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Turnall Holdings 2009 annual report
 

Turnall Holdings 2009 annual report

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Turnall Holdings annual financial report for the year ended 31 December 2009

Turnall Holdings annual financial report for the year ended 31 December 2009

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    Turnall Holdings 2009 annual report Turnall Holdings 2009 annual report Document Transcript

    • 2009 Annual Report Turnall Holdings Limited Annual Report 2009 1
    • 2 Turnall Holdings Limited Annual Report 2009
    • Contents Corporate Vision 4 Directorate and Corporate Information 5 Board of Directors 6 Group Management 7 Organisational Structure 8 Business Portfolio 9 Chairman’s Statement 10 Review of Operations 12 Directors’ Report 14 Statement of Corporate Governance 15 Statement of Directors’ Responsibilities for Financial Reporting 16 Statistical Analysis 18 Independent Auditor’s Report 20 Statement of Financial Position 22 Statement of Comprehensive Income 23 Statement of Cash Flows 24 Statement of Changes In Equity 25 Statement of Accounting Policies 26 Notes to the Financial Statements 31 Analysis of Shareholders 43 Notice to Shareholders 44 Shareholders’ Calender 45 Company Profile 46 Notes 47 Turnall Holdings Limited Annual Report 2009 3
    • Corporate Vision Corporate Vision Our Vision Turnall Holdings Limited serves its Zimbabwe and exports customer needs as the leading brand and manufacturer of quality shelter and pipe products. We will continue to grow and sustain our profitability to satisfy stakeholders and ourselves by demonstrating our real commitment to our values, environment and community. 4 Turnall Holdings Limited Annual Report 2009
    • Directorate & Corporate information Directorate & Corporate information Chairman H. Nkala Managing Director J.A. Jere Finance Director/Company Secretary R.S. Dube Non-Executive Directors J.P. Mutizwa P.C.C. Moyo J. Mushayavanhu C.E. Dhlembeu A.M. Zvandasara* R. Likukuma L. Manyenga C.M. Gadzikwa** * Resigned during the year ** Appointed during the year Senior Divisional Management E. Kondo - Marketing Director E. Mamukwa - Human Resources Director F. Chigwedere - Technical Director Registered Office 5 Glasgow Rd, Workington, Harare Postal Address P.O. Box 3985, Harare Legal Advisers Principal Bankers Chihambakwe, Mutizwa and Partners Barclays Bank of Zimbabwe Limited 8th Floor, Regal Star House CBZ Bank Limited 25 George Silundika Avenue FBC Bank Limited Harare Kingdom Bank Limited MBCA Bank Limited Dube, Manikai and Hwacha Premier Bank Limited 6th Floor, Eastgate Complex Standard Chartered Bank of Zimbabwe Limited Sam Nujoma/Robert Mugabe Road Harare Auditors Transfer Secretaries KPMG Chartered Accountants (Zimbabwe) Regatta Financial Advisory Services (Private) Limited Mutual Gardens, 100 The Chase (West) 3rd Floor, Regal Star House Emerald Hill 25 George Silundika Avenue Harare Harare Turnall Holdings Limited Annual Report 2009 5
    • Board of Directors Board of Directors H. Nkala Chairman J. P. Mutizwa J. A. Jere R. S. Dube Deputy Chairman Managing Director Finance Director P. C. C. Moyo C.M. Gadzikwa R. Likukuma Non-executive Director Non-executive Director Non-executive Director J. Mushayavanhu C. E. Dhlembeu L. Manyenga Non-executive Director Non-executive Director Non-executive Director 6 Turnall Holdings Limited Annual Report 2009
    • Group Management Group Management J.A. Jere R.S. Dube Managing Director Finance Director E. Kondo F. Chigwedere E. Mamukwa Marketing Director Technical Director Human Resources Director Turnall Holdings Limited Annual Report 2009 7
    • Organisational Structure Organisational Structure OPERATING DIVISIONS DORMANT SUBSIDIARIES Turnall Building Products Acacia Holdings Limited Turnall Piping Products Hastt Corporation Limited Hastt Discs (Pvt) Limited Tractor and Equipment (Pvt) Limited 8 Turnall Holdings Limited Annual Report 2009
    • Business Portfolio Business Portfolio Turnall Fibre Cement The division comprises two main sub-divisions namely: Turnall Building Products and Turnall Piping Products Key markets include the low-income housing sector for building products and local authorities and municipalities for piping products. Main raw materials are chrysotile fibre and cement. Manufacturing takes place in Bulawayo and Harare. Dormant Subsidiaries Acacia Holdings Limited Hastt Corporation Limited Hastt Discs (Private) Limited Tractor and Equipment (Private) Limted Turnall Holdings Limited Annual Report 2009 9
    • Chairman’s Statement H. Nkala Chairman Chairman’s Statement Introduction It is my pleasure to present the Turnall Holdings Limited second half of 2009. The improvement in sales volumes results for the year ended 31 December 2009. The results witnessed during the ensuing months is largely traceable to were achieved during a period of relatively improved the onset of the agricultural selling season which started macro-economic stability that came on the back of the around April 2009 through to September 2009. The formation of a Government of National Unity (GNU) early improved inflows from tobacco, cotton and maize underpinned in the year. the company’s sales performance during the latter part of the year and drove capacity utilisation which rose from 12% Operating environment at the beginning of the year to close at about 40% by year The introduction of multi-currencies in February 2009 end. brought stability in prices and created the necessary conditions for economic recovery. While the recovery was a Overall volumes at about 43 000t were slightly below the welcome development to the business community at large, 44 000t achieved in 2008. On a segment basis, volumes were companies continued, for the greater part of the first quarter of largely driven by domestic sales which grew 58% against 2009 to face liquidity and working capital challenges which prior year. Exports, traditionally at about 20% of sales, in turn negatively impacted capacity utilisation levels across came down to 10% mainly as a result of the asbestos ban the industry sector. in South Africa. The liquidity challenges were further worsened by the Performance overview unavailability of favourable credit lines and the generally The financial results are stated in United States dollars and high cost of capital. Companies were, however, in the no comparatives have been presented. The company achieved absence of off-shore funding options, forced to borrow at revenue of US$16 493 281 for the year to 31 December relatively very high interest rates. 2009 with exports contributing 6.1% of revenue. Profit from continuing operations of US$2 572 756 was posted during Sales volumes during the first quarter of 2009 were, as a the year. Profit before tax of US$2 387 530 was achieved result, depressed although gradually picking up during the after charging financing charges of US$189 256. 10 Turnall Holdings Limited Annual Report 2009
    • Chairman’s Statement (Continued) An attributable profit of US$1 535 656 was achieved. Basic The company recognises the criticality of consistent fibre earnings per share were recorded at 0.32 US cents. The supplies especially in the wake of recent reports surrounding compa n y c l o s e d t h e y e a r w i t h c a s h r e s o u r c e s o f Shabanie and Mashaba Mines. While the supply of fibre US$996 746. Finance charges were incurred on the short from the mines has been intermittent, the company continued term US$401 141 borrowings secured to fund working capital to work closely with the supplier during 2009 in order to as well as long term borrowings for the new capital project. secure supply lines for both the Bulawayo and Harare factories. Disruptions were therefore kept to a minimum. Capital project I am pleased to report that the non - asbestos plant capital In order to ensure supply consistency for the period 2010 project is on course for commissioning in the fourth quarter and beyond, the company has put in place a robust plan of 2010. The first drawdown from the US$5 million project that will see it importing fibre from Brazil and Russia. The was done in early August 2009 and a letter of credit established plan, which is already operational, will enable the company for the balance of the amount. The manufacturing of the to seize and maximise on a number of opportunities equipment is now at an advanced stage and progress especially those around infrastructural developments in the deliveries are expected to commence soon. country. Dividend Appreciation The Board, considering the current economic environment I would like to thank the Board members, the Managing and the need to retain cash resources for working capital Director Mr John Jere and all staff at Turnall for their support purposes, resolved not to declare a final dividend for the and commitment during the year. year to 31 December 2009. Directorate Mr A.M. Zvandasara resigned from the Board during the course of the year and I would like to express my gratitude for his contribution. Outlook H. Nkala The company is optimistic that the macro - economic stability Chairman experienced in 2009 has laid the foundation for growth and high capacity utilisation for the year 2010. The year 2010 9 March 2010 has started on a strong note with volumes for the first two months growing by 440% compared with the same period last year. Turnall Holdings Limited Annual Report 2009 11
    • Review Of Operations J.A. Jere Managing Director Review of Operations Overview Financial performance The year 2009 will best be remembered as a year when a The results have been prepared in United States dollars. number of changes took place on both the political and Comparative figures have not been presented due to the economic landscape. The signing of the Global Political company’s inability to reliably translate year 2008 figures. Agreement (GPA) and the subsequent formation of an inclusive Government in February 2009 went a long way in The company achieved a turnover of US$16.5 million and stabilising the macro-economic environment. The introduction an operating profit from continuing operations of US$2.6 million, of the multi-currency regime as a policy measure helped, giving a basic earnings per share of 0.32 cents. A total not only bring stability to the pricing of goods and services, comprehensive income of US$8.1 million was achieved. but also helped improve the quality of business planning and overall strategy formulation. Total assets were valued at US$32.8 million. For most businesses, the switch into multi-currency, while Divisional performance welcome, created a number of challenges, chief among Building Products which were the severe cash flow constraints that businesses Local Building Products sales increased by 51% to 37 968 experienced at the time. Against this backdrop, Turnall tonnes (2008 : 25 062 tonnes). The segment’s volumes which Holdings Limited experienced low capacity utilisation levels are mainly driven by private home construction in both the in all its operations much in line with the country-wide urban and rural areas benefited significantly from the im- depressed demand patterns obtaining during the first proved agricultural tobacco and cotton selling season. quarter of 2009. Piping Products Demand patterns gradually picked up during the latter part Pipe volumes declined by 75% to 886 tonnes (2008 : 3 551 of the second quarter of 2009 and strengthened further tonnes). The performance was largely affected by fibre during the second half of 2009. Overall volume sales were, supply shortages in certain critical grades necessary for therefore, affected given the slow start, declining 3% pipe production and lack of government funding for against prior year to 42 850. infrastructural development. 12 Turnall Holdings Limited Annual Report 2009
    • Review Of Operations (Continued) Growing markets Chrysotile Export volumes, which in the past were driven by the company’s The ‘Safe Use Principle’ of chrysotile asbestos remains sales into South Africa prior to the asbestos ban in that management’s philosophy in dealing with the negative country, declined by 58% against prior year. As reported perceptions around the subject. Management has, therefore, previously, the company successfully diversified its export continued to engage all key stakeholders and in the process markets into Mozambique during 2009. The strategy was, raise awareness on the use of chrysotile based products. In however, affected mainly by intense competitor actions an effort to deal with the asbestos ban in South Africa and mainly from Brazil. Brazil and other players diverted any driven by the need to re-capture that country’s lucrative excess capacity to new markets as a strategy to deal with fibre cement export market, the company has gone ahead the global economic crisis. and invested in non-asbestos technology. The new plant is due for commissioning in December 2010. Manufacturing excellence The economic downturn that businesses experienced prior Future prospects to 2009 risked in many instances to reverse the company’s The year 2010 started on a positive note with volumes for efforts towards achieving excellence in all key areas of the the first quarter being ahead of same period last year. This business. surge in volumes is despite the fact that Government and donor funding has not been forthcoming as anticipated. The I am pleased to report that despite these difficulties, the volume forecast for 2010 is expected to strengthen during company managed to maintain a high level of standards in the second half of 2010 largely on the back of the agricultural all its business processes. We continued to be innovative as selling season. evidenced by a number of initiatives that have since been successfully implemented and these revolve around :- Appreciation I would like to take this opportunity to thank the Board for • The successful amalgamation of ISO9000, 14000 and giving the Executive team strategic direction at critical 18000 into one auditable standard through the use of a moments during the year 2009 and, secondly, to extend business excellence model. my appreciation to fellow managers and Turnall Holdings Limited employees, shareholders, customers, suppliers and • The implementation of a computer-based planned business partners for their support. maintenance system. • The implementation of a Navision Enterprise Resource Planning System which included the Manufacturing Module implemented during the year 2010. J.A Jere Managing director • Implementation of a balanced scorecard as a tool for performance measurement. 9 March 2010 Turnall Holdings Limited Annual Report 2009 13
    • Directors’ Report Directors’ Report The Directors have pleasure in presenting their report, following are the only shareholders beneficially holding together with the audited financial statements of the group directly or indirectly, at 31 December 2009, in excess of 5% for the year ended 31 December 2009. of the issued share capital of the company: Annual results FBC Nominees 59.42% Year ended National Social Security Authority 9.03% 31 December 2009 Equivest Nominees (Private) Limited 8.95% US$ Auditors Earnings attributable to shareholders 1 535 656 Messrs KPMG offer themselves for reappointment as audi- tors of the group for the year ending 31 December 2010 and Dividend shareholders will be asked to consider their reappointment The Board, considering the current economic environment and and approve their remuneration for the year ended 31 the need to retain cash resources, resolved not to declare December 2009. dividend for the year ended 31 December 2009. Employment policies Investment in property, plant and equipment The continued motivation of employees and management Capital expenditure for the year totaled US$1.6 million. towards overall productivity enhancement is a fundamental US$1,4 million was incurred for the Nutec capital work in feature of the group’s operating philosophy and is key to progress, US$162 863 was spent on acquisition of motor management of risk. This is achieved through training, vehicles and US$3 000 was spent on acquisition of development, information sharing and progressive co-operative computers. levels, including short and long-term incentives, where appropriate. Share capital The group has employed policies which are appropriate to its At 31 December 2009, the authorised share capital comprised of business and markets and which attract, retain and motivate the 690 000 000 ordinary shares. Issued share capital quality of staff necessary to compete actively in the market. comprised of 483 944 920 ordinary shares. The details of These policies are required to provide equal employment the authorised share capital are set out in note 10 of the opportunities, without discriminating against gender, race financial statements. or physical ability. Directors and their interests Payment of suppliers Names of the Directors are set on page 5. The group agrees terms and conditions with suppliers before business takes place and its policy and practice is to pay Messrs. J. P. Mutizwa and C. E. Dhlembeu as well as Mrs R. agreed invoices in accordance with the terms of payment. Likukuma retire from the Board in terms of Article 95 of the Company’s Articles of Association. Mr C. M. Gadzikwa was By order of the Board appointed to the Board during the course of the year and serves in terms of Article 101 of the Company’s Articles of Association. All members being eligible offer themselves for re-election. Mr A. M. Zvandasara resigned from the Board during the course of the year. No director had, during or at the end of the year, any material R.S. Dube interests in any contract with the group which could be Secretary considered to be significant in relation to group’s business. The beneficial interests of the Directors and their families in 9 March 2010 the shares of the company are given on page 43. Substantial shareholders According to information received by the Directors, the 14 Turnall Holdings Limited Annual Report 2009
    • Statement Of Corporate Governance Statement of Corporate Governance Turnall Holdings Limited is committed to an open Audit Committee approach to corporate governance. This assurance ensures The committee is chaired by Mr J.P. Mutizwa, a that, in protecting and adding value to Turnall Holdings non-executive director and includes two other non-executive Limited’s financial and human resource investment, the group directors. The committee meets at least quarterly and is being managed ethically, according to prudently reviews records from the Executive Committee, the internal determined risk parameters and in compliance with the best auditors, and the group external auditors in relation to the interim international practices. The code, which Turnall Holdings and annual financial statements, as well as to the accounting Limited applied, was prepared by the Audit Committee and and internal control systems. approved by the Board on 6 March 2003. The Audit Committee also recommends the appointment of The Board and reviews the external auditors’ remuneration. The external The Board comprises two executive directors and eight auditors have unrestricted access to the audit committee. non-executive directors. The Chairman of the Board is a non-executive director. The executive directors generally have responsibility for making and implementing operational decisions in running the group’s businesses. Non-executive directors support the skills and experience of the executive directors, contributing to formulation of policy and decision-making through their knowledge of, and experience in, other businesses H. Nkala and sectors. Chairman The Board, which meets at least quarterly, sets the strategic 9 March 2010 objectives of the group, determines investments and environmental policies and approves major capital expenditure, acquisitions and investments. The Board also agrees on performance criteria and delegates to management the detailed planning and implementation of the agreed policy, in accordance with appropriate risk parameters. It monitors compliance with policies, and achievement against objectives, by holding management accountable for its activities through the measurement and control of operations by regular reports to the Board including quarterly performance reporting and budget updates. Turnall Holdings Limited Annual Report 2009 15
    • Statement Of Directors’ Responsibilities For Financial Reporting Statement of Directors’ Responsibilities for Financial Reporting Responsibility The directors are responsible for preparing the Annual group’s statements of comprehensive income, cash flows Report and the group financial statements in accordance with and changes in equity for decision making purposes. The applicable laws and regulations. directors believe that the statement of financial position fairly presents the assets and liabilities of the group, and The Companies Act (Chapter 24:03) requires the directors therefore fairly presents the shareholders’ equity. to prepare the group financial statements for each financial year. The financial statements were prepared in accordance with International Financial Reporting Standards as modified by The group financial statements are required by law and the guidance, in respect of the change in functional currency, International Financial Reporting Standards (IFRSs) to issued jointly by the Public Accountants and Auditors Board present fairly the financial position of the group and the per- (PAAB), the Zimbabwe Accounting Practices Board (ZAPB) formance for that period. and the Zimbabwe Stock Exchange (ZSE) in August 2009 to assist preparers of financial statements in converting In preparation of the group financial statements, the direc- their financial statements from Zimbabwean dollars into tors are required to: their new functional currency. • select suitable accounting policies and then apply them consistently; Compliance with Companies Act (Chapter 24:03) • make judgments and estimates that are reasonable and These financial statements which have been prepared under prudent; the historical cost convention are in agreement with the • state whether they have been prepared in accordance with underlying books and records and have been properly IFRSs; and prepared in accordance with the accounting policies set out • prepare the financial statements on the going concern basis on pages 26 to 30.The financial statements have not unless it is inappropriate to presume that the group and been properly prepared in compliance with the dis- parent company will continue in business. closure requirements of the Companies Act (Chapter 24:03) and Statutory Instruments (SI 33/99 and SI The directors are responsible for keeping proper accounting 62/96) to the extent that they do not comply with IAS 1, records that disclose with reasonable accuracy at any Presentation of Financial Statements, IAS 21, The Ef- time the financial position of the group and enable them to fects of Changes in Foreign Exchange Rates and IAS 29, ensure that its financial statements comply with the Compa- Financial Reporting in Hyperinflationary Economies as nies Act (Chapter 24:03). They have general responsibility for detailed in note 21 to the financial statements. taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and Compliance with IFRS other irregularities. Preparation of financial statements in conformity with IAS 21: Effects of Changes in Exchange Rates As a result of the prior year uncertainties and inherent The group‘s functional currency changed on 1 February limitations, the directors advise caution on the use of the 2009 from the Zimbabwean Dollar to the United States 16 Turnall Holdings Limited Annual Report 2009
    • Statement Of Director’s Responsibilities For Financial Reporting (Continued) Dollars, following the introduction of multi-currency system in functional currency) as required by IAS 29, IAS 29 “Financial Zimbabwe. The group has not been able to comply with Reporting in Hyperinflationary Economies”. the requirements of IAS21: Effects of Changes in Exchange Rates because the standard requires that, in accounting for Preparation of financial statements in conformity with changes in functional currency, all transactions that are in the IAS 1: Presentation of Financial Statements. currency of a hyper inflationary economy be adjusted to IAS 1 requires that comparative financial statements be a unity of measure, current at the measurement date presented alongside current financial statements. Comparative before conversion to an alternative presentation currency. financial statements have not been presented as it was practically impossible to restate prior year Zimbabwean Dollar Preparation of financial statements in conformity with figures in to United States dollars in a manner consis- IAS 29: Financial Reporting in Hyperinflationary Economies tent with IAS 21 and IAS 29, as indicated above, given the The Standard requires that financial statements that report unavailability of reliable inflation indices and exchange in the currency of a hyperinflationary economy should be rates. stated in terms of the measuring unit, current at the reporting date. These financial statements have not been In view of the preceding paragraphs, the independent prepared in conformity with IFRS in that the requirements of IAS auditors’ report for the year ended 31 December 2009 on 29 “Financial Reporting in Hyperinflationary Economies” have pages 20 to 21 has been qualified accordingly. not been complied with, due to non-availability of reliable in- flation indices. The requirements of all other International Accounting Standards have been complied with under the historical cost convention. The inflation indices applicable to the Zimbabwean dollar were not published from 31 July 2008. Estimates by economists H. Nkala for the Zimbabwean dollar inflation in the period after 31 Chairman July 2008 were wide ranging, extremely high and changing on daily basis (percentages in excess of quadrillions in 9 March 2010 some cases). Any attempt to measure inflation was subject to various limitations because reliable and timely data was not available. The inability to reliably measure inflation was exacerbated by the existence of multiple exchange rates and use of foreign currency for some transactions. In these circumstances, inflation adjusted financial statements were not prepared up to 1 February 2009 (date of change in Turnall Holdings Limited Annual Report 2009 17
    • Statistical Analysis Statistical Analysis Year ended 31 December 2009 Share performance USD Weighted avarage number of shares (000) 483,945 Closing market capitalisation (000) 145 Basic earnings per share (cents) 0.32 Diluted earnings per share (cents) 0.32 Net asset value per share (cents) 5,779 Closing share price (cents) 0.03 Highest share price (cents) 0.03 Closing price/earnings ratio (times) 0.09 Prifitability Gross profit margin (%) 36.93 Operating profit margin (%) 15.60 Return on shareholders equity (%) 7.45 Return on total assets (%) 4.68 Effective rate of tax (%) 36% Nominal rate of tax (%) 30.90 Liquidity and leverage Interest cover (times) 26.14 Current ratio 1.58:1 18 Turnall Holdings Limited Annual Report 2009
    • Turnall Holdings Limited Annual Report 2009 19
    • Independent Auditor’s Report KPMG Mutual Gardens Telephone +263 (4) 303700 100 The Chase +263 (4) 302600 P.O. Box 6, Harare, Zimbabwe Fax +263 (4) 303699 Independent Auditor’s Report To The Members Of Turnall Holdings Limited Report on the financial statements We have audited the accompanying financial statements of Turnall Holdings Limited as set out on pages 22 to 42, which comprise the statement of financial position at 31 December 2009, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes. Directors’ responsibility for the financial statements The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act (Chapter 24:03) and, because the directors are unable to comply with certain standards, they are responsible for compliance with the financial reporting guidance in the Joint Media Statement on the Impact on Financial Reporting as a Consequence of the Change in Functional Currency issued by the Public Accountants and Auditors Board, the Zimbabwe Accounting Practices Board and the Zimbabwe Stock Exchange, approved for issue on 5 August 2009, with which the directors have elected to comply. This responsibility also includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing, except for the standard on Modifications to the Auditor’s Report (ISA 701) where the guidance contained in the Joint Media Statement on the Report of the Independent Auditor, issued by the Public Accountants and Auditors Board, the Zimbabwe Accounting Practices Board and the Zimbabwe Stock Exchange – Guidance 3/2010, approved for issue on 18 March 2010, has been applied. International Standards on Auditing require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing 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 the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion that is partially modified. 20 Turnall Holdings Limited Annual Report 2009
    • Independent Auditor’s Report (Continued) Basis for adverse opinion on the company’s financial performance and cash flows and unqualified opinion on the company’s financial position The financial statements have been prepared in accordance with International Financial Reporting Standards, except for the following standards: • International Accounting Standard (IAS) 21, The Effects of Changes in Foreign Exchange Rates; and • International Accounting Standard (IAS) 29, Financial Reporting in Hyperinflationary Economies. The directors’ report describes the basis of preparation of the financial statements in the circumstances that have given rise to a change in the group’s functional currency from the Zimbabwe dollar to the United States dollar, and offers an explanation for departing from these standards. The directors’ report also indicates that it is not possible to quantify the effects of these departures on the company’s financial performance and cash flows and that there is no effect on the company’s financial position. Adverse opinion on the company’s financial performance and cash flows and unqualified opinion on the company’s financial position In our opinion, because of the significance of the matters described in the preceding paragraph, the financial statements of Turnall Holdings Limited do not give a true and fair view of the group’s financial performance and cash flows for the year ended 31 December 2009 in accordance with International Financial Reporting Standards. In our opinion, the financial statements give a true and fair view of the group’s financial position at 31 December 2009 in accordance with International Financial Reporting Standards. Report on other legal and regulatory requirements In accordance with the respective requirement and recommendation contained in the Joint Media Statement on the Report of the Independent Auditor, approved and issued by the Public Accountants and Auditors Board, the Zimbabwe Accounting Practices Board and the Zimbabwe Stock Exchange – Guidance 3/2010, approved for issue on 18 March 2010, we report as follows: • In our opinion the group has complied, in all material respects, with the financial reporting guidance in the Joint Media Statement on the Impact on Financial Reporting as a Consequence of the Change in Functional Currency issued by the Public Accountants and Auditors Board, the Zimbabwe Accounting Practices Board and the Zimbabwe Stock Exchange, approved for issue on 5 August 2009. • The financial statements have not been prepared in compliance with all the requirements of the Companies Act (Chapter 24:03) and Statutory Instruments (SI 33/99 and SI 62/96) as the group has not been able to comply with the requirements of International Financial Reporting Standard IAS 21, The Effects of Changes in Foreign Exchange Rates, as well as other matters, and has not presented comparative information. KPMG Chartered Accountants (Zimbabwe) Harare 9 March 2010 Turnall Holdings Limited Annual Report 2009 21
    • Statement Of Financial Position as at 31 December 2009 Statement of Financial Position 31 December Note 2009 US$ ASSETS Non-current assets Property, plant and equipment 11 25 159 958 Current assets Inventories 12 3 392 815 Short term investments 24 708 Trade and other receivables 13 3 219 975 Cash and cash equivalents 14 996 746 Total current assets 7 634 244 Total assets 32 794 202 EQUITY Capital and reserves Share capital 10 - Share premium - Non-distributable reserve 12 494 688 Revaluation reserve 6 582 675 Retained earnings 1 535 656 Total capital and reserves 20 613 019 LIABILITIES Non - current liabilities Loans and borrowings 629 545 Deferred tax liability 7 6 723 170 Total non-current liabilities 7 352 715 Current liabilities Loans and borrowings 14 401 141 Trade and other payables 15 2 882 445 Provisions 16 299 066 Taxation 1 245 806 Bank overdraft 10 Total current liabilities 4 828 468 Total liabilities 12 181 183 Total equity and liabilities 32 794 202 ……………………………………….. Chairman 9 March 2010 …………………………… ……………………………………….. Director 22 Turnall Holdings Limited Annual Report 2009
    • Statement Of Comprehensive Income For the year ended 31 December 2009 Statement of Comprehensive Income Note 2009 US$ Continuing operations Turnover 2 16 493 281 Cost of sales 3 (10 402 926 ) Gross profit 6 090 355 Other income 4 15 662 Selling and distribution expenses 5 (860 613 ) Administrative expenses 5 (2 425 249 ) Other expenses (247 399 ) Profit from continuing operations 2 572 756 Net finance costs (185 226 ) Finance income 6 4 030 Finance costs 6 (189 256 ) Profit from continuing operations before income tax expense 2 387 530 Income tax expense 7 (851 874 ) Profit for the year from continuing operations attributable to equity holders 1 535 656 Other comprehensive income,net of income tax Revaluation of property, plant and equipment 6 582 675 Other comprehensive income for the year, after tax 6 582 675 Total comprehensive income for the year 8 118 331 Number of shares in issue (000s) 483 945 Basic earnings per share (cents) 0.32 Turnall Holdings Limited Annual Report 2009 23
    • Statement Of Cash Flows For the year ended 31 December 2009 Statement of Cash Flows Note 2009 US$ NET CASH FLOWS FROM OPERATING ACTIVITIES Operating cash flows Profit from continuing operations 1 535 656 Adjustment for: Depreciation 1 073 944 Net finance costs 185 226 Unrealised exchange differences 337 Income tax 851 874 Operating cash flow before reinvestment in working capital 3 647 037 Change in inventories (1 789 370 ) Change in trade and other receivables (2 500 497 ) Change in prepayments (306 997 ) Change in provisions, trade and other payables 2 636 507 Cash generated from operating activities 1 686 680 Withholding tax paid (1 008 ) Interest paid (189 256 ) (190 264 ) Net cash flows operating activities 1 496 416 CASH FLOWS INVESTING ACTIVITIES Interest received 4 030 Proceeds from sale of property, plant and equipment 5 600 Acquisition of property, plant and equipment (166 050 ) Capital work in progress (1 423 339 ) Change in other investments (1 205 ) Net cash flows from investing activities (1 580 964 ) NET CASH FLOWS FROM FINANCING ACTIVITIES Loans raised 830 686 INCREASE IN CASH AND CASH EQUIVALENTS 14 746 138 24 Turnall Holdings Limited Annual Report 2009
    • Statement Of Changes In Equity For the year ended 31 December 2009 Statement of Changes in Equity Non- Share Share Revaluation disputable Retained capital premium reserve reserve earnings Total US$ US$ US$ US$ US$ US$ Balance as at 1 January 2009 - - - 16 073 056 - 16 073 056 Total comprehensive income for the year Profit from continuing operations - - - - 1 535 656 1 535 656 Impairment loss and adjustments to non-distributable reserve - - - (3 578 368 ) - (3 578 368 ) Other comprehensive income Revaluation of property, plant and equipment, net of tax - - 6 582 675 - - 6 582 675 Total other comprehensive income - - 6 582 675 - - 6 582 675 Total comprehensive income for the year - - 6 582 675 (3 578 368 ) 1 535 656 4 539 963 Balance at 31 December 2009 - - 6 582 675 12 494 688 1 535 656 20 613 019 Turnall Holdings Limited Annual Report 2009 25
    • Statement On Accounting Policies 31 December 2009 Accounting policies The principal accounting policies applied in the presentation United States dollars using the cross exchange rates of the financial statements are set out below. prevailing on 1 January 2009. • Monetary assets and liabilities denominated in Zimbabwe Basis of preparation dollars which were not renegotiated into amounts denominated in other currencies were taken as nil. (a) Statement of compliance • Trade and other payables were determined by establishing The financial statements have been prepared in conformity settlement amounts with the creditor or supplier. with International Financial Reporting Standards, promulgated • Owner-occupied properties were carried at fair values by the International Accounting Standards Board (IASB), which determined by independent external valuers as at 31 includes standards and Interpretations approved by the IASB December 2008. as well as International Accounting Standards and Standing • Property, plant and equipment were carried at deemed Interpretations Committee (SIC) interpretations issued under costs, being either the estimated fair value amounts or previous constitutions except for the following: depreciated replacement costs determined by independent external valuers as at 31 December 2008. IAS 21 The Effects of Changes in Foreign Exchange • Other assets were valued using the fair values prevailing Rates; and in the market. IAS 29 Financial in Hyperinflationary Economies The non-distributable reserve was derived as the difference between total assets and total liabilities as stated in the These departures arise from the circumstances in Zimbabwe new functional currency, United States dollars at 1 January which have given rise to a change in the group’s functional 2009. currency from the Zimbabwe dollar to the United States dollar, • Deferred tax was calculated using the balance sheet as more fully explained below, where it is not possible to apply liability method in line with IAS 12 and was provided for these standards or apply them in a meaningful way. at effective tax rates against the carrying amounts of all property, plant and equipment. Initially nil income tax values The Directors have elected to comply with the financial reporting were applied to these opening balances until guidance guidance in the Joint Media Statement on the Impact on on the implementation of transitional provisions was issued Financial Reporting as a Consequence of the Change in which resulted in the opening balances being adjusted Functional Currency, issued jointly by the Public Accountants for these provisions, subject to the Zimbabwe Revenue and Auditors Board, the Zimbabwe Accounting Practices Board Authority’s (ZIMRA) approval, which is still outstanding. and the Zimbabwe Stock Exchange in March 2010. (b) Basis of preparation Adoption of new and revised financial The financial statements have been prepared based on the reporting standards historical cost approach except for the following classes of assets which are stated at fair value: Three interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) are effective • Financial instruments carried at fair value for the current year. These are: • Freehold land and buildings • Plant IFRIC 13 Customer Loyalty Programmes IFRIC 15 Agreements for the Construction of Real Estate In view of the difficulties noted in part (a) of the basis of IFRIC 18 Transfer of Assets from Customer preparation, with regards to complying with the requirements of IFRS in respect of IAS 29 and IAS 21, the Group applied The adoption of these interpretations in the current year has guidance issued jointly by the Public Accountants and Auditors not led to any changes in the Group’s accounting policies. Board (PAAB), the Zimbabwe Accounting Practices Board (ZAPB) and the Zimbabwe Stock Exchange (ZSE) in August The following standards are effective for the current year: 2009. In this respect the following procedures were followed in coming up with opening balances from the old functional IAS 1 Presentation of financial statements currency (Zimbabwe dollars) to the new functional currency IAS 23 Borrowing costs (United States dollars): • Cash and financial instruments denominated in currencies Standards and interpretations in issue not yet adopted other than the Zimbabwe dollar were converted into The following standards and interpretations were in 26 Turnall Holdings Limited Annual Report 2009
    • Statement On Accounting Policies 31 December 2009 Adoption of new and revised financial reporting standards (continued) issue but not yet effective: financial statements include: • Property, plant and equipment. Amended IFRS 2 Amendments to IFRS 2 Share-based Payment – Group Cash-settled Revenue Share-based Payment Transactions (Effective 1 January 2010) Revenue represents amounts invoiced to customers for Revised IFRS 3 Business Combinations (Effective goods supplied and services rendered, net of value added 1 July 2009); tax and allowances for defective goods. Revenue from the Amended IFRS 5 Amendments to IFRS Non-Current sale of goods is recognised when the significant risks and Assets Held for Sale and Discontinued rewards of ownership have been transferred to the buyer. Operations as a result of Improvements Revenue is measured at the fair value of the consideration to IFRSs 2008; received or receivable. No revenue is recognised if there Amended IAS 27 Consolidated and separate Financial are significant uncertainties regarding recovery of the Statements (Effective 1 July 2009); consideration due, measurement of the associated costs Amended IAS 39 Eligible Hedged Items – Amendment incurred to earn the revenue or the possible return of the to IAS 39 Financial Instruments: goods. Recognition and measurement (Effective 1 July 2009); Basis of consolidation IFRIC 17 Distributions of Non-cash Assets to Owners (Effective 1 July 2009); Subsidiaries Various Improvements to IFRSs 2009 (Effective date: Dealt Subsidiaries are those enterprises controlled by the company. with on a standard-by-standard basis; Control exists when the company has the power, directly generally 1 January 2010). or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The directors anticipate that the above interpretations will The financial statements of subsidiaries are included in the be adopted in the Group’s financial statements for the year consolidated financial statements from the date that control commencing 1 January 2010 and the adoption of these commences until the date that control ceases. interpretations will have no material impact on the financial statements of the Group in the year of initial application. Transactions eliminated on consolidation These standards do not have any financial effect on the Intra-group balances and transactions, and any unrealised recognition or measurement of transactions and events, nor gains from intra-group transactions, are eliminated in preparing the financial position or performance of the Group. Their the consolidated financial statements. Unrealised gains arising effects are limited to the nature and extent of disclosure to from transactions with associates and jointly controlled entities are be made by the Group. eliminated to the extent of the Group’s interest in the enterprise, against the investment in the associate. Unrealised losses are Uses of estimates and judgements eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. The preparation of financial statements requires management to make judgements, estimates and assumptions that Property, plant and equipment affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual Recognition and measurement results may differ from these estimates. Items of property, plant and equipment are stated at revaluation or cost less accumulated depreciation and impairment losses. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised Cost includes expenditures that are directly attributable to in the period in which the estimate is revised and in any the acquisition of the asset. The cost of self-constructed future periods affected. assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a In particular, significant areas of estimation, uncertainty and working condition for its intended use, and the costs of dismantling critical judgments in applying accounting policies that have and removing the items and restoring the site on which they the most significant effect on the amounts recognised in the are located. Purchased software that is integral to the functionality Turnall Holdings Limited Annual Report 2009 27
    • Statement On Accounting Policies 31 December 2009 Property, plant and equipment (continued) of the related equipment is capitalised as part of that equipment. for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax When parts of an item of property, plant and equipment have payable in respect of previous years. different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Deferred tax liabilities are recognised for all taxable temporary differences, unless the deferred tax liability arises from: Items of property, plant and equipment are revalued at least once every three years or earlier if it becomes apparent that • Goodwill their carrying amount has declined below their recoverable • The initial recognition of an asset or liability in a transaction amount to a material extent. Gross carrying amounts of which: is not a business combination, and at the time of property, plant and equipment are determined by revaluation the transaction, affects neither accounting profit nor taxable on a net replacement basis. Revaluation surpluses are realised profit. on disposal of the assets. Deferred tax assets are recognised for all deductible temporary Subsequent costs differences to the extent that it is probable that taxable profit The cost of replacing part of an item of property, plant and will be available against which the deductible temporary equipment is recognised in the carrying amount of the item differences can be utilised, unless the deferred tax asset if it is probable that the future economic benefits embodied arises from the initial recognition of an asset or liability in a within the part will flow to the Group and its cost can be transaction which: measured in the statement of comprehensive income as is not a business combination, and incurred. at the time of the transaction, affects neither accounting profit nor taxable profit. Depreciation Depreciation is recognised in the statement of comprehensive Deferred tax is calculated based on the tax rates that are income on a straight line basis over the estimated useful expected to apply to the period when the asset or liability lives of each part of an item of property, plant and equipment. is settled. The effect on deferred tax of any changes in tax rates is charged to the statement of comprehensive income, Items of property, plant and equipment are depreciated using except to the extent that it relates to the items previously the straight-line method, so as to write off the assets over charged or credited directly to equity. their anticipated useful lives. The depreciation rates applied on the different categories of property, plant and equipment Impairment of assets are as follows: Financial assets Industrial buildings 2.5% per annum A financial asset is considered to be impaired if objective Plant and machinery 7.5 - 20% per annum evidence indicates that one or more events have had a Furniture, fittings and office equipment 10 - 20%per annum negative effect on the estimated future cash flows of that Motor vehicles 20 - 25%per annum asset. The residual value, if not insignificant, is reassessed annually. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between Expenditure on additions and improvements to property, its carrying amount, and the present value of the estimated plant and equipment is capitalised for major projects on the future cash flows discounted at the original effective interest basis of measured work completed and qualifying for rate. An impairment loss in respect of an available-for-sale recognition. financial asset is calculated by reference to its current fair value. Taxation Individually significant financial assets are tested for impairment Income tax on the estimated taxable income for the year on an individual basis. The remaining financial assets are comprises current and deferred tax. Income tax is recognised assessed collectively in groups that share similar credit risk in the statement of comprehensive income except to the characteristics. extent that it relates to items recognised directly to equity, in which case it is recognised in equity. All impairment losses are recognised in the statement of comprehensive income. Any cumulative loss in respect of Current tax is the expected tax payable on the taxable income an available-for-sale financial asset, recognised previously 28 Turnall Holdings Limited Annual Report 2009
    • Statement On Accounting Policies 31 December 2009 in equity, is transferred to the statement of comprehensive Inventories income. Inventories are valued at the lower of cost and estimated net An impairment loss is reversed if the reversal can be related realisable value. Cost is determined on the weighted average objectively to an event occurring after the impairment loss basis. Estimated net realisable value is the estimated selling was recognised. For financial assets measured at amortised price in the ordinary course of business less any costs of cost and available-for-sale financial assets that are debt completion and disposal. securities, the reversal is recognised in the statement of comprehensive income. For available-for-sale financial assets Provisions that are equity securities, the reversal is recognised directly in equity. A provision is recognised in the statement of financial position when the Group has a legal or constructive obligation as a Non-financial assets result of a past event, and it is probable that an outflow of The carrying amounts of the company’s non-financial assets, economic benefits will be required to settle the obligation. If the other than biological assets, investment property, inventories effect is material, provisions are determined by discounting the and deferred tax assets, are reviewed at each reporting expected future cash flows at a pre-tax rate that reflects current date to determine whether there is any indication of impairment. market assessments of the time value of money and, where If any such indication exists then the asset’s recoverable appropriate, the risks specific to the liability. amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for Foreign currencies use, the recoverable amount is estimated at each reporting date. Transactions in foreign currencies are accounted for at the rates of exchange ruling on the date of the transaction. An impairment loss is recognised if the carrying amount of Gains and losses arising from the settlement of such transactions an asset or its cash-generating unit exceeds its recoverable at different exchange rates are recognised in the statement amount. A cash-generating unit is the smallest identifiable of comprehensive income. Monetary assets and liabilities in asset group that generates cash flows that are largely foreign currencies are translated at the rates of exchange independent from other assets and groups. Impairment losses ruling as at the reporting date. Translation gains and losses are recognised in the statement of comprehensive income. are recognised in the statement of comprehensive income. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of Financial instruments any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of Non-derivative financial instruments carried in the statement units) on a pro rata basis. of financial position comprise: cash and cash equivalents, trade and other receivables, trade and other payables and The recoverable amount of an asset or cash-generating unit amounts owing to and from related parties. These instruments is the greater of its value in use and its fair value less costs are recognised initially at fair value plus, for instruments not to sell. In assessing value in use, the estimated future cash at fair value through profit and loss, any directly flows are discounted to their present value using a pre-tax attributable transaction costs. Subsequent to initial recognition discount rate that reflects current market assessments of non-derivative financial instruments are measured as the time value of money and the risks specific to the asset. described below: An impairment loss in respect of goodwill is not reversed. In Trade and other receivables respect of other assets, the impairment losses recognised Trade and other receivables are measured at amortised in prior periods are assessed at each reporting date for cost using the effective interest rate method. A provision any indications that the loss has decreased or no longer for impairment of trade receivables is established when exists. An impairment loss is reversed if there has been a there is objective evidence that the Group will not be able change in the estimate used to determine the recoverable to collect all amounts due according to the original terms amount. An impairment loss is reversed only to the extent of receivables. Significant financial difficulties of the debtor, that the asset’s carrying amount does not exceed the carrying probability that the debtor will enter bankruptcy or financial amount that would have been determined, net of depreciation reorganisation and default or delinquency in payments are or amortisation, if no impairment loss had been recognised. considered indicators that the trade receivables are impaired. When a trade receivable is uncollectible, it is written off Turnall Holdings Limited Annual Report 2009 29
    • Statement On Accounting Policies 31 December 2009 Financial instruments (continued) against the allowance for trade receivables. Subsequent valuation methods. Current and past service costs, as well recoveries of amounts previously written off are credited as experience adjustments and the effects of changes in against the trade receivables impairment provision in the actuarial assumptions are charged or credited to the statement statement of comprehensive income. of comprehensive income over the expected remaining working lives of the employee concerned. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, deposits In the case of defined contribution plans, retirement benefits held on call with banks, and investments in money market are provided for staff and the Group’s element of part service instruments. Cash and cash equivalents are measured at costs are charged against income for the year. fair value, with any impairment or appreciation in value of foreign currency denominated balances arising from changes Share-based payment transactions in exchange rates, being written off or credited against the exchange gains and losses account in the statement of The share option programme allows employees to acquire comprehensive income. In the statement of financial position, shares of Turnall Holdings Limited. The share-based payment bank overdrafts are shown under current liabilities. transactions are recognised as employee expenses with corresponding increases in equity. Where the fair value of the Trade payables, other payables and amounts owing to options cannot be measured reliably the entity shall adopt the and from related parties intrinsic value method, which is the difference between the These financial liabilities are measured at amortised cost market value and exercise price of the underlying instrument. using the effective interest rate method. Pension costs For defined benefit pension plans, the cost of employee pension funds are consistently determined using appropriate and compatible assumptions by means of projected unit 30 Turnall Holdings Limited Annual Report 2009
    • Notes To The Financial Statements 31 December 2009 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 Penhalonga Development Company (Private) Limited, which was again changed on 29 March 1976 to PDC (Private) Limited, and then to Turnall Holdings Limited (the company) on 31 October 2002. The company resumed trading on 1 July 2002 after being dormant for a long time. Its main business involves the production of building and construction materials comprising corrugated sheeting, flat sheets, pan tiles, pressure pipes, sewer pipes and related accessories. 2009 2. REVENUE US$ Sale of goods - local sales 15 481 191 - export sales 1 012 090 1 6493 281 3. COST OF SALES Depreciation of property, plant and equipment 846 611 Staff costs 2 297 734 Raw materials 5 499 455 Other 1 759 126 10 402 926 4. OTHER OPERATING INCOME Fair value adjustment on financial assets held for trading (note 20.4.2) 7 855 Sundry income 7 807 15 662 5. OPERATING EXPENSES Selling and distribution expenses Depreciation of property, plant and equipment 91 669 Staff costs 300 045 Other 468 899 860 613 Administrative expenses Depreciation of property, plant and equipment 135 664 Staff costs 895 421 Other 1 394 164 2 425 249 Turnall Holdings Limited Annual Report 2009 31
    • Notes To The Financial Statements 31 December 2009 2009 6. NET FINANCE COSTS US$ Finance income Interest income 4 030 Finance costs Interest expense 91 352 Unrealised exchange loss on current assets denominated in currencies other than the US$ 97 904 189 256 7. TAXATION 7.1 Charge based on profit for the year Withholding tax (1 008 ) Charge on profit for the year 1 246 813 Deferred tax (393 931 ) 851 874 7.2 Reconciliation of tax charge Notional tax charge based on profit for the year 737 746 Withholding tax (1 008 ) Additional tax resulting from: - permanent differences 36 349 - tax rate adjustment –from 30.9% to 25.75% 78 787 851 874 7.3 Effective tax rate 36% 7.4 Deferred tax liability 31 December 2009 US$ Property, plant and equipment 6 308 311 Mark to market adjustment on financial assets held for trading 843 Accruals 20 085 Deferred tax resulting from temporary differences 393 931 6 723 170 32 Turnall Holdings Limited Annual Report 2009
    • Notes To The Financial Statements 31 December 2009 8. CONSOLIDATION OF SUBSIDIARIES The company’s balance sheet has not been shown separately from the consolidated position, as it is the directors’ view that presentation of such would not present information significantly different from that already shown in the consolidated balance sheet. 9. EARNINGS PER SHARE Basic earnings per share have been calculated based on profit after tax attributable to shareholders of US$1 535 656 and 483 944 920 shares in issue for the year ended 31 December 2009. 10. SHARE CAPITAL 2009 US$ 10.1 Authorised 690 000 000 ordinary shares of ZW$0.000 000 000 000 5 cents each - 10.2 Issued and fully paid 483 944 920 ordinary shares of ZW$0.000 000 000 000 5 cents each - 10.3 The authorised share capital is shown at the statutory nominal value per share as multiplied by the number of shares authorised. Issued and fully paid share capital is stated in terms of the measuring unit current at 31 December 2009. 10.4 Of the 206 055 080 unissued shares, 34 500 000 are reserved for an Employee Share Option Scheme (ESOS), 22 738 474 are reserved for an Employee Share Participation Trust (ESPT) and 148 816 606 are under the control of the directors, subject to Section 183 of the Companies Act (Chapter 24:03) and the listing requirements of the Zimbabwe Stock Exchange. 10.5 At the Extraordinary General Meeting of TH Zimbabwe Shareholders, on 11 November 2002, approval was granted for Turnall Holdings Limited to establish an ESOS for managerial employees of the company and the allotment to the ESOS, for the grant of options to qualifying members of staff thereunder, of 34 500 000 ordinary shares, or up to five percent (5%) of the issued share capital of Turnall Holdings Limited. Also, approval was granted for Turnall to establish an ESPT for non managerial employees of the company and the allotment to the ESPT, for the benefit of qualifying members of staff thereunder, of 22 738 474 ordinary shares, or up to five percent (5%) of the issued share capital of Turnall Holdings Limited. The directors will administer both the ESOS and the ESPT. Turnall Holdings Limited Annual Report 2009 33
    • Notes To The Financial Statements 31 December 2009 11. PROPERTY, PLANT AND EQUIPMENT Freehold Plant & Motor Furniture Office land Buildings machinery vehicles & fittings equipment Total US$ US$ US$ US$ US$ US$ US$ Cost/Deemed cost At 1 January 2009 1 238 000 10 232 000 5 719 492 1 604 575 167 189 207 320 19 168 576 Additions - - - 162 100 950 3 000 166 050 Revaluation - - 8 405 363 - 14 495 - 8 419 858 Disposals - - - (5 600 ) - - (5 600 ) Impairment loss (512 200 ) (2 587 800 ) - (781 776 ) - (130 489 ) (4 012 265 ) Capital work-in-progress - - 1 423 339 - - - 1 423 339 At 31 December 2009 725 800 7 644 200 15 548 194 979 299 182 634 79 831 25 159 958 Depreciation At 1 January 2009 - - - - - - - Charge for the year - 255 790 428 969 330 859 16 728 41 598 1 073 944 Revaluation - - (428 969 ) - (16 728 ) - (445 697 ) Impairment loss - (255 790 ) - (330 859 ) - (41 598 ) (628 247 ) At 31 December 2009 - - - - - - - Net book amount At 31 December 2009 725 800 7 644 200 15 548 194 979 299 182 634 79 831 25 159 958 At 1 January 2009 1 238 000 10 232 000 5 719 492 1 604 575 167 189 207 320 19 168 576 34 Turnall Holdings Limited Annual Report 2009
    • Notes To The Financial Statements 31 December 2009 12. INVENTORIES 31 December 2009 US$ Raw materials 93 660 Finished goods 2 073 511 Consumables 1 125 644 3 392 815 13. TRADE AND OTHER RECEIVABLES Trade receivables 2 899 662 Prepayments 306 997 Other receivables 13 316 3 219 975 Debtors are shown net of an allowance for credit losses of US$575 664 (2008: US$420 505). Of this amount, debts amounting to ZAR4 248 400 were provided for as the amounts are unlikely to be recovered due to the anti-asbestos lobby in South Africa. Included in trade receivables are amounts denominated in currencies other than the US$ as follows: ZAR 4 366 026 BWP 1 107 751 14. CASH AND CASH EQUIVALENTS Balance at beginning of year 50 598 Bank balances and cash at the end of the year 796 736 Bank and cash balances 996 746 Bank overdraft and loans and borrowings (200 010 ) Increase in cash and cash equivalents 746 138 Included in cash and cash equivalents are amounts denominated in currencies other than the US$ as follows: ZAR 1 047 175 BWP 588 690 GBP 1 042 15. TRADE AND OTHER PAYABLES Trade payables 1 447 481 Amounts owing to group companies 251 349 Value Added Tax (VAT) 372 000 Payroll provisions 811 615 2 882 445 Turnall Holdings Limited Annual Report 2009 35
    • Notes To The Financial Statements 31 December 2009 16. PROVISIONS 31 December 2009 US$ Provision for employee benefits 251 039 Other 48 027 299 066 Cash out flows relating to these amounts are expected to occur during the subsequent financial year. 2009 17. RELATED PARTY TRANSACTIONS US$ 17.1 Analysis Purchases from fellow subsidiaries 1 202 017 Management fees paid to FBC Holdings Limited 86 345 Management fees paid to SMM Holdings Limited 32 406 The holding company changed in September 2009 from SMM Holdings Limited to FBC Holdings Limited. Management fees to SMM Holdings Limited were paid before the change in shareholding. 17.2 Related party balances Amounts due to related parties: Related party Relationship FBC Holdings Limited Holding Company 200 000 All transactions with Group companies are at arm’s length. Balances with related parties should be viewed in this light. Amounts outstanding are unsecured and will be settled on normal terms. No guarantees have been given or received. 17.3 Compensation of key management personnel The remuneration of directors and other members of key management during the year was as follows: Short-term benefits 310 825 Directors’ fees and emoluments 58 300 369 125 36 Turnall Holdings Limited Annual Report 2009
    • Notes To The Financial Statements 31 December 2009 18. PENSION SCHEMES – COMPANY 18.1 The company’s employees are part of the SMM pension schemes stated in 18.2 to 18.4 below. 18.2 SMM Holdings Pension Fund (formerly TH Zimbabwe Pension Fund) – defined contribution scheme With effect from 1 April 1999, the TH Zimbabwe and FSI defined benefit schemes, and the Acacia defined contribution scheme, were amalgamated into one scheme, TH Zimbabwe Pension Fund. On 1 August 2002, the fund changed its name from TH Zimbabwe Pension Fund to SMM Holdings Pension Fund. This is a defined contribution scheme to which both the Group and its permanent employees contribute, with the Group contributing 15% and the employees 5% of the employee’s pensionable emoluments. The Group’s contributions to the fund are charged to the statement of comprehensive income current service costs in the year in which they are incurred. 18.3 SMM Holdings Pension Fund – defined benefit scheme After the amalgamation of the pension schemes mentioned in note 18.2 above, some employees opted to retain their entitlements under the defined benefit scheme as at 31 March 1999. Accordingly, the defined benefit portion of the fund will continue being actuarially valued every three years. The latest actuarial valuation at 31 December 2007 reflected a past service surplus for the whole SMM Group, which was not split amongst the participating companies. The effect on the company’s financial statements is considered insignificant. The principal assumptions used in the actuarial valuation are as follows: % Discount rate at 31 December 12 Future salary increases 11 Future pension increases 3.5 Expected return on plan assets at 31 December 138 18.4 National Social Security Authority Scheme (NSSA) This is a defined benefit scheme promulgated under the National Social Security Authority Scheme Act1989. The company’s obligation under the scheme are limited to specific contributions legislated from time to time. 19. PRINCIPAL INVESTMENT AND THE COMPANY’S BENEFICIAL INTEREST 19.1 Operating divisions Percentage holding Turnall Building Products 100% Turnall Piping Products 100% 19.2 Dormant subsidiary companies Acacia Holdings Limited 100% Hastt Corporation Limited 100% Hastt Discs (Private) Limited 100% Tractor and Equipment (Private) Limited 100% Turnall Holdings Limited Annual Report 2009 37
    • Notes To The Financial Statements 31 December 2009 20. FINANCIAL RISK MANAGEMENT 20.1 Overview The Group 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 Group’s financial instruments: - currency risk - interest rate risk - market risk - credit risk - liquidity risk The Group does not use derivative financial instruments for speculative purposes. This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk and the Group’s management of capital. Further quantitative disclosures are included throughout these financial statements. The Board of Directors has overall responsibility for the establishment and oversight and the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risks faced by Turnall Holdings Limited, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the company. The Audit Committee is assisted in its role by Internal Audit which reviews risk management controls and procedures, the results of which are reported to the Audit Committee. 20.2 Currency risk Currency risk is, as far as possible, managed by hedging foreign currency denominated liabilities with foreign currency denominated liquid assets. The major trading currencies of the Group are the United States dollar (US$), the Botswana Pula (BWP) and the South African Rand (ZAR). For the purposes of financial reporting, the following exchange rates have been used for the translation of foreign currency balances at 31 December 2009: Reporting date Average rate (US$) Spot rate (US$) 2009 2008 2009 2008 ZAR 8.40 8.23 7.38 9.65 BWP 7.03 6.73 6.66 7.65 GBP 1.56 1.85 1.61 1.47 Also at the same date, the Group’s exposure to foreign currency risk was as follows based on notional amounts: 31 December 2009 ZAR EURO BWP Trade receivables 4 366 026 - 787 601 Trade payables (24 616 ) - - Cash and cash equivalents 888 690 - 1 047 175 Impairment provision (4 248 664 ) - - Gross balance sheet exposure 981 436 - 1 834 776 Estimated forecast sales - - 930 000 Estimated forecast purchases (554 200 ) (424 506 ) - Gross Exposure (554 200 ) (424 506 ) 930 000 Net Exposure 427 236 (424 506 ) 2 764 776 38 Turnall Holdings Limited Annual Report 2009
    • Notes To The Financial Statements 31 December 2009 Sensitivity analysis All foreign balances were converted to United States dollars using inter-bank rates. A 10% strengthening in the United States dollar against the other currencies to the exchange rate at 31 December 2009, would have increased equity and profit and loss by the amounts reflected below. This analysis assumes all variables remain constant. 20. FINANCIAL RISK MANAGEMENT (Continued) Equity Profit and loss Effect US$ US$ 31 December 2009 ZAR 12 281 12 281 BWP 169 644 169 644 GBP 104 104 182 029 182 029 A 10% weakening of the United States dollar against the above currencies at 31 December 2009 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. 20.3 Interest rate risk The interest rates for both interest receivable and payable from/to local financial institutions are generally pegged against the published Reserve Bank of Zimbabwe rates. The Group finances its operations through a mixture of retained profit and bank borrowings. The Group borrows principally in United States dollars at fixed and floating rates of interest. The interest rate characteristics of new borrowings and the refinancing of fixtures borrowings are positioned according to expected movements in interest rates. At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was: 31 December 2009 US$ Fixed rate instruments Financial liabilities 401 141 These are short term loans from Kingdom Bank Limited and FBC Bank Limited of US$200 000 each. The loans were for working capital purposes. 20.4 Market risks 20.4.1 Other market price risk Equity price risks arise from the equity securities held for speculative purposes. Management of the Group monitors the mix of equity securities in its investment portfolio based on market indications. Management is assisted by external advisors in this regard and all the buy and sell decisions are approved by the Finance Director. The primary goal of the Group’s investment strategy is to maximise investment returns. In accordance with this strategy, these investments are designated at fair value through profit or loss because their performance is actively monitored and they are managed on a fair value basis. Turnall Holdings Limited Annual Report 2009 39
    • Notes To The Financial Statements 31 December 2009 20. FINANCIAL RISK MANAGEMENT (Continued) 20.4.2 Short term investments 31 December 2009 US$ Investments held for trading 24 708 The financial assets designated at fair value through profit or loss are equity securities traded on the Zimbabwe Stock Exchange. 20.5 Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers. The Group does not normally require collateral in respect of financial assets. Management has a credit policy in place; exposure to credit risk is monitored on an on-going basis. Credit evaluations are performed on all customers requiring credit over a certain amount. Non-regular customers are required to prepay their orders in order to manage credit risk. Investments are allowed only in liquid securities, and only with counterparties that have a credit rating considered equal to or better than that of the Group. Given their high credit 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 the uninsured portion of any trade and other receivables considered doubtful. The maximum exposure to credit risk at the reporting date was: 31 December 2009 US$ Trade and other receivables 2 899 662 20.5 Credit risk The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was: 31 December 2009 US$ Domestic - Botswana - Mozambique - South Africa 575 664 575 664 A significant portion of the Group’s customers are retailers. 40 Turnall Holdings Limited Annual Report 2009
    • Notes To The Financial Statements 31 December 2009 20. FINANCIAL RISK MANAGEMENT (continued) 20.6 Liquidity and cash flow risk In order to mitigate any liquidity risk that the Group may face, the Group’s policy has been, throughout the period ended 31 December 2009, to maintain substantial unutilised facilities and reserve borrowings capacity. The following facilities were unutilised at year end: Bank Facility PTA loan US$4.3 million The Group tends to have significant fluctuations in short term borrowings due to seasonal factors. Group policy requires that sufficient revolving banking facilities are available to exceed projected peak borrowings. 20.7 Capital management The Group’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. 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 Group’s share option scheme. The Group is not subject to externally imposed capital requirements. 20.8 Borrowing powers The Articles limit Turnall’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 company’s 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. Turnall Holdings Limited Annual Report 2009 41
    • Notes To The Financial Statements 31 December 2009 21. LIMITATION OF FINANCIAL REPORTING IN THE GENERAL ENVIRONMENT The following limitations in reporting in 2008 have made the presentation of comparative information in 2009 misleading and therefore resulting in the Directors’ decision not to include comparative information: • The Consumer Price Indices (CPIs) which were not published since July 2008, with estimates by economists wide ranging. The use of foreign currency and multiple pricing, distorted the process of measuring inflation. Therefore, the Group’s results for 2008 were not adjusted to reflect changes in the general level of prices due to the unavailability of official CPIs. The requirement for Zimbabwean entities to restate financial figures to reflect their purchasing power is based on IAS 29, which requires that the financial statements prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at the balance sheet date and that corresponding figures for the previous period be restated on the same basis. • The measurement of transactions in local currency was dependent on the mode of settlement. As a result, there were significant variations in the valuations of assets and liabilities. Accordingly, such valuations were inherently unreliable. • The determination of fair values as at 31 December 2008 in the annual financial statements was affected by the prevailing economic environment and may, therefore, have been distorted. This resulted in significant variations in fair values, depending on the factors and assumptions used in the determination of the fair values. As a result of the prior year uncertainties and inherent limitations stated above, the Directors advise caution on the use of consolidated statements of comprehensive income, cash flows and changes in equity. The Directors believe that the consolidated statement of financial position that has been presented is a fair reflection of the assets and liabilities of the Group and, therefore, a fair reflection of the shareholders’ equity. 22. SUBSEQUENT EVENTS 22.1 Statutory Instrument 21 of 2010: Indigenisation and Economic Empowerment Regulations The Government of Zimbabwe promulgated Statutory Instrument 21 of 2010 on 29 January 2010. The statutory instrument requires that 51% of all shares or interests in businesses with an asset value in excess of US$500 000 be held by indigenous Zimbabweans within five years from 1 March 2010, on which date the instrument became effective. This statutory instrument does not have a significant impact on the operations of Turnall Holdings Limited but could impact the operations of some of its customers. 22.2 Re-denomination of share capital In February 2010, the Registrar of Companies issued a circular requiring that all companies re-denominate their share capital to United States dollars. The re-denominated share capital should be determined by the company and stated on all annual returns lodged with the Registrar of Companies. Turnall Holdings Limited is yet to comply with these requirements. No other significant subsequent events have been identified to date. 42 Turnall Holdings Limited Annual Report 2009
    • Analysis Of Shareholders 31 December 2009 ANALYSIS OF SHARES HELD No. of shareholders % of total Total shares % of total shareholders shares 1-500 245 24.55 36,701 0.01 501-1000 80 8.02 60,976 0.01 1001-5000 281 28.16 676,987 0.14 5001-10000 109 10.92 759,071 0.16 10001-20000 80 8.02 1,066,585 0.22 20001-50000 72 7.21 2,362,670 0.49 50001-100000 42 4.21 2,749,169 0.57 100001-500000 47 4.71 11,304,235 2.34 500001-1000000 16 1.60 11,905,874 2.46 100001 and over 26 2.61 453,022,652 93.61 998 100.00 483,944,920 100.00 ANALYSIS BY CATEGORY OF SHARES No. of shareholders % of total Total shares % of total shareholders shares Company (local) 75 7.52 23,955,589 4.95 Pension Funds 16 1.60 68,122,977 14.08 Nominees (local) 57 5.71 326,257,308 67.42 Investments Trusts etc 91 9.12 32,819,264 6.78 Local resident 692 69.34 19,518,325 4.03 Employees 26 2.61 12,132,952 2.51 Warrant not presentable 26 2.61 736,367 0.15 Insurance 5 0.50 203,942 0.04 New Non-Resident 4 0.40 84,404 0.02 FCDA-resident 3 0.30 80,081 0.02 Banks 1 0.10 20,000 0.00 Estates 2 0.20 13,711 0.00 Grand Total 998 100.00 483,944,920 100.00 TOP TEN SHAREHOLDERS AS AT 31 DECEMBER 2009 % of total Total holding shares FBC NOMINEES 287,547,778 59.42 National Social Security Authority 43,710,113 9.03 Local Authorities Pension Fund 22,000,000 4.55 Equivest Nominees (Pvt) Ltd 18,482,581 3.82 Equivest Nominees (Pvt) Ltd 24,818,128 5.13 Amaval Investments (Pvt) Limited 12,414,273 2.57 Turnall Holdings Employee Share Participation Trust 8,541,412 1.76 Nadim Noormohamed 3,370,272 0.70 Gezmark Investments (pvt) Ltd 2,971,719 0.61 AksiaTrust 2,858,569 0.59 Total holding of top 10 426,714,845 88.18 Remaining holding 57,230,075 11.82 Grand total 483,944,920 100.00 DIRECTOR’S SHAREHOLDING At 31 december 2009,the director’s shareholding in the company was as shown below: Name Beneficial J.P Mutizwa 201 J A Jere 51 568 R S Dube 2 702 082 Turnall Holdings Limited Annual Report 2009 43
    • Notice to Shareholders Notice is hereby given that the Eighth Annual General Meeting of the Members of Turnall Holdings Limited will be held on Thursday 3 June, 2010 in the Jacaranda room, Rainbow Towers, Harare at 12:00 Hours to consider the following business: 1.0 Ordinary Business 1.1 To receive, consider and adopt, the annual financial statements and the reports of the Directors and auditors for the financial year ended 31 December, 2009. 1.2 To elect Directors of the Company Messrs J.P. Mutizwa and C.E Dhlembeu as well as Mrs R. Likukuma retire from the Board in terms of Article 95 of the Company’s Articles of Association. Mr C.M. Gadzikwa was appointed to the Board during the course of the year and retires in terms of Article 101 of the Company’s Articles of Association. All of them being eligible offer themselves for re-election. Mr A.M. Zvandasara resigned from the Board during the course of the year. 1.3 Approve the remuneration of the Directors for the financial year ended 31 December, 2009. 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. 2.0 Special Business Redenomination of the Company’s share capital. To resolve as special business with or without amendments: 2.1 That the Company be and hereby authorised to alter or otherwise restructure its share capital such that the nominal value for shares be redominated from Z$0,00 (as a result of the debasement of the Zimbabwean dollar from 1 August, 2006 to 2nd February, 2009) to one US cent (US$0,01) per share. 2.2 That the Directors be and are hereby authorised to transfer from the non-distributable reserves of the Company an amount sufficient to fund the mentioned redenomination of the company’s Share Capital and to do all such things and execute all documents as maybe necessary to give effect to the resolutions before and after, in relation to the Company’s share capital. 2.3 That the Memorandum and Articles of Association of the Company be amended to the extent necessary to give effect to the above. 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 Board R.S. Dube 5 Glasgow Road COMPANY SECRETARY P.O. Box 3985 Workington 9 March 2010 HARARE 44 Turnall Holdings Limited Annual Report 2009
    • Shareholders Calender Shareholders Calender YEAR ENDED 31 DECEMBER 2009 Financial Year End 31 December 2009 Publication of Financial Results 24 March 2010 Annual General Meeting 3 June 2010 Half Year End 30 June 2010 Publication of Interim Results September 2010 Turnall Holdings Limited Annual Report 2009 45
    • Company Profile Company Profile Turnall holdings is an industrial and manufacturing group that was listed on the Zimbabwe Stock Exchange in November 2002 through the demerger of TH Zimbabwe Limited Precedent to the demerger, the THZ Group was restructured from a divisionalised structure into the three companies listed on the stock exchange: Turnall Holdings Limited General Beltings Limited Steelnet Zimbabwe Turnall Holdings is the sole shareholder of four dormant companies namely Acacia Holdings Limited, Hastt Corporation Ltd, Hastt Discs (Private) Limited and Tractor and Equipment (Private) Limited. It operates through two divisions namely Turnall Building Products and Turnall Piping Products. Turnall Fibre Cement was set up in 1943 at its present Harare site and grew to an extent that a second manufacturing plant was established in Bulawayo in 1948. Turnall is now the largest manufacturer and supplier of fibre cement roofing and pipe products in Zimbabwe. 46 Turnall Holdings Limited Annual Report 2009
    • Notes Turnall Holdings Limited Annual Report 2009 47
    • Notes 48 Turnall Holdings Limited Annual Report 2009
    • Turnall Holdings Limited Annual Report 2009 49
    • S A Z Turnall Harare Head Office 5 Glsagow Road, P.O.Box 3985, Harare, Zimbabwe Phone: (04) 754625/9, 754630/1, Fax: (04) 754632 Turnall Bulawayo Steel Works Road, P.O.Box 1753 Bulawayo, Zimbabwe Phone: (09) 882230-7 Fax: (09) 882238-9 Website: www.turnall.co.zw 50 Turnall Holdings Limited Annual Report 2009