Your SlideShare is downloading. ×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Zimplow Holdings Limited 2012 Annual Report

829

Published on

Zimplow Holdings Limited 2012 Annual Report

Zimplow Holdings Limited 2012 Annual Report

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

  • Be the first to like this

No Downloads
Views
Total Views
829
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. ANNUAL REPORT 2012 ZIMPLOW LIMITED Delivering value added engineering solutions
  • 2. Zimplow 39 Steelworks Road, Heavy Industrial Sites, PO Box 1059, Bulawayo Tel.: (+263) 9 71363-5 Fax.: (+263) 9 71365 C.T. Bolts (Bulawayo): Cnr Falcon Street/Wanderer Road, Belmont, Bulawayo Tel.: (+263) 9 471591-4 C.T. Bolts (Harare): 22-24 L Takawira Street, Harare Tel.: (+263) 4 793916-9 Tassburg: 13 Greenock Road, Workington, Harare Tel.: (+263) 4 621541-5 Tractive Power Holdings: Aon House, Northridge Close Northridge Park Borrowdale P. O. Box HG 298 Highlands, Harare Tel :(+263) 4 883888
  • 3. Our Brand Profile
  • 4. 19 20 22 23 62 Consolidated Statement of Financial Position Consolidated Statement of Changes In Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Value Added Statement 7 9 11 12 Notice to Shareholders 8 Mission, Vision and Core values Group Profile Directorship & Administration Corporate Governance 13 Chairman’s Review 14 Director’s Responsibility Statement 15 Report of the Directors 17 Independent Auditor’s Report 18 Consolidated Statement of Profit or Loss & Other Comprehensive Income contents
  • 5. 63 Shareholders’ Analysis 64 Financial Review 2012 65 Financial Calendar
  • 6. 7 Zimplow Limited Annual Report 2012 Notice to shareholders SIXTY THIRD ANNUAL GENERAL MEETING Notice is hereby given that the Sixty Third Annual General Meeting of shareholders will be held at the CT Bolts Division Office, Falcon Street and Wanderer Road, Bulawayo on 4 April 2013 at 10:00 hours to transact the following business: AGENDA Ordinary Business 1. To approve the minutes of the Annual General Meeting held on 28 March 2012 and Extraordinary Meetings held on 29 June 2012 and 15 January 2013. 2. To receive and adopt the directors’ report and audited financial statements for the year ended 31 December 2012. 3. To elect a director in place of Mr N Nhira, who retires from office by rotation, being available, offers himself for re-election. 4. To approve the remuneration of directors for the year ended 31 December 2012. 5. To fix the auditors’ remuneration for the year ended 31 December 2012. 6. To appoint auditors for the financial year ending 31 December 2013. BY ORDER OF THE BOARD D MKONTO (Mrs) Company Secretary 39 Steelworks Road P.O. Box 1059 BULAWAYO 4 March 2013 A member entitled to attend and vote is entitled to appoint one or more proxies to act in the alternative and to attend and vote and speak in his/her stead. Such proxy need not be a member of the company. Proxy forms must be lodged at the registered office of the company not less than forty-eight hours before the time of the meeting.
  • 7. 8 Zimplow Limited Annual Report 2012 mission vision core values “To provide agricultural, mining and infrastructural engineering solutions through internationally acclaimed dominant brands” “To be the dominant player in the provision of value driven engineering solutions for all our stakeholders” Integrity We commit to being truthfully responsible and accountable for all our actions. Wisdom We commit to applying our learning and experience to decide what to do next. Teamwork We commit to supportive actions and attitudes that achieve a shared goal. Positivity We commit to make the best of every situation.
  • 8. 9 Zimplow Limited Annual Report 2012 Group profile Zimplow Limited, incorporated in 1939, is the largest manufacturer and distributor of farming implements in sub-Saharan Africa and operates through three divisions, namely, Mealie Brand, CT Bolts and Tassburg. Zimplow’s registered and branded products are actively marketed and exported to several countries in Africa through a well-established distribution network. The company also manufactures and distributes metal fasteners for the mining, construction and agricultural industries. GROUP LEGAL STRUCTURE COMPANY PRINCIPAL ACTIVITIES PRODUCTS Mealie brand Manufacturer and distributor of agricultural implements Ploughs, cultivators, planters, harrows, hoes and parts CT Bolts Manufacturer and distributor of fasteners Bolts, nuts and screws Tassburg Manufacturer and distributor of fasteners Bolts, nuts and screws Farmec Distributor of farming equipment Tractors, generator sets and combine harvesters Puzey and Payne Car dealership and servicing Mazda, Peugeot and Toyota vehicles Manica road investments Investment Property Investment property Barzem Earthmoving and mining equipment Bulldozers, generators Northmec Distributor of farming equipment Tractors African Traction and Associated Technologies Distributor of agricultural implements Distributor of agricultural implements Ploughs, cultivators, planters, harrows, hoes and parts ZIMPLOW LIMITED Mealie Brand 100% CT Bolts 100% Tassburg 100% Farmec 100% Puzey and Payne 100% Manica Road Investments 100% Barzem 65% Northmec 50% TPH Limited 57.21% Afritrac 49%
  • 9. 11 Zimplow Limited Annual Report 2012 Directorship & Administration DIRECTORS: P Devenish Z Kumwenda* (Chief Executive Officer) A Kurauone B Mitchell* D Mkonto* E Mlambo T Moyo N Nhira Z L Rusike (Chairman) F Rwakonda* AR Rowland* (Appointed 20.08.2012) * Executive COMPANY SECRETARY: D Mkonto TRANSFER SECRETARIES: Corpserve (Private) Limited Cnr 1st Street / Union Avenue, Harare AUDIT COMMITTEE: A Kurauone (Chairman) T Moyo N Nhira REMUNERATION COMMITTEE: Z L Rusike (Chairman) P Devenish E Mlambo EXECUTIVE COMMITTEE: Z Kumwenda (Chairman) B Mitchell D Mkonto F Rwakonda AR Rowland REGISTERED OFFICE: 39 Steelworks Road, Heavy Industrial Sites, P.O. Box 1059, Bulawayo AUDITORS: Ernst & Young Derry House, 6th Avenue / Fife Street, Bulawayo BANKERS: African Banking Corporation Limited Barclays Bank of Zimbabwe Limited Kingdom Bank Limited Merchant Bank of Central Africa Limited National Merchant Bank Limited CURRENCY OF FINANCIAL STATEMENTS: United States Dollars PERIOD OF FINANCIAL STATEMENTS: Year ended 31 December 2012 GROUP COMPANIES’ BOARD COMPOSITION ZIMPLOW LIMITED P Devenish Z Kumwenda* A Kurauone B Mitchell* D Mkonto* E Mlambo T Moyo N Nhira Z L Rusike (Chairman) AR Rowland* (Appointed 20.08.2012) F Rwakonda* TRACTIVE POWER HOLDINGS Z.L. Rusike Chairman (Appointed on 26 July 2012) R.V. Wilde Chairman (Resigned on 26 July 2012) M.T. Kunaka Deputy Chairman (Resigned on 26 July 2012) *Z. Kumwenda(Appointed on 26 July 2012)(Appointed Group Chief Executive Officer 1 December 2012) *C. N. Nyambuya (Group Chief Executive)(Resigned 30 November 2012) A Adam (Appointed on 26 January 2012) *M. Chinorwadza Group Financial Director P. St. L. Devenish (Appointed on 26 July 2012) S. Fitzpatrick (alt. F. D. Macleod) T. M. Johnson G. T. Manhambara E. Mlambo (Appointed on 26 July 2012) S. Mngomezulu (Appointed on 27 October 2011) C.R. Maradza (Resigned on 26 July 2012) AFRICAN TRACTION AND ASSOCIATED TECHNOLOGIES *M C McMaster *M E McMaster *O Guzzardi *S Labuschagne Z Kumwenda F Rwakonda * Executive
  • 10. 12 Zimplow Limited Annual Report 2012 Corporate governance statement BOARD OF DIRECTORS The board of directors consists of a non-executive chairman, five executive directors and seven non-executive directors. The chairmen of the various committees are all non-executive directors. The board meets regularly to review results, dictate policy, formulate overall strategy and approve the budgets. They have introduced structures of corporate governance, certain functions and responsibilities have been delegated to the following committees. Their terms of reference and composition are regularly reviewed. AUDIT COMMITTEE The audit committee liaises with the Group’s external auditors. The external auditors have unrestricted access to the audit committee. The annual, half yearly statements and financial reporting matters are reviewed by the committee at appropriate intervals. REMUNERATION COMMITTEE This committee sets the remuneration of the executive directors and approves guidelines for the Group’s pay reviews. EXECUTIVE COMMITTEE The executive committee sits between board meetings to deliberate and consider detailed operational issues of the Group which includes strategy implementation.
  • 11. 13 Zimplow Limited Annual Report 2012 Chairman’s review INTRODUCTION Trading conditions for the year under review have been challenging. Whilst the economic environment had its own problems which included, constrained liquidity conditions, policy inconsistencies and reduced capital inflows, weather patterns also played a negative role on agricultural operations. Reduced grain harvests and low cotton prices resulted in less disposable income for the small-scale farmer. The 2012/13 rain season started late and affected the normal seasonal off-take for all agricultural products. This report incorporates six months trading of Tractive Power Holdings Limited (TPHL), which became a subsidiary of Zimplow Limited by virtue of a 57.2% acquisition concluded on 30 June 2012. The new group operates in a high capital-intensive market that requires asset based finance as well as medium to long term financing structures. Your directors are pleased to have acquired this business and are confident about the considerable upside potential that the business possesses. Operational review Agriculture Mealie-Brand, which is involved in the manufacture and distribution of animal drawn agricultural equipment, recorded a 10% decline in total volumes from last year mainly due to a negative swing in local implements volume sales. Local implements units decreased by 28% compared to prior year. The recovery that was expected in the second half did not take off as anticipated due to factors mentioned above. Export implement volumes were 13% ahead of prior year. This ameliorated the decline experienced in the local market. Spares were 98% of the prior year achievement with exports contributing 43% compared to 29% in the previous year. Factory throughput was lower than 2011 production due to reduced volumes sold. Farmec holds franchises for Massey Ferguson tractors and combine harvesters, Valtra tractors, Perkins generators, Piccini implements and Monosem planters. The division’s total wholegoods sales in units were 23% lower than the 2011 achievement for the comparative six months. The late rain season affected the seasonal off-take. Labour hours through the workshops were up by 32% whilst parts sales measured in dollars were 6% down from prior year. Afritrac, our South African operation’s volumes declined by 20% due to competition from the Far East. Northmec, which holds the franchise for CASE tractors and combine harvesters, Baldan implements, recorded a 143% increase in volumes albeit from a lower base. Mining and Construction. Barzem, which holds franchises for Caterpillar and Hyster Equipment in Zimbabwe, recorded a 10% decline in wholegoods sales compared to the same period last year, while parts sales measured in dollars were 26% above last year. CT Bolts, which incorporates Tassburg products, is involved in the supply and distribution of fasteners in Zimbabwe. Units for this division, measured in kgs declined by 7% while those measured in units declined by 12%. Motoring Division Puzey and Payne is a franchise holder for Peugeot and a dealer for Mazda, Mitsubishi, Forland and Toyota. It is involved in the sale and servicing of vehicles including parts sales under these brands. The division’s vehicle sales in units decreased by 20% against the same six months period last year while parts decreased by 23% measured in dollars. Labour hours through the workshop also decreased by 8%. The proliferation of grey imports, lack of asset based finance and a few non-performing brands contributed to the decline in motor vehicle and parts volumes. Financial Review The group recorded revenue of USD35 610 823 enhanced by the acquisition of Tractive Power Holdings Limited. Operating profit of USD1.78 million was well below what was acheived by Zimplow Limited alone in 2011 due to pressures on spares margins and sales mix between local and exports at Mealie- Brand. However, the group ended up with an attributable loss of USD 1 005 176 due to restructuring, merger, and acquisition expenses, which are non-recurring. Finance charges and significant losses from Puzey and Payne also contributed to the loss for the year. Prospects The group will consolidate its leadership as the agriculture and mining equipment supplier of choice representing world-class brands. The group is well positioned to take advantage of the current rehabilitation of equipment taking place in, roads, mining, rural councils, sugar and tea estates. Tobacco prices appear to be firm and this, coupled with a positive regional outlook should see the agricultural divisions improving. Directorate Mrs. Design Mkonto, Mr. Anthony Rowland and Mr. Brendan Mitchell resigned from the board after the conclusion of 100% take over of TPHL to pave way for new members from the former TPHL board. They remain within the group as executives in their respective divisions. I am grateful for the contributions they have made to the board during their tenure. In the same vein, I would like to take this opportunity to welcome Mr. Timothy Johnson, Mr. Godfrey Manhambara and Mr. Sibani Mngomezulu to the new group and look forward to their wise counsel and experience. Appreciation I would like to express my gratitude to our customers, employees, suppliers, bankers and other stakeholders for their steadfast assistance to bring the group to where it is at the moment. In conclusion, I would like to extend my sincere thanks to fellow board members and management for putting together a key strategic group that is set to deliver value to all stakeholders. Z L Rusike Chairman 4 March 2013
  • 12. 14 Zimplow Limited Annual Report 2012 Directors responsibility statement ACCOUNTING RECORDS AND FINANCIAL STATEMENTS The Directors are responsible for the maintenance of adequate accounting records as well as the preparation and integrity of the financial statements and related information contained in the annual report in a manner that fairly presents the state of affairs and the results of the Group’s operations. EXTERNAL AUDITORS’ ROLE The external auditors are responsible for carrying out an independent examination of the financial statements in accordance with International Standards on Auditing and reporting their findings thereon. SYSTEMS OF INTERNAL CONTROL The Directors are also responsible for the Group’s systems of internal financial control. These are designed to provide reasonable, but not absolute, assurance as to the reliability of the financial statements and to safeguard, verify and maintain accountability of assets and to prevent and detect misstatement and loss. Nothing has come to the attention of the Directors to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year under review. GOING CONCERN After reviewing the Group’s budgets and related financial projections, the Directors have no reason, in all material respects, to believe that the Group will not continue to operate in the foreseeable future. Accordingly, these financial statements have been prepared on a going concern basis. ACCOUNTING POLICIES In preparing the Group financial statements set, out on pages 18 to 61 appropriate accounting policies have been applied, as have the relevant International Financial Reporting Standards, unless otherwise stated, and are supported, where necessary, by reasonable and prudent judgement and estimates. APPROVAL OF FINANCIAL STATEMENTS The Consolidated financial statements for the year ended 31 December 2012 present fairly, in all material respects the financial position and performance of Zimplow Limited and have been approved by the Board of Directors and are signed on its behalf by: Chairman Chief Executive Officer Z. Rusike Z. Kumwenda 4 March 2013 4 March 2013
  • 13. 15 Zimplow Limited Annual Report 2012 Directors’ report Your directors’ report on the operations of Zimplow Limited for the year ended 31 December 2012 is as follows: (LOSS)/PROFIT AND APPROPRIATION ATTRIBUTABLE TO OWNERS OF THE PARENT The profit and relative appropriations are as follows: DIVIDEND No dividend has been proposed for the current period. SHARE CAPITAL The unissued ordinary shares of 239 537 287 have been placed under the control of the directors, in terms of Extraordinary General Meetings of Members held on 30 August 1989, 10 November 2004, 16 November 2005 and 14 November 2007. PROPERTY, PLANT AND EQUIPMENT Capital expenditure for the year ended 31 December 2012 for the Group amounted to US$ 351 074 (Company – US$ 137 555). Group capital commitments for the year to 31 December 2013 amount to US$ 942 055 (Company – US$ 409 200). DIRECTORATE The names of the directors and secretary are those in office at the time of the printing of this Notice (4 March 2013). AUDITORS Messrs Ernst & Young remain in office until the conclusion of the Annual General Meeting on 4 April 2013, at which members will be asked to fix their remuneration for the year under review and to appoint the auditors for the ensuing year. Messrs Ernst & Young have indicated their willingness to continue in office. For and on behalf of the Board Chairman Chief Executive Officer Z. Rusike Z. Kumwenda 4 March 2013 4 March 2013 GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ (Loss)/Profit for the year (812,754) 2,677,328 (135,561) 2,642,825 Equity dividend paid (907,950) (686,851) (907,950) (686,851) Retained earnings brought forward 6,161,945 4,171,468 6,127,442 4,171,468 Retained earnings carried forward 4,441,241 6,161,945 5,083,931 6,127,442
  • 14. 17 Zimplow Limited Annual Report 2012 Independent auditor’s report Chartered Accountants (Zimbabwe) Derry House Cnr Fife Street/6th Avenue P.O. Box 437, Bulawayo Tel: +263 9 76111 Fax: +263 9 72359 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ZIMPLOW LIMITED We have audited the accompanying consolidated and company financial statements of Zimplow Limited as set out on pages 18 to 61 which comprise the statements of financial position as at 31 December 2012, the statements of comprehensive income, the statements of changes in equity and the statements of 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 information. 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 (IFRS) and in the manner required by the Companies Act (Chapter 24:03) and the relevant statutory instruments (SI 33/99 and SI 62/96) and for such internal controls as the directors’ determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ 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. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, 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 controls 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. Opinion In our opinion, the consolidated and company financial statements present fairly, in all material respects, the financial position of Zimplow Limited as at 31 December 2012, its financial performance and its cash flows for the period then ended in accordance with International Financial Reporting Standards. Report on other legal and regulatory requirements In our opinion, the financial statements have, in all material respects, been properly prepared in compliance with the disclosure requirements of and in the manner required by the Companies Act (Chapter 24:03) and the relevant Statutory Instruments (SI 33/99 and SI 62/96). Bulawayo 11 March 2013
  • 15. 18 Zimplow Limited Annual Report 2012 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For The Year Ended 31 December 2012 GROUP COMPANY Notes 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ REVENUE 3 35,610,823 15,503,306 12,807,190 14,654,404 Domestic 30,439,175 11,235,468 8,399,612 10,910,355 Export 5,171,648 4,267,838 4,407,578 3,744,049 Cost of sales (22,804,381) (8,737,971) (7,839,221) (8,315,023) Gross profit 12,806,442 6,765,335 4,967,969 6,339,381 Net operating expenses (11,027,435) (3,300,806) (3,588,139) (2,994,298) Operating profit 1,779,007 3,464,529 1,379,830 3,345,083 Merger and restructuring expenses (1,941,388) - (1,045,644) - Fair value gain on investment property (90,000) - - - Finance income 280,046 249,237 105,603 240,241 Finance costs (1,016,879) (78,493) (297,851) (78,493) (Loss)/ Profit before tax (989,214) 3,635,273 141,938 3,506,831 Income tax expense 7.1 (15,962) (904,991) (277,499) (864,006) (Loss)/Profit for the year 4 (1,005,176) 2,730,282 (135,561) 2,642,825 Other comprehensive income Items that will not be reclassified subsequently to profit or loss Gain on revaluation of properties 2,615,176 - 1,953,954 - Income tax relating to items that will not be reclassified subsequently (631,412) - (498,031) - 1,983,764 - 1,455,923 - Items that will be reclassified subsequently to profit or loss Fair value gain/(loss) on AFS financial assets 2,475 (29,752) 2,475 (29,752) Exchange differences on translation of foreign operations (69,873) (135,147) - - Income tax relating to items that will be reclassified subsequently 7.1 (371) 4,546 (371) 4,546 (67,769) (160,353) 2,104 (25,206) Other comprehensive income for the year, net of tax 1,915,995 (160,353) 1,458,027 (25,206) Total comprehensive income for the year 910,819 2,569,929 1,322,466 2,617,619 (Loss)/Profit atributable to: Owners of the parent (812,754) 2,677,328 (135,561) 2,642,825 Non controlling interests (192,422) 52,954 - - (1,005,176) 2,730,282 (135,561) 2,642,825 Total comprehensive income attributable to: Owners of the parent 705,972 2,583,057 1,322,466 2,617,619 Non controlling interests 204,847 (13,128) - - 910,819 2,569,929 1,322,466 2,617,619 (Loss)/Earnings per share Basic 26 (0.002) 0.007 (0.0003) 0.007 Diluted 26 (0.002) 0.007 (0.0003) 0.007 Headline 26 (0.002) 0.007 (0.0003) 0.007 7.1
  • 16. 19 Zimplow Limited Annual Report 2012 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2012 GROUP COMPANY Notes 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ ASSETS Non Current Assets 21,676,098 3,053,206 15,034,050 3,557,799 Property plant and equipment 8 14,997,554 2,863,605 4,593,130 2,857,481 Investment property 9 4,500,000 - - - Investment in subsidiaries - - 10,290,469 552,342 Deferred tax asset 7.3 598,395 - - - Long term loan to joint venture (Liftquip) 125,000 - - - Available for sale financial assets 10 150,451 147,976 150,451 147,976 Goodwill 12 1,304,698 41,625 - - Current assets 31,487,321 13,692,191 12,058,500 12,541,545 Inventories 13 16,398,724 7,057,950 6,296,044 6,655,452 Trade and other receivables 14 12,735,950 2,686,329 3,422,975 2,448,092 Current tax receivable 59,465 - - - Cash and bank balances 17 2,293,182 3,947,912 2,339,481 3,438,001 TOTAL ASSETS 53,163,419 16,745,397 27,092,550 16,099,344 EQUITY AND LIABILITIES Issued share capital and reserves 6.1 19,875,736 7,563,254 19,691,679 7,632,319 Retained earnings 4,441,241 6,161,945 5,083,931 6,127,442 Equity attributable to owners of the parent 24,316,977 13,725,199 24,775,610 13,759,761 Non controlling interests 23 9,522,812 512,633 - - Total Equity 33,839,789 14,237,832 24,775,610 13,759,761 Non Current Liabilities 3,532,239 621,484 1,122,931 621,484 Deferred tax liabilities 7.3 3,389,214 621,484 1,122,931 621,484 Long term borrowings 16 143,025 - - - Current liabilities 15,791,391 1,886,081 1,194,009 1,718,099 Trade and other payables 15.1 9,380,972 1,171,111 707,990 1,005,277 Provisions 15.2 294,021 378,982 339,300 377,295 Short term borrowings 16 5,706,806 - - - Current tax liabilities 409,592 335,988 146,719 335,527 TOTAL EQUITY AND LIABILITIES 53,163,419 16,745,397 27,092,550 16,099,344 Chairman Chief Executive Officer Z. Rusike Z. Kumwenda 4 March 2013 4 March 2013
  • 17. 20 Zimplow Limited Annual Report 2012 CONSOLIDATEDSTATEMENTOFCHANGESINEQUITY Fortheyearended31December2012 GROUP SHARE CAPITAL CAPITAL RESERVE SHARE PREMIUM REVALUATION RESERVE AVAILABLE FORSALE RESERVE FOREIGN CURRENCY TRANSLATION RESERVE RETAINED EARNINGS SHARE BASED PAYMENT ATTRIBUTABLE TOOWNERS OFTHE PARENT NON CONTROLLING INTEREST TOTAL US$US$US$US$US$US$US$US$US$US$ Balanceat1January201132,7077,036,174--101,702-4,171,468-11,342,051-11,342,051 Profitfortheyear------2,677,328-2,677,32852,9542,730,282 Othercomprehensiveincome----(25,206)(69,065)--(94,271)(66,082)(160,353) Paymentofdividend------(686,851)-(686,851)-(686,851) Sharebasedpaymenttransaction-------(65,400)(65,400)-(65,400) Issueofordinarysharesonacqus- itionofAfritrac 9-552,333-----552,342-552,342 Noncontrollinginterestarising fromacquisitionofAfritrac ---------525,761525,761 Balanceat31December201132,7167,036,174552,333-76,496(69,065)6,161,945(65,400)13,725,199512,63314,237,832 Lossfortheyear------(812,754)-(812,754)(192,422)(1,005,176) Othercomprehensiveincome1,744,7472,104(35,703)-1,711,148204,8471,915,995 Paymentofdividend------(907,950)-(907,950)-(907,950) Sharebasedpaymenttransaction-------(261,600)(261,600)-(261,600) Issueofordinaryshares23,330-11,185,924-----11,209,254-11,209,254 Noncontrollinginterestarising fromacquisitionofTPH ---------8,997,7548,997,754 Shareissuecosts--(346,320)-----(346,320)-(346,320) Balanceat31December201256,0467,036,17411,391,9371,744,74778,600(104,768)4,441,241(327,000)24,316,9779,522,81233,839,789
  • 18. 21 Zimplow Limited Annual Report 2012 COMPANYSTATEMENTOFCHANGESINEQUITY Fortheyearended31December2012 COMPANY SHARE CAPITAL CAPITAL RESERVE SHARE PREMIUM REVALUATION RESERVE AVAILABLEFOR SALERESERVE RETAINED EARNINGS SHAREBASED PAYMENT ATTRIBUTABLE TOOWNERS OFTHE PARENT US$US$US$US$US$US$US$ Balanceat1January201132,7077,036,174--101,7024,171,468-11,342,051 Profitfortheyear-----2,642,825-2,642,825 Othercomprehensiveincome(25,206)-(25,206) Paymentofdividend-----(686,851)-(686,851) Sharebasedpaymenttransaction------(65,400)(65,400) IssueofordinarysharesonacqusitionofAfritrac9-552,333----552,342 Balanceat31December201132,7167,036,174552,333-76,4966,127,442(65,400)13,759,761 Lossfortheyear-----(135,561)-(135,561) Othercomprehensiveincome1,455,9232,1041,458,027 Paymentofdividend-----(907,950)-(907,950) Sharebasedpaymenttransaction------(261,600)(261,600) Issueofordinaryshares23,330-11,185,924----11,209,254 Shareissuecosts--(346,321)----(346,321) - Balanceat31December201256,0467,036,17411,391,9361,455,92378,6005,083,931(327,000)24,775,610
  • 19. 22 Zimplow Limited Annual Report 2012 CONSOLIDATED STATEMENT OF CASHFLOWS For the year ended 31 December 2012 GROUP COMPANY Notes 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ CASH FLOWS FROM OPERATING ACTIVITIES Operating (loss) / profit before dividends,interest,taxation and exchange gains/losses (888,333) 3,464,529 307,448 3,345,083 Adjustment for non cash items: Depreciation and amortisation of property, plant & equip- ment 626,302 302,328 351,907 296,482 Fair value loss on investment property 90,000 - Impairment losses recognised in trade receivebles 635,953 - 26,738 Income recognised in respect of share option scheme (261,600) (65,400) (261,600) (65,400) Loss/(Profit) on disposal of property, plant and equipment 19,911 (15,917) 3,553 (15,917) Operating income before working capital changes 222,233 3,685,540 428,046 3,560,248 (Increase)/decrease in inventories (2,176,479) (1,026,982) 359,407 (1,282,989) Increase in trade and other receivables (1,942,821) (171,043) (974,884) (205,581) Increase/(decrease) in trade and other payables 2,741,069 101,632 (335,282) 199,663 Cash (outflow)/inflow from operating activities (1,155,998) 2,589,147 (522,713) 2,271,341 Finance income received 280,046 249,237 105,603 240,241 Finance costs paid (1,016,879) (78,493) (297,851) (78,493) Taxation paid (683,335) (910,078) (463,420) (871,236) Net cash (outflow)/inflow from operating activities (2,576,166) 1,849,813 (1,178,381) 1,561,853 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (351,074) (510,762) (137,555) (508,796) Increase in long term advances (926) - - - Proceeds on disposal of property, plant and equipment 51,929 38,207 400 38,207 Net cash (outflow)/inflow on acquisition of subsidiary 24.6 (9,289,198) 355,919 (9,737,967) - Net cash invested (9,589,269) (116,636) (9,875,122) (470,589) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of equity instruments of the company 11,209,254 - 11,209,254 - Increase in short term loans 621,831 - - - Share issue costs (346,320) - (346,321) - Dividend paid to owners of the company (907,950) (686,851) (907,950) (686,851) Net cash inflow/(outflow) from financing activities 10,576,815 (686,851) 9,954,983 (686,851) (Decrease)/increase in cash and cash equivalents (1,588,620) 1,046,326 (1,098,520) 404,413 Cash and cash equivalents at 1 January 2012 3,947,912 3,033,588 3,438,001 3,033,588 Effects of exchange rates on the balance of cash held in foreign operations (66,110) (132,002) - - Cash and cash equivalents at 31 December 2012 2,293,182 3,947,912 2,339,481 3,438,001 Operating cashflow per share (US$) (0.01) 0.01 (0.01) 0.01
  • 20. 23 For the year ended 31 December 2012 1. Corporate information The consolidated financial statements of Zimplow Limited and its subsidiaries(collectively, the Group) for the year ended 31 December 2012 were authorised for issue in accordance with a resolution of the directors on 4 March 2013. Zimplow Limited, the Company is a limited company incorporated and domiciled in Zimbabwe and whose shares are publicly traded. The registered office is located at 39 Steelworks Road, Steeldale in Bulawayo, Zimbabwe. The principal activities of the Group are: manufacture and distribution of animal drawn implements, manufacture and distribution of metal fasteners for mining, construction and agricultural industries. On 1 July 2012 the Company acquired a 57.21% controlling stake in Tractive Power Holdings Limited(TPHL). TPHL is a retailer of acclaimed brands through its operating units Barzem (earthmoving machinery), Farmec (farming machinery), Northmec (farming machinery), Manica Road Investments (property) and Puzey and Payne (motoring). 2. Application of new and revised International Financial Reporting Standards (IFRS) 2.1 Amendments to IFRS affecting amounts reported in the financial statements Amendments to IFRS affecting presentation and disclosure only The Group has applied the amendments to IAS 1 Presentation of items of other comprehensive income in advance to the effective date (annual periods beginning on or after 1 July 2012). The amendments introduce new terminology for the statement of comprehensive income and income statement. Under the amendment to IAS 1, the “statement of comprehensive income” is renamed the “Statement of profit or loss and other comprehensive income” and “the income statement” is renamed the “statement of profit or loss”. The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However the amendments to IAS 1 require items of other comprehensive income to be grouped into two categories in the other comprehensive income section: a) Items that will not be reclassified subsequently to profit or loss and b) Items that will be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis. The amendments do not change the option to present items of other comprehensive income either before tax or net of tax. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation changes, the application of the amendment to IAS 1 does not result in any impact on profit or loss, other comprehensive income and total comprehensive income. Amendments to IFRS affecting the reported financial performance and or financial position Amendment to IAS12 Deferred tax: Recovery of underlying assets The amendment clarified the determination of deferred tax on investment property measured at fair value and introduces a rebuttable presumption that deferred tax on investment property measured using the fair value model in IAS 40 should be determined on the basis that its carrying amount will be recovered through sale. It includes the requirement that deferred tax on non-depreciable assets that are measured using the revaluation model in IAS 16 should always be measured on a sale basis. The amendment is effective for annual periods beginning on or after 1 January 2012 and had no effect on the Group’s financial position, performance or its disclosures. 2.2 New and revised IFRSs in issue but not yet effective The group has not applied the following new and revised IFRSs that have been issued but are not yet effective: IFRS 9 Financial instruments IFRS 10 Consolidated financial statements IFRS 11 Joint arrangements IFRS 12 Disclosure of interests in other entities IFRS 13 Fair value measurement Amendments to IFRS 7 disclosures –offsetting financial assets and financial liabilities Amendments to IFRS 9 and IFRS 7 Mandatory effective date of IFRS 9 and transition disclosures Amendments to IFRS 10, IFRS 11 Consolidated financial statements, Joint arrangements and disclosure of interests in other entities: Transition Guidance IAS 19 (as revised in 2011) Employee benefits IAS 27 (as revised in 2011) Separate financial statements IAS 28 (as revised in 2011) Investments in associates and joint ventures Amendments to IAS 32 offsetting financial assets and liabilities Amendments to IFRS annual improvements to IFRSs 2009-2011 Cycle IFRIC 20 Stripping costs in the Production Phase of a surface mine IFRS 9 Financial Instruments: Classification and Measurement IFRS 9, issued in November 2009 introduced new requirements for the classification and measurement of financial assets. IFRS 9 was amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for de-recognition. Key requirements of IFRS 9 All recognised financial assets that are within the scope of IAS 39 financial instruments: recognition and measurements are to be subsequently measured at amortised cost or fair value. Specifically debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent NOTES TO THE FINANCIAL STATEMENTS Zimplow Limited Annual Report 2012
  • 21. 24 accounting periods. All other debt investments and equity investments are measured at their value at the end of subsequent accounting periods. In addition, under IFRS 9, entities can make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss. With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires the amount of change in the fair value of the financial liability, that is attributable to changes in the credit risk of that liability, is presented in other comprehensive income, unless the recognition of the effects of changes in the liabilities credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liabilities credit risk are not subsequently reclassified to profit or loss previously, under IAS 39, the entire amount of change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss. The Directors anticipate that the application of IFRS 9 in the future may have a significant impact on amounts reported in respect of the Group’s financial assets and liabilities Mandatory Effective Date of IFRS 9 and Transition Disclosures, issued in December 2011, moved the mandatory effective date to 1 January 2015. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. In May 2011 a package of five standards on consolidation, joint arrangements was issued including IFRS 10, IFRS 11, IFRS 12 and IAS 27 (as revised in 2011) and IAS 28 (as revised in 2011) IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12 Consolidation — Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27. Based on the preliminary analyses performed, IFRS 10 is not expected to haveany impact on the currently held investments of the Group. This standard becomes effective for annual periods beginning on or after 1 January 2013. IFRS 11 Joint Arrangements IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities — Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method The application of IFRS 11 will change the classification and subsequent accounting of the Group’s investment in Northmec, which is classified as a jointly controlled entity under IAS 31 and has been accounted for using the proportionate consolidation method. Under IFRS 11, Northmec Pvt Ltd will be classified as a joint venture and accounted for using the equity method, resulting in the aggregation of the proportionate of Northmec’s net assets and items of profit or loss and other comprehensive income into a single line which will be presented in the consolidated statement of financial position and in the consolidated statement of profit or loss and other comprehensive as ‘investment in joint venture’ and share of profit/ (loss) of joint venture respectively. Besides the investment in Northmec (Pvt) Ltd, the Group does not have any other interest in jointly controlled entities. The standard becomes effective for annual periods beginning onor after 1 January 2013. IFRS 12 Disclosure of Interests in Other Entities IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required, but has no impact on the Group’s financial position or performance. This standard becomes effective for annual periods beginning on or after 1 January 2013. The Directors anticipate that the application of the new standards may affect certain amounts reported in the financial statements and result in more extensive disclosures in the financial statements. IFRS 13 Fair Value Measurement IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair valueunder IFRS when fair value is required or permitted. The Group is currently assessing the impact that this standard will have on the financial position and performance. This standard becomes effective for annual periods beginning on or after 1 January 2013. IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine This interpretation applies to waste removal (stripping) costs incurred in surface mining activity, during the production phase of the mine. The interpretation addresses the accounting for the benefit from the stripping activity. The interpretation is effective for annual periods beginning on or after 1 January 2013. The new interpretation will not have an impact on the Group. IAS 19 Employee Benefits (Revised) The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re- wording. NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 22. 25 However, the amended standard will impact the net benefit expense as the expected return on plan assets will be calculated using the same interest rate as applied for the purpose of discounting the benefit obligation. The amendment becomes effective for annual periods beginning on or after 1 January 2013. IAS 28 Investments in Associates and Joint Ventures (as revised in 2011) As a consequence of the new IFRS 11 Joint Arrangements, and IFRS 12 Disclosure of Interests in Other Entities, IAS 28 Investments in Associates, has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. The revised standard becomes effective for annual periods beginning on or after 1 January 2013. IAS 32 Offsetting Financial Assets and Financial Liabilities — Amendments to IAS 32 These amendments clarify the meaning of “currently has a legally enforceable right to set-off”. The amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. These amendments are not expected to impact the Group’s financial position or performance and become effective for annual periods beginning on or after 1 January 2014. IFRS 1 Government Loans – Amendments to IFRS 1 These amendments require first-time adopters to apply the requirements of IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, prospectively to government loans existing at the date of transition to IFRS. Entities may choose to apply the requirements of IFRS 9 (or IAS 39, as applicable) and IAS 20 to government loans retrospectively if the information needed to do so had been obtained at the time of initiallyaccounting for that loan. The exception would give first-time adopters relief from retrospective measurement of government loans with a below-market rate of interest. The amendment is effective for annual periods on or after 1 January 2013. The amendment will not impact on the Group since the Group is not a first time adopter. IFRS 7 Disclosures — Offsetting Financial Assets and Financial Liabilities — Amendments to IFRS 7 These amendments require an entity to disclose information about rights to set-off and related arrangements(e.g., collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity’s financial position. The new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32. These amendments will not impact the Group’s financial position or performance and become effective for annual periods beginning on or after 1 January 2013. 2.2.2 Annual Improvements May 2012 These improvements will not have an impact on the Group, but include: IFRS 1 First-time Adoption of International Financial Reporting Standards This improvement clarifies that an entity that stopped applying IFRS in the past and chooses, or is required, to apply IFRS, has the option to re-apply IFRS 1. If IFRS 1 is not re-applied, an entity must retrospectively restateits financial statements as if it had never stopped applying IFRS. IAS 1 Presentation of Financial Statements This improvement clarifies the difference between voluntary additional comparative information and the minimum required comparative information. Generally, the minimum required comparative information is the previous period. IAS 16 Property, Plant and Equipment This improvement clarifies that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not inventory. IAS 32 Financial Instruments Presentation This improvement clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12 Income Taxes. IAS 34 Interim Financial Reporting The amendment aligns the disclosure requirements for total segment assets with total segment liabilities in interim financial statements. This clarification also ensures that interim disclosures are aligned with annual disclosures. These improvements are effective for annual periods beginning on or after 1 January 2013. 2.3 Significant accounting judgements, estimates and assumptions The preparation of the Group’s financial statements requires the Group’s Directors and Management to make judgements, estimates and formulate assumptions that may affect the reported amounts of revenues, expenses, assets, liabilities and the disclosure of contingent liabilitie/assets at the reporting period date. Estimates and judgements are continually evaluated, and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. Zimplow Limited Annual Report 2012
  • 23. 26 Judgements In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimates, which have the most significant effect on the amounts recognised in the financial statements. The Group’s Directors are of the opinion that the Statement of Financial Position represents a true and fair position of the Group. • Useful lives and residual values of property, plant and equipment. The Group assesses the useful lives and residual values of property, plant and equipment each period, taking into account past experience and macro- economic changes. • Fair values The Group makes estimates and judgements in the valuation of property, plant and equipment, and the valuation of financial assets (such as trade receivables). Judgement is required in determining fair values of assets. The Group may also rely on independent opinions of experts in related specialist fields. Impairment of Goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value. The carrying amount of goodwill as at 31 December 2012 was US$1 304 698. No impairment was recognised during the year. 2.4 Summary of significant accounting policies 2.4.1 Basis of preparation The Consolidated financial statements have been prepared on the historical cost basis except for property, plant, equipment, investment property and financial instruments that are measured at revalued amounts or fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets. 2.4.2 Statement of compliance These consolidated financial statements have been prepared in accordance with international financial reporting standards and presented in United States dollars (US dollars), which is the Group’s functional currency. 2.4.3 Basis of consolidation The consolidated financial statements incorporate the financial statements of the company and entities controlled by the company (its subsidiaries). Control is achieved where the company has the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities. Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statements of profit or loss and other comprehensive income from the date of acquisition and up to the date of disposal as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the company and to non-controlling interests even if it results in non- controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies into line with those used by other members of the group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Investment in subsidiary companies is accounted for at cost less impairment. Changes in the Group’s ownership interests in existing subsidiaries. Changes in the Group’s ownership interest in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amount of the Group’s interests and non- controlling interests are adjusted to reflect the changes in their relative interest in the subsidiaries. Any difference between the amount by which non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Company. When the Group losses control of the subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between i) The aggregate of the fair value of the consideration received and the fair value of any retained interest and ii) The previous carrying amount of the assets (including goodwill) and liabilities of the subsidiary and non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Group had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable IFRS) The fair value of any investments retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 or when applicable, the costs on initial recognition of an investment in an associate or jointly controlled entity. a) Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 24. 27 When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with changes infair value recognised either in profit or loss or as a change to other comprehensive income. If the contingent consideration is not within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity. Goodwill Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non – controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over the fair value of the identifiable net assets recognised. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised, but is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Impairment losses relating to goodwill cannot be reversed in future periods. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the entity are assigned to those units. Each unit to which the goodwill is so allocated: • Represents the lowest level within the entity at which the goodwill is monitored for internal management purposes; and • Is not larger than a reportable segment determined in accordance with IFRS 8: “Operating Segments”. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash- generating unit is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of the cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash- generating unit retained. Bargain purchase gain If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non – controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately, in profit or loss as a bargain purchase gain. b) Segment reporting Operating segments are considered reportable segments when their operating results and financial position are: • Regularly reviewed by the Group’s chief operating decision makers as part of the decision making process regarding resources to be allocated towards each segment’s operations; and • Duly assessed against internally determined key performance indicators. The Group discloses its operating segments according to each legal entity, these are regularly reviewed by the Group’s chief operating decision maker. These values have been reconciled to the consolidated annual financial statements. Detailed information on the reportable segments identified and presented is disclosed in note 5. The Group has identified the Chief Executive Officer as the chief operating decision maker. c) Jointly controlled entities A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control that is when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control. Joint venture arrangements that involve a separate entity in which each venture has an interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using proportionate consolidation. The Group’s share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the equivalent items in the consolidated financial statements on a line-by-line basis. Any goodwill arising on the acquisition of the Group’s interest in a jointly controlled entity is accounted for in accordance with the Group’s accounting policy for goodwill arising on business combination. Upon loss of joint control, the Group measures and recognises its remaining investment at its fair value. The difference between the carrying amount of the investment upon loss of joint control and the fair value of the remaining investment and proceeds from disposal is recognised in profit or loss. When the remaining investment constitutes significant influence, it is accounted for as an investment in an associate. Zimplow Limited Annual Report 2012
  • 25. 28 The financial statements of the joint venture are prepared for the same reporting period as the Group. Adjustments are made, where necessary to bring the accounting policies in line with those of the Group. Investment in joint venture is accounted for at cost less impairment. d) Share-based payment arrangements Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity- settled share-based transactions are set out in note 21. The fair value determined at the grant date of the equity- settled share-based payments is expensed on a straight- line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity (equity-settled employee benefits reserve). At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve. The policy described above is applied to all equity-settled share-based payment transactions that were granted on and after 31 July 2011. Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service. For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year. Share-based payment arrangements of the acquiree in a business combination When the share-based payment awards held by the employees of an acquiree (acquiree awards) are replaced by the Group’s share-based payment awards (replacement awards), both the acquiree awards and the replacement awards are measured in accordance with IFRS 2 Share-based Payment(“market-based measure”) at the acquisition date. The portion of the replacement awards that is included in measuring the consideration transferred in a business combination equals the market-based measure of the acquiree awards multiplied by the ratio of the portion of the vesting period completed to the greater of the total vesting period or the original vesting period of the acquiree award. The excess of the market-based measure of the replacement awards over the market-based measure of the acquiree awards included in measuring the consideration transferred is recognised as remuneration cost for post-combination service. However, when the acquiree awards expire as a consequence of a business combination and the Group replaces those awards when it does not have an obligation to do so, the replacement awards are measured at their market-based measure in accordance with IFRS 2. All of the market-based measure of the replacement awards is recognised as remuneration cost for post-combination service. At the acquisition date, when the outstanding equity- settled share-based payment transactions held by the employees of an acquiree are not exchanged by the Group for its share-based payment transactions, the acquiree share-based payment transactions are measured at their market-based measure at the acquisition date. If the share- based payment transactions have vested by the acquisition date, they are included as part of the non-controlling interest in the acquiree. However, if the share-based payment transactions have not vested by the acquisition date, the market-based measure of the unvested share- based payment transactions is allocated to the non- controlling interest in the acquiree based on the ratio of the portion of the vesting period completed to the greater of the total vesting period or the original vesting period of the share-based payment transaction. The balance is recognised as remuneration cost for post-combination service. e) Foreign currency translations The Group’s consolidated financial statements are presented in United States dollars, which is also the parent company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. i) Transactions and balances Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange at the reporting date. All differences arising on settlement or translation of monetary items are taken to the profit or loss with the exception of monetary items that are designated as part of the hedge of the Group’s net investment of a foreign operation. These are recognised in other comprehensive income until the net investment is disposed, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 26. 29 when the fair value is determined. The gain or loss arising on retranslation of non-monetary items is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively). Any Goodwill arising in the acquisition of a foreign operation and any fair value adjustments to the carrying amount of assets and liabilities and assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date. ii) Group Companies For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the parent company’s functional currency using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate). On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss. f) Non-current assets held for sale Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when a sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less cost to sell and are no longer depreciated. g) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue excludes value added tax and other sales related duties, and is reduced for estimated customer returns, rebates, discounts and other similar allowances. Sale of goods Revenue from the sale of goods is recognised when all the following conditions are satisfied: • The Group has transferred to the buyer the significant risks and rewards of ownership of the goods; • The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; • The amount of revenue can be measured reliably; • It is probable that the economic benefits associated with the transaction will flow to the entity; and • The costs incurred or to be incurred in respect of the transaction can be measured reliably. Dividend and interest revenue Dividend revenue from investments is recognised when the shareholder’s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably). Interest revenue is accrued on a time proportionate basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. Rendering of services Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract. The stage of completion of the contract is determined as follows: Installation fees are recognised by reference to the stage of completion of the installation as determined by the proportion of the total time expected to install that has lapsed at the end of the reporting period. • Service fees included in the price of products sold are recognised by reference to the total proportion of the total cost of providing the servicing for the product sold and • Revenue from time and material contracts is recognised at the contractual rates as labour hours and direct expenses are incurred. Rental income The Group’s policy for recognition of revenue from operating leases is described below under leases. Other income Other income is recognised in the period that it is due and receivable. h) Property, plant and equipment Property, plant and equipment is measured at fair value less accumulated depreciation and impairment losses, if any, recognised after the date of a revaluation. Valuations, performed by the Group’s Directors or independent external valuers, are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Zimplow Limited Annual Report 2012
  • 27. 30 When items of property, plant and equipment are revalued, any accumulated depreciation at the date of a revaluation is restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount after revaluation equals its revalued amount. Any revaluation surplus (increase in the carrying amount of an asset as a result of a revaluation) is recognised in other comprehensive income in the statement of profit or loss and other comprehensive income and accumulated in equity (revaluation reserve) in the statement of changes in equity. The increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss. If an asset’s carrying amount is decreased as a result of a revaluation, the decrease shall be recognised in profit or loss. The decrease, however, is recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in equity as a revaluation reserve. Upon revaluation, subsequent costs are included in an asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised in profit or loss in the statement of profit or loss and other comprehensive income during the financial period in which they are incurred. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. Depreciation is calculated on a straight line basis over the estimated useful lives of the asset as follows: • Buildings: 50 years; • Plant and machinery: 5 to 50 years; • Motor vehicles: 5 years; • Office furniture and computer equipment: 4 to 10 years. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. The useful lives and residual values of assets are reviewed and adjusted, if appropriate, at each reporting period end date, with the effect of any changes in estimate accounted for on a prospective basis. Where the residual value of an asset increases to an amount equal to or greater than the asset’s carrying amount, depreciation will cease to be charged on the asset until its residual value subsequently decreases to an amount below its carrying amount. i) Investment property Investment property, which is property held for capital appreciation and or to earn rental income, is measured initially at its cost, including transaction costs. Subsequent to initial recognition, investment property is measured at fair value. Gains and losses arising from changes in the fair value of investment property are included in profit or loss in the period in which they arise. Investment properties are derecognised either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period of derecognition. Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use. j) Impairment of non-financial assets The Group assesses at each reporting period end date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group’s management makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognised in profit or loss in the statement of profit or loss and other comprehensive income in those expense categories consistent with the function of the impaired asset. An assessment is made at each reporting period date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 28. 31 prior periods. Such reversal is recognised in profit or loss unless the asset is carried at its revalued amount, in which case the reversal is treated as a revaluation increase and recognised in other comprehensive income. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis, over its remaining useful life. k) Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement. Group as a lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. Group as a lessor Amounts due from leases under finance leases are recognised as receivables at the amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investments outstanding in respect of the leases. The Group has entered into commercial property leases on its investment property via Manica Investments. Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term. Contingent rentals: Contingent rentals are lease payments, or portions thereof, that are not fixed in amount but are based on the future amount of a factor that is susceptible to change other than with the passage of time. Contingent rents are recognised as an expense in the period in which they are incurred. The CT Bolts premises where the Group operates from were leased under such terms for part of the current reporting period. Details regarding lease transactions are as disclosed in note 19. Lease incentives Lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. l) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to get ready for their intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. m) Intangible assets Intangible assets acquired separately Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. Internally-generated intangible assets - research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated: • the technical feasibility of completing the intangible asset so that it will be available for use or sale; • the intention to complete the intangible asset and use or sell it; • the ability to use or sell the intangible asset; • how the intangible asset will generate probable future economic benefits; • the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and • the ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally- generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Zimplow Limited Annual Report 2012
  • 29. 32 Intangible assets acquired in a business combination Intangible assets that are acquired in a business combination are recognised separately from goodwill and are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Derecognition of intangible assets An intangible asset is derecognised on disposal, or when no future economic benefits are expected from its use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised. n) Inventories Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition, are accounted for as follows: Raw materials - purchase costs on weighted average cost. Finished goods and work in progress - costs of direct materials, labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs. Net realisable value is the estimated selling price in the ordinary course of the business, less estimated costs of completion and the estimated costs necessary to make the sale. o) Cash and cash equivalents For the purposes of the consolidated statement of cash flows, cash and cash equivalents comprise cash at banks, cash on hand and short term highly liquid deposits with an original maturity of three months or less. For presentation purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. p) Provisions Provisions are recognised when the Group has a legal or constructive obligation as a result of past events, and when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Where the effect of the time value of money is considered material, the amount of a recognised provision represents the present value of the expenditures expected to be required to settle the obligation. Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by the employees up to the reporting period date. Warranties Provisions for warranty-related costs are recognised when the product is sold or service provided to the customer. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually. Restructuring provisions Restructuring provisions are recognised only when the recognition criteria for provisions are fulfilled. The Group has a constructive obligation when a detailed formal plan identifies the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs, and an appropriate timeline. Furthermore, the employees affected have been notified of the plans main features. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. q) Contingent liabilities acquired in a business combination A contingent liability recognised in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of the amount that would be recognised in accordance with the requirements for provisions above or the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the requirements for revenue recognition. r) Dividend distribution Dividend distribution to the Group’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Group’s shareholders and declared. s) Key management Key management include Group executive directors and management having authority and responsibility for planning, directing and controlling the activities of Zimplow Limited, in its parent entity capacity, as well as its Group member entities. t) Taxation The tax expense for the period comprises current and deferred tax. Tax expense recognised in profit or loss, except to the extent that it relates to items recognised directly as other comprehensive income. In this case, the tax is also recognised in other comprehensive income. Current tax The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit before tax as reported in the statement of profit or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are permanently non - taxable or non - deductible. NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 30. 33 The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting period end date. Deferred tax Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rate that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax asset against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Value added tax Revenues, expenses and assets are recognised net of the amount of Value Added Tax except: • Where the Value Added Tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the Value Added Tax is recognised as part of the cost of acquisition of the asset or as part of the expense item applicable; and • With receivables and payables that are stated with the amount of Value Added Tax included. The net amount of Value Added Tax recoverable from, or payable to the taxation authority is included as part of receivables or payables in the statement of financial position as at the end of the reporting period. u) Employee benefits Defined contribution plans Current contributions to the Zimplow Pension Fund, which is a defined contribution fund, and contributions to the National Social Security Authority (NSSA), which are determined by legislation (as promulgated under the National Social Security Act 1989), are recognised as an expense when employees have rendered service entitling them to the contributions.The Group’s obligations under the NSSA scheme are limited to specific contributions legislated from time to time. Termination benefits The Group recognises gratuity and other termination benefits in the financial statements when it has a present obligation relating to termination. v) Financial instruments Financial assets Initial recognition The Group’s financial assets falling within the scope of IAS 39: “Financial Instruments: Recognition and Measurement” include cash and short term deposits, trade and other receivables, and equity investments in a portfolio of quoted companies on the Zimbabwe Stock Exchange (ZSE). Financial assets are recognised initially at fair value plus transaction costs and, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of contractual arrangements. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way purchases) are recognised on the trade date, i.e. the date that the Group commits to purchase or sell the assets. Group management, in line with guidance prescribed in IAS 39, determines the classification of its financial assets at initial recognition. The Group has not taken out any derivative instruments. Subsequent measurement The subsequent measurement of financial assets depends on their classification. The Group’s non–cash and cash equivalent financial asset profile is classified and measured as follows: Available for sale financial assets (AFS) Listed shares held by the Group that are traded in an active market are classified as being available for sale and are stated at fair value. The fair value of the ZSE traded investments is recognised with direct reference to trading prices as published on the Stock Exchange. Gains and Losses arising from the changes in fair value are recognised in other comprehensive income Zimplow Limited Annual Report 2012
  • 31. 34 and accumulated in the available for sale revaluation reserve with the exception of impairment losses. Where the investments are disposed of or are determined to be impaired, the cumulative gain or loss previously accumulated in the available for sale revaluation reserve is reclassified to profit or loss. Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to receive the dividends is established. Loans and receivables Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for any related proceeds received. Impairment of financial assets Financial assets are assessed for indicators of impairment at each reporting period end date. Financial assets are impaired where there is objective evidence that, as a result of one or more loss events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. Assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables. For listed equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition costs and the current fair value, less any impairment loss on that investment previously recognised in profit or loss, is removed from available for sale reserve and recognised in profit or loss. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. With reference to the Group’s financial asset portfolio, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs and are presented in the statement of changes in equity as owner based equity transactions. Financial liabilities Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. The Group’s financial liabilities are limited to trade and other payables, and interest bearing loans and borrowings. The Group’s management has not designated any financial liabilities as financial liabilities at fair value through profit or loss. The Group’s financial liabilities and borrowings are initially measured at fair value, net of transaction costs. Financial liabilities are subsequently measured at amortised cost using the effective interest method, with the interest expense recognised in profit or loss. Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and consideration paid and payable is recognised in profit or loss. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset/liability and of allocating interest income/expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts/payments (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset/liability, or, where appropriate, a shorter period. NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 32. 35 Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial Position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Zimplow Limited Annual Report 2012
  • 33. 36 3. Revenue An analysis of Group revenue is as follows: GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Sale of goods 32,491,915 15,503,306 12,807,190 14,654,404 Services rendered 2,965,334 - - - Property rental income 153,574 - - - Total 35,610,823 15,503,306 12,807,190 14,654,404 NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 34. 37 4. (Loss)/Profit for the year GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ (Loss)/Profit for the year is attributable to: Owners of the company (812,754) 2,677,328 (135,561) 2,642,825 Non controlling interests (192,422) 52,954 - - (1,005,176) 2,730,282 (135,561) 2,642,825 (Loss)/Profit for the year has been arrived at after charging/ (crediting): Impairment loss recognised on trade receivables (note 14) 635,953 14,681 26,738 14,681 Depreciation and amortisation Depreciation of property, plant and equipment 626,302 302,328 351,907 296,482 Total depreciation and amortisation expense 626,302 302,328 351,907 296,482 Direct operating expenses arising from investment properties Investment properties that generated rental income during the year 38,095 - - - 38,095 - - - Employee benefits expenses Post employment benefits Defined contribution plans 244,984 52,831 57,867 48,196 Share based (income) / expense (note 21) (261,600) (65,400) (261,600) (65,400) Equity settled share based payments - - - - Salaries and allowances 6,064,380 3,361,767 2,842,171 3,237,969 - Administration expenses 3,226,665 2,498,749 1,633,221 2,444,391 Selling expenses 5,360,582 694,921 669,421 639,796 Acquisition & restructuring expenses 1,941,388 - 1,045,644 - Auditor’s remuneration 169,762 85,435 95,918 82,264 Director’s emoluments Fees 217,724 40,658 54,044 40,658 Other emoluments 390,432 294,555 144,520 125,808 608,156 335,213 198,564 166,466 Loss/(Profit) on disposal of property, plant and equipment 19,911 (15,917) 3,553 (15,917) Exchange gains 22,749 - 22,749 - Exchange losses (10,473) 64,117 (3,390) 64,117 Zimplow Limited Annual Report 2012
  • 35. 38 5. GROUP PRIMARY SEGMENTS For the year ended 31 December 2012 5.1 Products and services from which reportable segments derive their revenues Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on entity components. The Group’s reportable segments under IFRS 8: Operating segments are therefore as follows. • Zimplow, the Company • Afritrac the foreign subsidiary • Tractive Power Holdings Zimplow, the Company segment manufactures and distributes animal drawn implements metal fasteners, screws and bolts for the agricultural sector, mining, construction and household furniture industry. Afritrac the foreign subsidiary - distributes animal drawn implementsfor the agricultural sector Tractive Power Holdings a retailer of acclaimed brands through its operating units Barzem (earthmoving machinery), Farmec (farming machinery), Northmec (farming machinery), Manica Road Investments (property) and Puzey and Payne (motoring). In the preceding year reportable segments were presented as follows: • The Farming implements segments – manufacturer and distributor of animal drawn implements for the agricultural sector • The Fasteners segment – manufacturer and distributor of metal fasteners, wood screws, verandah bolts and high tensile bolts to the mining, construction, agricultural sectors and household furniture industry During the year the Group purchased a controlling stake in Tractive Power Holdings Limited – a Group with diverse operations. This resulted in change in the structure of the Group’s internal organization in a manner that caused the composition of its reportable segments to change. Segment information for the prior year has therefore been restated. NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 36. 39 5.2 Segment revenue and results The following is an analysis of the Group’s revenue and results from continuing operations by reportable segment: Segment revenue reported above represents revenue generated from external customers. The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 2. Segment profit represents the profit earned by each segment without allocation of central administration costs and directors’ salaries. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance. Transfer prices between operating segments are set on an arm’s length basis in a manner similar to transactions with third parties. Internal transactions are appropriately eliminated on consolidation and data aggregation. Zimplow Limited Annual Report 2012 31 DECEMBER 2012 ZIMPLOW AFRITRAC TPH ADJUSTMENTS TOTAL US$ US$ US$ US$ US$ Revenue 12,364,195 1,207,065 22,039,563 - 35,610,823 Intersegment revenue 442,995 62,578 - (505,573) - Total revenue 12,807,190 1,269,643 22,039,563 (505,573) 35,610,823 - - - - Segment operating profit 1,379,830 (126,282) 417,720 17,740 1,689,008 Unallocated items Acquisition and restructuring expenses (1,045,644) - (895,744) - (1,941,388) Finance income 105,603 14,201 160,242 - 280,046 Finance costs (297,851) (1,658) (717,371) - (1,016,880) Income taxes (277,499) 31,315 235,195 (4,973) (15,962) (Loss)/ Profit after tax (135,561) (82,424) (799,958) (1,005,176) Segment assets 27,092,550 1,122,206 35,926,204 (10,977,541) 53,163,419 Segment liabilities 2,316,940 234,046 19,069,857 (2,297,213) 19,323,630 Other segment information Depreciation and amortisation 351,907 10,549 263,846 - 626,302 Additions to non current assets 137,555 30,783 182,736 - 351,074
  • 37. 40 Geographical information Revenue from external customers (based on customer location) Revenue by product type NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012 31 DECEMBER 2011 ZIMPLOW AFRITRAC ADJUSTMENTS TOTAL US$ US$ US$ US$ Revenue 13,979,365 1,523,941 - 15,503,306 Intersegment revenue 675,039 325,114 (1,000,152) - 14,654,404 1,849,055 (1,000,152) 15,503,306 Segment operating profit 3,345,078 135,823 (16,372) 3,464,529 Unallocated items Finance income - - - 249,237 Finance costs - - - (78,493) Income taxes - - - (904,991) Profit after tax 2,730,282 Segment assets 16,128,140 1,318,663 (701,406) 16,745,397 Segment liabilities 1,718,100 313,500 (145,519) 1,886,081 Other segment information Depreciation and amortisation 296,482 5,846 - 302,328 Additions to non current assets 508,796 1,966 - 510,762 GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Local 30,439,175 11,235,468 8,399,612 10,910,355 Foreign 5,171,648 4,267,838 4,407,578 3,744,049 Total 35,610,823 15,503,306 12,807,190 14,654,404 31 DECEMBER 2012 FARMING MINING FASTENERS MOTORING PROPERTY ADMINSTRATION TOTAL US$ US$ US$ US$ US$ US$ US$ Revenue 19,244,288 9,031,868 3,396,363 4,290,353 153,574 - 36,116,396 Intersegment revenue (62,578) - (442,995) - - - (505,573) Total revenue 19,181,660 9,031,868 2,953,368 4,290,353 153,574 - 35,610,823 - - - - Segment operating profit 1,173,329 1,167,469 180,606 (529,992) 25,371 (327,775) 1,689,008
  • 38. 41 6. Share capital 6.1 Reconciliation of authorised and issued share capital On the 29th of June 2012 the shareholders approved a resolution to increase the company’s authorised shares from 500 000 000 of US $ 0.0001 each to 800 000 000 shares of US$ 0.0001 each. Subject to Section 183 of the Companies Act (Chapter 24:03), and to the limitations of the Zimbabwe Stock Exchange, the unissued shares are under the control of the Directors, in terms of Extraordinary General Meetings of Members held on 30 August 1989, 10 November 2004, 16 November 2005 and 14 November 2007. 6.3 Share options granted under the Company’s employee share option plan At 31 December 2012, executives and senior employees held options over 16 350 000 ordinary shares of the Company, of which 40% will expire in 2016, another 40% in 2017 and 20% will expire in 2018. Share options granted under the Company’s employee share option plan carry no rights to dividends and no voting rights. Further details of the employee share option plan are provided in note 21. 6.4. Rights offer On 29 June 2012,the shareholders approved to raise approximately US$ 11 200 000 by way of a renounceable rights offer of 224 185 085 ordinary shares of a nominal value of US$0.0001 each at a subscription price of US$0.05 per share to existing Shareholders of ordinary shares in the Company in the ratio of 2 (two) ordinary shares for every 3 (three) ordinary shares already held by shareholders in the Company as at close of business on Friday 29 June 2012.The Rights offer opened on 9 July 2012 and closed on the 27th of July 2012 and was successful. Zimplow Limited Annual Report 2012 31 DECEMBER 2011 FARMING MINING FASTENERS MOTORING PROPERTY ADMINSTRATION TOTAL US$ US$ US$ US$ US$ US$ US$ Revenue 12,832,957 - 3,670,502 - - - 16,503,459 Intersegment revenue (325,114) - (675,039) - - - (1,000,153 Total revenue 12,507,843 - 2,995,463 - - - 15,503,306 - Segment operating profit 3,190,432 - 274,097 - - - 3,464,529 GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 Authorised share capital Number of ordinary shares 800,000,000 500,000,000 800,000,000 500,000,000 Nominal value per share(US$) 0.000 0.000 0.000 0.000 Total value of shares(US$) 80,000 50,000 80,000 50,000 Issued and fully paid Number of shares At the beginning of the year 336,277,628 327,071,924 336,277,628 327,071,924 Afritrac acquisition - 9,205,704 - 9,205,704 Rights issue 224,185,085 - 224,185,085 - Balance at the end of year 560,462,713 336,277,628 560,462,713 336,277,628 Nominal value per share(US$) 0.000 0.000 0.000 0.000 Total value of shares(US$) 56,046 33,628 56,046 33,628 6.2
  • 39. 42 6. Share capital continued 6.5 At 31 December 2012, the directors of the Group held directly and indirectly, the following shares: NAME YEAR ENDED 2012 YEAR ENDED 2011 Z. Kumwenda 24,217 14,530 D. Mkonto 2,693 1,213 B. Mitchell 63,501,667 63,501,000 N. Nhira 2,019,204 1,084,980 P. Devenish 2,022 1,213 A. Kurauone 1,667 1,000 T. Moyo 1,667 1,000 E. Mlambo 1,667 1,000 Z. Rusike 1,667 1,000 F. Rwakonda 1,667 1,000 AR Rowland 22,425 - NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 40. 43 7. Taxation GROUP COMPANY 7.1 Charge based on income for the year 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ 7.1 Income tax expense Zimbabwe income tax 145,282 811,253 267,414 811,253 Foreign income tax @28% - 40,983 - - Deferred taxation relating to foreign operation (31,315) - - - Deferred taxation relating to local operation (105,047) 26,196 3,045 26,194 Withholding tax 7,042 26,559 7,040 26,559 Income tax expense reported in the statement of profit or loss and other comprehensive income 15,962 904,991 277,499 864,006 Consolidated statement of other comprehensive income Deferred tax related to items charged or credit directly to OCI during the year: Fair value gain/(loss) on available for sale financial assets 371 (4,546) 371 (4,546) Fair value gain on property, plant and equipment 631,412 - 498,031 - Income tax charged directly to other comprehensive income 631,783 (4,546) 498,402 (4,546) 7.2 Reconciliation of tax charge Tax on (loss)/profit for the year at 25.75%(inclusive of 3% AIDS levy) (225,435) 902,996 36,549 902,996 Tax effect on expenses that are not deductible in determining taxable profit 315,056 11,420 283,325 11,420 Income taxed at special rates (31,755) (63,338) (31,755) (63,340) Export promotion incentive (17,662) (13,629) (17,660) (13,629) Effect of different tax rates between current and deferred tax 31 - - - Effect of tax on foreign subsidiary @28% (31,315) 40,983 - - Withholding tax 7,042 26,559 7,040 26,559 15,962 904,991 277,499 864,006 7.3 Deferred tax liability Key components of deferred tax: Accelerated wear and tear 3,900,225 568,079 1,007,115 568,079 Prepayments 12,184 23,416 12,183 23,416 Deferred income - (4,648) - (4,648) Gain on financial assets 13,709 4,454 13,709 4,454 Provisions (596,404) - - - Assessed loss (628,819) - - - Net exchange gain 5,721 13,342 5,721 13,342 Share based payment expense 84,203 16,841 84,203 16,841 Net deferred tax liability 2,790,819 621,484 1,122,931 621,484 Zimplow Limited Annual Report 2012
  • 41. 44 7. Taxation continued Reflected in the statement of financial position as follows: GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Deferred tax asset asset (598,395) - - - Deferred tax liability 3,389,214 621,484 1,122,931 621,484 Net deferred tax asset liability 2,790,819 621,484 1,122,931 621,484 GROUP COMPANY 7.4 Reconciliation of deferred tax liabilities,net 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Opening balance as at 1 January 2012 621,484 599,833 621,484 599,833 Tax expense/(income) during the period recognised in profit or loss (136,362) 26,197 3,045 26,197 Tax expense/(income) during the period in other comprehen- sive income 631,783 (4,546) 498,402 (4,546) Deferred taxes on assessed losses 1,673,914 - - - Closing balance as at 31 December 2012 2,790,819 621,484 1,122,931 621,484 NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 42. 45 8. Property, plant and equipment Zimplow Limited Annual Report 2012 8.1 GROUP LAND AND BUILDINGS- FREEHOLD PLANT AND MACHINERY MOTOR VEHICLES OFFICE FURNITURE AND COMPUTER EQUIPMENT TOTAL At cost/valuation US$ US$ US$ US$ US$ At 1 January 2011 632,481 1,793,894 790,765 174,840 3,391,980 Additions 2,595 22,753 421,239 64,175 510,762 Acquisition through business combination 2,213 - 7,491 1,142 10,846 Effects of foreign currency exchange (262) - (886) (135) (1,283) Disposals - - (123,841) (1,737) (125,578) At 31 December 2011 637,027 1,816,647 1,094,768 238,285 3,786,727 Additions 5,164 13,089 226,440 106,381 351,074 Acquisition through business combination 8,185,122 195,278 1,277,243 181,115 9,838,758 Revaluation 1,053,481 1,143,833 - - 2,197,314 Effects of foreign currency exchange (135) - (333) (205) (673) Disposals - (3) (181,095) (11,230) (192,328) At 31 December 2012 9,880,659 3,168,844 2,417,023 514,346 15,980,872 Accumulated depreciation At 1 January 2011 (66,360) (252,212) (343,621) (62,426) (724,619) Charge for the year (27,631) (100,516) (142,040) (32,141) (302,328) Effects of foreign currency exchange 121 - 365 51 537 Disposals - - 102,700 588 103,288 At 31 December 2011 (93,870) (352,728) (382,596) (93,928) (923,122) Charge for the year (69,536) (111,825) (365,398) (79,543) (626,302) Eliminated on revaluation 118,392 299,469 - - 417,861 Effects of foreign currency exchange 115 - 849 71 1,035 Disposals - 2 142,210 4,998 147,210 At 31 December 2012 (44,899) (165,082) 604,935) (168,402) (983,318) Carrying amount At 31 December 2011 543,157 1,463,919 712,172 144,357 2,863,605 At 31 December 2012 9,835,760 3,003,762 1,812,088 345,944 14,997,554
  • 43. 46 Depreciation is calculated on a straight line basis over the following asset class useful life spans in order to allocate their cost or revalued amounts to their residual values: • Buildings: 50 years • Plant and machinery: 5 to 50 years; • Motor vehicles: 5-7 years; • Office furniture and computer equipment: 3 to 10 years. The Group’s property, plant and equipment are not encumbered and do not form collateral on any borrowing and loan facilities in place. The investment property comprises a property that is leased to a third party. The fair value of the Group’s investment property at 31 December 2012 has been arrived at on the basis of a valuation carried out at that date by Messrs Guest & Tanner, independent valuers not connected with the Group. The valuation, which conforms to International Valuation Standards, was arrived at by reference to market evidence of transaction prices for similar properties. The properties comprise of land and office buildings situated in Harare and a residential property in Masvingo. NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012 8.2 COMPANY LAND AND BUILDINGS- FREEHOLD PLANT AND MACHINERY MOTOR VEHICLES OFFICE FURNITURE AND COMPUTER EQUIPMENT TOTAL At cost/valuation US$ US$ US$ US$ US$ At 1 January 2011 632,481 1,787,998 790,765 174,841 3,386,085 Additions 2,595 22,753 421,240 62,209 508,797 Disposals - - (123,841) (1,739) (125,580) At 31 December 2011 635,076 1,810,751 1,088,164 235,311 3,769,302 Additions 5,164 10,926 73,658 47,807 137,555 Revaluation 392,259 1,143,833 - - 1,536,092 Disposals - (3) - (6,497) (6,500) At 31 December 2012 1,032,499 2,965,507 1,161,822 276,621 5,436,449 Accumulated depreciation At 1 January 2011 (66,360) (246,224) (343,621) (62,426) (718,631) Charge for the year (26,027) (100,426) (138,559) (31,470) (296,482) Disposals - 4 102,700 588 103,292 At 31 December 2011 (92,387) (346,646) (379,480) (93,308) (911,821) Charge for the year (26,004) (100,939) (190,063) (34,901) (351,907) Eliminated on revaluation 118,392 299,469 - - 417,861 Disposals - 4 - 2,544 2,548 At 31 December 2012 1 (148,112) (569,543) (125,665) (843,319) Carrying amount At 31 December 2011 542,689 1,464,105 708,684 142,003 2,857,481 At 31 December 2012 1,032,500 2,817,395 592,279 150,956 4,593,130 9. INVESTMENT PROPERTY GROUP 31-Dec-12 31-Dec-11 US$ US$ Balance as at 1 January 2012 - - Acquisition through business combination 4,590,000 - Change in fair value (90,000) - Balance as at 31 December 2012 4,500,000 -
  • 44. 47 Capital commitments Capital commitments are expected to be financed through the utilisation of funds generated by the Group’s operating activities. 10. Available for sale financial assets The fair value of the Group’s investments in listed equity shares at 31 December 2012 is determined by reference to published price quotations in an active market. 11. Investments held in Joint ventures The Group holds a 50% shareholding in Liftquip (Private) limited, trading as Northmec Zimbabwe. The strategic, financial and operating decisions rest with the Board and mutual consent between the two shareholders is required for all decisions of the Board. The Group, therefore, regards Northmec Zimbabwe as a jointly controlled entity and the Group’s proportionate share of the profit for the year was US$ 12 601 aftertax. The effect of Northmec Zimbabwe on the Group’s assets and liabilities at the reporting date is given below: GROUP 31-Dec-12 31-Dec-11 US$ US$ Current assets 127,835 - - - Non current assets 22,634 - - - Current liabilities (49,665) - - - Non current liabilities (143,565) - Net identifiable assets and liabilities (42,761) - Zimplow Limited Annual Report 2012 GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Authorised but not yet contracted 942,055 326,560 409,200 326,560 Authorised and contracted - - - - 942,055 326,560 409,200 326,560 GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Balance as at 1 January 2012 147,976 177,728 147,976 177,728 Change in fair value 2,475 (29,752) 2,475 (29,752) Balance as at 31 December 2012 150,451 147,976 150,451 147,976
  • 45. 48 12. Goodwill GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Cost Balance at beginning of year 41,625 - - - Additional amounts recognised from business combinations occuring during the year(note 24) 1,023,028 47,200 - - Acquired at acquisition 242,917 - - - Effect of foreign currency exchange differences (2,872) (5,575) - - Balance at year end 1,304,698 41,625 - - The Group performed its annual impairment on 31 December 2012. The Group considers the ability of the business to continue generating increased cashflows in the future amongst other factors to assess goodwill impairment. Future cashflow forecast as 31 December indicated that the Group will generate increased cashflows in the foreseeable future and thus there was no impairment on goodwill. 13. Inventories GROUP COMPANY Raw materials 1,937,499 2,661,601 2,525,939 2,287,900 Finished goods 11,313,409 1,611,287 1,362,564 1,582,490 Spares and components 3,147,816 2,785,062 2,407,541 2,785,062 16,398,724 7,057,950 6,296,044 6,655,452 Cost of inventory recognised as an expense during the year was US$ 22 804 381 (2011 - US$8 737 971). The amount of write down of inventories recognised as an expense is nil (2011 - US12 001). 14.Trade and other receivables GROUP COMPANY Local trade receivables 8,173,106 1,359,589 1,816,717 1,359,589 Foreign trade receivables 1,099,616 751,622 987,584 513,385 Allowance for doubtful debts (635,953) (14,681) (26,738) (14,681) Other receivables and prepayments 4,099,181 589,799 645,412 589,799 12,735,950 2,686,329 3,422,975 2,448,092 Ageing of receivables that are past due but not impaired 30-60 days 1,450,137 532,732 1,450,137 432,732 61-90 days 4,133,164 37,684 55,914 27,184 91-120 days 1,261,534 - - - Over 120 days 276,715 1,050 276,715 1,050 Total 7,121,550 571,466 1,782,766 460,966 Movement in the allowance for credit losses Balance at beginning of the year 14,681 12,295 14,681 12,295 Impairment losses recognised on receivables 635,953 14,681 26,738 14,681 Amount written off during the year as uncollectible (14,681) (14,681) Amounts recovered during the year - (12,295) - (12,295) Balance at end of the year 635,953 14,681 26,738 14,681 NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 46. 49 The average credit period on local sales of goods is 30 days. No interest is charged on local trade receivables for the first 30 days from the date of invoice. Thereafter, interest is charged at 15% per annum on the outstanding balance. Before accepting any new local customer, the Group uses an internal credit scoring system to assess the potential customer’s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are constantly reviewed. Included in the Group’s local trade receivables balance are debtors with a carrying amount of US$ 635 953 (2011 - US$ 14 681) which are past due at the reporting period end date for which the Group has provided for them as doubtful debts. The Group has insured these balances and are therefore recoverable. The average age of these receivables is 45 days. Foreign trade receivables The credit period on foreign sales of goods ranges between 60 – 90 days. No interest is charged on outstanding foreign trade receivables. Before accepting any new foreign (export) customer, members of the Group’s executive team and foreign sales administrators deliberate the prospective customer’s credit worthiness. Members of the Group’s executive team, its foreign sales administrators and marketing managers often meet prospective foreign customers in order to conduct background and screening checks and attach a credit quality rating before accepting credit trading customers. Credit limits are defined for each foreign customer and set by the executive team. Credit limits and customer quality are constantly reviewed. The provision for employee benefits represents annual leave, long service leave entitlements accrued and compensation claims made by the Group’s employees. The effect of the time value of money in settling the above employee benefit obligations is considered immaterial. Zimplow Limited Annual Report 2012 15.Trade, other payables and provisions GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ 15.1 Trade and other payables Local trade payables 5,072,491 354,817 97,627 354,817 Foreign trade payables 723,940 306,404 315,932 335,891 Other payables and accrued expenses 3,584,541 509,890 294,431 314,569 Total 9,380,972 1,171,111 707,990 1,005,277 Local trade payables The average credit period on local purchases of key manufacturing inputs ranges between 7 – 30 days (from date of invoice). Foreign trade payables The average credit period on foreign purchases of key manufacturing inputs is 30 days (from date of invoice). The Group has financial risk management policies in place to ensure that trade payables are paid within the credit time frame. 15.2 Provisions employee benefits Balance at 1 January 2012 378,982 378,421 377,295 363,656 Additional provision recognised 142,538 65,121 72,248 55,558 Reductions arising from payments (227,499) (64,560) (110,243) (41,919) Balance at 31 December 2012 294,021 378,982 339,300 377,295
  • 47. 50 16.Borrowings GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Current borrowings Unsecured at amortised cost Bank loans 5,706,806 - - - Total current borrowings 5,706,806 - - - Non current borrowings Unsecured at amortised cost Bank loans 143,025 - - - Total non current borrowings 143,025 - - - Total borrowings Current 5,706,806 - - - Non current 143,025 - - - Total 5,849,831 - - - Maturity profile of borrowings Due within I year 0-3 months - - - - 3-6 months - - - - 6-12 months 5,706,806 - - - Total 5,706,806 - - - Due after 1 year 1-2 Years - - 2-3 Years - - - - 3-4 Years 18,025 - - - 4-5 Years 125,000 - - - Total 143,025 - - - 17.Cash and bank balances GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Cash at bank and on hand 1,924,787 3,407,355 1,971,086 3,407,355 Foreign cash at bank (other than US$) 368,395 540,557 368,395 30,646 Total 2,293,182 3,947,912 2,339,481 3,438,001 Short term deposits are made for varying periods of between one day and three months, depending on the immediate and short term cash requirements of the Group, and earn interest at the respective short term deposit. At 31 December 2012, the Group had available US$ 7 000 000 (2011 - US$ 2 500 000) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met. NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 48. 51 18. Related Party Disclosures Key management personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity directly or indirectly. Transactions with key management personnel Loans to key management personnel During the year, no loans were advanced to key management personnel. The remuneration of directors and key executives is determined by the Group’s Remuneration Committee having regard to the performance of individuals and market trends. 18. Related party Disclosures continued Companies related to key management personnel Amounts due to/ (by) companies related to key management personnel There were no amounts due to or by companies related to key management personnel at the balance sheet date. Transactions with Companies related to key management personnel GROUP COMPANY Rental payments to lessors (under operating lease arrangements) 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ CT Bolts premises-B Mitchell(Shareholder and Director) 75,878 75,686 75,878 75,686 Tassburg premises-M Pringle Wood(Shareholder) 106,056 77,640 106,056 77,640 Afritrac Premises-Volanto Beleggings CC 17,723 6,857 - - Total 199,657 160,183 181,934 153,326 Loans from shareholders MC McMaster 3,206 2,176 - - S Labuschangne 3,531 3,792 - - ME McMaster 8,064 8,661 - - O Guzzardi 10,691 11,596 - - Total 25,492 26,225 - - Loans owing by related parties Volanto Beleggings CC 66,651 77,147 - - Volanto Beleggings CC is a company owned by the previous shareholders of Afritrac namely: MC McMaster S Labuschangne ME McMaster O Guzzardi Zimplow Limited Annual Report 2012 GROUP COMPANY Compensation to key management personnel 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Short-term employee benefits 1,016,784 335,213 228,486 330,548 Total 1,016,784 335,213 228,486 330,548
  • 49. 52 18.Related party disclosures continued Future minimum lease payments UP TO 1 YEAR 1-5 YEARS MORE THAN 5 YEARS US$ US$ US$ Future minimum lease payments at 31 December 2012 90,018 450,090 - 2012 2011 Group US$ US$ Payments recognised as an expense 199,657 160,183 2012 2011 Company US$ US$ Payments recognised as an expense 181,934 153,326 19.OperatingLease arrangements 19.1 Operating lease with no contingent rentals TPH Head Office sub-leases offices from AON Zimbabwe (Private) Limited. The total lease payments for the year amounted to $ 36 007 with no contingent rent payments. The lease agreement is for an indefinite period and does not provide TPH with an option to purchase the premises nor does it impose any restriction. The future minimum lease payments for the period “more than 5 years” could not be determined with accuracy at year-end. 19.2 Operating lease with contingent rentals Operating leases relate to premises occupied by CT Bolts (Bulawayo and Harare), Afritrac(SA) and Tassburg (Harare) TRANSACTION VALUE BALANCES Group companies 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Sales to group companies Zimplow Ltd 442,995 - - - Tractive Power holdings - - - - Afritrac 62,578 368,791 - 145,520 Purchases from group companies Zimplow Ltd 62,578 - - - Tractive Power holdings - - - - Afritrac 442,995 306,791 223,052 - Other transactions Loans and charges to group companies Zimplow Ltd 1,021,270 - - - Tractive Power holdings - - - - Afritrac - - - - The non – cancellable nature of the Group’s leases would ordinarily necessitate disclosures in accordance with IAS 17: 35 (“Leases”). In this regard, future minimum lease payment commitments over prescribed periods would need to be disclosed in accordance with the particulars of lease arrangements. Given the contingent rental payment terms in place throughout most of the current reporting period and in place as at period end, the aforementioned disclosures are not considered relevant and accordingly do not form part of the note. The Group’s contingent rental payment terms, introduced in January 2010, are based on a percentage of the monthly turnover of CT Bolts. Payments are remitted monthly, in arrears, to the former owner of the business unit. Set payment terms are not leveraged or indexed to any external sources and are considered to relate only to the Zimbabwean economic environment. NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 50. 53 Application Guidance to IAS 39: “Financial Instruments: Recognition and Measurement” states that operating lease payments based on turnover is a common contingent rental term within leases that is categorised as an embedded derivative. Such embedded derivatives are however considered closely related to the host lease contract and accordingly, do not have to be separated from the lease contract as a whole. The Group, as lessee, therefore continues to expense such contingent payments as they arise. 20. Financial instruments 20.1 Capital Management The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising return to stakeholders through the optimisation of the debt and equity balance. The Group’s strategy remains unchanged from 2011. The Group is not subject to any externally imposed capital requirements. The Group’s Audit Committee reviews the capital structure. As part of this review, the committee considers the cost of capital and risks associated with each cost of capital. The capital structures of the group consist of issued capital, reserves, retained earnings and Non-controlling interests as detailed in the statement of changes in equity The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and positive capital ratios in order to support the application of its business model and maximise shareholder value. The Group manages its capital structure and considers making related adjustments to it in line with changes in prevailing and forecast economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend pay-out to shareholders, return capital to shareholders or issue new shares. The Group monitors capital levels and appropriateness with reference to a gearing ratio. The Group’s policy is to keep its gearing ratio between 15% and 35%. As at 31 December 2012 the Group had interest bearing loans and borrowings amounting to US$ 5 849 831 (2011 – nil).The Company had no borrowings as at 31 December 2012 (2011 – nil). 20.2 Financial Risk Management The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group’s activities involve the analysis, evaluation, acceptance and management of some degree of risk or a combination of risks. Taking an acceptable level of risk is core to a business and operational risks are considered an inevitable consequence of being in business. The Group’s aim, in line with its risk management programme, is therefore aligned with achieving an appropriate balance between risk and return, and minimising potential adverse effects on the Group’s financial performance. Risk management is a dynamic process that requires the on-going analysis efforts of the Group’s Directors. The Group’s Board of Directors and Executive Committee fulfil the entity’s risk appetite formulation and management process in consultation with management of the Group’s operating units. The Group’s Directors are of the opinion that the entity does not have significant exposure to financial risk. Market risk • Foreign exchange risk The Group operates regionally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the South African Rand and the Botswana Pula. Foreign exchange risk arises when future commercial transactions or recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The carrying amount of the Group’s foreign currency denominated monetary assets and liabilities as at the reporting period end date, are as follows: 31-DEC-12 31-DEC-11 Group S. African Rand Botswana pula British Pound S. African Rand Botswana pula US$ US$ US$ US$ US$ ASSETS Trade and other receivables 656,048 21,750 - 691,162 57,441 Cash and cash equivalents 367,613 782 - 530,660 9,897 Total assets 1,023,661 22,532 - 1,221,822 67,338 Liabilities Trade and other payables 375,144 - 1,491,029 306,404 - Total net position 648,517 22,532 (1,491,029) 915,418 67,338 Zimplow Limited Annual Report 2012
  • 51. 54 The table below details the Group’s sensitivity to the strengthening of the US$ against the South African Rand and the Botswana Pula by 10%, with all other variables held constant. The analysis was applied to monetary items at the reporting period end date, as denominated in respective currencies. • Price risk The Group is exposed to equity securities price risk because of investments held by the Group and classified on the Statement of Financial Position as available for sale. The Group’s listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group manages the equity price risk through diversification and placing limits on individual and total equity instruments. The Group’s Executive Committee regularly reviews its investment portfolio and considers disposing equity securities when related investee share prices would potentially disadvantage the Group’s position. Similarly, the Group acquires equity securities when gains are anticipated. At the reporting period end date, the exposure to listed equity securities at fair value was US$ 150 611. A decrease of 10% on the Zimbabwe Stock Exchange (ZSE) market index, marked as having a similar reducing impact on the specific equity securities within the Group’s investment portfolio at 31 December 2012, would have an approximate pre-tax negative impact in value of US$ 15 061 on other comprehensive income and equity attributable to the Group, depending on whether or not the decline is significant and prolonged. Alternatively, an increase of 10% in the Group’s listed security investment portfolio value would positively impact profit or loss and equity by a similar amount. • Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s interest rate risk arises from medium – long term borrowing arrangements. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Alternatively, borrowings issued at fixed rates expose 31-DEC-12 31-DEC-11 Company S. African Rand Botswana pula British Pound S. African Rand Botswana pula US$ US$ US$ US$ US$ ASSETS Trade and other receivables 538,994 21,750 - 307,405 57,441 Cash and cash equivalents 86,381 782 - 20,749 9,897 Total assets 625,375 22,532 - 328,154 67,338 Liabilities Trade and other payables 98,407 - - 88,872 - Total net position 526,968 22,532 - 239,282 67,338 NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012 Group 31-DEC-12 31-DEC-11 S. African Rand Botswana pula British Pound Total S. African Rand Botswana pula Total US$ US$ US$ US$ US$ US$ US$ Profit before taxation (42,162) (2,048) 149,103 (44,210) 16,538 6,734 23,272 Effect on equity (31,306) (1,521) 110,709 (32,827) 12,279 5,000 17,279 (73,468) (3,569) 259,812 (77,037) 28,817 11,734 40,551 Company 31-DEC-12 31-DEC-11 S. African Rand Botswana pula British Pound Total S. African Rand Botswana pula Total US$ US$ US$ US$ US$ US$ US$ Profit before taxation (47,906) (2,048) - (49,954) (14,463) 6,734 (7,729) Effect on equity (35,570) (1,521) - (37,091) (10,739) 5,000 (5,739) (83,476) (3,569) - (87,045) (25,202) 11,734 (13,468)
  • 52. 55 the Group to fair value interest rate risk. Borrowings are settled as promptly as possible if interest rates are unfavourable and the Group always strives to negotiate the most favourable rates and tenures to avoid both cash flow and fair value interest rate risk. The Group endeavours to maximise interest rates on investments and minimise interest rates on borrowings. The Group policy is to adopt a non – speculative policy on managing interest rate risk. A 50 basis point increase or decrease (equivalent to a 0.5% absolute interest rate change) is considered by management as a reasonable possible change in interest rate terms and would therefore be representative of an approximate loan sensitivity analysis. However, as at 31 December 2012, the Group did not have any exposure to variable interest rate borrowings. • Credit risk Credit risk relates to the risk that trade counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss being incurred. Potential concentrations of credit risk consist principally of short term cash and cash equivalents, investments and trade receivables. Credit risk related to cash deposits and equity security investments held in listed concerns: The Group deposits short term cash surpluses only with major banks and financial institutions of high credit standing and within investment limits assigned to each counterparty. Investment limits with banks and financial institutions are assigned by the Group’s Executive Committee in an effort to minimise the concentration of risk and therefore mitigate financial loss through potential counterparty failure. The Group’s Board of Directors reviews the limits and investment placements on a periodic basis and approves the Committee’s proposals accordingly, or alternatively rejects related proposals and effects changes to Group policy. The Group similarly adopts the aforementioned approach in formulating policy over equity security investments. The Group’s maximum exposure to credit risk for the affected components of the statement of financial position at 31 December 2012 is the aggregate of the carrying amounts as shown therein; Credit risk related to trade receivables: Trade receivables comprise a relatively large and widespread customer base. Group entities perform on going credit evaluations of the financial condition of their customers. Credit limits are established for all customers based on internal credit rating assessments after extensive prospective customer background and credit reference checks are performed. Outstanding customer receivables are regularly monitored and a full time credit control department exists to independently perform this function. The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. Accordingly, the Group has no significant concentration of credit risk which has not been adequately provided for. The Group’s maximum exposure to credit risk at 31 December 2012 and further specific credit risk mitigating activities adopted by the entity are as shown in note 14. • Liquidity risk Liquidity risk relates to a risk of a shortage of corporate funds being experienced. Prudent liquidity risk management includes maintaining sufficient cash and marketable securities, the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions. The Group maintains flexibility in funding by maintaining funding availability under committed credit lines. The Group’s objective is to maintain a beneficial balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans, whilst always considering the need for potential funding source diversification through the introduction of finance lease or hire purchase arrangements, or the issuance of preference shares. As at the reporting period end date, the Group’s external funding sources were limited to bank overdrafts and interest bearing loans and borrowings. The Group has access to financing facilities, the total unused amount of which is US$ 7 000 000 at 31 December 2012. The Group expects to meet its core trading based obligations from operating cash flows and proceeds from the realisation of its financial assets. The table below summarises the maturity profile of the Group’s financial liabilities at 31 December 2012 based on contractual undiscounted payments: Fair value of financial instruments The estimated net fair values of all financial instruments approximate the carrying amounts shown in the financial statements, largely due to the short term nature of these instruments. Zimplow Limited Annual Report 2012 GROUP COMPANY Maturity profile of trade and other payables 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Due within I year - - - - On demand 375,643 135,701 13,120 115,326 Less than 3 months 9,005,329 1,035,410 694,870 889,951 Total 9,380,972 1,171,111 707,990 1,005,277
  • 53. 56 21. Share based payments 21.1 Employee share option plan of the Company 21.1.1 Details of the employee share option plan of the Company The Company has a share option scheme for executives and senior employees of the Group and its subsidiaries. In accordance with the terms of the plan, as approved by shareholders at a previous annual general meeting, executives and senior employees with more than five years’ service with the Group may be granted options to purchase ordinary shares at an exercise price of US$0.09 per ordinary share. Each employee share option converts into one ordinary share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. The number of options granted is calculated in accordance with the performance-based formula approved by shareholders at the previous annual general meeting and is subject to approval by the remuneration committee. In respect of any option, the grantee shall be limited to exercising the option, and the right to exercise the option shall only accrue, as follows: (i) 40% was granted in 2011, vest after 1 year, and will expire after 5 years (i.e 2016). (ii) 40% was granted in 2012, vest after 1 year, and will expire after 5 years (i.e 2017). (iii) 20% will be granted in 2013, vest after 1 year, and will expire after 5 years (i.e 2018). 21.1.2 Fair value of share options granted in the year The Group was unable to estimate reliably the fair value of the equity instruments at the measurement date due to lack of information in the economy that would enable the Group to estimate the risk free rate over the next 10 years as required by binomial option pricing model. Share options for the Group have been measured at their intrinsic value. The intrinsic value of a share option at any point in time is the difference between the market price (US$0.065)of the underlying shares and exercise price of the option (US$0.09).The intrinsic value of the share options was US$ 327 000 in 2012 and US$ 65 40 in 2011. 21.1.3 Movements in shares options during the year The following reconciles the share options outstanding at the beginning and end of the year: 22. Reserves (net of income tax) 22.1 Equity-settled employee benefits reserve under the Company’s employee share option plan The above equity-settled employee benefits reserve relates to share options granted by the Company to its employees under its employee share option plan. Further information about share-based payments to employees is set out in note 21. NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012 GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 Number of options Number of options Number of options Number of options Balance at beginning of the year 6,540,000 - 6,540,000 - Granted during the year(40% of 16 350 000) 6,540,000 6,540,000 6,540,000 6,540,000 Balance at the end of the year 13,080,000 6,540,000 13,080,000 6,540,000 GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Balance at beginning of the year (65,400) - (65,400) - Arising on share based payments (261,600) (65,400) (261,600) (65,400) Balance at the end of the year (327,000) (65,400) (327,000) (65,400)
  • 54. 57 22.2 Foreign currency translation reserve Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from their functional currencies to the Group’s presentation currency are recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve. Exchange differences previously accumulated in the foreign currency translation reserve (in respect of translating both the net assets of foreign operations and hedges of foreign operations) are reclassified to profit or loss on the disposal of the foreign operation. GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Balance at beginning of the year (69,065) - - - Exchange difference on translating foreign operations (35,703) (69,065) - - Balance at the end of the year (104,768) (69,065) - - 23. Non-Controlling interests GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Balance at beginning of the year 512,633 - - - Non controlling interests arising on the acquisition of Afritrac - 525,761 - - Non controlling interests arising on the acquisition of TPH 8,997,754 - - - Share of (loss) / profit current year (192,422) 52,954 - - Exchange differences on translating foreign operations (34,170) (66,082) - - Share of other comprehensive income 239,017 - - - Balance at the end of the year 9,522,812 512,633 - - Zimplow Limited Annual Report 2012
  • 55. 58 24. Business combinations Acquisitions in 2012 24.1 Subsidiaries acquired Tractive Power holdings Principal activity Date of acquisition potential of voting Consideration equity interests Transfered Mining and farming 1 July 2012 57.21% US$ 9 737 967 TPH was acquired so as to continue the expansion of the Group’s activities in agricultural implements and mining. 24.2 Consideration transferred Cash US$9 737 967. The Group paid US$ 9 737 967 as consideration for the 57.21% interest in TPH. The fair value of the consideration given is therefore US$ 9 737 967. Acquisition-related costs amounting to US$ 1 045 644 have been excluded from the consideration transferred and have been recognised as an expense in the current year, within the ‘other expenses’ line item in the consolidated statement of comprehensive income. 24.3 Assets acquired and liabilities recognised at the date of acquisition US$ Non current assets Plant and equipment 9,838,758 Investment property 4,590,000 Deferred tax asset 157,438 Long term receivables 242,918 Current assets Cash and & cash equivalents 448,769 Trade and other receivables 8,106,800 Tax receivable 273,966 Inventories 7,164,295 30,822,944 Non Current liabilities Long term loans (125,000) Deferred tax (2,498,419) Current liabilities Trade and other payables (5,383,832) Short term borrowings (5,103,000) (13,110,251) Net assets 17,712,693 NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 56. 59 24.4 Non-controlling interests The non-controlling interest (57.21% ownership interest in TPH) recognised at the acquisition date was measured by reference to the fair value of the net assets acquired and amounted to US$8 997 754 24.5 Goodwill arising on acquisition US$ Consideration transferred 9,737,967 Plus: non-controlling interests (57.21 % in TPH) 8,997,754 Less: Net identifiable assets (17,712,693) Goodwill arising on acquisition 1,023,028 Goodwill arose in the acquisition of TPH because the cost of the combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of TPH. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. 24.6 Net cash outflow on acquisition of subsidiaries US$ Consideration paid 9,737,967 Less:Cash and cash equivalents acquired (448,769) Net cash outflow on acquisition 9,289,198 Acquisitions in 2011 African Traction and Associated Technologies Principal activity Date of acquisition potential of voting Consideration equity interests Transfered Import and sale of farming 28 February 2011 49% US$ 552 342 Implements and tools Afritrac was acquired so as to continue the expansion of the Group’s activities on agricultural implements. By virtue of agreement Zimplow Limited is the majority shareholder in Afritrac holding 49%, the remainder of the shareholding is held by the previous shareholders in their individual capacities at 12.75%. Zimplow has the power to govern the financial reporting, appoint or remove the majority of the members of the board of directors. Consideration transferred US$ Cash - Equity US$ 552 342 Total US$ 552 342 The Group issued 9 205 704 ordinary shares as consideration for the 49% interest in Afritrac. The fair value of the shares is the published price of the shares of the Group at the acquisition date, which was 0.06 US cents each. The fair value of the consideration given is therefore US$552 342. Acquisition-related costs amounting to US$11 500 have been excluded from the consideration transferred and have been recognised as an expense in the current year, within the ‘other expenses’ line item in the consolidated statement of comprehensive income. Zimplow Limited Annual Report 2012
  • 57. 60 US$ Non current assets Plant and equipment 10,845 Current assets Cash and & cash equivalents 355,919 Trade and other receivables 272,775 Inventories 658,505 1,298,044 Current liabilities Trade and other payables (265,552) Tax payable (1,588) (267,140) Net assets 1,030,904 Assets acquired and liabilities recognised at the date of acquisition US$ Consideration transferred 552,342 Plus: non-controlling interests (51 % in Afritrac) 525,761 Less: Net identifiable assets (1,030,904) Goodwill arising on acquisition 47,200 Goodwill arose in the acquisition of Afritrac because the cost of the combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of Afritrac. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. 24.6 Net cash outflow on acquisition of subsidiaries US$ Consideration paid - Less:Cash and cash equivalents acquired 355,919 Total 355,919 Non-controlling interests The non-controlling interest (51% ownership interest in African Traction and Associated Technologies)) recognised at the acquisition date was measured by reference to the fair value of the net assets acquired and amounted to US$525 761. Goodwill arising on acquisition NOTES TO THE FINANCIAL STATEMENTS (continued) Zimplow Limited Annual Report 2012
  • 58. 61 25. Events after the reporting date Non-adjusting events Acquisition of the balance of the issued share capital of Tractive Power Holdings Limited. On 15 January 2013, Zimplow Limited acquired the balance of the issued capital of Tractive Power Holdings Limited (TPHL),being 66,206,418 (Sixty Six Million Two Hundred and Six Thousand Four Hundred and Eighteen) TPHL ordinary shares, through the issue of 191.78 (One Hundred and Ninety One Comma SevenEight) Zimplow Shares for every 100 (One Hundred) TPHL ordinary shares held, or a cash consideration of USD0.10 (TenUnited States of America Cents) for every TPHL ordinary share held. TPHL is now a 100% owned subsidiary of Zimplow Limited. 26. Earnings per share The calculation of earnings per share are based on the following data: GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 Weighted average number of ordinary shares in issue: For the purpose of basic earnings per share 462,135,923 391,902,501 462,135,923 391,902,501 Add dilutive impact of shares - - - - For the purposes of diluted earnings/(loss) per share 462,135,923 391,902,501 462,135,923 391,902,501 US$ US$ US$ US$ Earnings for the purpose of basic and diluted earnings per share (812,754) 2,677,328 (135,562) 2,642,825 Adjustments for items of a capital nature, net of tax: (Profit)/Loss on disposal of property,plant and equipment 14,784 (11,818) 2,638 (11,818) Fair value loss adjustment on investment property 66,825 - - - Earnings for the purpose of headline earnings per share (731,145) 2,665,510 (132,924) 2,631,007 Basic earnings per share(US$) (0.002) 0.007 (0.000) 0.007 Headline earnings per share(US$) (0.002) 0.007 (0.000) 0.007 Diluted earnings per share(US$) (0.002) 0.007 (0.000) 0.007 The Group did not have any dilutive shares during the year. The following potential ordinary shares are anti-dilutive and are therefore excluded from the weighted number of ordinary shares for the purposes of diluted earnings per share. The Group had share options of 16 350 000, that could potentially become dilutive. However the average market price for the year of US$0.065 was less than the issue price of the share options of US$0.09 Zimplow Limited Annual Report 2012
  • 59. 62 Value added statement Value added is a measure of the wealth the Group has been able to create by adding value to the cost of raw materials, products and services purchased. The statement summarises the total wealth created and shows how it was shared by employees and other parties who contributed to the Group’s operations. The calculation takes into account the amount retained and reinvested in the Group for the replacement of assets and further development of operations. GROUP 31-Dec-12 31-Dec-11 US$ % US$ % Turnover 35,610,823 15,503,306 Less: Cost of material and services (26,075,246) (7,654,362) 9,535,577 7,848,944 APPLIED AS FOLLOWS Employee remuneration/benefits 7,104,364 75% 3,414,598 44% Government taxes (15,962) -0% 900,445 11% Dividends 907,950 10% 686,851 9% Balance retained in the Group 1,539,225 16% 2,847,050 36% Depreciation 626,302 7% 302,328 4% Fair value adjustment on equity 2,104 0% (25,205) -0% Retained income 910,819 10% 2,569,927 33% 9,535,577 100% 7,848,944 100% COMPANY 31-Dec-12 31-Dec-11 US$ % US$ % Turnover 12,807,190 14,654,404 Less: Cost of material and services (6,382,559) (6,976,682) 6,424,631 7,677,722 APPLIED AS FOLLOWS Employee remuneration/benefits 4,117,704 43% 3,237,969 41% Government taxes (277,499) -3% 864,006 11% Dividends 907,950 10% 686,851 9% Balance retained in the Group 1,676,476 18% 2,888,896 37% Depreciation 351,907 4% 296,482 4% Fair value adjustment on equity 2,104 0% (25,205) -0% Retained income 1,322,465 14% 2,617,619 33% 6,424,631 67% 7,677,722 98% Zimplow Limited Annual Report 2012
  • 60. 63 Shareholders’ analysis For the year ended 31 December 2012 No. of shareholders % No. of shares held % 1-5 000 667 56% 936,452 0.17% 5001-10 000 105 9% 784,216 0.14% 10 001-25 000 146 12% 2,373,543 0.42% 25 001-5 0000 66 6% 2,414,296 0.43% 50 001-100 001 52 4% 3,826,748 0.68% 100 001-200 000 50 4% 7,316,813 1.31% 200 001-500 000 47 4% 13,752,571 2.45% 500 001-1 000 000 19 2% 13,452,061 2.40% 1 000 001 and Above 30 3% 515,606,013 92.00% 1,182 100% 560,462,713 100% Type of shareholders Local nominees 84 7% 312,034,264 56% Local companies 143 12% 107,615,035 19% Pension funds 72 6% 48,238,720 9% Insurance companies 17 1% 24,501,140 4% Foreign nominees 6 1% 23,027,597 4% Local individual residents 751 64% 17,343,918 3% New non residents 26 2% 15,178,262 3% Charitable and trusts 26 2% 5,465,055 1% Fund managers 32 3% 3,904,203 1% Government/quasi-government 2 0% 2,395,215 0% Deceased estates 9 1% 679,340 0% Investments 14 1% 79,964 0% 1,182 100% 560,462,713 100% Top 10 largest shareholders TFS Nominees (Pvt) Ltd 264,674,822 55% CTB Investments(Pvt) Ltd 63,500,000 13% Datvest Nominees (Pvt) Ltd 36,191,223 7% Yumiko Investments (Pvt) Ltd 34,905,677 7% Old Mutual Life Assurance Co. Zim Ltd 23,328,649 5% Standard Chartered Nominees (Pvt) Ltd -NNR 22,312,421 5% National Social Security Authority (NPS) 18,020,156 4% Mining Industry Pension Fund 6,880,066 1% Chitepo Bernard Norman 6,712,891 1% National Railways of Zim Contributory p/f 6,681,046 1% 483,206,951 100% Zimplow Limited Annual Report 2012
  • 61. 64 GROUP COMPANY 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 US$ US$ US$ US$ Summary of Results Turnover 35,610,823 15,503,306 12,807,190 14,654,404 (Loss)/Profit before tax (989,214) 3,635,273 141,938 3,506,831 Taxation (15,962) (904,991) (277,499) (864,006) (Loss)/Profit after tax (1,005,176) 2,730,282 (135,561) 2,642,825 Return on investment (%) -2% 24% -1% 24% Financial Status Current assets 31,487,321 13,692,191 12,058,500 12,541,545 Current liabilities 15,791,391 1,886,081 1,194,009 1,718,099 Net current assets 15,695,930 11,806,110 10,864,491 10,823,446 Current ratio (times) 2 7 10 7 Total assets employed 53,163,419 16,745,397 27,092,550 16,099,344 Total equity 33,839,789 13,725,199 24,775,610 13,759,761 US$ Per Ordinary Share Basic earnings (0.001) 0.01 (0.001) 0.01 Dividends 0.003 0.00 0.003 0.00 Income retained for the year (0.001) 0.01 (0.001) 0.01 Net asset value 0.03 0.04 0.02 0.03 Shares In Issue No. of ordinary shares issued 560,462,713 336,277,628 560,462,713 336,277,628 Market price (US$) -Highest 0.085 0.11 0.085 0.11 Market price (US$) -Lowest 0.04 0.06 0.04 0.06 Market price (US$) -end of year 0.065 0.08 0.065 0.08 Staff Complement Average number of employees 774 503 384 492 Financial review Zimplow Limited Annual Report 2012
  • 62. 65 Financial calendar Annual General Meeting 4 April 2013 BY ORDER OF THE BOARD D MKONTO Company Secretary 39 Steelworks Road P.O. Box 1059 BULAWAYO Zimplow Limited Annual Report 2012
  • 63. 66 Zimplow Limited Annual Report 2012 NOTES
  • 64. www.zimplow.co.zw

×