an omnibus of amendments t o its IFRS standards. The amendments have not been adopted as they become effective for annual periods on or after either 1 July 2010 or 1 January2011. The amendments listed below, are considered t o have a reasonable possible impact on the Group: IFRS 3 Business Combinations . IFRS 7 FinancialInstruments: Disclosures . IAS 1 Presentationof FinancialStatements IAS 27 Consolidatedand Separate FinancialStatements . IAS 34 Interim financial reporting IFRlC 13 Customer Loyalty Programmes The Group, however, expects no impact from the adoption of the amendments on its financial position or performance.2.4 Significant accountingjudgments. estimates and assumptions The preparation of financialstatements requires managementto makejudgments, estimates and assumptions that affect the application of the accounting policies and the reported amounts, assets, liabilities, income and expenses. However. uncertainty about these assumptions and estimates could results in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. /* In the process of applying the Groups accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the consolidated financial statements. SEED40 u The African Seed Company
  23. 23. Notes to the FinancialStatements (continued) Estimates and assumptions The key assumptions concerning the future and other key resources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment t o the carrying amounts of assets and liabilities within the next financial year are discussed below: i. Useful lives and residualvalues of property, plant and equipment The Group assesses useful lives and resldualvalues of property, plant and equipment each year taklng into consideration past experience, technology changes and the local operating environment. Residual values were reassessedduring the year and adjustments for depreciation were done in current year. ii. Revaluation of property, plant and equipment and investment property In assessing the carrying amounts of property, plant and equipment management has considered the condition of the assets and their life span on an item by item basis in determining fair market values. The following methods and assumptions were adopted by the professionalvaluer: Land: Active market by reference to recent property transactions of similar properties, complemented by periodic property valuations done by Local Authorities for rating purposes. Office space and industrial: a level of subjectivity has been applled In determining market values owing t o a lack of market evidence arising from a relatively inactive market. Plant and equipment: by referenceto observable prices In active markets or recent market transactions on arms length terms. In the absence of market based evidence of fair value because of specialised nature of an item, lack of recent transactions. item rarely sold or lnactlve market, a fair value was estimated using depreciated replacement cost approach. Investment property: The Group measures investment property at fair value with changes in fair value being recognised in the income statement. The Groups directors, with guidance from independent professionalvaluers,determined fair value as at 31 March 201 1, with reference to market transaction prices of similar properties, adjusted for any differences in location and condition. iii. Allowances for credit losses Allowances for credit losses are a specif~cprovision which is reviewed on a monthly basis. iv. Share based payments The Group measures the cost of equity-settled transactions with employees by references to the fair value equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate inputs to the valuation model, which is dependent on the terms and conditions of the grant. This estimate also requiresdetermining the most appropriate inputs t o the valuation model including the expected life of the share option, volatilityand dividend yield and making assumptions about them. The value of the share options granted is determined using the Black Scholes model.2.5 Summary of Significant Accounting Policies a) Business Combinations and Goodwill Business combination from 1April 2009 Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date. fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree elther at fair value or at the proportionate share of the acquirees identifiable net assets. Acquisition costs incurred are expensed. The African Seed Company
  24. 24. Notes t o the FinancialStatements (continued)When the Group acquires a business it assesses the financial assets and liabilities assumed for appropriate classification anddesignation in accordance with the contractual terms, economic circumstances and pertinent conditions as at theacquisitions date. Thls lncludes the separation of embedded derivatives In host contracts by the acqulree.If the business comblnatlon IS achleved In stages, the acquisitlon date fair value of the Groups previously held equlty interestin the acquiree is remeasured to fair value as at acquisition date through profit and loss.Any contingent consideration to be transferred by the Group will be recognlsed at the fair value at the acquisition date.Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will berecognised in accordance with IAS 39 either in the profit or loss or as change to other comprehensive income. If thecontingent consideration is classified as equity. I t shall not be remeasured until ~t finally settled within equity. isGoodwill is initially measured at cost being the excess of the consideration transferred over the Groups net identifiableassets acqulred and liabilities assumed. If this consideration is lower than falr value of the net assets of the subsidiaryacquired, the difference is recognised in profit or loss.After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose ofimpairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of theGroups cash generating unlts that are expected to beneflt from the combination, irrespective of whether other assets orliabilities of the acquiree are asslgned to those units.Where goodwill forms pan of the cash-generating unit and part of the operation within the unit is disposed of, the goodwillassociated with the operation disposed of is included in the carrying amount of the operation when determining the gain orloss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of theoperation disposed of and the portion of the cash-generating unit retained.Business combinations prior 31 March 2009In comparison to the above mentioned requirements,the following differences applied:Buslness combinations were accounted for using the purchase method. Transaction costs directly attributable to theacquisltion formed part of the acquisitlon costs. The non-controlling Interest formerly known as minorlty interest wasmeasured at the proportionate share of the acquirees identifiable net assets.Buslness combinations achieved In stages were accounted for as separate steps Additional acquired share of Interest did notaffect previously recognised goodwill.When the Group acquired a business, embedded derivatives separated from the host contract by the acquireewere notreassessedon acquisition unless the business combination resulted in a change in the terms of the contract that significantlymodified the cash flows that otherwise would have been required under the contract.Contingent considerationwas recognised if, and only if, the Group had a present obligation, the economic outflow was morelikely than not and a reliable estlmate was determinable. Subsequent adjustments to the contingent consideration affectedgoodwill.b) Foreign currency translationThe consolidatedfinancial statements are presented in United States Dollarswhich is also the parent companys presentationcurrency. Each entity in the Group determines its own functional currency and items included in the financial statements ofeach entity are measured using the functional currency. The Group has elected to recycle the gain or loss that arises fromthe direct method of consolidation, which IS the method the Group uses to complete ~ t consolidation. si) Transactions and balancesTransactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates atthe date of the transactionMonetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rate ofexchange ruling at the reporting date.All differences are taken to the income statement with the exception of all monetary items that provide an effective hedgefor a net investment in a foreign operation. These are recognised in other comprehensive income until the disposalof the netinvestment, at which they are recognised in the income statement. Tax charges and credits attributable to exchange
  25. 25. Notes t o the FinancialStatements (continued)differences on those monetary rtems are also recorded in equity.Prior to 1 January 2005 the Group treated goodwill and any fair value adjustments to the carrying amounts to assets andliabilities arising on the acquisition, as assets and liabilities of the parent. Therefore, those assets and liabilities are alreadyexpressed in the reporting currency or non-monetary items and hence no further translation differences occur.ii) Group CompaniesThe assets and liabilities of foreign operations are translated to US$ at exchange rates prevailing at the reporting date andtheir income statements are translated at the exchange rates prevailing at the date of the transactions. The exchangedifferences arising on the translat~on recognised In other comprehensive income. On disposalof a foreign operation, the arecomponent of other comprehensive income relating to that particular foreign operation is recognised in the incomestatement.Any goodwill arising on the acquisition of a foreign operation subsequent to 1 January2005 and any fair value adjustmentsto the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreignoperation and translated at closing rate.c) TaxesCurrent Income TaxCurrent income tax assets and liabilities for the current and prior periods are measured at the amount expected to berecovered from or paid to taxation authorities The tax rates and tax laws used to compute the amount are those that areenacted or substantively enacted, by the reporting date, in the countries where the Group operates and generates taxableIncome.Current income tax relating t o items recognised directly in other comprehensive income and equity is recognised in othercomprehensive income or equity and not in the income statement.Deferred TaxDeferred income tax is provided using the liability method on temporary differences at the reportrng date between the taxbases of assets and l~abilit~es their carrying amounts for financial reporting purposes. andDeferred income tax liabilities are recognised for all taxable temporary differences, except:Where the deferred income tax liability arlses from the initial recognition of goodwill or of an asset or liability in a transactionthat is not a business combination, and, at the time of the transaction, affects neither the accounting profit or taxable profitor loss, andIn respectof taxable temporary differences associated with investment in subsidiaries, associates and interests in jointventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that thetemporary differenceswill not reverse in the foreseeable future.Deferred income tax assets are recognised for all deductible temporary differences, carry forward unused tax credits andunused tax losses, to the extend that ~t probable that the taxable profrt will be available agarnst the deductible temporary isdifferences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:Where the deferred income tax asset relating t o the deductible temporary differences arises from the initial recognition of anasset and liability in a transaction that is not a business combination and, at the time of the transaction, affects neither theaccount profit nor the taxable profit or loss; and;In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in j o ~ nventures, deferredtax assets are recognised only to the extent that is probable that the temporary differenceswill reverse Inthe foreseeable future and taxable profit will be available against which the temporary differences can be utilised.The carrying amount of deferred income tax is reviewed at each reporting date and reduced to the extent that it is no longerprobable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.Unrecognisable deferred income tax assets are reassessedat each reporting date and are recognised to the extent that it hasbecome probable that future taxable profit will allow deferred tax asset to be recovered.
  26. 26. Notes t o the FinancialStatements (continued)Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the assetis reallsed or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at thereporting date.Deferred income tax relatlng to Items recognised outslde profit or loss is recogn~sed outside profit or loss. Deferredtax itemsare recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.Deferred income tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current taxassets against current income tax liabilities and the deferred income tax relates to the same taxable entity and the sametaxation authority.Value Added TaxRevenue and expense are recognised net of the amount of Value Added Tax(VAT) . Receivables and payables are stated withthe amount of VAT included. The net amount of VAT recoverable from, or payable to the taxatlon authorties 1 included sas part of receivables or payables in the statement of financial position.d) Property, plant and equipmentProperty, plant and equipment is stated at cost or valuation net of accumulated depreciation and impairment losses if any.Cost includes expenditures that are directly attributable t o the acquisition of the asset. The cost of self-constructed assetsinclude the cost of materials, direct labor and any other costs directly attributable to bringing the asset to the location andcondition necessary for ~t be capable of operating in the manner Intended by management. toltems of property, plant and equipment are revalued by external independent valuers at least once every five years or earlierif it becomes apparent that their carrying amounts no longer reflect the fair value of such assets. At each financial year endwhere professionalvaluesare not involved, property, plant and equipment items are revalued by directors to restate theseitems t o fair values.Depreciationis not provided on freehold land and capital projects under development.Other fixed assets are depreciatedovertheir expected useful lives on a straight-lined basis at the following annual rates:Freehold and leasehold properties 50 yearsMotor vehicles 5 yearsPlant and machineryOffice furniture and equipment ElOyearsThe carrying amounts are reviewed at each reporting date to assess whether they are fairly stated.Where carryingamounts exceeds the estimated recoverable amount, assets are written down to the recoverable amount. Theassets residual value and useful life are reviewed and adjusted if appropriate at each financial year end. Depreciation is notcharged when the carrying amount of an Item of property, plant and equipment becomes equal or less than the residual value.Land on which the research stations are situated falls within the regulations of rural land under Statutory Instrument 419 of1999. The effect of this is that no market value of the land can be determined.An item of property, plant and equipment IS derecognised upon disposal or when no future economic benefits are expectedfrom its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the netdisposal proceeds and the carrying amount of the asset) is included in the profit or loss in the year the asset is derecognised.The assets residual values, useful lives and methods of depreciation are reviewed, and adjusted ~f appropriate, at eachfinancial year end.Revaluation surplusIncrease in the carrying amount arising from revaluation is recognised In other comprehensive Income and accumulated inequity in the revaluation reserves, except t o the extent that it reverses a revaluation decrease of the same asset previouslyrecognised in the income statement, in which case the increase is recognised in the income statement. Decreases that offsetprevious increases on the same assets are charged in other comprehensive income and set off against the revaluation reserve.All other decreases are charged to the income statement.
  27. 27. Notes t o the FinancialStatements (continued)An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciationbased on the revalued carryrng amount of the assets and depreciation based on the assets original cost. Additionally,accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the netamount is restated t o the revaluedamount of the asset. Upon disposal, any revaluation reserve relating to the particular assetbeing sold IS transferred to reta~ned earnings.e) Investment propertiesi) Recognition criteriaInvestment property, which is property held to earn rental and or for capital appreciation, is measured initially at its cost.including transaction cons. The carrying amount Includes the cost of replacing part of an existlng investment propeny at thetime that the cost is incurred if the recognition criteria are met; excludes the costs of day to day servicing of an investmentproperty.Subsequent t o initial recognition, investment property is stated at fair value, which reflect5 market conditions at reportingdate. Gains or losses arising from changes in f a ~ value of investment property are included in the income statement in the rperiod in which they arise.Falr value is determined by professionalvaluers at each reporting date on the basis of open market value wh~ch the amount isthe property could be exchanged between knowledgeable, willing parties on an arms length transaction.ii) Transfers t o and from investments propertiesTransfers are made to or from investment property only when there is a change in use. For a transfer from investmentproperty to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use.If the owner occupied property becomes an investment property, the Group accounts for such property in accordance withthe policy stated under property, plant and equipment up to the date of change in use.iii) Derecognitionlnvestment property is derecognised when either they have been disposed or when the investment property is permanentlywithdrawn from use and no future economic benefits are expected from its disposal. The difference between the net disposalproceeds and the carrying amount of the asset is recognised in the income statement In the period of derecognitionf) InventoriesInventories are valued at the lower of cost and net realisable value. Costs incurred in brining each product to its presentlocation and condit~on accounted for as follows: areParent and commercial seed - actual costStores and consumables - on the purchase cost on a first-~n-f~rst basis outGrowlng crops at Research stations are not brought to account as all expend~turerelating thereto is of a research nature andis written off to the income statement when incurredNet realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion andthe estimated costs necessary t o make the sale.g) Biological assetsFair values could not be measured reliably as market determined prices or values are not available and alternative estimatesof fair value are determined to be unreliable.As a results biological assets have been measured at cost less any accumulateddepreciation and any accumulated impairment losses.h) RevenueRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue canbe rellably measured. Revenue 1 measured at the fair value of the consideration received or receivable, exclud~ng s d~scounts,rebates, and value added tax or duty. lntra group revenue which arises in the normal course of business is excluded fromrevenue. The following specific recognition criteria must also be met before revenue is recognised:
  28. 28. Notes t o the FinancialStatements (continued) Sale of goods Revenue from the sale of goods is recognlsed when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on dispatch of the goods. Interest income Revenue is recognlsed as interest accrues (using the effective interest rate that is the rate that exactly discounts estimated future cash receipts through the expected Life of the financial instruments to the net carrying amount of the financial asset). Rental income Rental income arising from operating leases on investment properties is accounted for on a straight line basis over the lease terms.i) Research and development Costs relating to research and development of new seed products are written off as incurredi) Share based payment transactionsShare options issued t o employees are fair valued at the date of grant, and their fair value is recorded as an expense, with acorrespondingamount being recognised in equity over the period in which options are expected t o vest. The amount recognisedas an expense is adjusted t o reflect the actual number of options that vest.The value of the share options granted is determined using the Black Scholes-model. For options that are forfeited or expired, thevalue recorded in the non-distributable reserve IS transferred to distributable reserves.j) Retirement benefitsRetirement benefits in Zimbabwe are provlded for group employees through a self admlnlstered defined contribution fund and theNational Social Security Authority. The cost of retirement benef~ts the deflned contribution fund is determined by the amount forof the contributionThe cost of retirement benefits applicable to the National Social Security Authority is determined by the systematic recognitionof legislated contributions. The cost of all retirement benefits is expensed in the income statement. Employees in the region aremembers of pension funds in their respective countries.k) Cash and cash equivalentsCash and cash equivalents consist of cash at banks and on hand and short term depositswith an original maturity of three monthsor less.For the purpose of the consolidated statement of cash flows, cash and cash equivalents conslst of cash on hand and deposits Inbanks, net of bank overdrafts and short term borrowings.I) LeasesThe determination of whether an arrangement is, or contains a lease Is based on the substance of the arrangement at Inceptiondate whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveysa right to use the asset.For arrangementsentered into prior to 1 January2005, the date of inception is deemed to be 1 January2005 in accordance withthe transitional requirements of IFRIC4.Group as a lesseeFinance leases, which transfertothe Group substantially all the risks and benefit incidental to ownership of the leased Item, arecapitallsed at the inception of the lease at the falr value of the leased property or. ~flower, at the present value of the mlnlmumlease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as t o achievea constant rate of interest on the remaining balance of liability