The financial year ended 31 March 2014 was a challenging one for the Group and was characterised
by macro-economic uncerta...
7. Supplementary Information
7.1 Profit from operations is stated after the following impairment losses:
Impairment Losses...
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Cottco Holdings Limited FY 2014 financial results


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Cottco Holdings Limited leading Agriculture company listed on the Zimbabwe Stock Exchange has released their Full Year Results . Check out insights into this company in their presentation which appears below.
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Cottco Holdings Limited FY 2014 financial results

  1. 1. The financial year ended 31 March 2014 was a challenging one for the Group and was characterised by macro-economic uncertainties, increased volatility in the agri-commodity sector and an acute decline in cotton production which was observed across the Sub-Saharan Africa region. The liquidity challenges that the economy has endured over the years persist. In December 2013, we announced the unbundling of the Group which received immense shareholder support and successfully raised US$45 million. The net proceeds were used to recapitalise the Cotton business in order to underwrite its profitable growth and escalate cash flow generation. The actions we took in this year were designed to ensure that the Group is well positioned for long-term growth while delivering strong and consistent financial results. Through pursuing improved agronomic practices and continued investment in our farmers, agricultural policy and human capital, Cottco Holdings continues to maintain its market leadership position. The Group continues to change lives and transform communities for the better through its flagship contract farming scheme which, over the years, has empowered the majority of families in cotton producing areas. This has been achieved by providing them with production means and access to cash income. We continue to recognise the importance of our Zimbabwean farmers to the growth of the cotton industry and are committed to remaining their partner of choice. OPERATIONS REVIEW Continuing operations Cotton The year under review witnessed an acute decline in cotton production in Zimbabwe and the region. National cotton output declined from 250,000 tonnes in 2012/13 to 145,000 tonnes in the 2013/14 season, a decrease of 42%. The decline was attributed to a myriad of factors, chief among them: poor rainfall distribution across the country and a reduction in inputs support by the cotton industry on speculation of poor industry compliance and excessive side-marketing. The Cotton business recorded intake volumes of 35,000 tonnes. Despite the Cotton business achieving lower than expected intake volumes, inputs scheme recoveries improved by 9% in line with expectation. Impairment losses attributable to the inputs scheme therefore declined and a loss of US$2.8 million recorded in the current year only represents an increase in our provision on account of current year inputs scheme receivables. Improvements in on-farm yields continue to remain a focus area. International lint prices firmed marginally from 80 US cents per pound last year to an average of 89 US cents per pound. The outlook for cotton prices remains bearish as production is forecast to outpace global consumption for a fifth consecutive year running. Demand for the Cotton business's lint however remains strong. Discontinued operations Seed The Seed business results for the first 10 months of the year recorded a 1% decrease in revenue despite growth in maize and wheat volumes which grew by 16% and 31%, respectively. Soya bean and cotton seed sales were however negative with declines of 39% and 11%, respectively. Fast Moving Consumer Goods (FMCG) The FMCG business's profit before tax improved by 65% for the 10 months to January 2014. The company's improved financial performance was driven by changes to the business's product mix. FINANCIAL RESULTS The Group's interests in Seed Co Holdings Limited (Seed Co) and Olivine Holdings Limited (Olivine) were disposed of in January 2014 as part of the Group's unbundling process. The Group's financial performance for the year ended 31 March 2014 therefore only incorporates the results of Seed Co and Olivine for the 10 months ended 31 January 2014, which was the effective date of disposal. All assets and liabilities of both Seed Co and Olivine were derecognised after this date. Both entities are disclosed in the group statement of profit or loss as discontinued operations. Revenue from continuing operations amounted to US$42 million (2013: US$129.1 million), a decrease of 67%. The decrease in revenue was mainly driven by a 77% decrease in sales volumes recorded by the Cotton business, a direct result of the reduced intake volumes recorded. Group operating margins declined from an operating profit of $5.9 million to an operating loss of US$22.3 million owing to low production volumes and the resultant low cost absorption. Margins also declined due to higher seed cotton prices versus declining lint prices. Cotton business impairment charges at US$6.9 million (last year: US$14.2 million) were 51% lower than last year. The quantum of increase in the allowance for credit losses was not repeated in the current year as a notable improvement in inputs scheme recoveries was achieved. The Group realised a gain of US$37.2 million arising from the disposal of its interests in Seed Co and Olivine. Profit for the year amounted to US$14.9 million against a loss of US$2.1 million last year. The Group's debt at 31 March 2014 amounted to US$41.6 million compared to US$126 million at 31 March 2013. Net proceeds amounting to US$32.8 million which had been received as at 31 March 2014 were applied to the Group's borrowings. A further decline in borrowings is expected in the coming financial year when the Group's recapitalisation processes are concluded. OUTLOOK We have refocused the Group to drive resurgent performance in the Cotton business driven by a stronger balance sheet and complemented by reforms in the cotton industry's regulations. The stipulation of minimum funding thresholds for all ginners by the Agricultural Marketing Authority should underpin an increase in cotton crop production. The aforementioned national effort to resuscitate the cotton industry is motivated by the fact that cotton remains a significant foreign currency earner in the agricultural sector. International lint prices are expected to continue to soften as the world market responds to uncertainties on China's stock policies. Despite the odds, the World Bank is projecting global economic growth of 2.8 %. As cotton is a consumption crop and not a food crop, its prospects are closely tied to the health of the global economy. Ongoing cost reduction measures in the Cotton business are bearing fruit and will continue to do so into the future. With a significant portion of the Group's debt having been eliminated, finance costs, which have in the past hamstrung the Group's financial performance, will decline significantly. The Group's funding model has also evolved and we will, in the coming year, exploit available opportunities in supply chain financing to further reduce the costs of financing. DIRECTORATE Following the restructuring of the Group, the entire board stepped down while Messrs Freeman Kembo, James Maposa, Ayoob Adam, Collins Chihuri, Dr Douglas Ncube and Ms Rufaro Maunze were appointed to the Board during the year. My fellow Directors and I wish the outgoing board all the best in their future endeavours and thank them most sincerely for their valuable contribution to the Group's successful capital raising initiatives. DIVIDEND In light of the ongoing recapitalisation of the business, the Directors have decided not to declare a dividend for the year ended 31 March 2014. APPRECIATION On behalf of the Board, I would like to offer my heartfelt thanks to the Cottco Holdings team for their loyalty, commitment and tireless efforts in pushing the Group forward under difficult conditions. I wish to also thank my fellow Directors on the Board, our shareholders, business partners and stakeholders for their unstinting support. We will continue to build on our distinctive strengths and valuable experience gained through tough times to deliver value to our shareholders. F Kembo Chairman 26 June 2014 CHAIRMAN’S STATEMENT OVERVIEW Abridged Group Statement of Financial Position as at 31 March 2014 31 March 31 March 2014 2013 US$'000 US$'000 ASSETS Non-current assets Property, plant and equipment 29,867 103,321 Intangible assets 15 20 Investment property - 332 Other financial assets 5 1,157 Other receivables 808 997 Total non-current assets 30,695 105,827 Current assets Assets classified as held for sale 15,373 1,454 Other current assets 38,289 181,003 Total current assets 53,662 182,457 Total assets 84,357 288,284 EQUITY AND LIABILITIES Capital and reserves Share capital 10,948 5,341 Capital reserves 26,513 21,190 Retained earnings (5,883) 46,777 Equity attributable to equity holders of the parent 31,578 73,308 Non-controlling interest - 39,944 Total equity 31,578 113,252 Non-current liabilities Borrowings 5,809 11,805 Deferred tax liabilities 331 14,144 Finance lease liabilities - 314 Total non-current liabilities 6,140 26,263 Current liabilities Liabilities classified as held for sale 467 467 Other current liabilities 46,172 148,302 Total current liabilities 46,639 148,769 84,357 288,284 Abridged Group Statement of Cash Flows for the year ended 31 March 2014 31 March 31 March 2014 2013 US$'000 US$'000 Cash flows from operating activities Operating cash flows before reinvesting in working capital 28,250 31,277 Movement in working capital (10,578) 20,931 Net finance cost (20,878) (24,090) Net taxation paid (8,708) (5,433) Net cash (utilised in)/generated from operations (11,914) 22,685 Net cash inflow/(outflow) from investing activities 63,225 (11,281) Net cash outflow from financing activities (13,519) (5,422) Effect of exchange rate fluctuations on cash held - (701) Increase in cash and cash equivalents 37,792 5,281 Abridged Group Statement of Profit or Loss for the year ended 31 March 2014 Restated 31 March 31 March 2014 2013 US$'000 US$'000 Revenue 42,001 129,072 (Loss)/profit from operations (22,316) 5,858 Investment income 67 274 Other gains and losses 1,419 (198) Gain on disposal of Group entities 37,227 - Finance costs (13,409) (16,113) Profit/(loss) before taxation 2,988 (10,179) Income tax (expense)/credit (320) 507 Profit/(loss) after tax from continuing operations 2,668 (9,672) Profit from discontinued operations 12,188 7,581 Profit/(loss) for the year 14,856 (2,091) Attributable to: Equity holders of the parent 5,851 (6,711) Non-controlling interest 9,005 4,620 14,856 (2,091) Basic earnings/(loss) per share (US cents) 0.53 (1.26) Diluted earnings/(loss) per share (US cents) 0.53 (1.21) Abridged Group Statement of Comprehensive Income for the year ended 31 March 2014 31 March 31 March 2014 2013 US$'000 US$'000 Profit/(loss) for the year 14,856 (2,091) Other comprehensive income Revaluation of property, plant and equipment (net of tax) (2,493) 897 Exchange differences on translating foreign operations (2,085) (7,268) Other comprehensive loss for the year (4,578) (6,371) Total comprehensive income/(loss) for the year 10,278 (8,462) Total comprehensive income/(loss) attributable to: Equity holders of the parent 2,926 (9,389) Non-controlling interest 7,352 927 10,278 (8,462)
  2. 2. 7. Supplementary Information 7.1 Profit from operations is stated after the following impairment losses: Impairment Losses by Operating Segment Operating Segment Cotton Other Total 31 March 2014 31 March 2014 31 March 2014 US$'000 US$'000 US$'000 Investments in subsidiary and joint venture - 52,621 52,621 Trade and other receivables 1,380 - 1,380 Inputs scheme receivables 2,841 - 2,841 Inventories 2,682 - 2,682 Total 6,903 52,621 59,524 Charged to equity - 25,079 25,079 Charged to profit or loss 6,903 27,542 34,445 31 March 31 March 2014 2013 US$'000 US$'000 7.2 Depreciation 3,274 8,376 7.3 Capital expenditure 676 10,931 7.4 Commitments for capital expenditure Contracted for 103 - Approved by the Directors but not yet contracted for 3,320 16,875 Total 3,423 16,875 8. Included in 'assets classified as held for sale' are assets worth US$8.3 million relating to the Cotton business. 9. Audit of the financial statements These financial statements have been audited by the Group’s external auditors, KPMG, and have been extracted from the Group's annual report. KPMG has issued an unmodified opinion. 10. Cautionary statement Cottco Holdings Limited advises its shareholders that the Company is engaged in negotiations which, if successfully concluded, will have a significant impact on its operations and share price. Shareholders are accordingly advised to exercise caution when dealing in the Company's securities until further announcement is made. 1. Presentation The financial statements are presented in United States dollars, which is the Group's functional currency. The financial information presented in United States dollars has been rounded off to the nearest thousand. 2. Accounting policies Accounting policies have been applied consistently with those used in the Group financial statements of Cottco Holdings Limited (formerly AICO Africa Limited) for the year ended 31 March 2013. 3. Basis of preparation The basis of preparation of these financial statements is the International Financial Reporting Standards (IFRS). 4. Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards. 5. Group unbundling and capital raise In January 2014, the Group raised US$45.6 million for the recapitalisation of its subsidiary, The Cotton Company of Zimbabwe Limited. This was done through a series of transactions as follows: i) A portion of the Group's interest in Seed Co Limited (Seed Co) was disposed of to third parties for US$30.5 million. Of this amount, 7 million shares valued at US$6.5 million were in the process of being disposed of as at 31 March 2014. These shares are recognised at fair value in assets classified as held for sale. ii) The remaining Seed Co shares were distributed to Cottco Holdings Limited shareholders through a dividend in specie. iii) The Group raised US$15.1 million through a rights issue. iv) The Group warehoused its interest in Olivine Holdings (Private) Limited (Olivine) in a trust for the benefit of its shareholders. As a result of the above transactions, the Group unbundled and Cottco Holdings Limited remains with one operating subsidiary, The Cotton Company of Zimbabwe Limited. Seed Co and Olivine are therefore reported as discontinued operations. The Group realised a gain on disposal amounting to US$37.2 million on the above transactions as the fair value of Seed Co exceeded its net asset value. Notes to the financial statements 6. Results of discontinued operations The analysis of assets, liabilities and performance of the discontinued operations is shown below: 31 March 31 March 2014 2013 US$'000 US$'000 Property, plant and equipment 1,287 1,372 Current assets 14 15 Total assets 1,301 1,387 Deferred tax 438 439 Current liabilities 28 28 Total liabilities 466 467 Net assets 835 920 Revenue 130,635 134,850 Profit/(loss) from operations 24,991 (18,325) Profit for the year 12,188 7,581 Abridged Group Audited Results for the year ended 31 March 2014 1 Lytton Road, Workington, P.O.Box 2697, Harare, Zimbabwe Telephone: (+263) 04 749458, 04 771981 / 5, 04 775324, 04 750339, 04 775330 Fax: (+263) 04 753854, 708573, Email: Directors: F Kembo (Chairman), JP Maposa (Deputy Chairman), C Chihuri (Managing Director), AE Adam, D Ncube, RAM Maunze adrenalinadvertising&design