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Turnall 2012 annual report

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    Turnall 2012 annual report Turnall 2012 annual report Document Transcript

    • ContentsOverviewCorporate History 1Our Mission and Values 2Group Profile 3Our Business Portfolio, Products and Markets 4Highlights of our Performance 5Governance, Ethics & EngagementsChairman’s Statement 7Management‘s Review of Operations 11Our Governance and Ethics Approach 16Our Sustainability Approach 24Principal Risks and Opportunities 25Stakeholder Engagement 27PerformanceOur Sustainability Performance 30Directors` Responsibility andApproval of Financial Statements 38Company Secretary’s Certification 40Directors’Report 41Independent Auditor’s Report 43Annual Financial Statements 44 - 76Shareholders‘ Information 77Notice to Shareholders’ 78Shareholders’Diary 79AnnexuresGlossary of Terms 80GRI Index 81Corporate Information coverScope of this ReportWe are pleased to present the annual report forTurnall Holdings Limited,a company listed on the Zimbabwe Stock Exchange (ZSE) whichincludes Turnall Fibre Cement, a Building and Piping Products Companyfor the year ended 31 December 2012. We published our previousannual report for the reporting period ended 31 December 2011.This report is targeted at a broad range of our stakeholders with the aimof presenting a balanced review of material issues from our operations.The report includes our Harare and Bulawayo Factory operations. Therehave been very little changes in the company since our previousreporting.This is our first report prepared using Global Reporting Initiatives (GRI)Sustainability Reporting Framework (G3.1) in measuring our progresstowards sustainability. This report is prepared meeting GRI ApplicationLevel-C reporting requirements. Our sustainability reporting process wassupported with technical guidance from the Institute for SustainabilityAfrica ( Insaf).Our sustainability reporting is integrated with our financial reports asencouraged by King Code of Corporate Governance (King III) anddevelopment from the International Integrated Reporting Council (IIRC).Our financial statements are prepared in accordance with InternationalFinancial Reporting Standards (IFRS) and are audited by KPMG CharteredAccountants (Zimbabwe). An independent auditors’ report on thefinancial statements contained in this report appears on page 43 of ourfinancial statements.Forward looking StatementsCertain statements in this report constitute‘forward looking statements’.Such statements involve known and unknown risks, uncertainties andother factors that may cause the actual results, performances, objectivesor achievements of Turnall Holdings Limited to be materially differentfrom future results, performance, objectives or achievements expressedor implied in forward looking statements.The performance of Turnall Holdings Limited is subject to effects ofchanges in the operating environment and other factors. TurnallHoldings Limited undertakes no obligation to update publicly or torelease any revision of these forward looking statements to reflect theevents or circumstances after the date of publication of these pages orto reflect the occurrence of unanticipated events.We would welcome your feedback on our reporting and anysuggestions you have in terms of what you would like to seeincorporated in our report for 2013. To do so, please contact:rdube@turnall.co.zw..................................................................... ....................................................................Herbert Nkala John JereChairman Managing Director
    • 1A n n u a l R e p o r t 2 0 1 2Corporate HistoryKey Features of Our Corporate JourneyFor more than 50 years, Turnall has been a regional market leader in the manufacture and supply of fibrecement products made from select quality Chrysotile Asbestos.Alfred Porter, a dynamic Australian, who was both an engineer and entrepreneur and a specialist in thefield of Asbestos Cement, saw the great potential of starting the industry in the country. Porter CementIndustries was under way and the Harare Works produced its first Asbestos Cement sheets, which wereused to provide cover for the machine that made them.Highlights of some important dates in the growth and development of our company and the establishmentof the Asbestos Cement industry in Zimbabwe are listed below:1949: Bulawayo produces its first asbestos cement sheets.1953: Turnall & Newall bought “Alfie” Porter out, and over the next few years introduced modern techniques and expertise and built new offices and laboratories.1962: Bulk cement silos that were once at Arriba installed at both the Harare and Bulawayo plants.1974: Bulawayo sheeting plant re-commissioned.1977: A second sheeting machine built and installed in Harare.1992: Brand new sheeting line purchased from Lamort, France, installed at Harare factory as the third sheeting line.1996: Environment-friendly Fibre Treatment facilities installed at both Harare and Bulawayo factories. Further upgrades were done to sheeting machines.2002: Completed three tier change rooms in compliance with ILO 162 Convention.2002: Certified to an integrated Quality and Environmental Management System (ISO 9001: 2000 and ISO 14001:1996).2003: Certified to OHSAS 18001:1999 Occupational Health and Safety Management System.2004: A computerised Enterprise Resource Planning system was introduced. Integration of the three certified systems incorporating the aids management system and the Social Accountability Standard among other resumes.2006: Awarded, in recognition of Business Excellence, the Confederation of Zimbabwe Industries (CZI), Industrialist of the Year Award-Second Runner Up.2008: Started manufacture of asbestos free products destined for the export market.2010: Won awards for the Best Manufacturing Company and Overall Best Quoted Company on the Zimbabwe Stock Exchange, sponsored by Zimbabwe Independent and African Banking Corporation of Zimbabwe Limited.2011: Awarded the 2011 Superbrand in the construction sector category.
    • 2 T u r n a l l H o l d i n g s L i m i t e dOur Mission and Values“... we provide high qualityaffordable constructionmaterials to help themachieve their dreams...”ValuesWe’ll find time to genuinely care, opening our doors tosupport, encourage & develop our People.Our priority is to focus on our customers - we will beguided by their needs.We are honest in ALL our business dealings & we willhonour our commitments.We communicate in an Open, Frank & Direct way, faceto face, regularly challenging our thinking to ensurewe are creative in our business approach.A sense of humour is important to us: we don’t takeourselves too seriously. However we take our work &our customers very seriously.We will manage and make decisions with facts.MissionWe are passionate about the quality of life of ourcustomers; we provide high quality affordableconstruction materials to help them achieve theirdreams.
    • 3A n n u a l R e p o r t 2 0 1 2Group ProfileDORMANTSUBSIDIARIES Hastt Corporation Limited Hastt Discs (Private) Limited100% Turnall Fibre Cement 100%100%100%100%Acacia Holdings LimitedOPERATINGSUBSIDIARYTractor and Equipment(Private) LimitedT u r n a l l H o l d i n g s L i m i t e d 3A n n u a l R e p o r t 2 0 1 2
    • 4 T u r n a l l H o l d i n g s L i m i t e dOur Business Portfolioand ProductsTurnall Fibre CementThe operating subsidiary comprises two main sub-divisionsnamely; Turnall Building Products Turnall Piping ProductsKey markets include the low-income housing sector forbuilding products and local authorities and municipalitiesfor piping products.Main raw materials are chrysotile fibre and cement.Manufacturing takes place in Bulawayo and Harare.Markets Zimbabwe South Africa Mozambique Zambia
    • 5A n n u a l R e p o r t 2 0 1 2Highlights of Our Performance20112012US$ US$Share Price VS Industrial IndexSharePriceIndustrialIndexGroup SummaryRevenue 42 508 441 51 865 260 Profit after taxation 1 059 915 3 968 057 Total assets 67 980 841 63 616 390Total liabilities 38 445 441 35 140 905ProfitabilityAfter tax return on assets (%) 1.6 6.2Gross profit margin (%) 29.11 30.08Operating profit margin (%) 10.17 14.17Return on shareholders equity (%) 3.59 13.93Return on total assets (%) 1.56 6.24Effective rate of tax (%) 12.00 23.00Nominal rate of tax (%) 25.75 25.75Share PerformanceClosing market capitalisation (000) 25 683 49 303Basic earnings per share (cents) 0.21 0.81Diluted earnings per share (cents) 0.21 0.81Net asset value per share (cents) 5.99 5.78Closing share price (cents) 0.05 0.10Highest share price (cents) 0.12 0.15Closing price/earnings ratio (times) 0.25 0.13Liquidity and LeverageInterest cover (times) 1.39 3.30Current ratio 1.13:1 1.15:1
    • 6 T u r n a l l H o l d i n g s L i m i t e dInstallation of Concrete TilePlant to be commissioned inmid June 2013.6 T u r n a l l H o l d i n g s L i m i t e d
    • 7A n n u a l R e p o r t 2 0 1 2“...I am pleased to report thatthe efforts by government toresuscitate the local chrysotilefibre mines started bearing somefruits towards the end of the year.While the output quantities arestill very much subdued, we areconfident that these will improvein due course once the mines’re-capitalisation program has beencompleted....”ChairmanHerbert NkalaChairman`s Statement
    • 8 T u r n a l l H o l d i n g s L i m i t e dIt is my pleasure to present the Turnall Holdings Limited results for the year ended 31 December 2012.Operating EnvironmentThe results were achieved against a subdued economic environment which was characterised byliquidity constraints and high interest rates ranging between 18 and 25 percent per annum. The highinterest rates persisted for most of the year, exerting a significant strain on working capital for a greaternumber of companies in the country.As the year started, there was a general expectation that the economy would grow, with the Ministerof Finance forecasting a GDP growth of 9.4 percent. This growth did not materialise due to a number offactors, chief among them, the generally poor agricultural season. Government, as a result, revised theGDP growth downwards to 4.4 percent.Agriculture, comprising mainly of cotton and tobacco, traditionally contributing close to 42 percent ofthe company’s volumes, was negatively affected by the delayed onset of rains in the 2011/2012 season.In addition, a number of projects that were lined up by the Government for both sewer and waterreticulation did not materialise as a result of funding limitations.In light of the above factors, the company made the strategic decision towards the end of the firstquarter to re-align it’s operations to prevailing economic conditions. The company, thus maintaineda strong focus on assets and cash flow management and cost control rather than grow volumes.Concerted efforts were also made to minimise debtor delinquency through close monitoring ofthe debtors’ trading operations. The focus on improving working capital management resulted in areduction in sales and production levels, negatively impacting profitability and margins.The company continued to import chrysotile fibres from Brazil, China and Russia which furtherincreased the strain on working capital.I am pleased to report that the efforts by Government to resuscitate the local chrysotile fibre minesstarted bearing some fruits towards the end of the year. While the output quantities are still very muchsubdued, we are confident that these will improve in due course once the mines’ re-capitalisationprogram has been completed.Financial performanceRevenue totalling US$42.5 million was 18.04 percent below the previous year’s level of US$51.9 million.Operating profit was US$4.32 million compared to US$7.35 million for the same period last year.Chairman`s Statement (cont`d)
    • 9A n n u a l R e p o r t 2 0 1 2Chairman`s Statement (cont`d)Gross profit margin was 29.11 percent compared with 30.08 percent in 2011, with an operating profitmargin of 10.17 percent compared to 14.17 percent a year earlier.Turnall generated net income of US$1.06 million on revenue of US$42.5 million representing a netprofit margin of 2.49 percent, compared with net income of US$3.97 million against revenue of US$51.9million representing a net profit margin of 7.65 percent for 2011. Net finance charges were US$3.11million compared to US$2.23 million in the previous year.Capital projectsNotwithstanding the economic challenges, the company has continued to believe in strategicallypositioning the business through a capital expenditure program to enhance both technology andproduct offering for the future.Thus over and above the Newtec non-asbestos plant commissioned in 2011 specifically for the exportmarket,anumberofnewinitiativesarebeingimplementedandthesewillseethecompanycommissiontwo plants in its Harare factory as follows:• Concrete Tile Plant to be commissioned in mid June 2013.• Pavers Production Plant to be commissioned in June 2013.We are confident that the state of the art Tile Plant will enable us to compete in the high end segmentof the roofing market and offer price competitive products on the back of improved technology andmachinery.The company, in view of its long term goal of becoming a one stop-shop for all building products, willcontinue with its research and development and has plans to build onto this vision by introducingmore complimentary products in the next three years.Sustainability PerformanceWe are moving towards an integrated approach in managing our sustainability impacts andopportunities. The company adopted the Global Reporting Initiatives (GRI)’s Sustainability ReportingFramework as a business model in addressing and managing our economic, environmental, social andgovernance aspects of our operations.To this effect, a core sustainability team which was established in 2011 played a critical role in the yearunder review in identifying and advising management of our economic, environmental, and socialimpacts and opportunities, and their disclosure for accountability to the public and our stakeholders.
    • 10 T u r n a l l H o l d i n g s L i m i t e dAs such, we have produced our first sustainability report using and meeting the requirements of theGlobal Reporting Initiative (GRI) Sustainability Reporting Framework (G3.1: Level C).This report is integrated with our financial performance in our annual report for 2012.The report reflectsour sustainability performance in material issues relating to our stakeholder engagement, economic,environmental and social performance as well as our governance and ethics approach during the yearunder review.Future OutlookLiquidity constraints are expected to continue as well as the lack of affordable medium to long termfunding. We, however, believe that our investment in human capital, technology and our focus onworking capital management and cost control will steer the company in a positive direction.Market risk remains substantial due to economic uncertainty and low growth remains entrenched inthe Zimbabwean economy. We continue to be on the lookout for opportunities, considering that ourbusiness is well capitalised, and has greater latitude to access funding to finance working capital andexpansion programmes in the short to medium term.Exports and Pipes continue to offer real opportunities for sales volume growth during 2013. A numberof projects, originally ear-marked for 2012 have now received funding and supply into these projects isexpected to resume during the first quarter of 2013.We believe the future of this business relies heavily on the value created by its people. As part of thestrategic focus, considerable time and money has been budgeted and will be spent on human capitaldevelopment and retention.AppreciationI would like to express my appreciation to all the employees at various levels of the company for theirdiligence and contribution. I would also like to record my appreciation for the support and co-operationreceived from the distributors, agents, suppliers, bankers and all other stakeholders.Last but not least, I wish to thank my fellow Board Members, Management and the Shareholders fortheir continued support and wise counsel.Herbert NkalaChairman18 March 2013Chairman`s Statement (cont`d)
    • 11A n n u a l R e p o r t 2 0 1 2“...the companycontinued to capacitatethe operations to ensurestrategic positioning...”Managing DirectorJohn JereManagement`s Reviewof Operations
    • 12 T u r n a l l H o l d i n g s L i m i t e dManagement`s Reviewof Operations (cont`d)OverviewThemacro-economicenvironmentobtaininginthecountryremainedchallengingowingtotheliquidityconstraints that persisted. Interest rates remained unsustainable for businesses ranging between 18and 25 percent. The economy grew by 4.4 percent against the 9 percent originally forecasted by theMinister of Finance in his budget.Capacity utilisation thus remained subdued in the economy owing to the above factors. Companiesfaced difficulties in paying back the borrowings taken up in previous years resulting in increasedfinance charges and at the same time inability to restock and/or recapitilise businesses either toexpand product lines or to increase efficiencies by replacing aging plant and equipment. The ability ofcustomers to pay within the stipulated credit terms was also affected by the above factors leading tofurther cash flow constraints for the businesses.For Turnall Holdings Limited, the challenging environment was, however, not devoid of opportunitieswhich the company used to good effect. Whilst the volumes and the margins remained largelyconstrained, the company continued to capacitate the operations to ensure strategic positioning. Thecompany acquired a concrete tile plant as well as a paver making machine. Both machines are beinginstalled and commissioning is expected in June this year.Financial PerformanceRevenue totaling US$42.5 million was 18.04 percent below the previous year’s level of US$51.9 million.Operating profit was US$4.64 million compared to US$7.35 million for the same period last year.Gross profit margin was 29.11 percent compared with 30.08 percent in 2011, with an operating profitmargin of 10.91 percent compared to 14.17 percent a year earlier.Turnall generated net income of US$1.06 million on revenue of US$42.5 million representing a netprofit margin of 2.49 percent, compared with net income of US$3.97 million against revenue of US$51.9million representing a net profit margin of 7.65 percent for 2011. Net finance charges were US$3.11million compared to US$2.23 million in the previous year.The company closed the period with net borrowings of US9.3 million.Attributable profit at US$1.06 million represented basic earnings per share of 0.21 cents.
    • 13A n n u a l R e p o r t 2 0 1 2Management`s Review of Operations (cont`d)The Galvanised Corrugated Iron sheets line at the Harare FactoryThe company closed the year with total assets of US$67.98million compared to US$63.62 million for the year ended 31December 2011.Divisional PerformanceBuilding ProductsLocal Building Products sales decreased by 6 percent to69  202 tonnes representing a 94 percent contribution tooverall volumes. The reduced volumes were largely due to thesubdued demand given the generally low disposible incomesand reduced government expenditure.Exports at 2 285 tonnes were significantly lower than thebudgeted plan of 5 705 tonnes due to delays on the finalisationof the financial instruments that where being established toensure payment for products delivered.TheGalvanisedCorrugatedIronSheets(GCIS)volumesdeclinedby 78 percent to 469 tonnes.Piping ProductsPipe volumes decreased by 66 percent to 1 609(2011 - 4  699 tonnes). Performance was largelyaffected by lack of funding of major projects andmunicipality water programmes.Raw materialsThe company continued to import most of thefibre requirements from China, Russia and Brazil.This continued to place a significant strain onworking capital.The local chrysotile fibre mines started deliveringsome fibres towards the end of the year.While theoutput quantities are still very much subdued,we are confident that these will improve in duecourse once the mines’ re-capitalisation programhas been completed.
    • 14 T u r n a l l H o l d i n g s L i m i t e dStakeholder EngagementCritical to our strategy is building and maintaining strong relationships with key stakeholders. Thecompany has developed a comprehensive stakeholder engagement strategy to manage stakeholderissues. Stakeholder engagement shall remain a corporate culture and strategy for Turnall HoldingsLimited in helping identify opportunities, risks and material issues associated with our operations.Sustainability PerformanceWe are moving towards an integrated approach for managing our sustainability impacts andopportunities. The company adopted the Global Reporting Initiatives (GRI) Sustainability ReportingFramework as a business model to address and manage economic, environmental, social andgovernance aspects of the company operations. To this effect, a core sustainability team establishedin 2011 played a critical role in the year under review in identifying and advising management of oureconomic, environmental, and social impacts and opportunities, and their disclosure for accountabilityto public and our stakeholders.As such, we have produced our first sustainability report using and meeting requirements of theGlobal Reporting Initiative (GRI) Sustainability Reporting Framework (G3.1: Level C) covering mainlyour Harare and Bulawayo operations. This report now forms an integral part of our annual report for2012 and beyond. The report reflects our sustainability performance in material issues relating to ourstakeholder engagement; economic, environmental and social performance as well as our approach togovernance and ethics during the year under review.The company will continue to improve performance in reported sustainability indicators in the comingyears. Furthermore, we hope to consider progressional reporting on other sustainability indicatorsconsidered material to our stakeholders and the business. Management remains committed to oursustainability goals and public disclosure of Human Capital.Key to the success of Turnall Holdings is our human capital. The company maintains good workingrelationships with employees through various engagement platforms. The company continues tocommit resources towards staff development and skill upgrade in all areas of our business.Legislative EnvironmentI am pleased to advise that Turnall Holdings Limited has continued to uphold its ISO14001, ISO9001and OHSAS 18001 certification. We continue to comply with relevant legislative requirements of theEnvironmental Management Act (20:27), Labour Act, Companies Act and other related legislations.Management`s Reviewof Operations (cont`d)
    • 15A n n u a l R e p o r t 2 0 1 2Future prospectsThechairman’sremarksonthecompany’sfutureprospectscannotbeoveremphasised.Thechallengingenvironment obtaining towards the end of 2012 has continued into the first quarter of 2013. Targetedvolumes have been met for the first quarter although pricing has proved to be a thorn in the flesh.Volume forecast for 2013 is expected to firm in the second half of the year on the back of increasedgovernment expenditure and agricultural activity.Continued availability of Chrysotile fibre from the local mines will go a long way in underpinning bothgrowth and profitability of the company.AppreciationThese results for 2012 could not have been achieved without strong working relationships built overseveral years with shareholders, the board, customers, suppliers and other business partners. I wishto express my gratitude and trust that, through their continued support, Turnall Holdings Limited willcontinue to grow and fulfill its mission. I also would like to extend my profound appreciation to themanagement team and all Turnall employees, for the effort and commitment to company values andideals during an otherwise challenging year.J. A. JereManaging Director18 March 2013Installation of Concrete Tile Plant to be commissioned in mid June 2013.Management`s Review of Operations (cont`d)
    • 16 T u r n a l l H o l d i n g s L i m i t e dHerbert NkalaNon-Executive: ChairmanJohn MushayavanhuNon-Executive DirectorJames MutizwaNon-Executive: Deputy ChairmanRobert DubeExecutive: Finance DirectorLinda ManyengaNon-Executive Director-IndependentCA (Z)A seasoned Chartered Accountant, Mr Dubejoined Turnall in 2002.Dip Eng (France) MBA (UK)He joined Turnall in 2001 as Group Technical Director andwas then promoted through various positions toDip Mgt, MBA (UK)He was appointed Non-Executive Director in 2005.He heads one of the top banking groupsin the country. He is also a Non-Executive Directorof several companies.She was appointed Non-Executive Director in 2002.She is a Trade Unionist and was a boardmember of the National Social Security Authority (NSSA).John JereExecutive: Managing DirectorBSc Hon (Wales, UK) MBA (UZ)He was appointed Non-Executive Chairman of Turnall in2005. He is a Non-Executive Director ofnon-listed companies.BL Hon LLB (UZ).He was appointed Non-Executive Director in 2005 and isalso a Legal Practioner based in Harare.He is a Non-Executive Director of several companies.several listed andManaging Director.DirectorateOur Governance &Ethics Approach
    • 17A n n u a l R e p o r t 2 0 1 2Celestine GadzikwaNon-Executive Director-IndependentKiritkumar NaikNon-Executive Director-IndependentRita LikukumaNon-Executive Director-IndependentChirandu DhlembeuNon-Executive Director-IndependentRodgers DhliwayoNon-Executive Director-IndependentMSc Dev Econ, MBL (UNISA)He was appointed Non-ExecutiveDirector of Turnall in 2005. He holdsDirectorships in other companies.Dip Mech Eng (UK)He was appointed to the Turnall board in 2010. He holdsDirectorships in other companies.MSc Env Health (Scotland). He was appointed Non-Executive Director in 2011.He is a Director of Occupational Safety andHealth for the National Social SecurityAuthority (NSSA).Peter MoyoNon-Executive Director-IndependentFCISHe is a qualified Chartered Secretary. He was appointedNon-Executive Director in 2009. He is also aNon-Executive Director of several companies.LLB Hon (UZ), FZiMHe is a Corporate Lawyer. He was appointedNon-Executive Director in 2005. He holdsDirectorships in other companies.BSc Econ (UZ), MBA (UK)She was appointed Non-Executive Director ofTurnall in 2009. She is also a Non-ExecutiveDirector of several companies.Our Governance &Ethics Approach (cont`d)
    • 18 T u r n a l l H o l d i n g s L i m i t e dOur Governance &Ethics Approach (cont`d)Human Resources DirectorElizabeth MamukwaBA (UNISA) MBA(Nottingham UK)She joined Turnall in 2004from SMM Holdings, whereshe was Group Human.evitucexEsecruoseRTechnical DirectorFrancis ChigwedereBSc Eng (UNZA), MBA (UZ)He joined Turnall FibreCement in 2002 as anEngineering Manager androse through the ranks tobecome Technical.6002nirotceriDManaging DirectorJohn Jere*see Board of Directors.Finance DirectorRobert Dube*see Board of Directors.Management
    • 19A n n u a l R e p o r t 2 0 1 2Governance and Management ApproachWe recognise that good corporate governance is key to the long term success and integrity of ourcompany. As such, we are committed to highest standards of ethical and sustainable business practicesto enable management of risks and opportunities arising from our operations.To reflect our commitment to good corporate governance and sustainable business practice, wehave included in the report our first sustainability report using the Global Reporting Initiatives (GRI)’sSustainability Reporting Framework Guidelines. As custodians of good governance and strategydirection, we strive to ensure that there is a clear allocation of responsibilities to demonstrate balanceof power and authority. The company endeavors to improve its corporate governance systems towardalignment with voluntary codes such as King III Code of Corporate Governance.Business EthicsTurnall Holdings Limited is a member of the Tipp-off Anonymous service provided by Deloitte andTouché Chartered Accountants (Zimbabwe). More than 80 percent of our staff has been trained onhow to use this service in case they pick or are aware of any corrupt act impacting on the company’sprofitability. Where incidents of corruption are identified, we carry out investigations through our RiskDepartment. Depending on the nature of the case, we may also involve our external auditors, KPMGChartered Accountants (Zimbabwe) and the Zimbabwe Republic Police.Mechanisms for Stakeholders’Communication with the BoardTurnall Holdings Limited has a formal platform for engaging and communicating with stakeholders.The systems include formal meetings with investors, annual general meeting, press announcementson interim and year-end results, presentations, company website, annual reporting to shareholdersand use of proxy forms.Board & Management EthicsTurnall Holdings Limited believes that it is the responsibility of the Board and Management to leadby example in observing personal ethical practices detrimental to the business. As such, all Directorsand management are required to declare interests which might be deemed in conflict with theirappointment or contract with the company.Board StructureThe structure of our Board is such that 83 percent is Non - Executive and 17 percent is Executive. Of the10 Non-Executive directors, 7 are independent.Board ExpertiseBoard members possess skills that include finance, legal, labour, engineering, health and economics.The main responsibility of our board is to support good corporate governance, strategy formulationand guide policy implementation. Some members are further allocated responsibilities withinOur Governance &Ethics Approach (cont`d)
    • 20 T u r n a l l H o l d i n g s L i m i t e dsubcommittees in areas of strategic strength and expertise. During the year, no major changes in theBoard structure took place which could be deemed significant to the group’s operations and strategies.Sub-Committees Membership and RoleStrategic to the implementation of key policies, decisions and guidance are our committees that workclosely with management. Our committees include the Executive, Audit, New Business Development,Marketing & Chrysotile and Human Resources. It is the group’s ambition that committees are aligned toa corporate governance code that we intend to adopt like King III.CommitteeExecutiveAudit and FinanceNew Business DevelopmentCompositionMr. H Nkala (Chairman)(two Executive Directors &ten Non - Executive Directors)Mr. J Mutizwa (Chair)(two other Non ExecutiveDirectors)Mr. J Mushayavanhu (Chair)(two other Non ExecutiveDirectors)Role & ResponsibilitiesFormulating, directing andimplementation of operationaldecisions. The Executive meetsquarterly.Review records from theExecutive Committee, internalauditors and the group externalauditors in relation to interimand annual financial statementsas well as accounting andinternal controls systems.Recommend appointment andreviews of external auditors’remuneration. The committeemeets quarterly.Identify potential newbusiness portfolios. Conductsand appraise new projectsidentified to fit with thebusiness’overall vision andmission. The committee meetsat least three times a year.Our Governance &Ethics Approach (cont`d)
    • 21A n n u a l R e p o r t 2 0 1 2CommitteeMarketing & ChrysotileHuman ResourcesCompositionMrs. R Likukuma (Chair)(four Other Non - ExecutiveDirectors)Mr. H Nkala (Chair)(three other Non - ExecutiveDirectors)Role & ResponsibilitiesUnderstanding developmentssurrounding asbestos lobbyand impact on business so as toadequately update and advisethe Board. The committeemeets at least three times a year.Discuss and advise on matterspertaining to Human ResourcesPolicy, staff retention andremuneration of both non -executive, executive directorsand staff. The committee meetsat least three times a year.Our Governance &Ethics Approach (cont`d)
    • 22 T u r n a l l H o l d i n g s L i m i t e dOur Governance &Ethics Approach (cont`d)Herbert NkalaJames MutizwaJohnMushayavanhuLinda ManyengaCelestineGadzikwaRita LikukumaPeter MoyoChiranduDhlembeuKiritkuma NaikRoger DhliwayoJohn JereRobert DubeChairmanNon - ExecutiveDeputy ChairmanNon - ExecutiveNon - ExecutiveIndependentNon - ExecutiveIndependentNon - ExecutiveIndependentNon - ExecutiveIndependentNon - ExecutiveIndependentNon - ExecutiveIndependentNon - ExecutiveIndependentNon - ExecutiveManagingDirectorExecutiveFinance Director 01/09/2005 09/10/2002 01/09/2005 09/10/2002 18/09/2009 18/09/2009 27/03/2005 01/09/2005 23/09/2010 09/12/2011 20/11/2003 01/09/20054/44/44/44/44/44/44/43/ 44/43/ 44/44/44/48/107/104/44/44/69/103/65/64/69/1010/10Declaration of Directors’InterestsDuring the year under review, no directors had any material interests during their contract within thecompany which could cause significant conflict of interests with the business’objectives.The beneficialinterests of the Directors and their families in the shares of the company are given in the financialstatements section.Meeting Attendance during 2012As part of our performance and commitment, board members are expected to attend meetings whichare crucial to the company. These meetings shape the strategic direction and value creation by thecompany and its units. Attendance and information of board members is outlined below:Date of FirstAppointmentAttendanceto BoardMeetingsAttendanceto CommitteeMeetingsPositionDirector
    • 23A n n u a l R e p o r t 2 0 1 2“a core sustainability team established in 2011 played acritical role in the year under review in identifying andadvising management of our economic, environmental,and social impacts and opportunities, and theirdisclosure for accountability to the publicand our stakeholders.”Sustainability
    • 24 T u r n a l l H o l d i n g s L i m i t e dOur SustainabilityApproachWe strive to operate our business in a socially and environmentally responsible manner. The companycontinues to strengthen its systems to address both environmental and social aspects associatedwith our operations. The company adopted implementation of the Global Reporting initiatives (GRI)’sSustainability Reporting Framework by setting up a Sustainability Team with responsibility to assistin identifying and managing material issues, risks and opportunities associated with our operations.To this effect, two Sustainability teams were set up in our Harare and Bulawayo factories and are led byMr. Robert Dube (Finance Director) and Mr. Francis Chigwedere (Technical Director) respectively. In theperiod under review, our sustainability teams in Harare and Bulawayo received training on sustainabilitymanagement and reporting. The teams comprise representatives from Finance & Administration,Human Resources, Sales & Marketing, Engineering, Production and World Class Practices (Quality,Environment and Health and Safety) departments.In keeping with reasonable expectations and interest of a wide range of our stakeholders who includescustomers, suppliers, regulators, employees, shareholders, investors, government, communities andothers in general, Turnall Holdings Limited adopted an inclusive strategy which requires continuousengagement with stakeholders. Our stakeholder engagement process helps us capture materialissues from our stakeholders that help us balance the long term social, environmental and economicinterests with the principle to maximise earnings of the company and business value while respondingto concerns of our stakeholders.The process of identifying indicators reported in this report involved an assessment of the overallbusiness and key issues of concern from our stakeholders. In the process of identifying material issuesandchoiceofindicators,thesustainabilityteamwasguidedbyGRI-SustainabilityReportingFrameworkguidelines. In defining the boundary of reporting in this report, the company’s approach is to reportfor the entire company covering operating subsidiaries (with exception of dormant subsidiaries) andwhere we have material controlling influence and impacts.Data measurementData measurement in this report is according to specific indicators selected, particurarly where graphsand tables are presented. In most indicators, quantitative data is provided. Where the latter is notprovided, qualitative data is provided to relevant indicators. Data measurement is according to systemsand policies of Turnall Holdings Limited.LimitationsFor the specific indicators reported, no major limitations were encountered in providing required data.
    • 25A n n u a l R e p o r t 2 0 1 2Principal Risks andOpportunitiesOur ApproachWe believe that our operations are subject to risk and opportunities material to the business andimplementation of our strategies. Therefore, we apply a Risk Management (RM) framework which isa process applied strategy set across the company. The framework is designed to identify potentialrisks and manage those risks within our group’s risk appetite in order to enhance the outcome of ourcorporate objectives. Our Risk framework considers challenges, opportunities and uncertainties thatmay impact our strategic and financial objectivesRisk & OpportunityThreats of products ban in foreign marketsThe anti asbestos campaign led to the banningof asbestos products in some of our foreignmarkets.The non asbestos plant we have installed isnot able to produce quantities that will meetdemand for all our markets.Loss of consumer confidenceThe confidence of consumers on our productsdepends on maintaining high quality. Therefore,failing to provide appropriate quality could leadto loss of confidence.Mitigation Measure and ActionWe are upgrading the capacity of our non-asbestos plant so that it produces to meetdemand.We are also in the process of installing a concretetile machine that will produce concrete basedroofing materials.As Turnall, we ensure and monitor theproduction and safe use of asbestos containingmaterials in Zimbabwe under the guidance ofNational Chrysotile Task Force (NCTF).We depend on continuous monitoring of ourproduction processes and upgrading wherenecessary. Product performance on the marketis also continuously monitored. We haveestablished good relationships with key suppliersto ensure provision of high quality raw materials.Periodical schedules to monitor our equipmentefficiencies are also in place.
    • 26 T u r n a l l H o l d i n g s L i m i t e dRisk & OpportunityIncreased competitionWe face intensifying competition from small localproducers and imports supplying at a low cost toour markets. The opening of the global marketsand the introduction of the multi-currencysystem has attracted intensifying competitionfrom foreign competitors. Competition couldlead to a reduction in the rate at which we addnew customers especially in the export market.Recovery of the construction industryEconomic and political developments inZimbabwe show possibilities of future economicrecovery that could lead to the rise in demandfor housing and infrastructural developmentrequiring pipe and tile materials.Access to financial capitalAs the demand of our products is increasingin our markets, the organisation encounterchallenges in accessing affordable finances toenable meeting working capital requirementsnecessary to meet our market demands.Water supply challengeOur manufacturing processes depend on reliablewater supply by local authorities. Further, thedepletion of ground water sources in cities weoperate may cause challenges for our futureproductionMitigation Measure and ActionWe continue focusing on high quality customerservice and the value of our products. We areenhancing distribution channels to get closerto customers and using targeted promotionswhere appropriate to attract and retain specificcustomers by offering competitive prices. Weclosely monitor and model competitor behavior,customer partnerships and products by offeringto understand future intentions so as to be moreproactive. We continue to build strong customerrelations by offering free technical support.The company has resuscitated the pipemanufacturing plant. Neccessary resources tofund production have been secured.We are continuously having regular meetingswith financial institutions to ensure that there isalways interim financial arrangement for urgentneeds when required.The company is hoping that with investmentbeing directed towards water issues in thecities, reliability of water supply will improve.The company is, however, looking into variousoptions to manage water use and sources.Principal Risks andOpportunities (cont`d)
    • 27A n n u a l R e p o r t 2 0 1 2Critical to our strategy is building and maintaining strong relationships with key stakeholders.Our stakeholders include Customers, Suppliers, Financial Institutions, Government, Regulators,Shareholders, Investors, Employees, Local Authorities, Civil Society, Communities, Economic sectorrepresentative bodies and others. These stakeholders are identified following a due process basedon how the company impacts on them and how they can impact on the company both directly andindirectly. The prioritisation of these stakeholders is conducted following an internal due processsupported with guidance provided in the Global Reporting Initiatives (GRI)’s Sustainability reportingframework.The company developed a system of engaging with key internal and external stakeholders so as tocapture material issues that the company can improve on. In so doing, the company used a broad rangeof strategies that included one on one formal and informal meetings, presentations, media, workshops,circulars, conferences and consultations to name a few. Outcomes of these key engagements arereviewed to provide appropriate responses and action as reflected below:Stakeholder Method of Frequency Material Issues Action Taken Engagement Raised /PlannedStakeholder EngagementEmployeesShareholdersSuppliersCustomers • Works council meetings• Management meetings • NECs meeting• SHEQ meeting• Board meetings • Analyst briefing• Annual general meetings• Media• Meetings• Written correspondences• Supplier evaluations • Meetings• Correspondence through emailContinuouslyQuarterlyand annuallyContinuouslyContinuouslyBusinessperformanceand conditionsof serviceBusinessperformanceQuality of service/product andpayment modelsCustomer service,promotions,transportationissues, pricingand productperformanceImprovementof identifiedperformance gapsImprovementof identifiedperformance gapsConforming to theagreed issuesImprovementon the identifiedperformancegaps
    • 28 T u r n a l l H o l d i n g s L i m i t e dStakeholder EngagementStakeholder Method of Frequency Material Issues Action Taken Engagement Raised /PlannedFinancialInstitutionsGovernmentRegulatorsLocal Authority • Meetings• Analyst briefing• Environmental• cluster meetingsContinuouslyThree times peryear and as perdevelopmentsthat merit ameetingAt least quarterlyAt least half yearlyBusinessperformanceand investmentoptionsBusinessperformance andEnvironmental,Safety and Health,Impact of policyissuesEmployee wellnessand welfare,environment,process, productand service qualityWaste and watermanagementImprovementof identifiedperformancegaps andfostering effectivepartnershipsImprovementof identifiedperformance gapsand adoptionof new policies,standards andor legislation asappropriateRegularperformancemonitoringthrough activeengagementsto enhanceimprovementsImprovedrelations andwaste and watermanagementpracticesCivil Society(NGOs, TradeUnions, N.E.C) Community/Society (Academic)Institutions,Cluster, Media, • Meetings• Written correspondences,• Meetings and workshops/ conferences• Seminars and meetings• Road shows • Meetings factory toursAtleasttwiceayearAs necessarySafe use of asbestosenvironmentalstewardship andconditions ofemployment.Perception aboutAsbestos, companyvisibilityImproved relationsRespond andact upon anyconcerns raised
    • 29A n n u a l R e p o r t 2 0 1 2“We continue to be on the lookout for opportunities,considering that our business is well capitalised, and hasgreater latitude to access funding to finance workingcapital and expansion programmes in the short tomedium term.”New Product Initiatives
    • 30 T u r n a l l H o l d i n g s L i m i t e dOur Sustainability PerformanceMaterialsSource OUR ENVIRONMENT PERFORMANCEChallenges • Resources management: Water and Energy use. • Greenhouse gas emissions. • Waste management and emissions.Policy and Management ApproachTurnallHoldingsLimited operateswithinregulationsandbestpracticesonenvironmentalmanagement.The company has an environmental policy which guides management in articulating and managingwaste and discharge from operations. Our environmental management systems (EMS) are fully alignedwith ISO14001: Environmental Management Systems and the Environmental Management Act (EMA)Zimbabwe. This allows various audits to be carried out during operations for measuring performanceand continuous improvement in managing our environmental and climate impacts.PerformanceMaterial Use 2012 2011 (Tonnes) (Tonnes)Cement 53 640 60 712Fibre 7 866 9 056Ground Hard Waste (GHW) 2 756 2 577Total Material use 64 262 72 345The above reflects a decrease in material use to support production to meet our market demand. Totalmaterial use decreased by 11percent from 2011.Water Usage 2012 2011 m3 m3 Municipal 32 003 24 272Underground Borehole 113 275 120 818Total water usage 145 278 145 090Our water usage during the year was within the same range as that of the previous year, due tocontinued efforts to manage water usage in many of our processes. Municipal water usage increasedby 32 percent while underground borehole water usage decreased by 6 percent. Overall water usageincreased by 0.1 percent from 2011.
    • 31A n n u a l R e p o r t 2 0 1 2Energy Use (by Primary Source)Coal (Tonnes) 1,111 1,521Petrol (Litres) 138,588 130,721Diesel (Litres) 378,783 317,220Energy efficiency remains a priority of Turnall Holdings Limited. Increased energy use in the periodis compounded by national challenges in electricity supply and rail transportation systems. As such,the company relied on use of alternative energy generation during national load shedding and roadtransportation.Energy Use (by Secondary Source)Harare 3,087 3,690Bulawayo 3,241 2,115Total Usage (Megawatt) 6,328 5,805Total electricity use for the year increased by 9 percent from 2011. The increase was managed byalternative energy use as referred above.Emissions and WasteGreenhouse Gas (GHG) Emission – CO2eThe drop by 14 percent in emissions is attributed to continuous efforts towards managing greenhousegas emission and accurate quantification of our emissions. Our CO2e calculation included electricity asdirect energy consumption using a regional factor of electricity used.Our SustainabilityPerformance (cont`d)02,0004,0006,0008,00010,0007,5668,79320112012Electricity (Megawatt) 2012 2011Energy Type 2012 2011
    • 32 T u r n a l l H o l d i n g s L i m i t e dOur SustainabilityPerformance (cont`d)Waste Disposal Disposal 2012 2011 Method (Tonnes) (Tonnes)Sludge Landfill 4,365 7,005In managing the reduction of waste disposal through landfill, Turnall Holdings opted to findingalternative use of sludge waste by degrading some of the waste for other purposes. Our tonnage tolandfill reduced by 38 percent from 2011.CertificationThe company upheld its ISO14001: Environmental Management Systems certification for the periodunder review similar to 2011.OUR SOCIAL PERFORMACEHuman Capital MaintenanceChallenges • Building a stable workforce. • Match operations with workforce. • Providing equal opportunities. • Providing a safe working environment with minimum incidences. • Maintaining a health workforce.Policy and Management ApproachTurnall Holdings Limited recognises the value of the development of its employees in the long termcompany’s prosperity and sustainability. We therefore embrace the duty to treat them in a respectable,fair, human way and provide equal opportunities to all. We follow the principle of engaging ouremployees through collective bargaining and regular constructive meetings. We continue to observeprovisionofconditionsofservicestipulatedinthelawsoftheRepublicofZimbabwethroughtheLabourAct (Zimbabwe) and other international provisions through the International Labour Organisation’sDeclaration on Fundamental Principles and Rights at Work.The company employs policies appropriate to the business and markets meant to attract, retain andmotivate the quality of staff through training, development, information sharing and progressivecooperation. The company provides equal opportunity, without discriminating against gender, race,physical ability or HIV/Aids status. The company continues to enhance and apply its HIV/Aids policyadopted in 2010. Our HIV/Aids policy commits the company to maintain confidentiality over status,provide education and awareness, provide counseling, prevent spreading and promote safe sex.Waste
    • 33A n n u a l R e p o r t 2 0 1 2Our SustainabilityPerformance (cont`d)PerformanceTotal Workforce AnalysisEmployment Type 2012 2011Permanent 427 445Contract 293 277Graduate Trainees 2 7Apprentice 8 18Attachment Students 6 3Total 736 750Workforce Distribution by RegionTotal Workforce Distribution by Gender01002003004005006007008002012Female2011MaleEmployment 2012 Total 2011 TotalType Harare Bulawayo Harare Bulawayo Permanent 248 179 427 257 188 394Contract 128 165 293 137 140 277Graduate Trainees 2 - 2 5 2 7Apprentice 4 4 8 11 7 18Attachment Students 5 1 6 2 1 3
    • 34 T u r n a l l H o l d i n g s L i m i t e dOur SustainabilityPerformance (cont`d)GenderGender Distribution Statistics 2012 2011Male 698 715Female 38 35Total Workforce 736 750Our policy provides for equal opportunities between men and women, and we continue to encouragewomen to apply for any engagement opportunities that may arise in our company. Our current statusreflects that majority of our workforce is predominantly male.Health & SafetyIssues 2012 Total 2011 Total Harare Bulawayo Harare Bulawayo Rate of Injuries 3 3 6 7 9 16Lost days 41 116 157 156 158 314Work related fatalities - - - - - -Turnall Holdings Limited credits the continued efforts to maintain high standards to our workforce.The rate of our injuries went down by 63 percent from 2011. This also correlated with the number oflost days that went down by 50 percent from 2011. The company did not experience any work relatedfatalities for the past 2 years and this is credited to our workforces observing high standards of safetyprocedures during operations. All injuries and lost days were from males. No injuries or lost days wererecorded from female workforce.CertificationDuring the year under review, the company upheld its OHSAS18001: Occupational Health and SafetyStandards certification, similarly to the prior year, 2011.PRODUCTS RESPONSIBILITYChallenges • Safety of Products to customers. • Products quality. • Adequate products information.
    • 35A n n u a l R e p o r t 2 0 1 2Policy and Management ApproachTurnall Holdings Limited recognises the importance of supplying customers and markets withhigh quality and safe products. This recognition requires appropriate systems to be in place forthe management of products safety, quality and labeling information. As such, Turnall HoldingsLimited has quality management systems administered through the Department of Production andWorld Class Practices (Quality, Environment and Health & Safety). This department is responsible forimplementation and management of quality control and safety procedures during production. Ourprocedures are aligned to ISO9001 standards of Quality Management Systems and these require auditsto be carried out during production to ensure products quality control measures and productionprocess adhere to set procedures.PerformanceDuring the year under review, Turnall Holdings upheld its ISO9001: Quality Management Systemscertification, similar to the prior year 2011.OUR ECONOMIC PERFORMANCEChallenges • Negative global financial uncertainty. • Rising cost of production. • High cost of access to finance • Depressed local construction industry market. • Exchange rate variation in foreign markets.This section provides a brief summary of selected economic performance of the Company in 2012.Complete economic performance is provided in the financial statements section of this report.Key Economic Value GeneratedTurnover 42 508 441 51 865 260Net Profit before Interest and Tax (NPBIT) 1 209 889 5 122 279Cash Flow from operating activities 5 385 485 (3 178 822 )Our SustainabilityPerformance (cont`d)Direct Economic Value 2012 2011
    • 36 T u r n a l l H o l d i n g s L i m i t e dFinancial Support from GovernmentThe company acknowledges that in some instances government may assist companies in distressedpositions due to economic factors beyond their control. Through coordination of the Ministries ofFinance, Industry & Commerce, Economic Planning and Reserve Bank, a fund has been set to supportdistressed and struggling Industries and Companies. Turnall Holdings Limited did not receive any suchfinancial assistance from government during the year under review and prior.Defined Contribution Pension PlanThe company makes contributions to the SMM Holdings Pension Fund which is a Defined Contributionpension scheme for employees. The company contributed US$633 481 in 2012 and US$673 875 in2011.National Pension SchemeAll employees are required under the National Social Security Act (NSSA) to contribute to a nationaldefined contribution scheme. Contributions are made by both employer and employees according tospecific contribution legislated from time to time. The company contributed US$175 023 in 2012 andUS$179 055 in 2011.Our SustainabilityPerformance (cont`d)
    • 37A n n u a l R e p o r t 2 0 1 2TURNALLSHOPAs a way of ensuring that customers have easy access tothe company’s products, Turnall Holdings Limited hasembarked on a project to roll out factory shops in areaswhere the company is not fully represented.The year under review saw the successful opening ofRenkini Bulawayo shop and the Rusape shop.Customer Convenience
    • 38 T u r n a l l H o l d i n g s L i m i t e dThe Directors are responsible for preparing the Annual Report and the company’s financial statementsin accordance with applicable laws and regulations.The Companies Act (Chapter 24:03) requires the directors topreparethecompany’sfinancialstatementsforeach financial year.The company’s financial statements are required to present fairly, in all material respects, the financialposition of the company and its financial performance and cash flows for that period in accordancewith International Financial Reporting Standards (IFRS’s) and in the manner required by the Companies Act(Chapter 24.03) of Zimbabwe.In preparing of the company financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; state whether the financial statements have been prepared in accordance with IFRS’s; and prepare the financial statements on the going concern basis unless it is inappropriate to presume thatthe company will continue in business in the foreseable future.The directors are responsible for keeping proper accounting records which disclose with reasonableaccuracy at any time, the financial position of the company and enable them to ensure that its financialstatements comply with the Companies Act (chapter 24:03).They have general responsibility for takingsuch steps as are reasonably open to them to safeguard the assets of the company and to prevent anddetect fraud and other irregularities.The auditors are responsible for reporting on whether the company’s annual financial statements arefairly presented in accordance with the applicable International Financial Reporting Framework, andin the manner required by the Company’s Act (chapter 23:03) of Zimbabwe.Statement of complianceThe financial statements of the company have been prepared in conformity with International FinancialReporting Standards (IFRS’s), promulgated by the International Accounting Standards Board (IASB),which includes standards and interpretations approved by the IASB as well as International AccountingStandards (IAS’s) and Standing Interpretations Committee (SIC) interpretations issued under previousconstitutions.Directors’Responsibilityand Approval of Financial StatementsFor the year ended 31 December 2012
    • 39A n n u a l R e p o r t 2 0 1 2Sustainabilty reportingThe company has set its goal and commitment to providing access to relevant, high quality informationon the company’s economic, environmental and social aspects related to its activities, which allowassessment of the company’s sustainability and governance through sustainability reporting. Thecompany is striving to align its practices with global best practices reflected in voluntary frameworkssuch as the Global Reporting Framework and the King III code of corporate governance.The company’sfinancial statements for the coming period are expected to be accompanied by a sustainability reportprepared according to the requirements of GRI Sustainability Reporting Framework, ApplicationLevel - C.The sustainability Reporting Advisors are responsible for providing technical guidance and compliancecheck on selected sustainability performance indicators and reporting process in accordance with theGlobal Reporting Initiatives (GRI) Sustainability Reporting Framework – G3.1.Approval of company financial statementsThe company’s annual financial statements were approved by the board of directors on 18 March 2013.H. Nkala J. JereChairman Managing Director18 March 2013 18 March 2013Directors’Responsibilityand Approval of Financial Statements (cont`d)For the year ended 31 December 2012
    • 40 T u r n a l l H o l d i n g s L i m i t e dCompany Secretary’sCertificationFor the year ended 31 December 2012I certify that, to the best of my knowledge and belief, thecompany has lodged with the Registrar of Companiesall such returns as are required to be lodged by a publiccompany in terms of the Companies Act (Chapter 24:03)of the Republic of Zimbabwe, and that all such returns aretrue, correct and up to date.R. S. DubeCompany SecretaryHarare18 March 2013
    • 41A n n u a l R e p o r t 2 0 1 2Directors’ReportFor the year ended 31 December 2012The Directors have pleasure in presenting their report, together with the audited financial statementsof the company for the year ended 31 December 2012.Annual ResultsEarnings attributable to shareholders were US$1 059 915 for the period ended 31 December 2012(2011: US$3 968 057).Going ConcernThe directors believe that the company has sufficient resources and expected cash flows to continueas a going concern.DividendAt a meeting held on 7 March 2013, the Board of Directors resolved not to declare a final dividend forthe year to 31 December 2012 in view of the need to build resources for both working capital and newprojects that will enhance the company’s medium to long-term competitive advantage and capacity torespond to developments in its chosen markets.Investment in property, plant and equipmentCapitalexpenditurefortheyeartotaledUS$2.6million.US$2.5millionwasspentonplantandmachineryand US$0.05 million was spent on motor vehicles and office equipment. Share capitalAt 31 December 2012, the authorised share capital comprised of 690 000 000 ordinary shares. Issuedshare capital comprised of 493 040 308 ordinary shares. The details of the authorised and issued sharecapital are set out in note 10 of the financial statements.Directors and their interestsNames of the Directors are set on page 16 -17.Messrs J.Mushayavanhu, P. C. C. Moyo as well as Ms. L. Manyenga retire from the Board in terms of Article95 of the company’s Articles of Association. All of them being eligible, offer themselves for re-election.No director had, during or at the end of the year, any material interests in any contract with thecompany which could be considered to be significant in relation to company’s business. Related partytransactions are given on page 67, while the beneficial interests of the Directors and their families inthe shares of the company are given on page 77.
    • 42 T u r n a l l H o l d i n g s L i m i t e dSubstantial shareholdersAccording to information received by the Directors, the following are the only shareholders beneficiallyholding directly or indirectly, at 31 December 2012, in excess of 5% of the issued share capital of thecompany:FBC Bank Limited 47.90%FBC Holdings Limited 10.42%National Social Security Authority 9.79%Equivest Nominees 5.17%AuditorsMessrs KPMG offer themselves for re-appointment as auditors of the company for the year ending31 December 2013 and shareholders will be asked to consider their re-appointment and approve theirremuneration for the year ended 31 December 2012.Employment policiesThe continued motivation of employees and management towards overall productivity enhancementis a fundamental feature of the group’s operating philosophy and is key to management of risk. Thisis achieved through training, development, information sharing and progressive co-operative levels,including short and long-term incentives, where appropriate.The company has employed policies which are appropriate to its business and markets and whichattract, retain and motivate the quality of staff necessary to compete actively in the market. Thesepolicies are required to provide equal employment opportunities, without discriminating againstgender, race or physical ability.Payment of suppliersThe company agrees terms and conditions with suppliers before business takes place and its policy andpractice is to pay agreed invoices in accordance with the terms of payment.By order of the BoardR. S. DubeCompany Secretary18 March 2013Directors’Report (cont`d)For the year ended 31 December 2012
    • 43A n n u a l R e p o r t 2 0 1 2Independent Auditor’s ReportTo The Members of Turnall Holdings LimitedWe have audited the accompanying financial statements of Turnall Holdings Limited as set out on pages 44 to 76, which comprise thestatement of financial position at 31 December 2012, and the statements of comprehensive income, changes in equity and cash flowsfor the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies andother explanatory notes.Directors’responsibility for the financial statementsThe company’s Directors are responsible for the preparation and fair presentation of these financial statements in accordance withInternational Financial Reporting Standards and in the manner required by the Companies Act (Chapter 24:03) of Zimbabwe, andfor such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free frommaterial misstatement, whether due to fraud or error.Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordancewith International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of thefinancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevantto the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate inthe circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by theDirectors, as well as evaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the financial statements present fairly, in all material respects, the financial position of Turnall Holdings Limited at31 December 2012, and its financial performance and cash flows for the year then ended in accordance with International FinancialReporting Standards, and in the manner required by the Companies Act (Chapter 24:03) of Zimbabwe.KPMG Chartered Accountants (Zimbabwe)Harare18 March 2013KPMGMutual Gardens100 The Chase (West)Emerald HillP O Box 6 HarareZimbabweTel +263 (4) 303700 +263 (4) 302600Fax +263 (4) 303699KPMG, a Zimbabwean partnership and a member firm of theKPMG network of independent member firms affiliated with KPMGInternational Cooperative (“KPMG International”), a Swiss entity.
    • 44 T u r n a l l H o l d i n g s L i m i t e dStatement ofComprehensive IncomeYear ended 31 December 2012 Note 2012 2011 US$ US$ Turnover 2 42 508 441 51 865 260Cost of sales 3 (30 133 932 ) (36 265 512 ) Gross profit 12 374 509 15 599 748 Other operating income 4 253 761 172 836 Selling and distribution expenses 5 (1 711 288 ) (1 987 399 ) Administrative expenses 5 (6 592 576 ) (6 433 469 ) Results from operating activities 4 324 406 7 351 716 Finance income 6 3 285 76 145 Finance costs 6 (3 117 802 ) (2 305 582 ) Net finance costs (3 114 517 ) (2 229 437 ) Profit from operations before income tax expense 1 209 889 5 122 279 Income tax expense 7 (149 974 ) (1 154 222 ) Profit for the year 1 059 915 3 968 057 Other comprehensive income, net of income tax - -Total comprehensive income for the period 1 059 915 3 968 057 Number of shares in issue (000s) 9 493 040 493 040 Basic earnings per share (cents) 9 0.21 0.81
    • 45A n n u a l R e p o r t 2 0 1 2NoteStatement ofFinancial PositionAs at 31 December 2012Chairman Director18 March 2013 18 March 2013 2012 2011 US$ US$ASSETSNon-current assetsProperty, plant and equipment 13 31 685 103 31 509 622 Investment property 13.6 291 325 297 550 31 976 428 31 807 172Current assetsInventories 11 18 757 112 14 812 361 Short term investments 21.4.2 19 958 19 585 Trade and other receivables 12 16 233 953 16 217 424 Cash and cash equivalents 14 993 390 759 848 36 004 413 31 809 218 Total assets 67 980 841 63 616 390 EQUITY AND LIABILITIESCapital and reservesShare capital 10.2 4 930 403 4 930 403 Share premium 181 908 181 908 Non-distributable reserve 7 655 239 7 655 239 Revaluation reserve 7 639 504 7 639 504 Retained earnings 9 128 346 8 068 431 29 535 400 28 475 485 Non-current liabilitiesLoans and borrowings 8 - 1 138 295 Deferred taxation 7.4 6 604 514 6 454 677 6 604 514 7 592 972 Current liabilitiesLoans and borrowings 8 10 779 318 12 455 545 Trade and other payables 15 18 472 943 12 149 775 Provisions 16 605 494 584 343 Taxation 1 488 266 2 126 818 Bank overdraft 14 494 906 231 452 31 840 927 27 547 933 Total liabilities 38 445 441 35 140 905 Total equity and liabilities 67 980 841 63 616 390
    • 46 T u r n a l l H o l d i n g s L i m i t e dStatement ofChanges in EquityYear ended 31 December 2012 Non- Share Share Revaluation distributable Retained capital premium reserve reserve earnings Total US$ US$ US$ US$ US$ US$ Balance at 1 January 2011 4 930 403 181 908 7 639 504 7 655 239 4 953 334 25 360 388Total comprehensive incomefor the yearProfit for the year - - - - 3 968 057   3 968 057Dividend paid - - - - (852 960 ) (852 960 ) Balance at 31 December 2011 4 930 403 181 908 7 639 504 7 655 239 8 068 431 28 475 485 Total comprehensive incomefor the yearProfit for the year - - - - 1 059 915 1 059 915 Balance at 31 December 2012 4 930 403 181 908 7 639 504 7 655 239 9 128 346 29 535 400
    • 47A n n u a l R e p o r t 2 0 1 2Statement ofCash FlowsYear ended 31 December 2012 Note 2012 2011CASH FLOWS FROM OPERATING ACTIVITIES US$ US$ Profit for the year 1 059 915 3 968 057 Adjustments for: Depreciation of property, plant and equipment 13.2 2 422 240 1 856 542Depreciation of investment property 13.6 6 225 6 225Net finance costs 6 3 114 517 2 229 437 Unrealised exchange losses (126 110 ) (255 612 ) Loss on disposal of property, plant and equipment 6 438 - Net change in other investments (373 ) 1 544 Income tax expense 7 149 974 1 154 222 Operating cash flows before reinvestment in working capital 6 632 826 8 960 415 Increase in inventories (3 944 751 ) (6 776 345 ) Increase in trade and other receivables (16 530 ) (7 542 534 ) Increase in provisions, trade and other payables 6 344 320 6 185 992 9 015 865 827 528 Withholding tax paid (137 ) (1 160 ) Income tax paid (638 551 ) (2 030 000 ) Realised exchange (losses)/gains (2 956 ) 74 780Interest paid (2 988 736 ) (2 049 970 ) (3 630 380 ) (4 006 350 ) Net cash flows from operating activities 5 385 485 (3 178 822 ) CASH FLOWS FROM INVESTING ACTIVITIESInterest received 3 285 1 365 Acquisition of property, plant and equipment 13 (2 604 160 ) (4 415 003 ) Net cash flows from investing activities (2 600 875 ) (4 413 638 ) CASH FLOWS FROM FINANCING ACTIVITIES (Decrease)/increase in loans and borrowings (2 814 522 ) 7 828 107 Dividend paid - (852 960 ) Net cash flows from financing activities (2 814 522 ) 6 975 147 DECREASE IN CASH AND CASH EQUIVALENTS 14 (29 912 ) (617 313 )
    • 48 T u r n a l l H o l d i n g s L i m i t e dThe principal accounting policies of the company, which are set out below, have been consistentlyfollowed in all material respects.BASIS OF PREPARATIONStatement of complianceThe financial statements of the company have been prepared in accordance with InternationalFinancial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB)which includes standards and interpretations approved by the IASB as well as International AccountingStandards (IAS’s) and Standing Interpretations Committee (SIC) interpretations issued under previousconstitutions. The financial statements are based on statutory records that are maintained under thehistoric cost convention and are expressed in United States dollars (US$).SIGNIFICANT ACCOUNTING POLICIESAdoption of new and revised financial reporting standards and interpretationsThe following revised standards issued by the International Financial Reporting InterpretationsCommittee (IFRIC) are effective for the current year.IAS 12 Deferred tax - Recovery of Underlying Assets.FRS 1 Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters.IFRS 7 Transfers of Financial Assets.The adoption of these revised standards in the current year has not led to any changes in thecompany’s accounting policies. These standards do not have any financial effect on the recognition ormeasurement of transactions and events, nor the financial position or performance of the company.Their effects are limited to the nature and extent of disclosure to be made by the company.The following standards and interpretations were in issue but not yet effective:IAS 1 amendment Presentation of Financial Statements: Presentation of Items of Other Comprehensive Income - Annual periods beginning on or after 1 July 2012.IAS 19 amendment Employee Benefits: Defined benefit plans - Annual periods beginning on or after 1 January 2013.IAS 27 Separate Financial Statements (2012) - Annual periods beginning on or after 1 January 2013.IAS 28 Investments in Associates and Joint Ventures (2012) - Annual periods on or after 1 January 2013.IAS 32 Offsetting Financial Assets and Financial Liabilities - Annual periods beginning on or after 1 January 2015.Statement ofAccounting Policies31 December 2012
    • 49A n n u a l R e p o r t 2 0 1 2IFRS 1 amendment Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters - Annual periods beginning on or after 1 July 2012.IFRS 9 (2009) Financial Instruments - Annual periods beginning on or after 1 January 2015.IFRS 9 (2011) Financial Instruments - Annual periods beginning on or after 1 January 2015.IFRS 10 Consolidated Financial Statements - Annual periods beginning on or after 1 January 2013.IFRS 11 Joint Arrangements - Annual periods beginning on or after 1 January 2013.IFRS 12 Disclosure of Interests in Other Entities - Annual periods beginning on or after 1 January 2013.IFRS 13 Fair Value Measurement - Annual periods beginning on or after 1 January 2013.IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine - Annual periods beginning on or after 1 January 2013.IAS 19, IFRS 11 and IFRIC 20 are not applicable to the business of the entity and will, therefore, have noimpactonfuturefinancialstatements.TheDirectorsareoftheopinionthattheimpactoftheapplicationof the applicable standards and interpretations will be as follows:Amendment to IAS 1 - Presentation of Financial Statements: Presentation of items of otherComprehensive IncomeThe amendment to IAS 1 will be adopted by the company for the first time for its financial reportingperiod ending 31 December 2013.The company will present those items of other comprehensive income that may be reclassified to profitor loss in the future separately from those that would never be reclassified to profit or loss. The relatedtax effects for the two sub-categories will be shown separately.This is a change in presentation and will have no impact on the recognition or measurement of itemsin the financial statements.This amendment will be applied retrospectively and the comparative information will be restated.IFRS 9 (2009) - Financial InstrumentsIFRS 9 (2009) will be adopted by the company for the first time for its financial reporting period ending31 December 2015. The standard will be applied retrospectively, subject to transitional provisions.Statement ofAccounting Policies (cont`d)31 December 2012SIGNIFICANT ACCOUNTING POLICIES (cont`d)Adoption of new and revised financial reporting standards and interpretations (cont`d)
    • 50 T u r n a l l H o l d i n g s L i m i t e dIFRS 9 (2009) addresses the initial measurement and classification of financial assets and will replace therelevant sections of IAS 39.Under IFRS 9 (2009), there are two options in respect of classification of financial assets, namely, financialassets measured at amortised cost or at fair value. Financial assets are measured at amortised costwhen the business model is to hold assets in order to collect contractual cash flows and when they giverise to cash flows that are solely payments of principal and interest on the principal outstanding. Allother financial assets are measured at fair value. Embedded derivatives are no longer separated fromhybrid contracts that have a financial asset host.The impact on the financial statements for the company cannot be reasonably estimated as at31 December 2012.IFRS 9 (2011) - Financial InstrumentsIFRS 9 (2011) will be adopted by the company for the first time for its financial reporting period ending31 December 2015. The standard will be applied retrospectively, subject to transitional provisions.IFRS 9 (2011) addresses the measurement and classification of financial liabilities and will replace therelevant sections of IAS 39.Under IFRS 9 (2011), the classification and measurement requirements of financial liabilities are thesame as per IAS 39, except for the following two aspects: Under IFRS 9 (2011), derivative liabilities that are linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured, are measured at fair value.IFRS 9 (2011) incorporates the guidance in IAS 39 dealing with fair value measurement and accountingfor derivatives embedded in a host contract that is not a financial asset, as well as the requirements ofIFRIC 9 - Reassessment of Embedded Derivatives.Statement ofAccounting Policies (cont`d)31 December 2012SIGNIFICANT ACCOUNTING POLICIES (cont`d)Adoption of new and revised financial reporting standards and interpretations (cont`d)Fairvaluechangesforfinancialliabilities(otherthanfinancialguaranteesandloancommitments)designated at fair value through profit or loss, that are attributable to the changes in the creditrisk of the liability, will be presented in other comprehensive income. The remaining amountof the fair value change is recognised in profit or loss. However, if this requirement creates orenlarges an accounting mismatch in profit or loss, then the whole fair value change is presentedin profit or loss. The determination as to whether such presentation would create or enlargean accounting mismatch is made on initial recognition and is not subsequently reassessed.
    • 51A n n u a l R e p o r t 2 0 1 2IFRS 13-Fair Value MeasurementIFRS 13 provides a single source of guidance on how fair value is measured, and replaces the fair valuemeasurement guidance that is currently dispersed throughout IFRS. Subject to limited exceptions,IFRS 13 is applied when fair value measurements or disclosures are required or permitted by otherIFRSs. IFRS 13 is effective for annual periods beginning on or after 1 January 2013 with early adoptionpermitted.The impact on the financial statements for 31 December 2015 cannot be reasonably estimated as at31 December 2012.Use of accounting judgements, estimates and assumptionsThe preparation of financial statements requires management to make judgements, estimates andassumptions that affect the application of accounting policies and the reported amounts of assets,liabilities, income and expenses. Actual results may differ from these estimates.Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognised in the period in which the estimates are revised and in any future periodsaffected. Information about significant areas of estimation uncertainty and critical judgement inapplying accounting policies that have the most significant effect on the amounts recognised in thefinancial statements is included in the following notes: Statement ofAccounting Policies (cont`d)31 December 2012SIGNIFICANT ACCOUNTING POLICIES (cont`d)Adoption of new and revised financial reporting standards and interpretations (cont`d)Valuation of property, plant and equipmentThe company reviews its estimates for residual values, useful lives and methods ofdepreciation of all plant and equipment annually. Residual values of each asset have beenassessed by reviewing the fair value of the assets after taking into account age, usageand obsolescence. In determining recoverable amount of the assets, expected cashflows are discounted to their present values. In determining useful lives, managementconsiders technology changes, local operating environment and the use of each asset. Current and deferred taxationSignificantjudgementisrequiredtodeterminethetotalprovisionforcurrentanddeferredtaxes.There are many transactions and calculations for which the ultimate tax determination andtiming of payment is uncertain. In particular, when calculating deferred taxation, the effectivetax rate applicable on the temporary differences in property, plant and equipment depends onthe method by which the carrying amount of property, plant and equipment will be realised.
    • 52 T u r n a l l H o l d i n g s L i m i t e dStatement ofAccounting Policies (cont`d)31 December 2012RevenueRevenue represents amounts invoiced to customers for goods supplied and services rendered, net ofvalue added tax and allowances for defective goods. Revenue from the sale of goods in the courseof ordinary activities is measured at the fair value of the consideration received or receivable, net ofreturns, trade discounts and volume rebates. Revenue is recognised when significant risks and rewardsof ownership have been transferred to the customer, recovery of the consideration is probable,the associated costs and possible return of goods can be estimated reliably, there is no continuingmanagement involvement with the goods, and the amount of revenue can be measured reliably. If it isprobable that discounts will be granted and the amount can be measured reliably, then the discount isrecognised as a reduction of revenue as the sales are recognised.The timing of the transfer of risks and rewards varies depending on the individual terms of the salesagreement. For domestic sales, transfer of risks and rewards usually occurs when the product isdelivered to the customer’s designated place of business, however, for international sales, transferoccurs on loading the goods onto the relevant carrier at the Turnall Holdings Limited premises.Basis of consolidationSubsidiariesSubsidiaries are those enterprises controlled by the company. Control exists when the company hasthe power, directly or indirectly, to govern the financial and operating policies of an enterprise soas to obtain benefits from its activities. The financial statements of subsidiaries are included in theconsolidated financial statements from the date that control commences until the date that controlceases.Transactions eliminated on consolidationIntra-group balances and transactions, and any unrealised gains from intra-group transactions,are eliminated in preparing the consolidated financial statements. Unrealised gains arising fromtransactionswithassociatesandjointlycontrolledentitiesareeliminatedtotheextentofthecompany’sinterest in the enterprise, against the investment in the associate. Unrealised losses are eliminated inthe same way as unrealised gains, but only to the extent that there is no evidence of impairment.Property, plant and equipmentItems of property, plant and equipment are measured at cost less accumulated depreciation andimpairment losses.SIGNIFICANT ACCOUNTING POLICIES (cont`d)
    • 53A n n u a l R e p o r t 2 0 1 2Statement ofAccounting Policies (cont`d)31 December 2012Property, plant and equipment (cont’d)Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributableto bringing the asset to a working condition for its intended use, and the costs of dismantling andremoving the items and restoring the site on which they are located. Purchased software that is integralto the functionality of the related equipment is capitalised as part of that equipment.When parts of an item of property, plant and equipment have different useful lives, they are accountedfor as separate items (major components) of property, plant and equipment. Gains and losses ondisposal of an item of property, plant and equipment are determined by comparing the proceeds fromdisposal with the carrying amount of property, plant and equipment, and are recognised net withinother income in profit or loss.The cost of replacing a part of an item of property, plant and equipment is recognised in the carryingamount of the item if it is probable that the future economic benefits embodied within the part willflow to the company, and its cost can be measured reliably. The carrying amount of the replaced part isderecognised.The costs of the day-to-day servicing of property, plant and equipment are recognised inprofit or loss as incurred.Items of property, plant and equipment are revalued at least once every three years or earlier ifit becomes apparent that their carrying amount has declined below their recoverable amount to amaterial extent.Gross carrying amounts of property, plant and equipment are determined by revaluation on a netreplacement basis. Revaluation surpluses are realised on disposal of the assets.Subsequent costsThe cost of replacing part of an item of property, plant and equipment is recognised in the carryingamount of the item if it is probable that the future economic benefits embodied within the part willflow to the company and its cost can be measured reliably.DepreciationDepreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives ofeach part of an item of property, plant and equipment, since this most closely reflects the expectedpattern of consumption of the future economic benefits embodied in the asset. The depreciation ratesare shown below:Industrial buildings 2.5% per annumPlant and machinery 7.5 - 20% per annumFurniture, fittings and office equipment 10 - 20% per annumMotor vehicles 20 - 25% per annum SIGNIFICANT ACCOUNTING POLICIES (cont`d)
    • 54 T u r n a l l H o l d i n g s L i m i t e dStatement ofAccounting Policies (cont`d)31 December 2012Property, plant and equipment (cont’d)The residual values and useful lives, if not insignificant, are reassessed annually.Expenditure on additions and improvements to property, plant and equipment is capitalised for majorprojects on the basis of measured work completed and qualifying for recognition.Impairment of assetsFinancial assetsA financial asset is considered to be impaired if objective evidence indicates that one or more eventshave had a negative effect on the estimated future cash flows of that asset.An impairment loss in respect of a financial asset measured at amortised cost is calculated as thedifference between its carrying amount and the present value of the estimated future cash flowsdiscounted at the original effective interest rate. An impairment loss in respect of financial assets iscalculated as the difference between its carrying amount and its current fair value.Significant financial assets are tested for impairment on an individual basis. The remaining financialassets are assessed collectively in groups that share similar credit risk characteristics. All impairmentlosses are recognised in profit or loss.An impairment loss is reversed if the reversal can be related objectively to an event occurring after theimpairment loss was recognised. For available for sale financial assets that are equity securities, thereversal is recognised directly in equity. For other financial assets the reversal is recognised in profit orloss.Non-financial assetsThe carrying amounts of the company’s non-financial assets, other than inventories and deferred taxassets, are reviewed at each reporting date to determine whether there is any indication of impairment.If any such indication exists then the assetís recoverable amount is estimated.An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceedsits recoverable amount. A cash-generating unit is the smallest identifiable asset group that generatescash flows that largely are independent from other assets and groups. Impairment losses are recognisedin profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first toreduce the carrying amount of any goodwill allocated to the units and then to reduce the carryingamount of the other assets in the unit (group of units) on a pro-rata basis.SIGNIFICANT ACCOUNTING POLICIES (cont`d)
    • 55A n n u a l R e p o r t 2 0 1 2Statement ofAccounting Policies (cont`d)31 December 2012Impairment of assets (cont’d)The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fairvalue less costs to sell. In assessing value in use, the estimated future cash flows are discounted to theirpresent value using a pre-tax discount rate that reflects current market assessments of the time valueof money and the risks specific to the asset.For intangible assets that are not yet available for use, the recoverable amount is estimated at eachreporting date. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss.TaxationIncome tax on the estimated taxable income for the year comprises current and deferred tax. Incometax is recognised in the statement of comprehensive income except to the extent that it relates toitems recognised directly to equity, in which case it is recognised in equity.Current tax is the expected tax payable on the taxable income for the year, using tax rates enactedor substantially enacted at the balance sheet date, and any adjustment to tax payable in respect ofprevious years.Deferred tax liabilities are recognised for all taxable temporary differences, unless the deferred taxliability arises from: Goodwill The initial recognition of an asset or liability in a transaction which: - is not a business combination, and - at the time of the transaction, affects neither accounting profit nor taxable profit.Deferred tax assets are recognised for all deductable temporary differences to the extent that it isprobable that taxable profit will be available against which the deductable temporary differences canbe utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in atransaction which is not a business combination.Deferred tax is calculated based on the tax rates that are expected to apply to the period when theasset or liability is settled. The effect on deferred tax of any changes in tax rates is charged to thestatement of comprehensive income, except to the extent that it relates to the items previouslycharged or credited directly to equity.SIGNIFICANT ACCOUNTING POLICIES (cont`d)
    • 56 T u r n a l l H o l d i n g s L i m i t e dStatement ofAccounting Policies (cont`d)31 December 2012InventoriesInventories are stated at the lower of cost and net realisable value. Net realisable value is the estimatedselling price in the ordinary course of business, less the estimated costs of completion and sellingexpenses.The cost of inventories is based on the weighted average basis and includes expenditure incurred inacquiring the inventories and bringing them to their existing location and condition.ProvisionsA provision is recognised in the statement of financial position when the company has a legal orconstructive obligation as a result of a past event, and it is probable that an outflow of economicbenefits will be required to settle the obligation. If the effect is material, provisions are determined bydiscounting the expected future cash flows at a pre-tax rate that reflects current market assessments ofthe time value of money and, where appropriate, the risks specific to the liability. The unwinding of thediscount is recognised as finance costs.Foreign currenciesForeign currency transactions (which are currencies other than the functional currency), on initialrecognition, are translated at the exchange rates ruling on the date of the transaction. Subsequent tothat, all foreign currency denominated financial assets and liabilities are translated at each reportingdate, using the exchange rates ruling at that date. Accordingly, foreign currency denominated incomeand expenses are recorded at exchange rates ruling on the date of the transaction.Exchange differences are recognised in profit or loss in the period in which they arise.Financial instrumentsNon-derivative financial instruments carried in the statement of financial position comprise: cash andcash equivalents, trade and other receivables, trade and other payables, provisions and amounts owingto and from related parties. These instruments are recognised initially at fair value plus, for instrumentsnot at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initialrecognition non-derivative financial instruments are measured as described below:Trade and other receivablesTrade and other receivables are measured at amortised cost using the effective interest rate method. Aprovision for impairment of trade receivables is established when there is objective evidence that theCompany will not be able to collect all amounts due according to the original terms of receivables.Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy orfinancial re-organisation and default or delinquency in payments are considered indicators that thetrade receivables are impaired. When a trade receivable is uncollectible, it is written off against theSIGNIFICANT ACCOUNTING POLICIES (cont`d)
    • 57A n n u a l R e p o r t 2 0 1 2Statement ofAccounting Policies (cont`d)31 December 2012Financial Instruments (cont’d)allowance for trade receivables. Subsequent recoveries of amounts previously written off are creditedagainst the trade receivables impairment provision in the statement of comprehensive income.Cash and cash equivalentsCash and cash equivalents comprise cash on hand, deposits held on call with banks, and investments inmoney market instruments. Cash and cash equivalents are measured at fair value, with any impairmentor appreciation in value of foreign currency denominated balances arising from changes in exchangerates, being written off or credited against the exchange gains and losses account in the statement ofcomprehensive income. In the statement of financial position, bank overdrafts are shown under currentliabilities.Trade payables, other payables and amounts owing to and from related partiesThese financial liabilities are measured at amortised cost using the effective interest rate method.OffsetIf a legally enforceable right exists to set-off recognised amounts of financial assets and liabilities,which are in determinable monetary amounts and the company intends to settle on a net basis, therelevant financial assets and liabilities are offset.Pension costsA defined contribution plan is a post-employment benefit plan under which an entity pays fixedcontributions into a separate entity and will have no legal or constructive obligation to pay furtheramounts. Obligations for contributions to defined contribution pension plans are recognised as anemployeebenefitexpenseinprofitorlossintheperiodsduringwhichservicesarerenderedbyemployees.Share based payment transactionsThe share option programme allows Turnall Fibre Cement employees to acquire shares of TurnallHoldings Limited. The share-based payment transactions are recognised as employee expenses withcorresponding increases in equity.Where the fair value of the options cannot be measured reliably, theentity shall adopt the intrinsic value method, which is the difference between the market value andexercise price of the underlying instrument.Borrowing costsBorrowing costs that are directly attributable to the acquisition, construction or production of aqualifying asset are capitalised and included in the cost of that qualifying assets. These compriseborrowing costs that would have been avoided if the expenditure on the qualifying asset had not beenmade. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.SIGNIFICANT ACCOUNTING POLICIES (cont`d)
    • 58 T u r n a l l H o l d i n g s L i m i t e dStatement ofAccounting Policies (cont`d)31 December 2012Finance income and finance costsFinance income comprises interest income on funds invested (including available-for-sale financialassets), gains on the disposal of available-for-sale financial assets, fair value gains on financial assetsat fair value through profit or loss. Interest income is recognised as it accrues in profit or loss, using theeffective interest rate method.Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions anddeferred consideration, losses on disposal of available-for-sale financial assets, fair value losses onfinancial assets at fair value through profit or loss and contingent consideration, impairment lossesrecognised on financial assets (other than trade receivables).Borrowing costs that are not directly attributable to the acquisition, construction or production of aqualifying asset are recognised in profit or loss using the effective interest method.Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basisas either finance income or finance cost depending on whether foreign currency movements are in anet gain or net loss position.Investment propertyInvestment property is property held either to earn rental income or for capital appreciation or for both,but not for sale in the ordinary course of business, use in the production or supply of goods or servicesor for administrative purposes. Investment property is initially measured at cost and subsequentlyusing the cost model with any depreciation change therein recognised in profit or loss. Cost includesexpenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costsdirectly attributable to bringing the investment property to a working condition for their intended useand capitalised borrowing costs. Any gain or loss on disposal of an investment property (calculatedas the difference between the net proceeds from disposal and the carrying amount of the item) isrecognised in profit or loss.SIGNIFICANT ACCOUNTING POLICIES (cont`d)
    • 59A n n u a l R e p o r t 2 0 1 2Notes to theFinancial Statements31 December 2012 2012 20112. REVENUE US$ US$ Sale of goods - local sales 41 516 549 50 206 737 - export sales 991 892 1 658 523 42 508 441 51 865 260 Export sales are made up of sales within the region to South Africa, Mozambique and Botswana.3. COST OF SALES Depreciation of property, plant and equipment 2 119 318 1 571 942 Raw materials 21 766 429 25 671 283 Staff costs 6 052 734 6 354 093 Other 195 451 2 668 194 30 133 932 36 265 5124. OTHER OPERATING INCOME Bad debts previously written off recovered - 14 795 Fair value adjustment on financial assets held for trading (note 21.4.2) 373 (1 544 ) Raw material sales 35 363 122 820 Rental income 36 000 16 800 Scrap sales 28 491 4 490 Sundry income 153 534 15 475 253 761 172 836 1. INCORPORATION AND ACTIVITIES The company was incorporated as Penhalonga Exploration (Private) Limited on 16 August 1962.On 14 October 1970, Penhalonga Exploration (Private) Limited changed its name to PenhalongaDevelopment Company (Private) Limited, which was again changed on 29 March 1976 to PDC (Private)Limited, and then to Turnall Holdings Limited on 31 October 2002. Its main business involves theproduction of building and construction materials comprising corrugated sheeting, flat sheets, pantiles, pressure pipes, sewer pipes and related accessories.Included in sundry income is interest charged on overdue trade receivables amounting to US$152 018. Raw material sales represent fibre sold to a company which specialises in car brakes.
    • 60 T u r n a l l H o l d i n g s L i m i t e d 2012 20115. OPERATING EXPENSES US$ US$ Selling and distribution expenses Depreciation of property, plant and equipment 39 252 39 231 Staff costs 845 612 853 333 Other 826 424 1 094 835 1 711 288 1 987 399 Administrative expenses Auditors’remuneration 90 099 73 380 Depreciation of property, plant and equipment 263 070 245 366 Depreciation of investment property 6 225 6 225 Directors’remuneration - executive 889 216 737 989 - non-executive 138 402 146 020 Loss on disposal of property, plant and equipment 6 438 - Management fees 637 537 778 238 Staff costs 2 146 924 2 329 269 Other 2 414 065 2 116 982 6 592 576 6 433 4696. NET FINANCE COSTS Finance income Interest income 3 285 1 365 Exchange gains on current assets and current liabilities denominated in currencies other than the US$ - 74 780 3 285 76 145 Finance costs Interest expense (2 988 736 ) (2 049 970 ) Exchange losses on current assets and current liabilities denominated in currencies other than the US$ (129 066 ) (255 612 ) (3 117 802 ) (2 305 582 ) Net finance cost (3 114 517 ) (2 229 437 ) Notes to theFinancial Statements (cont`d)31 December 2012
    • 61A n n u a l R e p o r t 2 0 1 2Notes to theFinancial Statements (cont`d)31 December 2012 2012 2011 7. TAXATION US$ US$7.1 Charge based on profit for the year Current tax - 1 735 866 Deferred tax (note 7.4) 149 837 (582 804 ) Withholding tax 137 1 160 149 974 1 154 2227.2 Reconciliation of tax charge Notional tax charge based on profit for the year 311 547 1 323 433 Taxation savings resulting from permanent differences (161 710 ) (170 371 ) Withholding tax 137 1 160 149 974 1 154 2227.3 Effective tax rate 12% 23% 7.4 Deferred tax liability Movement in temporary differences during the year: Balance at Balance at 31 December Recognised Recognised 31 December 2011 in income in equity 2012 US$ US$ US$ US$ Property, plant and equipment 6 598 107 102 233 - 6 700 340 Mark to market adjustment on financial assets held for trading 980 19 - 999 Deferred tax resulting from other temporary differences (144 410 ) 47 585 - (96 825 ) 6 454 677 149 837 - 6 604 514
    • 62 T u r n a l l H o l d i n g s L i m i t e d8. LOANS AND BORROWINGS This note provides information about the company’s interest-bearing loans and borrowings, whichare measured at amortised cost. 2012 2011 Non-current liabilities US$ US$ Eastern and Southern African Trade and Development Bank - 1 138 295 Current liabilities Eastern and Southern African Trade and Development Bank 1 379 208 2 538 762 FBC Bank Limited 3 244 379 4 224 063 FBC Reinsurance Limited 1 659 654 - Kingdom Bank Limited 1 206 482 1 990 017 African Banking Corporation of Zimbabwe Limited 3 289 595 3 702 703 10 779 318 12 455 545 Terms and debt repayment schedule These loans are analysed as follows: Kingdom Bank Limited - US$2.54 million global loan facility. Interest is payable at therate of 18% per annum. The facility is secured by finished stock and raw materials. FBC Bank Limited - US$5 million global loan facility that is unsecured. Interest is payable at anaverage rate of 20% per annum. FBC Reinsurance Limited - US$2 million facility in the form of a commercial paper which isunsecured. Interest is payable at 20% per annum. 9. EARNINGS PER SHARE Notes to theFinancial Statements (cont`d)31 December 2012Eastern and Southern African Trade and Development Bank - US$5 million loan facility,the original tenure being 36 months from the date of signing the loan agreement andinterest rate per annum is LIBOR plus 4% per annum. The loan is secured on both theHarare and Bulawayo properties. The balance as at 31 December 2012 is now all current andhas to be repaid by 31 December 2013.African Banking Corporation of Zimbabwe Limited - U$5 million global loan facility that isunsecured. Interest is payable at an average rate of 16% per annum.The facilities were for working capital purposes whereas the Eastern and Southern African Tradeand Development Bank loan was for the Newtec plant in Bulawayo.Basic earnings per share has been calculated based on profit for the year of US$1 059 915(2011: US$3 968 057) and 493 040 308 (2011: 493 040 308) shares in issue for the year ended31 December 2012.
    • 63A n n u a l R e p o r t 2 0 1 2Notes to theFinancial Statements (cont`d)31 December 2012 2012 201110. SHARE CAPITAL US$ US$10.1 Authorised 690 000 000 ordinary shares of US1 cent each 6 900 000 6 900 00010.2 Issued and fully paid 493 040 308 ordinary shares of US1 cent each 4 930 403 4 930 40310.3 Of the 196 959 692 unissued shares, 14 197 062 are reserved for an Employee Share Participation Trust (ESPT) and 182 762 630 are under the control of the Directors, subject to Section 183 of the Companies Act (Chapter 24:03) and the listing requirements of the Zimbabwe Stock Exchange.10.4 At the Extraordinary General Meeting of TH Zimbabwe Shareholders, on 11 November 2002, approval was granted for Turnall Holdings Limited to establish an Employee Share Option Scheme (ESOS) for managerial employees of the company and the allotment to the ESOS, for the grant of options to qualifying members of staff thereunder, of 34 500 000 ordinary shares, or up to five percent (5%) of the issued share capital of Turnall Holdings Limited. The ESOS has been exhausted and the shares have been allocated under the ESOS.10.5 Also, approval was granted for Turnall Holdings Limited to establish an Employee Share ParticipationTrust ( ESPT) for non-managerial employees of the company and the allotment to the ESPT, for the benefit of qualifying members of staff thereunder, of 22 738 474 ordinary shares, or up to five percent (5%) of the issued share capital of Turnall Holdings Limited. Of the 22 738 474 ordinary shares reserved for employee share participation trust, 8 541 412 have been issued. The Directors will administer the remaining shares allotted to the ESPT. 2012 201111. INVENTORIES US$ US$ Raw materials 2 736 146 6 245 209 Work in progress 2 057 490 69 537 Finished goods 12 454 741 7 057 886 Consumables 1 508 735 1 439 729 18 757 112 14 812 36112. TRADE AND OTHER RECEIVABLES Trade receivables 14 763 313 15 033 985 Amounts owing by group companies 84 896 - Prepayments 180 298 383 827 Other receivables 1 205 446 799 612 16 233 953 16 217 424 Trade receivables are shown net of an allowance for credit losses of US$27 765 (2011: US$283 375).
    • 64 T u r n a l l H o l d i n g s L i m i t e dNotes to theFinancial Statements (cont`d)31 December 2012Investment property comprises of a commercial property at number 4 Darwin Road, Workington, Harare. The rental is indexedto consumer prices. Subsequent renewals are negotiated with the lessee and, on average, the renewal period is 12 months. Nocontingent rents are charged.Included in additions to plant and machinery is capital work in progress amounting to US$1 542 721. This represent the full invoicevalue of the concrete tile plant and all other incidental the costs for the concrete tile plant incurred up to 31 December2012.Installation is in progress and commissioning is planned for June 2013.13. PROPERTY, PLANT AND EQUIPMENT Freehold Plant and Motor Furniture Office land Buildings machinery vehicles andfittings equipment Totall US$ US$ US$ US$ US$ US$ US$13.1 Cost At 31 December 2011 664 800 7 395 200 25 323 762 1 141 033 185 830 242 523 34 953 148 Additions - - 2 534 145 40 290 6 031 23 694 2 604 160 Disposals - - - (12 461 ) - - (12 461 ) At 31 December 2012 664 800 7 395 200 27 857 907 1 168 862 191 861 266 217 37 544 84713.2 Depreciation At 31 December 2011 - 369 767 2 565 445 412 653 36 949 58 712 3 443 526 Charge for the year - 184 871 1 936 973 230 709 19 060 50 627 2 422 240 Disposals - - - (6 022 ) - - (6 022 ) At 31 December 2012 - 554 638 4 502 418 637 340 56 009 109 339 5 859 74413.3 Net book amount At 31 December 2012 664 800 6 840 562 23 355 489 531 522 135 852 156 878 31 685 103 At 31 December 2011 664 800 7 025 433 22 758 317 728 380 148 881 183 811 31 509 62213.4 The title deeds for both the Harare and Bulawayo plants are held by Eastern and Southern African Trade and Development Bank as security for the loan facility. See note 8 for further details of the loan.13.5 2012 201113.6 Investment Property US$ US$ Cost 310 000 310 000 Closing accumulated depreciation (18 675 ) (12 450 ) Charge for the year (6 225 ) (6 225 ) Opening accumulated depreciation (12 450 ) (6 225 ) Balance at 31 December 291 325 297 550
    • 65A n n u a l R e p o r t 2 0 1 2 Included in other income (note 4) is rental income of US$36 000 (2011: US$16 800) relating to this investment property. 2012 201114. CASH AND CASH EQUIVALENTS US$ US$ Balance at the beginning of year 528 396 1 145 709 Balance at the end of the year 498 484 528 396 Bank and cash balances 993 390 759 848 Bank overdraft and borrowings (494 906 ) (231 452 ) Decrease in cash and cash equivalents (29 912 ) (617 313 )15. TRADE AND OTHER PAYABLES 15.1 Analysis Trade payables 8 363 783 6 110 447 Amounts owing to group companies (note 17.2) 2 353 449 1 620 179 Value Added Tax 4 174 433 2 146 692 Other payables 3 581 278 2 272 457 18 472 943 12 149 77515.2 Contingent liabilities The need to fund the importation of fibre has continued to put a strain on the company’s working capital. To manage the timing of the cash flows management has been establishing letters of credit (LCs). This is an off balance sheet transaction and can only be recognised in the financial statements if the company does not accumulate enough funding as of the date of maturity. To ensure funding on maturity of the letters of credit, the company thus established sinking funds into which weekly deposits are made. The recognition of the other costs of establishing these LCs in profit or loss is matched to the receipt and/or usage of the related raw materials. Below is a summary of the letters of credit raised by the company in the year under review and still operational: Financial institution Tenure (days) Maturity date Amount (US$) Kingdom Bank Limited 270 16 September 2013 1 540 000 Ecobank Limited 180 30 June 2013 2 000 000 3 540 000 Notes to theFinancial Statements (cont`d)31 December 2012The fair value of the building as at 31 December 2012 is US$310 000 (2011: US310 000). This fairvalue is based on a Directors’valuation made with reference to the market prices.13.6 Investment Property (cont’d)13. PROPERTY, PLANT AND EQUIPMENT (cont’d)
    • 66 T u r n a l l H o l d i n g s L i m i t e dNotes to theFinancial Statements (cont`d)31 December 201215. TRADE AND OTHER PAYABLES (cont’d) 15.2 Contingent liabilities (cont’d) To date three letters of credit have been raised (two with Kingdom Bank and one with EcobankLimited). The first one with Kingdom Bank Limited matured on 20 December 2012 and has beenpaid up. All the amounts above are unsecured. 2012 201116. PROVISIONS US$ US$ Provision for employee benefits 549 325 510 963 Other 56 169 73 380 605 494 584 343 Cash outflows relating to these amounts are expected to occur during the subsequent financial year.17. RELATED PARTY TRANSACTIONS 17.1 Identifiable related parties The ultimate holding company for Turnall Holdings Limited is FBC Holdings Limited. TurnallHoldings Limited pays a management fee equivalent to 1.5 percent of total revenue for a numberof management services performed by FBC Holdings Limited. A number of key management personnel, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of these entities. Key management personnel have been defined as the executive and non- executive Directors of the company. The definition of key management personnel also includes close members of their families. Close members of family are those family members, who may be expected to influence, or be influenced by the individual in their dealings with the company. Some of these entities transacted with the company during the year. The terms and conditions of these transactions were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management personnel, their related entities and/or third parties. Overleaf is a summary of all the identifiable related parties as at 31 December 2012 as defined by International Financial Reporting Standard 24 - Related Party Transactions:
    • 67A n n u a l R e p o r t 2 0 1 2Notes to theFinancial Statements (cont`d)31 December 201217. RELATED PARTY TRANSACTIONS (cont’d)17.1 Identifiable related parties (cont’d) Entity Nature of relationship FBC Holdings Limited Ultimate holding company FBC Bank Limited Common control FBC Building Society Common control FBC Security (Private) Limited Common control FBC Reinsurance Limited Common control Eagle Insurance Limited Common control Arena Travel (Private) Limited Common director Chihambakwe, Mutizwa and Partners Legal Practioners Common director Gossard Enterprises t/a Woodmaster (Private) Limited Common director Déco In View (Private) Limited Common director 2012 201117.2 Transactions and balances US$ US$ Sales FBC Building Society 232 231 3 945 Déco In View (Private) Limited 2 473 516 Purchases Arena Travel (Private) Limited 91 753 105 366 Gossard Enterprises t/a Woodmaster (Private) Limited 450 613 713 546 Chihambakwe, Mutizwa and Partners 47 081 44 935 Déco In View (Private) Limited 3 040 3 281 Other FBC Holdings Limited (management fees) 637 537 778 238 2012 2011 Balances Amounts owing to related parties FBC Holdings Limited 2 353 449 1 620 179 Gossard Enterprises t/a Woodmaster (Private) Limited 31 243 12 674 FBC Building Society - 842 2 384 692 1 633 695 Amounts owing from related parties FBC Building Society 84 896 - Déco In View (Private) Limited 1 689 516 Gossard Enterprises t/a Woodmaster (Private) Limited 36 000 12 000 122 585 12 516 Other balances FBC Bank Limited (note 8) 3 244 379 4 224 063 FBC Reinsurance Limited (note 8) 1 659 654 - 4 904 033 4 224 063
    • 68 T u r n a l l H o l d i n g s L i m i t e d 2012 2011 17. RELATED PARTY TRANSACTIONS (cont’d) US$ US$17.3 Key management personnel remuneration The remuneration of Directors and other members of key management during the year was as follows: Short-term benefits 889 216 737 989 All transactions with all the identifiable related parties are priced on an arm’s length basis. Alloutstanding balances with these related parties are also priced on an arm’s length basis and are to besettled in cash on normal terms. All the related party balances are not secured.18. CONSOLIDATION OF SUBSIDIARIES The company’s statement of financial position has not been shown separately from the consolidatedposition, as it is the Directors’ view that presentation of such would not present informationsignificantly different from that already shown in the consolidated statement of financial position.19. PENSION SCHEMES19.1 SMM Holdings Pension Fund The company makes contributions to the SMM Holdings Pension Fund which is a defined contribution pension scheme for employees. Contributions for the year ended 31 December 2012 amounted to US$633 481 (2011: US$ US$673 875).19.2 National Social Security Authority Scheme (NSSA) All employees are required by law to be members of the National Social Security Scheme, which is a defined contribution fund. Both the employees and the company contribute. The company ís obligation under the scheme are limited to specific contributions legislated from time to time. The company ís contributions are charged to profit or loss and, in the current year, amounted to U$175 023 (2011: US$179 055).20. PRINCIPAL INVESTMENTS AND THE COMPANY’S BENEFICIAL INTEREST20.1 Operating divisions Percentage holding Turnall Building Products 100% Turnall Piping Products 100%Notes to theFinancial Statements (cont`d)31 December 2012
    • 69A n n u a l R e p o r t 2 0 1 220. PRINCIPAL INVESTMENTS AND THE COMPANY’S BENEFICIAL INTEREST (cont’d)20.2 Dormant subsidiary companies Acacia Holdings Limited 100% Hastt Corporation Limited 100% Hastt Discs (Private) Limited 100% Tractor and Equipment (Private) Limited 100%21. FINANCIAL RISK MANAGEMENT21.1 Overview The company operates a central treasury function, the objective being to minimise funding costs, optimise returns on investments and minimise financial risk. The following risks arise from the company’s financial instruments: currency risk interest rate risk market risk credit risk liquidity risk. The company does not use derivative financial instruments for speculative purposes. This note presents information about the company ís exposure to each of the above risks, the company’s objectives, policies and processes for measuring and managing risk and the company’s management of capital. Further quantitative disclosures are included throughout these financial statements. 21.2 Currency risk Currency risk is, as far as possible, managed by hedging foreign currency denominated liabilities with foreign currency denominated liquid assets. As the US$ is the companyís main trading currency, as well as the reporting currency, for the purpose of defining currency risk, all currencies other than the US$ are considered foreign currencies.Notes to theFinancial Statements (cont`d)31 December 2012The Board of Directors has overall responsibility for the establishment and oversight and thecompanyís risk management framework. The company’s risk management policies are establishedto identify and analyse the risks faced byTurnall Holdings Limited, to set appropriate risk limits andcontrols, and to monitor risks and adherence to limits.The Audit Committee oversees how management monitors compliance with the company’srisk management policies and procedures and reviews the adequacy of the risk managementframework in relation to the risks faced by the company. The Audit Committee is assisted in itsrole by Internal Audit which reviews risk management controls and procedures, the results ofwhich are reported to the Audit Committee.
    • 70 T u r n a l l H o l d i n g s L i m i t e dNotes to theFinancial Statements (cont`d)31 December 2012The major trading currencies of the company are the United States dollar (US$), the Botswana Pula(BWP), the British Pound (GBP) and the South African Rand (ZAR). For the purposesof financial reporting, the following exchange rates have been used for the translation ofbalances other than the US$ at 31 December 2012:21. FINANCIAL RISK MANAGEMENT (cont’d)21.2 Currency risk (cont’d) Reporting date spot rate (US$) ZAR 8.50 BWP 7.78 GBP 1.61 EUR 1.32 Also at the same date, the company’s exposure to foreign currency risk was as follows: 31 December 2012 ZAR GBP BWP EUR Trade receivables 17 400 460 - 580 487 - Trade payables (247 557 ) - - (83 411 ) Cash and cash equivalents 521 848 796 155 910 - Gross balance sheet exposure 17 674 751 796 736 397 (83 411 ) 31 December 2011 Trade receivables 10 241 209 - 1 144 679 - Trade payables (105 520 ) - - - Cash and cash equivalents 783 045 1 076 33 280 - Gross balance sheet exposure 10 918 734 1 076 1 177 959 - Sensitivity analysis A 10 percent fluctuation of the United States dollar against the Rand would have increased/(decreased) equity and profit or loss by the amounts reflected below. This analysis is based onforeign currency exchange rate variances that the company considered to be reasonably possible atthe end of the reporting period. This analysis assumes all other variables remain the same.
    • 71A n n u a l R e p o r t 2 0 1 2 21. FINANCIAL RISK MANAGEMENT (cont’d) 21.2 Sensitivity analysis (cont’d) Equity Profitorloss ZAR US$ US$ 31 December 2012 10% appreciation 189 035 189 035 10% depreciation (231 043 ) (231 043 ) 31 December 2011 10% appreciation 121 644 121 644 10% depreciation (148 676 ) (148 676 ) y Profitorloss BWP 31 December 2012 10% appreciation 8 605 8 605 10% depreciation (10 517 ) (10 517 ) 31 December 2011 10% appreciation 14 203 14 203 10% depreciation (17 359 ) (17 359 ) GBP 31 December 2012 10% appreciation 117 117 10% depreciation (142 ) (142 ) 31 December 2011 10% appreciation 152 152 10% depreciation (185 ) (185 ) Notes to theFinancial Statements (cont`d)31 December 2012
    • 72 T u r n a l l H o l d i n g s L i m i t e d EURO 31 December 2012 10% appreciation (5 745 ) (5 745 ) 10% depreciation 7 021 7 021 31 December 2011 10% appreciation - - 10% depreciation - -21.3 Interest rate risk The interest rates for both interest receivable and payable from/to local financial institutions aregenerally pegged against the market rate. The company finances its operations through a mixture of retained profit and bank borrowings.The company borrows principally in United States dollars at fixed and floating rates of interest.The interest rate characteristics of new borrowings and the refinancing of fixed borrowings arepositioned according to expected movements in interest rates. Atthereportingdatetheinterestrateprofileofthecompany’sinterest-bearingfinancialinstrumentsis as disclosed in note 8 to the financial statements.21.4 Market risks21.4.1 Other market price risk Notes to theFinancial Statements (cont`d)31 December 201221. FINANCIAL RISK MANAGEMENT (cont’d) 21.2 Sensitivity analysis (cont’d) Equity Profitorloss US$ US$ Equity price risks arise from the equity securities held for speculative purposes. Management ofthe company monitors the mix of equity securities in its investment portfolio based on marketindications. Management is assisted by external advisors in this regard and all the buy and sell decisions areapproved by the Finance Director.The primary goal of the company’s investment strategy is to maximise investment returns. Inaccordance with this strategy, these investments are designated at fair value through profit orloss because their performance is actively monitored and they are managed on a fair value basis.
    • 73A n n u a l R e p o r t 2 0 1 2Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the company’sreceivables from customers. The company does not normally require collateral in respect of financial assets. Managementhas a credit policy in place. Exposure to credit risk is monitored on an on-going basis. Non-regularcustomers are required to prepay their orders in order to manage credit risk.Investments are allowed only in liquid securities, and only with counterparties that havea credit rating considered equal to or better than that of the company. Given their highcredit ratings, management does not expect any counterparty to fail to meet its obligations. At balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet, net of the insured portion of trade receivables. Adequate provision is made against theuninsured portion of any trade and other receivables considered doubtful.The maximum exposure to credit risk at the reporting date was as follows:Notes to theFinancial Statements (cont`d)31 December 2012 2012 201121.5.1 Analysis US$ US$ Trade receivables 14 763 313 15 033 985 Other receivables 84 896 - Cash and cash equivalents 1 205 446 799 612 993 390 759 848 17 047 045 16 593 445 2012 201121.4.2 Short term investments US$ US$ Equity securities held for trading: Opening balance 19 585 21 129 Fair value adjustments 373 (1 544 ) Closing balance 19 958 19 585 The financial assets designated at fair value through profit or loss are equity securities traded on the Zimbabwe Stock Exchange.21.5 Credit risk
    • 74 T u r n a l l H o l d i n g s L i m i t e dNotes to theFinancial Statements (cont`d)31 December 2012The impairment loss at 31 December 2012 relates to several customers that management are notexpecting to be able to pay their outstanding balances, mainly due to economic circumstances.The company believes that the unimpaired amounts that are past due by more than 30 days arestill collectable and thus not impaired. This is based on historic payment behaviour and extensiveanalysis of the underlying customerís credit ratings.Based on historical default rates, the company believes that, apart from the amount alreadyprovide for as shown above, no other impairment allowance is necessary in respect of tradereceivables not past due or past due.21. FINANCIAL RISK MANAGEMENT (cont’d)21.5.1 Analysis (cont’d) 2012 2011 US$ US$ Maximum exposure to credit risk by geographic region was: Domestic 12 182 459 13 296 667 South Africa 2 457 988 1 556 707 Mozambique 47 425 26 260 Botswana 75 441 154 351 14 763 313 15 033 985 21.5.2 Impairment losses The aging of trade receivables at the reporting date was: Gross Impairment Gross Impairment 2012 2012 2011 2011 US$ US$ US$ US$ Not past due 4 079 585 - 5 791 889 - Past due 0 – 30 days 2 260 439 - 4 439 458 - Past due 31 – 120 days 2 020 286 - 2 363 967 - More than 120 days 6 480 768 27 765 2 722 046 283 375 14 791 078 27 765 15 317 360 283 375 The movement in the allowance for impairment in respect of loans and receivables during the yearwas as follows: 2012 2011 US$ US$ Balance at 1 January 283 375 782 567 Current years’assessments for allowances for credit losses 496 128 283 375 779 503 1 065 942 Amounts written off relating to previous years’assessments (283 375 ) (782 567 ) Amounts written off relating to current years’assessments (468 363 ) - Balance at 31 December 27 765 283 375
    • 75A n n u a l R e p o r t 2 0 1 221. FINANCIAL RISK MANAGEMENT (cont’d)21.6 Liquidity and cash flow risk In order to mitigate any liquidity risk that the company may face, the company’s policy has been,throughout the period ended 31 December 2012, to maintain substantial unutilised facilities andreserve borrowings capacity. The company had a long-term facility for the Newtec project andshort-term borrowings for working capital requirements. The following were facilities at the end ofthe year: Facility Utilised Unutilised US$ US$ US$ 31 December 2012 Long term facilities - - - Short term facilities Eastern and Southern African Trade and Development Bank loan facility 5 000 000 1 379 208 3 620 792 FBC Bank Limited 5 000 000 3 244 379 1 755 621 Kingdom Bank Limited 2 540 000 1 206 482 1 333 518 African Banking Corporation of Zimbabwe Limited 5 000 000 3 782 668 1 217 332 FBC Reinsurance Limited 2 000 000 1 659 654 340 346 19 540 000 11 272 391 8 267 609 31 December 2011 Long term facilities Eastern and Southern African Trade and Development Bank loan facility 5 000 000 3 677 057 1 322 943 Short term facilities FBC Bank Limited 5 000 000 4 224 063 775 937 Kingdom Bank Limited 2 000 000 1 990 017 9 983 African Banking Corporation of Zimbabwe Limited 5 000 000 3 702 703 1 297 297 12 000 000 9 916 783 2 083 217 The company tends to have significant fluctuations in short-term borrowings due to seasonal factors. Company policy requires that sufficient revolving banking facilities are available to exceed projected peak borrowings.21.7 Capital management The company’s policy is to maintain a strong capital base in order to maintain shareholder and market confidence and sustain future development of the business. Return on capital including the share appreciation and the level of dividends to ordinary shareholders is constantly monitored by the Board of Directors. Notes to theFinancial Statements (cont`d)31 December 2012
    • 76 T u r n a l l H o l d i n g s L i m i t e d21. FINANCIAL RISK MANAGEMENT (cont’d) 21.7 Capital management (cont’d) The Board of Directors allocates part of the shareholding to its employees. Currently key management and other senior employees are granted share options under the companyís share option scheme. The company is not subject to externally imposed capital requirements.21.8 Borrowing powers The Articles limit Turnall Holdings Limited’s borrowing powers as follows: The Directors may exercise all the powers of the company to borrow money and to mortgage or charge its undertaking, property and uncalled capital, or any part of it, and to issue debentures, debenture stock and other securities, whether outright or as security for any debt, liability or obligation of the company or of any third party, provided that the aggregate amount at any one time owing in respect of monies borrowed by the company and its subsidiary companies (exclusive of inter company borrowings) shall not exceed the aggregate of the nominal amount paid up on the companyís issued share capital plus the total amount standing to the credit of the capital and reserves of the company as shown in the latest balance sheet of the company except with the consent of the company in general meeting by ordinary resolution. The Directors shall procure that the aggregate amount at any one time owing in respect of monies borrowed by the company will not without such consent, exceed the aforesaid limit.Notes to theFinancial Statements (cont`d)31 December 2012
    • 77A n n u a l R e p o r t 2 0 1 2Shareholders Information ANALYSIS OF SHARES HELD No. of % of total Total shares % of total shareholders shareholders shares 1-500 258 26.71 39 019 0.01 501-1000 80 8.28 59 495 0.01 1001-5000 282 29.19 681 759 0.14 5001-10000 100 10.35 697 533 0.14 10001-20000 63 6.52 875 231 0.18 20001-50000 59 6.11 1 816 939 0.37 50001-100000 47 4.87 3 181 067 0.65 100001-500000 44 4.55 9 228 242 1.87 500001-1000000 6 0.62 4 657 964 0.94 100001 and over 27 2.80 471 803 059 95.69 966 100 493 040 308 100 ANALYSIS BY CATEGORY OF SHARES No. of % of total Total % of total shareholders shareholders shares shares Banks 2 0.21 236 176 476 47.90 Pension Funds 24 2.48 87 879 790 17.82 Company Local 69 7.14 69 531 842 14.10 Nominees - local 53 5.49 38 487 280 7.81 Invetsment Trust LOCAL resident 69 7.14 30 428 203 6.17 Local Resident 651 67.39 13 950 256 2.83 Employees 17 1.76 10 937 793 2.22 Insurance 8 0.83 4 483 257 0.91 Warrant not presentable 64 6.63 915 281 0.19 New Non - Resident 5 0.52 144 404 0.03 FCDA - resident 2 0.21 79 019 0.02 Non - Resident 1 0.10 20 985 0.00 Estates 1 0.10 5 722 0.00 Grant Total 966 100 493 040 308 100TOP TEN SHAREHOLDERS AS AT 31 DECEMBER 2012 Total share % of total holding sharesFBC Bank Limited 236 156 476 47.90FBC Holdings Limited 51 379 837 10.42National Social Security authority 48 249 222 9.79Equivest Nominees (Private) Limited 25 504 689 5.17Local Authority Pension funds 20 000 000 4.06Equivest Nominees (Private) Limited 13 429 113 2.72Amaval investments (Private) Limited 12 414 273 2.52Turnall Holdings Employee Share Participation Trust 8 541 412 1.73National Social Security authority (NPF) 8 380 323 1.70National Social Security authority (WCIF) 8 204 562 1.66 Total hoding of top 10 432 259 907 87.67Remaining holding 60 780 401 12.33Grant total 493 040 308 100 DIRECTOR’S SHAREHOLDING At 31 December 2012, the Director’s shareholding in the company was as shown below: Name No. of shares J P Mutizwa 201J A Jere 1 184 244R S Dube 1 729 245
    • 78 T u r n a l l H o l d i n g s L i m i t e dNotice to ShareholdersTurnall Holdings Limited(Incorporated in the Republic of Zimbbawe)Registration Number: 476/62(Turnall Holdings or the company)Notice is hereby given that the Eleventh Annual General Meeting will be held on Thursday 23 May 2013 inthe Jacaranda Room, Rainbow Towers, Harare at 1200hrs for the following business:1. Ordinary Business1.1 To receive, consider and adopt the annual financial statements and the reports of the Directors and auditors for the financial year ended 31 December 2012.1.2 To elect Directors of the company. 1.3 Approve the remuneration of the Directors for the financial year ended 31 December 2012.1.4 To appoint auditors for the ensuing year and to approve their remuneration for the past year. The auditors, KPMG, being eligible, offer themselves for re-appointment.2. General To transact such other business as may be transacted at an Annual General Meeting.3. Proxies A member entitled to attend and vote at a meeting may appoint a proxy to attend and speak and on a poll to vote on his stead. Such proxy need not be a member of the company. The instrument appointing a proxy shall be deposited at the company’s registered office at least forty eight hours before the meeting. By order of the BoardR. S. DubeCompany SecretaryRegistered Office5 Glasgow RoadP. O. Box 3985WorkingtonHarare24 April 2013Messrs J. Mushayavanhu, P. C. C. Moyo as well as Ms. L. Manyenga retire from the Board in terms ofArticle 95 of the Company’s Articles of Association. All of them being eligible, offer themselves forre-election.
    • 79A n n u a l R e p o r t 2 0 1 2YEAR ENDED 31 DECEMBER 2013Financial Year End 31 December 2012Publication of Financial Results 21 March 2013Annual General Meeting 23 May 2013Half Year End 30 June 2013Publication of Interim Results August 2013Shareholders’Diary
    • 80 T u r n a l l H o l d i n g s L i m i t e dGlossary of TermsGlossary of TermsAIDS – Acquired Immune Deficiency Syndrome Chrysotile/White Asbestos – It is a soft, fibourous silicate mineral in the serpentine group, composed of silica, magnesia and iron and is of a yellow to green colour.CO2e – Carbon Dioxide equivalencyEMA – Environmental Management AgencyGRI – Global Reporting Initiative – a multistakehoder international process whose mission is to formulate and disseminate globally applicable sustainability reporting framework to help corporate reporting of economic, environmental and social performance.Group – Turnall Holdings LimitedIAS – International Accounting StandardsIFRS – International Financial Reporting StandardsILO – International Labour OrganisationISO 14001 – ISO Standard for Environmental ManagementISO 9001 – ISO Standard for Quality ManagementISO – Organisation for StandardsMW – Megawatt Electricity MeasurementNEC - National Employment CouncilNGO - Non- Governmental OrganisationOHSAS – Occupational Health and Safety Standard referring to OHSAS 18001SAZ – Standard Association of ZimbabweSHEQ – Safety Health Environment and QualitySustainability – Sustainability is a way of working and living that balances immediate needs for commerce, living, habitation, food, transportation, energy and entertainment with future needs for these resources and systems as well as the liveliness and support of nature, natural resources and future generations.Sustainable development – Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needsSustainability Reporting – A sustainability report enables companies and organizations to report sustainability information in a way that is similar to financial reporting. Systematic sustainability reporting gives comparable data, with agreed disclosures and metrics.
    • 81A n n u a l R e p o r t 2 0 1 2GRI Index1 STRATEGY AND ANALYSIS1.1 Statement from the most senior decision maker of the organisation about the 7 -10 relevance of sustainability to the organisation and its strategy.2 ORGANISATIONAL PROFILE2.1 Name of organisation. Cover2.2 Primary brands, products, and/or services. 42.3 Operational Structure of the organisation. 32.4 Location of the organisation’s head office. Inside backcover2.5 Number of countries where the organisation operates, and names of countries Scope of with either major operations or that are specifically relevant to the sustainability report issues covered in the report. 24 2.6 Nature of ownership and legal form. 3,42, 77 782.7 Markets served including (including geographic breakdown, sectors served, 4, 74 and types customers/beneficiaries). 2.8 Scale of the reporting organisation, including: 5, 8-9 • Number of employees 12-13 • Net sales 33-34 • Capitalization broken down in terms of debt and equity 45 • Quantity of products or services provided.2.9 Significant Changes during the reporting period regarding size, structure or Scope of ownership including: report • The location of, or changes in operations, including facility opening, 6, 9 closings and expansion. 45, • Changes in the share capital structure and other capital formation, 41-42 maintenance, and alteration operations. 45-772.10 Awards received in the reporting Period. N/A3 REPORT PARAMETERS Report Profile3.1 Reporting period for information provided. Scope3.2 Date of the most recent previous report. Scope3.3 Reporting cycle. Scope3.4 Contact point for questions regarding the report or its content. ScopeGRIIndicatorPageNo.
    • 82 T u r n a l l H o l d i n g s L i m i t e dGRI Index (cont`d) Report Scope and Boundary3.5 Process for defining report content , including: 24 • Determining materiality; • Prioritizing topics within the report; and • Identifying stakeholders the organisation expects to use the report.3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased 24 facilities, joint ventures, suppliers).3.7 Any specific limitations on the scope or boundary of the report. 243.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, 44-76 outsourced operations, and other entities that can significantly affect comparability from period to period and/between organisations.3.10 Explanation of the effects of any re-statements of information provided N/A in earlier reports, and the reasons for such re-statement (e.g. mergers/acquisitions, change of base years/periods, nature of business, measurement methods).3.11 Significant changes from previous reporting periods in the scope, boundary, Scope of or measurement methods applied in the report. report3.12 GRI Index (i.e. this table). 81-834 GOVERNANCE, COMMITMENTS AND ENGAGEMENTS Governance4.1 Governance structure of the organisation including committees under the 16-18, highest governance body responsible for specific tasks, such as setting strategy 20-21 or organisational oversight.4.2 Whether Chair of the Board executive or non executive? 164.3 Organisations with unitary board structure, state the number of members 19 of the highest governance body that are independent and/or non executive members.4.4 Mechanisms for shareholders and employees to provide recommendations or 19, 27 direction to the highest governance board. Stakeholder Engagement 4.14 List of stakeholders engaged by the organisation. 274.15 Basis for identification of and selection of stakeholders with who to engage. 27GRIIndicatorPageNo.
    • 83A n n u a l R e p o r t 2 0 1 2 ECONOMIC PERFORMANCE INDICATORS Economic PerformanceEC1 35,(Core) 44-76EC3 Coverage of the organisation’s defined plan obligations. 36(Core)EC4 Significant financial assistance received from government. 35(Core) ENVIRONMENTAL PERFORMANCE INDICATORS MaterialsEN1 Material used by weight or volume. 30(Core) EnergyEN3 Direct energy consumption by primary energy source. 31(Core) WaterEN8 Total water withdrawn by source. 30(Core) Emissions, Effluents, and WasteEN16 Total direct and indirect greenhouse gas emissions by weight. 31(Core) EN22 Total waste by type and disposal method. 32(Core) SOCIAL PERFORMANCE INDICATORS EmploymentLA1 Total workforce by employment type, employment contract, and region. 33-34(Core)LA7 Rate of injury, occupational diseases, lost days, and absenteeism, and 34(Core) number of work related fatalities by region. GRI Index (cont`d)GRIIndicatorPageNo.Direct economic value generated and distributed, including revenues, operatingcosts, employee compensation, donations and community investments, retainedearnings, and payments to capital providers and government.
    • 84 T u r n a l l H o l d i n g s L i m i t e dNotes
    • Corporate InformationChairmanHerbert NkalaManaging DirectorJohn A JereFinance Director/Company SecretaryRobert S DubeNon-Executive DirectorsJames P MutizwaPeter C C MoyoJohn MushayavanhuChirandu E DhlembeuKirikumar NaikRita LikukumaLinda ManyengaCelestine M GadzikwaRodgers DhliwayoSenior Division ManagementMarketing DirectorCaleb MusodzaHuman Resources DirectorElizabeth MamukaTechnical DirectorFrancis ChigwedereHead Office and Registered OfficeHead Office5 Glasglow Road,WorkingtonHararePostal AddressP.O. Box 3985,Harare PROFESSIONAL ADVISORSLegal AdvisorsChihambakwe, Mutizwa and Partners8th Floor, Regal Star House25 George Silundika AvenueHarareDube, Manikai and Hwacha6th Floor, Eastgate ComplexSam Nujoma/ Robert Mugabe RoadHarareAuditorsKPMG Chartered Accountants (Zimbabwe)Mutual Gardens, 100 The Chase (West)Emerald HillHarareSustainability Reporting AdvisorsInstitute for Sustainability Africa (Insaf)52 Northampton CrescentEastlea, HararePrincipal BankersAgribankBanc ABCBarclays Bank of ZimbabweCBZ Bank LimitedEcobankFBC Bank LimitedKingdom Bank LimitedMBCA Bank LimitedNMB Bank LimitedStandard Chartered Bank of Zimbabwe LimitedPeoples Own Savings Bank of Zimbabwe LimitedTransfer SecretariesRegatta Financial Advisory Services (Private) Limited101 Union AvenueHarare