Turnall Holdings Limited 2010 AR


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Turnall Holdings Limited 2010 annual report for the year ended 31 December 2010

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Turnall Holdings Limited 2010 AR

  1. 1. 1 ContentsMission and Values 2Directorate and Corporate Information 3Board of Directors 4Group Management 6Organisational Structure 7Business Portfolio 8Chairman’s Statement 10Review of Operations 12Directors’ Report 14Statement of Corporate Governance 15Statement of Directors’ Responsibilities for Financial Reporting 16Statistical Analysis 17Independent Auditor’s Report 19 Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0Statement of Financial Position 20Statement of Comprehensive Income 21Statement of Cash Flows 22Statement of Changes In Equity 23Statement of Accounting Policies 24Notes to the Financial Statements 32Analysis of Shareholders 48Notice to Shareholders 49Shareholders’ Calendar 50Notes 51
  2. 2. 2 Mission and Values MISSION We are passionate about the quality of life of our customers; we provide high quality affordable construction materials to help them achieve their dreams. VALUES We’ll find time to genuinely care, opening our doors to support, encourage & develop our People. Our priority is to focus on our customers - we will be guided by their needs. We are honest in ALL our business dealings & we will honour our commitments. We communicate in an Open, Frank & Direct way, face to face, regularly challenging our thinking to ensure we are creative in our business approach. A sense of humour is important to us: we don’t take ourselves too seriously. However we take our work & our customers very seriously. We will manage and make decisions with facts.Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0 Quality new product... Turnall Corrugated Iron Roof Sheets
  3. 3. Director & corporate information 3Chairman H. NkalaManaging Director J.A. JereFinance Director/Company Secretary R.S. DubeNon-Executive Directors J.P. Mutizwa P.C.C. Moyo J. Mushayavanhu C.E. Dhlembeu K. Naik* R. Likukuma L. Manyenga C.M. Gadzikwa * Appointed during the yearSenior Divisional Management E. Kondo - Marketing Director E. Mamukwa - Human Resources Director F. Chigwedere - Technical DirectorRegistered Office 5 Glasgow Rd, Workington, HararePostal Address P.O. Box 3985, HarareLegal Advisers Principal BankersChihambakwe, Mutizwa and Partners Banc ABC8th Floor, Regal Star House Barclays Bank of Zimbabwe Limited25 George Silundika Avenue CBZ Bank LimitedHarare FBC Bank Limited Kingdom Bank LimitedDube, Manikai and Hwacha MBCA Bank Limited6th Floor, Eastgate Complex Premier Bank LimitedSam Nujoma/Robert Mugabe Road Standard Chartered Bank of Zimbabwe LimitedHarare Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0Auditors Transfer SecretariesKPMG Chartered Accountants (Zimbabwe) Regatta Financial Advisory Services (Private) LimitedMutual Gardens, 100 The Chase (West) 101 Union AvenueEmerald Hill HarareHarare
  4. 4. 4 Board of directors H. Nkala Chairman J. P. Mutizwa Deputy Chairman J. A. Jere Managing Director R. S. Dube Finance DirectorTu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0 P. C. C. Moyo Non-executive Director J. Mushayavanhu Non-executive Director
  5. 5. Board of directors 5 C.M. Gadzikwa Non-executive Director R. LikukumaNon-executive Director K. Naik Non-executive Director C. E. DhlembeuNon-executive Director Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0 L. ManyengaNon-executive Director
  6. 6. 6 Group ManaGeMent J. A. Jere Managing Director R. S. Dube Finance Director E. Mamukwa Human Resources DirectorTu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0 F. Chigwedere Technical Director E. Kondo Marketing Director
  7. 7. orGanisational structure 7OPERATING SUBSIDIARY DORMANT SUBSIDIARIES Turnall Fibre Cement Acacia Holdings Limited Hastt Corporation Limited Hastt Discs (Pvt) Limited Tractor and Equipment (Pvt) Limited Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0
  8. 8. 8 Business portifolio 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) LimtedTu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0
  9. 9. 9 Regional markets “Exports into the regional markets of South Africa, Botswana and Mozambique will go a long way in strengthening Turnall’s regional market presence going forward”. H. Nkala Chairman Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0STRENGTH IN PRODUCT AND SERVICE
  10. 10. 10 chairMan’s stateMent Introduction It is my pleasure to present the Turnall Holdings Limited results for the year ended 31 December 2010. The company posted good results on the back of a relatively stable macroeconomic environment. Operating Environment for its building products. The volume The stable macroeconomic and growth was largely underpinned by operating business environment the agricultural sector with tobacco which came on the back of the being the dominant crop. Volumes at introduction, in 2009, of a multi- 67 371 tonnes for the year, grew by currency system, persisted in the 57% compared to the same period year 2010. However, despite this last year and helped underline H. Nkala - Chairman stability, companies continued Turnall’s dominant position in the to face a number of challenges domestic market. Exports, which notably liquidity and working were largely confined to Botswana It has always capital constraints. This position and Mozambique, contributed 6% was further worsened by the to total volumes. been the unavailability of offshore credit lines to enable businesses in general to The company achieved a turnover company’s import raw materials for use in their operations. from operations of US$34.9 million for the year representing an increase strategic drive of 111% over the same period last With borrowing rates generally year. Exports contributed 2.1% to to re-enter remaining high for the entire period, total turnover. the lucrative at between utilisation in 13-20%, most capacity companies Operating profit from continuing South African remained locked within the 45-60% range. Price stability was, however, operations at US$5.3 represented an increase of 104.1% million roofing market maintained for the greater part of over the same period last year. The the year as evidenced by the year operating margin for the year at after the 2008 on year inflation figure of 3.2% for 15% was slightly below the 16% asbestos December 2010. achieved in prior year. The marginalTu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0 decline is largely attributable to the ban in that As highlighted in my half year report, the company continued to higher importation costs of fibre. country . import chrysotile fibre from Brazil Profit before tax of US$4.9 million and Russia at a much higher cost. was achieved after net finance costs H. Nkala Chairman The importation of chrysotile fibres, of US$391 199. Finance charges at a cost of US$1 200 per ton, were incurred on short term had the net effect of lowering the borrowings secured to fund working company’s operating margins. capital requirements. Performance Overview An attributable profit of US$3.4 I am pleased to report, that despite million was achieved representing an these challenges, the company increase of 122.6% over the same experienced an increase in demand period last year. Basic earnings per
  11. 11. chairMan’s stateMent 11share was recorded at 0.70 cents, the books of the company at the first two months of the year. Thecompared to 0.32 cents last year. close of business on 15 April 2011. level of demand currently in the The share register will be closed business gives me optimism aboutCapital Project from 19 April 2011 to 22 April 2011 the future. The company, as a result,It has always been the company’s both dates inclusive. is optimistic of growing volumesstrategic drive to re-enter the significantly in the year on the backlucrative South African roofing Non-resident shareholders tax of increased pipe sales activity andmarket after the 2008 asbestos ban will be deducted from payment the re-entry into regional exportin that country. Exports into the where applicable. The payment markets with the new productregional markets of South Africa, of the dividend for non-resident range.Botswana and Mozambique will go a shareholders will be in accordancelong way in strengthening Turnall’s with exchange control regulations. Appreciationregional market presence going I would like to thank my fellow Boardforward. Directorate members, management and all staff Mr. K. Naik was appointed to the at Turnall, customers, suppliers andTo that end, I am pleased to advise Board of Turnall Holdings Ltd during all stakeholders for their supportthat the capital project to install the course of the year. He brings and commitment during the year.an asbestos free plant has been to the Board his vast commercialcompleted and that trial runs and business experience which will addcommissioning will take place value to the company’s operationsduring the first week of March 2011.The state-of-the-art plant which is Outlookbased in Bulawayo will use PVA The performance for the year 2011 H. Nkalaand cellulose fibres to produce a will largely hinge on the anticipated CHAIRMANdiversified product range which, in growth in agriculture. As is the case Harareaddition to the traditional corrugated for 2010, the growth in agriculturesheet, will include ceiling, fascia and will help underpin local volume sales 24 February 2011barge boards. in Building Products while the re- entry into regional export marketsInitial orders to kick start these will drive export sales.exports have already been received.Deliveries are set for April 2011 In addition to these volumes and Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0pending the South African Bureau largely as a result of the infra-of Standards registration (SABS) structural developments expectedprocess which is currently in in 2011 around water and sewerprogress. reticulation, pipe sales are forecast to significantly contribute to overallDividend sales performance of the business.At a meeting held on 24 February The company has started the year2011, the Board of Directors 2011 with a fairly strong pipe orderresolved that a final dividend of book driven largely by current0.173 cents per share be and is local councils’ and municipalityhereby declared for the year ended rehabilitation programs.31 December 2010. The dividendwill be payable on or about 6 May Capacity utilisation has remained2011 to shareholders registered in generally high at 80% during the
  12. 12. 12 reView of operations Overview The political stability and economic growth trends that started with the advent of the dollarisation of the economy in 2009 continued during the year under review. Business confidence, as a result, continued to strengthen albeit cautiously given the lack of a clear economic and investment policy framework. Foreign Direct Investment (FDI) inflows therefore remained subdued and largely remained confined to a few counters on the Zimbabwe Stock Exchange (ZSE). In the absence of these investment Financial Performance flows, liquidity challenges persisted The results have been prepared in throughout the year and interest United States dollars. rates, which although having J. A. Jere - Managing Director come down, remained relatively The company achieved a turnover high at 12% - 18% especially of US$34.9million representing when compared to South Africa’s 111% ahead of same period last borrowing rates which ended the year. An operating profit from ...the year at around 9%. While liquidity continuing activities of $5.3 million commissioning constraints constituted a significant factor in spending patterns, capacity which is 104% ahead of last year was achieved. of the non- utilisation, while remaining largely Attributable profit at US$3.4 million asbestos plant subdued at around 45%, showed a major improvement on 2009 which represents a basic earnings per in the first half recorded utilisation levels of below share of 0.70 cents which is 119% ahead of prior period. 15%. of 2011 will enable the The improvement in economic activity, as witnessed in 2010, was Total assets were valued at US$47.1 million. company to driven largely by a recovery in Divisional Performance resume exports the mining and agricultural sector. Mining grew 47% while agriculture into the South grew 34%. Manufacturing grew a Building Products Division Local Building Products sales modest 5%. An overall GDP growth African marketTu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0 of 8.1% for 2010 was, as a result, increased by 65% to 62 963 tonnes during the recorded against a 5.7% growth achieved last year. (2009 : 38 149 tonnes). Volumes were mainly driven by tobacco and second half of cotton sales. Short-term loans from banks enabled customers to borrow 2011. . Against this background, Turnall Holdings Limited experienced for construction projects. J. A. Jere Managing Director improved capacity utilisation in its operations and achieved an overall Exports accounted for 6% of total volume sales growth of 57% ahead volumes and were 33% below of same period last year. prior year. The asbestos ban in
  13. 13. reView of operations 13Mozambique affected volumes Manufacturing Excellence has, on an ongoing basis, continuedleaving the Botswana market as the I am pleased to report that despite to engage all key stakeholders and inonly export destination for Turnall the closure of the local chrysotile the process raise awareness on theproducts. asbestos fibre mines in early 2010, use of chrysotile based products. the company managed to secureThe company started the production imported asbestos from Brazil During the year, Turnall resuscitatedand sale of corrugated galvanized and Russia. The imported fibres, the National Chrysotile Taskforce toiron sheets during the year under which are landing at USD 1200/t deal with negative perceptions onreview. Volume sales grew during are generally 30% to 40% more the local market.the year from a mere 50t per month expensive than local asbestos.to around 250t per month by the Future Prospectsend of the year. On the factory front, we continued The year 2011 started on a positive to be innovative as evidenced by note with volumes for the firstPiping Products Division a number of initiatives that were quarter being ahead of samePipe volumes increased by 101% to successfully implemented and these period last year. This is despite1779 tonnes (2009 : 886 tonnes). included: the liquidity challenges beingSignificant volumes were sold to faced in the economy. The volumelocal authorities for water and Commissioning of the non- forecast for 2011 is expected tosewer reticulation. However, the asbestos plant in Bulawayo to strengthen during the second halfdemand for pipes largely remained mitigate against the loss of of 2011 largely on the back of thesubdued during the first half of 2010 exports into South Africa. agricultural selling season.due to project funding challenges.The funding position improved The successful amalgamation of Appreciationduring the second half of the year ISO9000, 14000 and 18 000 into I would like to take this opportunityprompting the company to resume one auditable standard through to thank the Board for giving thePipe production after two years the use of a business excellence Executive team strategic directionunder care and maintenance. model. at critical moments during the year 2010 and, secondly to extend myGrowing Markets The implementation of a appreciation to fellow managers andExports volumes, which in the computerized Manufacturing Turnall employees, shareholders,past were driven by the company’s Module and a balanced scorecard customers, suppliers and businesssale into South Africa prior to the as a tool for performance partners for their support. Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0asbestos ban in that country, measurement.declined by 33% against prior year.Turnall’s product was also banned in The installation of generators forMozambique during the second half both the Harare and the Bulawayoof the year leaving Botswana as the plants.sole market for its exports products. J.A JereHowever, the commissioning of the Chrysotile Managing Directornon-asbestos plant in the first half The ‘Safe Use Principle’ whenof 2011 will enable the company using chrysotile asbestos remains 24 February 2011to resume exports into the South management’s philosophy in dealingAfrican market during the second with the negative perceptionshalf of 2011. around the subject. Management
  14. 14. 14 directors’ report The Directors have pleasure in presenting their report, together with the group for the year ending 31 the audited financial statements of the group for the year ended 31 December 2011 and shareholders December 2010. will be asked to consider their reappointment and approve their Annual results the authorised share capital are remuneration for the year ended 31 set out in note 10 of the financial December 2010. 31 December 2010 statements. US Employment policies Earnings attributable to Directors and their interests The continued motivation of shareholders 3 417 678 Names of the Directors are set on employees and management towards page 4-5. overall productivity enhancement Dividend is a fundamental feature of the At a meeting held on 24 February Messrs J. Mushayavanhu and P. C. group’s operating philosophy and 2011, the Board of Directors C. Moyo as well as Ms. L. Manyenga is key to management of risk. resolved that a final dividend of retire from the Board in terms of This is achieved through training, 0.173 cents per share be and is Article 95 of the Company’s Articles development, information sharing hereby declared for the year ended of Association. Mr. K. Naik was and progressive co-operative levels, 31 December 2010. The dividend appointed to the Board during the including short and long-term will be payable on or about 06 May course of the year and retires in incentives, where appropriate. 2011 to shareholders registered in terms of Article 101 of the Company’s the books of the company at the Articles of Association. All of them The group has employed policies close of business on 15 April 2011. being eligible offer themselves for which are appropriate to its business The share register will be closed re-election. and markets and which attract, from 19 April 2011 to 22 April 2011 retain and motivate the quality of both dates inclusive. No director had, during or at the end staff necessary to compete actively of the year, any material interests in in the market. These policies Non-resident shareholders tax any contract with the group which are required to provide equal will be deducted from payment could be considered to be significant employment opportunities, without where applicable. The payment in relation to group’s business. The discriminating against gender, race of the dividend for non-resident beneficial interests of the Directors or physical ability. shareholders will be in accordance and their families in the shares of with exchange control regulations. the company are given on page 48. Payment of suppliers The group agrees terms and Investment in property, plant Substantial shareholders conditions with suppliers before and equipment According to information received business takes place and its policyTu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0 Capital expenditure for the year by the Directors, the following are and practice is to pay agreed totaled US$4.4 million. US$3.8 the only shareholders beneficially invoices in accordance with the million was incurred for the Nutec holding directly or indirectly, at 31 terms of payment. capital work in progress, US$ 0.3 December 2010, in excess of 5% million was spent on plant and of the issued share capital of the By order of the Board machinery, US$0.2 million was spent company: on acquisition of motor vehicles and US$0.1 million was spent on FBC Nominees 58.32% acquisition of computers. National Social Security Authority 8.91% R.S. Dube Share capital Equivest Nominees Secretary At 31 December 2010, the authorised (Private) Limited 10.86% share capital comprised of 690 000 24 February 2011 000 ordinary shares. Issued share Auditors capital comprised of 493 040 308 Messrs KPMG offer themselves ordinary shares. The details of for reappointment as auditors of
  15. 15. stateMent of corporate GoVernance 15Turnall Holdings Limited is committed to an open approach to corporategovernance. This assurance ensures that, in protecting and adding valueto Turnall Holdings Limited’s financial and human resource investment,the group is being managed ethically, according to prudently determinedrisk parameters and in compliance with the best international practices.The code, which Turnall Holdings Limited applied, was prepared by theAudit Committee and approved by the Board on 6 March 2003.The BoardThe Board comprises two executive and control of operations by regulardirectors and eight non-executive reports to the Board includingdirectors. The Chairman of the quarterly performance reportingBoard is a non-executive director. and budget updates.The executive directors generallyhave responsibility for making and Audit Committeeimplementing operational decisions The committee is chaired by Mr J.P.in running the group’s businesses. Mutizwa, a non-executive directorNon-executive directors support and includes two other non-the skills and experience of the executive directors. The committeeexecutive directors, contributing to meets at least quarterly andformulation of policy and decision- reviews records from the Executivemaking through their knowledge of, Committee, the internal auditors,and experience in, other businesses and the group external auditors inand sectors. relation to the interim and annual financial statements, as well as toThe Board, which meets at least the accounting and internal controlquarterly, sets the strategic systems.objectives of the group, determinesinvestments and environmental The Audit Committee alsopolicies and approves major recommends the appointment ofcapital expenditure, acquisitions and reviews the external auditors’and investments. The Board also remuneration. The external auditorsagrees on performance criteria have unrestricted access to theand delegates to management audit committee. Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0the detailed planning andimplementation of the agreed policy,in accordance with appropriate riskparameters. It monitors compliancewith policies, and achievement H. Nkalaagainst objectives, by holding Chairmanmanagement accountable for itsactivities through the measurement 24 February 2011
  16. 16. 16 stateMent of directors’ responsiBilities for financial reportinG Responsibility The directors are responsible for preparing the Annual Report and the group financial statements in accordance with applicable laws and regulations. The Companies Act (Chapter 24:03) The directors are responsible for Transition to IFRS requires the directors to prepare the keeping proper accounting records The Company is resuming group financial statements for each which disclose with reasonable presentation of IFRS financial financial year. accuracy at any time, the financial statements after the early adoption position of the group and enable of the Amendments to IFRS 1 The group financial statements are them to ensure that its financial issued on 20 December 2010. The required by law and International statements comply with relevant Company failed to present IFRS Financial Reporting Standards legislation. They have general financial statements for the financial (IFRSs) to present fairly the responsibility for taking such steps years ended 31 December 2008 financial position of the group and as are reasonably open to them to and 31 December 2009 due to the the performance for that period. safeguard the assets of the group effects of severe hyperinflation, as and to prevent and detect fraud and defined in Amendments to IFRS 1. In preparation of the group financial other irregularities. statements, the directors are required to: Statement of compliance select suitable accounting The financial statements have policies and then apply them been prepared in conformity H. Nkala consistently; with International Financial Chairman make judgments and estimates Reporting Standards (IFRS’s), that are reasonable and promulgated by the International 24 February 2011 prudent; Accounting Standards Board state whether they have been (IASB), which includes standards prepared in accordance with and interpretations approved by IFRSs; and the IASB as well as International prepare the financial statements on the going concern basis Accounting Standards (IAS’s) and unless it is inappropriate to Standing Interpretations Committee presume that the group and (SIC) interpretations issued underTu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0 parent company will continue in previous constitutions. business.
  17. 17. statistical analysis 17 Year ended Year ended 31 December 31 December 2010 2009 USD USDShare performanceWeighted avarage number of shares (000) 493 040 483 945Closing market capitalisation 330 145Basic earnings per share (cents) 0.70 0.32Diluted earnings per share (cents) 0.70 0.32Net asset value per share (cents) 7 148 5 961Closing share price (cents) 0.07 0.03Highest share price (cents) 0.07 0.03Closing price/earnings ratio (times) 0.10 0.09ProfitabilityGross profit margin (%) 31.91 36.93Operating profit margin (%) 15.06 15.60Return on shareholders equity (%) 13.48 7.09Return on total assets (%) 7.25 4.49Effective rate of tax (%) 30.00 36.00Nominal rate of tax (%) 25.75 30.90Liquidity and leverageInterest cover (times) 13.72 26.14Current ratio 1.50:1 1.58:1 Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0
  18. 18. Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0 18 Quality Product STRENGTH IN PRODUCT AND SERVICE
  19. 19. independent auditor’s report 19 KPMG Mutual Gardens Telephone +263 (4) 303700 100 The Chase +263 (4) 302600 P.O. Box 6, Harare, Zimbabwe Fax +263 (4) 303699Independent Auditor’s ReportTo The Members Of Turnall Holdings LimitedReport on the financial statementsWe have audited the accompanying financial statements of Turnall Holdings Limited as set out on pages20 to 47, which comprise the statement of financial position at 31 December 2010, and the statementsof comprehensive income, statements of changes in equity and statements of cash flows for the yearthen ended, and the notes to the financial statements, which include a summary of significant accountingpolicies and other explanatory notes.Directors’ responsibility for the financial statementsThe Company’s Directors are responsible for the preparation and fair presentation of these financialstatements in accordance with International Financial Reporting Standards and in the manner required bythe Companies Act (Chapter 24:03) of Zimbabwe, and for such internal control as the Directors determineis necessary to enable the preparation of financial statements that are free from material 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 conductedour audit in accordance with International Standards on Auditing. Those standards require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assurance whether thefinancial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements. The procedures selected depend on the auditor’s judgement, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entity’spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe entity’s internal control. An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of accounting estimates made by the Directors, as well as evaluating the Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.OpinionIn our opinion, the financial statements present fairly, in all material respects, the financial position ofTurnall Holdings Limited at 31 December 2010, and its financial performance and cash flows for the yearthen ended in accordance with International Financial Reporting Standards, and in the manner requiredby the Companies Act (Chapter 24:03) of Zimbabwe.KPMG Chartered Accountants (Zimbabwe)Harare24 February 2011
  20. 20. 20 stateMent of coMprehensiVe incoMe Year ended 31 December 2010 31 December 31 December 2010 2009 Restated Note US$ US$ Continuing operations Turnover 2 34 856 966 16 493 281 Cost of sales 3 (23 733 248) (10 402 926) Gross profit 11 123 718 6 090 355 Other operating income 4 274 553 15 662 Selling and distribution expenses 5 (1 416 249) (860 613) Administrative expenses 5 (4 731 642) (2 672 648) Results from operating activities 5 250 380 2 572 756 Finance income 6 22 015 4 030 Finance costs 6 (413 214) (189 256) Net finance costs (391 199) (185 226) Profit from continuing operations before income tax expense 4 859 181 2 387 530 Income tax expense 7 (1 441 503) (851 874) Profit from continuing operations 3 417 678 1 535 656 Other comprehensive income, net of income tax Revaluation of property, plant and equipment - restated - 7 639 504 Total comprehensive income for the period 3 417 678 9 175 160 Number of shares in issue (000s) 493 040 483 945 Basic earnings per share (cents) 0.70 0.32Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0
  21. 21. stateMent of financial position 21 31 December 2010 31 December 31 December 1 January 2010 2009 2009 Restated Note US$ US$ US$ASSETSNon-current assetsProperty, plant and equipment 13 29 254 936 26 583 297 19 168 576Current assetsInventories 11 8 036 016 3 392 815 1 645 785Short term investments 21.4.2 21 129 24 708 23 456Trade and other receivables 12 8 674 890 3 219 975 533 584Cash and cash equivalents 14 1 149 058 996 746 250 598Total current assets 17 881 093 7 634 244 2 453 423Total assets 47 136 029 34 217 541 21 621 999EQUITY AND LIABILITIESCapital and reservesShare capital 10.2 4 930 403 - -Share premium 10.3 181 908 - -Non-distributable reserve 7 655 239 12 494 688 16 073 056Revaluation reserve 7 639 504 7 639 504 -Retained earnings 4 953 334 1 535 656 -Total equity attributable to equity holders of the company 25 360 388 21 669 848 16 073 056Non-controlling interest - - -Total equity 25 360 388 21 669 848 16 073 056Non-current liabilitiesLoans and borrowings 8 2 842 991 629 545 -Deferred taxation 7.4 7 037 481 7 089 680 4 840 432Total non-current liabilities 9 880 472 7 719 225 4 840 432 Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0Current liabilitiesLoans and borrowings 8 2 922 741 401 141 200 000Trade and other payables 15 5 876 935 2 882 445 443 511Provisions 16 671 191 299 066 65 000Taxation 2 420 953 1 245 806 -Bank overdraft 14 3 349 10 -Total current liabilities 11 895 169 4 828 468 708 511Total liabilities 21 775 641 12 547 693 5 509 105Total equity and liabilities 47 136 029 34 217 541 21 621 999……………………………………….. ………………………………………..Chairman Director24 February 2011 24 February 2011
  22. 22. 22 stateMent of cash flows Year ended 31 December 2010 31 December 31 December 2010 2009 Restated Note US$ US$ CASH FLOWS FROM OPERATING ACTIVITIES Profit from continuing operations 3 417 678 1 535 656 Adjustments for: Depreciation of property, plant and equipment 13 1 605 439 1 073 944 Net finance costs 6 391 199 185 226 Unrealised exchange differences (52 790) 337 Loss on disposal of property, plant and equipment 24 925 - Net change in other investments 3 579 (1 205 ) Income tax expense 7 1 441 503 851 874 Operating cash flow before reinvestment in working capital 6 831 533 3 645 832 Change in inventories (4 643 201) (1 789 370 ) Change in trade and other receivables (4 367 254) (2 500 497 ) Change in prepayments (1 087 661) (306 997 ) Change in provisions, trade and other payables 3 366 615 2 636 507 100 032 1 685 475 Withholding tax paid (1 596) (1 008 ) Income tax paid (316 959) - Interest paid (354 173) (189 256 ) (672 728) (190 264 ) Net cash flows from operating activities (572 696) 1 495 211 CASH FLOWS FROM INVESTING ACTIVITIES Interest received 15 764 4 030 Proceeds from disposal of property, plant and equipment 54 567 5 600 Acquisition of property, plant and equipment (4 356 570) (1 589 389 ) Net cash used in investing activities (4 286 239) (1 579 759 )Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0 CASH FLOWS FROM FINANCING ACTIVITIES Loans and borrowings 4 735 046 830 686 Exercise of share options 272 862 - Net cash flows from financing activities 5 007 908 830 686 INCREASE IN CASH AND CASH EQUIVALENTS 14 148 973 746 138
  23. 23. stateMent of chanGes in equity 23 Year ended 31 December 2010 Non- Share Share Revaluation distributable Retained capital premium reserve reserve earnings Total US$ US$ US$ US$ US$ US$Balance at 1 January 2009 - - - 16 073 056 - 16 073 056Total comprehensive income for the yearProfit from continuing operations - - - - 1 535 656 1 535 656Impairment loss and adjustment to non-distributable reserve - - - (3 578 368 ) - (3 578 368)Other comprehensive incomeRevaluation of property, plant and equipment - - 6 582 675 - - 6 582 675Balance at 31 December 2009 as previously stated - - 6 582 675 12 494 688 1 535 656 20 613 019Prior year revaluation reserve understated (note 13.4) - - 1 056 829 - - 1 056 829Balance as at 31 December 2009 - restated - - 7 639 504 12 494 688 1 535 656 21 669 848Total comprehensive income for the yearProfit from continuing operations - - - - 3 417 678 3 417 678Share capital changesShare capital redenomination 4 839 449 - - (4 839 449 ) - -Share options exercised 90 954 181 908 - - - 272 862Balance at 31 December 2010 4 930 403 181 908 7 639 504 7 655 239 4 953 334 25 360 388 Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0
  24. 24. 24 stateMent on accountinG policies 31 December 2010 The principal accounting policies of the Company, which are set out below, have been consistently followed in all material respects. BASIS OF PREPARATION Statement of compliance The financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS’s), promulgated by the International Accounting Standards Board (IASB), which includes standards and interpretations approved by the IASB as well as International Accounting Standards (IAS’s) and Standing Interpretations Committee (SIC) interpretations issued under previous constitutions. Transition to IFRS The Company is resuming presentation of IFRS financial statements after the early adoption of the Amendments to IFRS 1 issued on 20 December 2010. The Company failed to present IFRS financial statements for the financial years ended 31 December 2008 and 31 December 2009 due to the effects of severe hyperinflation, as defined in Amendments to IFRS 1. The first amendment replaces reference to a fixed date of ‘1 January 2004’ with ‘the date of transition to IFRS’, which eliminates the requirement to reconstruct transactions that occurred before the date of transition to IFRS. The second amendment provides guidance for entities emerging from severe hyperinflation to resume presenting IFRS financial statements. An entity can elect to measure assets and liabilities at fair value as the deemed cost in its opening IFRS statement of financial position. The Company elected to use the severe hyperinflation exemption. The effect of the application of this amendment is to render the opening statement of financial position, prepared on 1 January 2009 (date of transition to IFRS), IFRS compliant. The opening statement of the financial was reported in the prior year as not compliant with the International Accounting Standard (IAS) 1 - Presentation of Financial Statements; IAS 21 - The Effects of Changes in Foreign Exchange Rates and IAS 29 - Financial Reporting in Hyperinflationary Economies.Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0 The Company’s previous functional currency, the Zimbabwean dollar (Z$), the currency of a hyperinflationary economy, was subjected to severe hyperinflation before the date of transition to IFRS on 1 January 2009 because it had both of the following characteristics: a) a reliable general price index was not available to all entities with transactions and balances in Z$; and b) exchangeability between the Z$ and a relatively stable foreign currency did not exist. The Company changed its functional and presentation currency from the Zimbabwe dollar to the United States dollar with effect from 1 January 2009 after the presentation and pronouncement of the National Budget and Monetary Policy in January 2009, which legalised the use of foreign currency to measure and settle day to day transactions with effect from 30 January 2009.
  25. 25. stateMent on accountinG policies 25 31 December 2010Exemption for fair value as deemed costThe Company elected to measure certain items of property, plant and equipment, trade and otherreceivables, inventories and trade and other payables at fair value as the deemed cost of those assets andliabilities in the opening IFRS statements of financial position.Management determined fair values/deemed costs as follows:Monetary items• Cash and financial investments in currencies other than the Zimbabwe dollar were converted into United States dollars using the cross rates prevailing on 1 January 2009.• Loans and advances that were denominated in foreign currency have been carried at fair value as at 1 January 2009.• Trade and other receivables denominated in foreign currency were converted into United States dollars using the cross rates prevailing on 1 January 2009.• Other liabilities were determined by establishing the settlement amounts with the suppliers.• All monetary assets and liabilities denominated in Zimbabwe dollars at 1 January 2009 were not considered in the determination of the opening balances.Non-monetary items• Owner occupied and investment properties were recorded at fair values determined by independent external valuers.• Motor vehicles were recorded at fair values determined by external valuers.• Office equipment, furniture and fittings were recorded at amounts determined by external valuers.• The non-distributable reserve was derived as the difference between total assets and total liabilities in United States dollars as at 1 January 2009.Comparative financial informationThe financial statements comprise three statements of financial position, two statements of comprehensiveincome, changes in equity and cash flows as a result of the retrospective application of the Amendmentsto IFRS 1. Tu r n a l l H o l d i n g s L i m i t e d A n n u a l R e p o r t 2 0 1 0Reconciliation of Zimbabwe GAAP to IFRSThere is no requirement to reconcile the IFRS financial statements as prior to 1 January 2009 the nonIFRS compliant financial statements had Z$ as the functional currency which was subjected to severehyperinflation. The IFRS financial statements have the US$ as the functional currency. The basis ofpreparation of the opening IFRS statements of financial position is IFRS compliant.SIGNIFICANT ACCOUNTING POLICIESThe accounting policies set out below have been applied consistently to all periods presented in thesefinancial statements and in preparing the opening IFRS statement of financial position at 1 January 2009for the purposes of the resuming presentation of IFRS financial statements, unless otherwise indicated.