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AICO Holdings Limited 2013 annual report

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AICO Holdings Limited 2013 annual report

AICO Holdings Limited 2013 annual report

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  • 1. Notice To Shareholders 2 Proxy Form And Change Of Address Notice 3 Vision, Mission and Value Statements 5 Group Profile 6 Corporate Information 7 Board Of Directors 8 Group Companies’ Board Composition 10 Board Committees and Group Management 11 Corporate Governance Statement 12 Chairman’s Statement 14 Directors’ Responsibility Statement 16 Group Chief Executive’s Report 18 Directors’ Report 20 Independent Auditor’s Report 22 Income Statements 24 Statements Of Comprehensive Income 25 Statements Of Financial Position 26 Group Statement Of Changes In Equity 27 Company Statement Of Changes In Equity 28 Statements Of Cash Flows 29 Group Primary Segment Reports 30 Group Secondary Segment Reports 32 Accounting Policies 34 Notes To The Financial Statements 42 Shareholders’ Analysis 61 Shareholders’ Calendar 61 Corporate Directory 62 1 AICO Africa Limited 2013 CONTENTS
  • 2. Notice is hereby given that the 5th Annual General Meeting of the members of AICO Africa Limited will be held in The Lecture Theater at SAZ Building, No.1 Northend Close, Northridge Park, Borrowdale, Harare, Zimbabwe on Friday, 30 August 2013 at 1500 hours for the following business: ORDINARY BUSINESS 1. FINANCIAL STATEMENTS To receive and adopt the financial statements for the year ended 31 March 2013 together with the reports of the Directors and the auditors thereon. 2. ELECTION OF DIRECTORS In terms of Article 32.1 of the Company's Articles of Association, Messrs I Chagonda, JP Rooney and F Rwodzi retire by rotation. The retiring Directors, being eligible, offer themselves for re-election. 3. DIRECTORS' REMUNERATION To approve the fees paid to the Directors for the the year ended 31 March 2013. 4. AUDITORS To approve the remuneration of the auditors and to consider the re-appointment of KPMG as auditors for the ensuing year. NOTE: A member entitled to attend and vote at the meeting may appoint any person or persons to attend and speak in his stead. A proxy need not be a member of the Company. Proxies must be lodged with the Secretary at least 48 hours before the time of holding the meeting. BY ORDER OF THE BOARD P MANAMIKE COMPANY SECRETARY 26 June 2013 REGISTERED OFFICE 1st FLOOR SAZ BUILDING NORTHEND CLOSE NORTHRIDGE PARK BORROWDALE HARARE 2 AICO Africa Limited 2013 NOTICE TO SHAREHOLDERS
  • 3. I/We being the registered holder/holders of shares in AICO Africa Limited hereby appoint Of Signed this Signature of shareholder day of 2013 or failing him, the Chairman of the meeting, as my/our proxy to vote on my/our behalf at the fifth annual general meeting of the Company to be held on Friday, 30 August 2013 at 15:00 hours and at any adjournment thereof. NOTE: A member entitled to attend and vote at the meeting may appoint any person or persons to speak in his stead. A proxy need not be a member of the Company. Proxies must be lodged with the Secretary at least forty-eight hours before the meeting. (In full block letters) NAME: NEW ADDRESS: OLD ADDRESS: CHANGE OF ADDRESS NOTICE 5th Annual General Meeting PROXY FORM 5th Annual General Meeting
  • 4. First Transfer Secretaries (Private) Limited Transfer Secretaries AICO AFRICA Limited P O Box 11 Harare Zimbabwe Stamp First Transfer Secretaries (Private) Limited Transfer Secretaries AICO AFRICA Limited P O Box 11 Harare Zimbabwe Stamp
  • 5. 5 AICO Africa Limited 2013 VISION, MISSION AND VALUE STATEMENTS
  • 6. PREAMBLE AICO Africa Limited (AICO) is a diversified agro-industrial conglomerate. It was incorporated in Zimbabwe on 23 July 2008 and subsequently reverse listed on the Zimbabwe Stock Exchange on 1 September 2008, in place of The Cotton Company of Zimbabwe Limited (Cottco) through a Group restructuring exercise. INVESTMENTS AICO wholly owns Cottco, which, with nine ginneries across Zimbabwe, constitutes the Cotton operations of the Group. Cottco is the single largest ginner of cotton in Southern Africa, and is involved in every facet of cotton production and sales. This includes the provision of agronomic advisory services, merchandising of planting seed, supply of chemicals and fertiliser, ginning, warehousing as well as marketing of lint and cotton seed in global and local markets. AICO holds a 50.14% controlling stake in Seed Co Limited (Seed Co). Seed Co develops and markets hybrid maize and other broad acre crop seeds. Seed Co, in turn, holds a 100% interest in a cotton planting seed production house, Quton Seed Company (Private) Limited. These two seed houses make up the Group’s Seed operations. AICO also has a 49.31% stake in Olivine Holdings (Private) Limited (Olivine), a major player in the local fast moving consumer goods (FMCG) market. Its key products include edible oils and fats, canned vegetables, soaps, cotton and soya meal. COMPANY PRINCIPAL ACTIVITIES PRODUCTS MARKETS Cottco Seed Co Africa, Asia and Europe Africa Ginning of seed cotton and selling of lint and by products of the ginning process. Development, production and selling of broad acre crop seeds. Lint, ginned seed, delinted seed and linters. Maize, soya beans, wheat, cotton, sorghum and a variety of other crop seeds. Olivine Exhort Africa Africa Manufacturing of edible oils and fats, jams and marmalades, soaps, candles as well as canned fruits and vegetables. Cooking oil, margarine, candles, baked beans, bath soaps, canned foods etc. Processing of frozen vegetables. Frozen carrots, beans, peas, cauliflower, sweet corn, broccoli etc. Zambrano Investment vehicle for inflation hedged assets. Quoted shares. Zimbabwe GROUP STRUCTURE PRINCIPAL ACTIVITIES Note: i) Operations of Exhort Enterprises (Private) Limited have been closed down, pending disposal. ii) The Group disposed of its entire stake in the spinning business, Scottco (Private) Limited, at the beginning of the year. 100%49.31%50.14%100% 100% Zambrano Investments (Private) Limited Cottco International (Proprietary) Limited Incorporating 100% 6 AICO Africa Limited 2013 GROUP PROFILE The African Seed Company
  • 7. Lawyers Gill Godlonton & Gerrans Kantor & Immerman Legal Practitioners 19 Selous Avenue Beverly Court HARARE 100 Nelson Mandela Avenue ZIMBABWE HARARE ZIMBABWE Atherstone & Cook 7th Floor Mercury House George Silundika Avenue HARARE ZIMBABWE Standard Chartered Bank 22 Billiter Street LONDON UNITED KINGDOM Registered Office Company Secretary 1st Floor SAZ Building P Manamike Northend Close Northridge Park Box BW 537 Borrowdale HARARE ZIMBABWE Tel: 263-4-853054-6 Fax: 263-4-850705 Email: info@aicoafrica.com Website: www.aicoafrica.com Auditors Transfer Secretaries KPMG Chartered Accountants (Zimbabwe) First Transfer Secretaries Mutual Gardens No. 1 Armagh Avenue 100 The Chase (West) Off Enterprise Road, Eastlea Emerald Hill HARARE HARARE ZIMBABWE ZIMBABWE Main Bankers African Banking Corporation Limited CBZ Bank Limited 1 Endeavor Crescent 60 Kwame Nkrumah Avenue Mount Pleasant Business Park HARARE HARARE ZIMBABWE ZIMBABWE Standard Chartered Bank Zimbabwe Limited African Export-Import Bank Africa Unity Square 72 (B) El Maahad El Eshteraky Street, Sam Nujoma Street Heliopolis, HARARE CAIRO 11341, ZIMBABWE EGYPT PTA Bank 22nd and 23rd Floors NSSF Building NAIROBI KENYA 7 AICO Africa Limited 2013 CORPORATE INFORMATION
  • 8. Bekithemba was appointed Chairman of AICO on 12 November 2010 having been appointed to the AICO Board on 15 August 2008. Prior to that, he had been on the Cottco Board since 1 December 2002. He is a prominent businessman and Managing Director of Lloyd Corporate Capital (Private) Limited. Bekithemba sits on the boards of CABS and African Sun Limited and is also a Director of Gaskets and Cuttings International (Private) Limited, Willsgrove Ware Pottery (Private) Limited and Rubber Products Manufacturers (Private) Limited. He holds a Bachelor of Technology degree in Accounting from the University of Zimbabwe and is a certified Business Excellence Assessor with The South African Excellence Foundation. Patrick was appointed to the position of Group Chief Executive for AICO with effect from 1 January 2010. Pat is the former Group Chief Executive of Seed Co Limited, a subsidiary of AICO. Prior to that he was Managing Director of Tobacco Sales Floor Limited. He brings with him a wealth of experience in management, strategy and business development and is well positioned to lead the Group into the future. He is a holder of an MBA from the University of Cape Town. Innocent was appointed to the Board on 1 January 2011, and is a partner with Atherstone & Cook Legal Practitioners. He holds a Bachelor of Laws (Honours) degree from the University of Zimbabwe and has over 15 years of commercial law experience. Innocent also sits on various company boards. Catherine was appointed to the Board on 15 August 2008, and is a partner with Atherstone & Cook (Incorporating Wickwar & Chitiyo) Legal Practitioners. Prior to this appointment, she was a Cottco Board member since 1 December 2002. She holds a Bachelor of Laws (Honours) degree from the University of Zimbabwe and has several years of commercial law experience. Catherine also sits on various company boards. Albert was appointed to the Board on 15 August 2008. Prior to this appointment, Albert was a Cottco Board member since June 2007. He has vast experience in business and is the Group Chief Executive of Mike Appel Organisation (Private) Limited. He sits on the boards of Nestle’ Zimbabwe (Private) Limited, RioZim Limited, Beta Holdings (Private) Limited, and is the Chairman of The Cotton Company of Zimbabwe Limited. Bekithemba Nkomo (Non-Executive Director) Patrick Devenish (Group Chief Executive) Catherine Chitiyo (Non-Executive Director) Albert Nhau (Non-Executive Director) Innocent Chagonda (Non-Executive Director) 8 AICO Africa Limited 2013 BOARD OF DIRECTORS
  • 9. Bernard was appointed to the post of Group Finance Director on 15 August 2008. Prior to this he was the Finance Director for Cottco since 1 September 2005. He is a fellow of the Chartered Institute of Management Accountants and holds an MBA from Nottingham Trent University, United Kingdom. Prior to his appointment, he exercised his skills in finance, business and strategy development as a consultant. Bernard is a former Finance Director of Zimboard Products (Private) Limited and has worked for several blue chip companies and groups of companies in Zimbabwe, including Carnaudmetalbox, Unilever (then Lever Brothers), Innscor Africa Limited and PG Industries Zimbabwe Limited. Bernard also sits on the boards of Seed Co Limited and Olivine Holdings (Private) Limited. Pious was appointed the Group Company Secretary on 15 August 2008. He joined the Group in August 2005 after holding various positions in finance and administration for 15 years. He holds a Bachelor of Accountancy (Honours) degree from the University of Zimbabwe, a Masters in Business Administration degree from Midlands State University and is a Chartered Secretary. Lawrence has been involved in cotton merchandising for more than 57 years and is currently the president of Lawrence Preston Associates, a commodity brokerage and advisory group. Lawrence has considerable experience in international trading, having served as president of the Liverpool Cotton Association in 1976 and the American Cotton Shippers Association in 1991/2. He also served as Chairman of the Committee for International Cooperation between Cotton Associations (C.I.C.C.A) from 1978 to 1980. He was appointed to the Board on 15 August 2008. Prior to this appointment he was a Cottco Board member since October 2000. Farai is a Zimbabwean entrepreneur with significant investments in various sectors of the economy including financial services, hospitality, manufacturing, property development and mining. Farai is a chartered accountant by profession having served his articles of clerkship with Ernst & Young. He is the founder member of Interfin Holdings Limited incorporating banking, insurance and stockbroking businesses. He is currently a shareholder and a Director of several listed and unlisted companies. Patrick matriculated at Michaelhouse, Natal. He was articled and obtained CA (SA) and CA (Z) qualifications. Pat was a partner in a firm of Chartered Accountants before joining the corporate world as Financial Director and later Chief Executive Officer of Delta Corporation Limited, where he spent a total of 34 years. A Director of Barclays Bank of Zimbabwe Limited for 7 years, Pat took a career change on leaving Delta Corporation Limited and now runs an office that oversees five (5) operating companies. Bernard Mudzimuirema (Group Finance Director) Pious Manamike (Company Secretary) Lawrence Preston (Non-Executive Director) Farai Rwodzi (Non-Executive Director) Patrick Rooney (Non-Executive Director) 9 AICO Africa Limited 2013 BOARD OF DIRECTORS
  • 10. Subsidiaries Joint Operations Olivine Holdings (Private) Limited K Katsande - Chairman P St L Devenish - Deputy Chairman J Mushangari - Managing Director* CC Chitiyo (Ms) S Mavende* S Mazhandu CB Mudzimuirema E Mugamu AFNhau M Ndudzo The Cotton Company of Zimbabwe Limited AF Nhau - Chairman D Machingaidze - Managing Director* CC Chitiyo (Ms) P St L Devenish F Kembo CB Mudzimuirema L Preston Seed Co Limited BL Nkomo - Chairman M Nzwere - Group Chief Executive* P St L Devenish D Garwe (Dr) C Kabaghe DEB Long J Matorofa* CB Mudzimuirema MS Ndoro JP Rooney CMB Utete (Dr) Exhort Enterprises (Private) Limited P St L Devenish - Chairman CB Mudzimuirema Zambrano Investments (Private) Limited P St L Devenish - Chairman CB Mudzimuirema * Executive Director 10 AICO Africa Limited 2013 GROUP COMPANIES’ BOARD COMPOSITION
  • 11. Audit Committee CC Chitiyo (Ms) - Chairperson I Chagonda CB Mudzimuirema AF Nhau JP Rooney Remuneration Committee BL Nkomo - Chairman CC Chitiyo (Ms) P St L Devenish Investment Committee AF Nhau - Chairman I Chagonda CC Chitiyo (Ms) P St L Devenish CB Mudzimuirema JP Rooney AICO Africa Limited P St L Devenish - Group Chief Executive CB Mudzimuirema - Group Finance Director P Manamike - Group Company Secretary A Nyakonda - Group Audit Manager The Cotton Company of Zimbabwe Limited D Machingaidze - Managing Director D Rambanepasi - Head of Finanace Seed Co Group M Nzwere - Group Chief Executive J Matorofa - Group Finance Director G Bwanali - Managing Director, Seed Co Zambia D Clements - Managing Director, Seed Co Tanzania E Mhandu - Managing Director, Quton Seed Company D Phiri - Managing Director, Seed Co Malawi D Zaranyika - Managing Director, Seed Co Zimbabwe Olivine Holdings (Private) Limited J Mushangari - Managing Director S Mavende - Finance Director S Madondo - Supply Chain Director F Mtangadura - Marketing and Sales Director V Nkomo - Human Resources Director C Murove - Operations Director Board Committees Group Management 11 AICO Africa Limited 2013 BOARD COMMITTEES AND GROUP MANAGEMENT
  • 12. 12 AICO Africa Limited 2013 CORPORATE GOVERNANCE STATEMENT The Group is committed to the principles of ethics, transparency, responsibility, integrity and accountability in dealings with its stakeholders. The primary objective of corporate governance systems is to ensure that Directors, Executives and Management carry out their responsibilities effectively and efficiently. The Group's structures are, therefore, continuously reviewed and updated to ensure compliance with applicable laws and generally accepted corporate governance practices. FINANCIAL STATEMENTS The Directors recognise that they are responsible for 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. The annual financial statements have been independently examined by the Company's external auditors. Their report is presented on page 22. INTERNAL CONTROL The Group has developed and continues to maintain and develop systems of internal control. These controls 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. The internal auditors have been tasked to ensure compliance with policies, procedures and internal controls and systems through continuous programmes that are designed to cover all risks and provide regular feedback to executive management and the Audit Committee. The internal audit function has free and unrestricted access to the Audit Committee. BOARD OF DIRECTORS All companies in the Group have unitary board structures. The boards meet regularly, retaining full and effective control over the respective companies and monitor the performance of executive management. To ensure unity of objectives and proper co-ordination, the Company elects management representatives to sit on the various boards. Each board is responsible for maintaining the direction and control of its company through: • Setting and playing a prominent role in strategic development as well as determining the strategic direction of the Company and/or the Group; • Determining performance targets and the remuneration of Executive Management; • Monitoring management performance against targets; • Liaising with internal and external auditors on the financial and business affairs of the Company; • Reviewing, deciding and acting on material business transactions and/or matters; and • Promoting ethical conduct in business affairs of the Group. The composition of each board ensures a well balanced team with a broad range of business and industry expertise. The Board of AICO Africa Limited comprises seven non- executive Directors and two executive Directors. The Chairman of the Board is a non-executive director. All Directors have access to outside professional advice through the Company Secretary who is responsible to the Board for ensuring that correct procedures are followed. The Group Chief Executive is responsible for the day-to-day management of the Company. There is clear separation of responsibility between the Board and Management. ATTENDANCE OF BOARD MEETINGS The Board met five times during the year under review. The number of Directors' meetings and the number attended by each Director during the period are: Held Attended BL Nkomo (Chair) 5 5 I Chagonda 5 4 CC Chitiyo 5 4 P St L Devenish 5 5 CB Mudzimuirema 5 5 AF Nhau 5 5 LF Preston 5 4 JP Rooney 5 4 F Rwodzi 5 0 Board meetings are held at least once every quarter. BOARD COMMITTEES The Board has established committees to assist in discharging its duties as follows: • Audit Committee; • Remuneration Committee; • Investment Committee; and • Executive Committee. Audit Committee The Audit Committee, which includes two executive Directors, consists of four non-executive Directors and is chaired by one of the non-executive Directors. The Audit Committee is responsible for: • Internal and external audit policy; • Reviewing the performance of external auditors; • Reviewing the scope, adequacy and effectiveness of the internal audit function; • Reviewing and acting on matters relating to financial and internal control, fraud, regulatory compliance, accounting policies, financial reporting and disclosure; • Reviewing financial statements prior to publication and adoption by the Board of Directors; • Reviewing material financial transactions and projects prior to adoption by the Board of Directors; and • Reviewing business risks and the adequacy of the Company's risk management systems and processes.
  • 13. 13 AICO Africa Limited 2013 CORPORATE GOVERNANCE STATEMENT (Continued) Both the internal audit function and the external auditors have unrestricted access to the Audit Committee and all of their significant findings are brought to the attention of the Audit Committee and the Board. The Audit Committee meets at least once every quarter. The Committee met four times during the year. Members' attendance of these meetings is shown below: Held Attended CC Chitiyo (Chair) 4 4 I Chagonda 4 3 P St L Devenish 4 4 CB Mudzimuirema 4 4 AF Nhau 4 4 JP Rooney 4 3 Remuneration Committee The Remuneration Committee consists of two non-executive Directors, as well as the Group Chief Executive, and is chaired by a non-executive Director. The Committee's tasks are to review, assess and make recommendations to the main Board on the following matters: • The Group’s remuneration policies in general; • Remuneration packages for top management, especially executive Directors; • Incentive schemes including share incentive plans; • Measurement criteria for the performance of executive Directors; and • The development of people and succession planning. The Remuneration Committee met twice during the year. Members' attendance of these meetings is shown below: Held Attended BL Nkomo (Chair) 2 2 CC Chitiyo 2 2 P St L Devenish 2 2 Investment Committee The Investment Committee consists of four non-executive Directors and two executive Directors. The Committee is responsible for: • Providing advice to the Board in establishing policies related to investments and making recommendations thereon to the Board for approval; • Reviewing, approving and recommending to the Board investment transactions that management may consider within the investment guidelines; • Monitoring the management of investment funds; • Evaluating investment performance, taking into account investment policies, guidelines and risk levels; • Monitoring, as required, staff's compliance with guidelines a n d p ro c e s s e s o f t h e i n v e s t m e n t p o l i c y ; a n d • Reviewing annually the continued appropriateness of the investment policy and recommending to the Board any proposed modifications. The Investment Committee meets, largely, on an ad hoc basis. It met five times during the year. Held Attended AF Nhau (Chair) 5 5 CC Chitiyo 5 4 P St L Devenish 5 5 CB Mudzimuirema 5 5 JP Rooney 5 4 I Chagonda 5 3 Executive Committee The Executive Committee consists of the two executive Directors and selected senior executives. The Committee's functions are: • Assisting the Group Chief Executive in managing the Group; • Providing a working link between the Board and senior management; • Ensuring that strategic decisions are effectively implemented; and • Ensuring that management and operations performance are adequately and regularly monitored in-between Board meetings. The Committee meets at least once each month. SHARE DEALINGS BY DIRECTORS, MANAGEMENT AND STAFF The Group's policy concerning dealings in the shares of AICO Africa Limited and its listed subsidiaries, by Directors, Management, Staff and their immediate families, stipulates the periods when they can or cannot deal in its shares. DIRECTORS' INTERESTS The Directors of the Company are required to disclose, in writing, any material interest in any significant contract with the Company that may result in a conflict or potential conflict of interest. No such conflicts were reported during the year. EMPLOYEE RELATIONS The Group has formally constituted works councils in each operating company. These deal with issues that affect the employees directly and provide platforms for: • Productivity improvements; • Information sharing and dissemination; • Enhancing good employer/employee relations; • Consultation and dispute/conflict resolution; and • Collective bargaining.
  • 14. Bekithemba Nkomo ECONOMIC OVERVIEW The macro-economic environment remained stable throughout the year. However, there also appeared to be some signs of stagnation during the year, although GDP growth was estimated at 9% for the year to December 2012. Inflation remained low at 4.2% (December 2012). Annual inflation to March 2013 was estimated at 2.8% while the inflation outlook for the year to December 2013 remains at 5% or lower. The liquidity crunch that the economy has endured over the years persists. The operating environment, therefore, remains problematic particularly in the absence of adequate funding to correct, turn around, expand and/or re-equip/modernise operations. There is an apparent resurgence in tobacco and the mining sector (led by the gold, platinum and diamond subsectors) which should help the country's export earnings. However, this will be eroded by the country's overreliance on imports occasioned by inability of local companies to fully supply and support the local market. On the other hand, unemployment is still a major concern although there is a very apparent and exponential growth in informal sector activity. Properly managed and supported, this could significantly support economic recovery initiatives in the country. In the region, Zambia remains largely stable with growth forecasts of about 7% for 2013. In Kenya, elections that were held earlier in the year have been hailed as credible and a new government is now in place. In Malawi, inflation is high, foreign currency shortages persist while elections are due early next year. In Tanzania, the economy continues to perform strongly with the recent discovery of natural gas set to support and drive its economy in the medium to long term. OPERATIONS The Group's operations performed below expectation during the year under review, due to the 34% decline in Seed business profits and posting of losses in both the Cotton and FMCG businesses, although the FMCG business did improve by 53% over prior year losses. Cotton The Cotton business recorded intake volumes of 150,000 tonnes - a 45% growth over last year, while sales volumes grew 42% as a result. However, international lint prices came down significantly from highs of above 240 US cents per pound last year to around 80 US cents per pound. As a result, revenue fell 20% over prior year despite the increase in sales volumes. Below par inputs scheme recoveries resulted in the raising of US$12.0 million of impairment charges against the income statement. This business posted a loss of US$7.8 million as a result. Improvements in inputs scheme recoveries and on-farm yields remain a focus area as does the elimination of core debt which is costing this business approximately US$6.0 million in finance costs a year. Ongoing cost reduction measures are bearing fruit and will continue into the future. However, these benefits continue to be eroded by the high interest bill (this year: US$16.8 million versus US$18.5 million last year). Seed The Seed business suffered a 12% fall in volumes to 59,406 tonnes, mostly as a result of sales volume shortfalls in Seed Co Zimbabwe. Slow payment of trade receivables by key customers together with high inventory levels resulted in interest charges escalating by 73% to US$7.4 million (last year: US$4.3 million). Consequently, profit for the year fell 34.9% to US$12.6 million. Key focus areas in this business are centred around recovery of sales volumes in Zimbabwe, collection of trade receivables and downward management of inventory levels, together with sustaining growth in new territories. FMCG (49.31% Share) Despite well documented working capital constraints, the FMCG business recorded a 2% increase in volumes. Revenue improved to US$24.4 million (last year: US$19.2 million). Loss for the year of US$2.0 million improved 53% compared to last year's loss of US$4.2 14 AICO Africa Limited 2013 CHAIRMAN’S STATEMENT
  • 15. million, driven by improvements in production throughput and gross margins. Capitalisation of this business, as well as volume and margin growth, remain key priorities. GROUP FINANCIAL PERFORMANCE Group sales volumes rose 18% above last year to reach 213,720 tonnes driven by the 45% improvement in Cotton intake volumes. However, Group revenue of US$263.9 million was 10% lower than last year, largely due to much softer lint prices compared to last year. Aggregate lint prices for the year were 45% lower than prior year. Group gross profit margin rose to 36% (last year: 31%) driven mostly by margin improvements in the FMCG business which recorded an aggregate gross margin of 13% (last year: 1%). Group operating costs of US$73.4 million were 29% higher than last year. Group operating profit of US$24.2 million was 37% lower than last year after accounting for impairment charges of US$19.2 million. Consequently, loss before tax of US$0.5 million fell 103% relative to last year after charging interest costs of US$25.4 million (last year: US$24.4 million). Higher interest charges are due to higher loan facilities necessitated by the need to increase working capital financing to cope with late payment of trade receivables in the Seed business. Similarly, profit after tax fell 114% to US$2.1 million this year with attributable earnings falling 209% from US$6.2 million profit last year to a loss of US$6.7 million this year. EBITDA of US$32.7 million is 31% lower than last year. Shareholders' funds and equity fell by 12% and 9% since March 2012, respectively. Capital expenditure for the year amounted to US$10.9 million (last year: US$17.8 million). Of this amount US$0.8 million and US$9.6 million was spent in the Cotton and Seed businesses, respectively. GROUP RESTRUCTURING The fund raising and group restructuring initiatives announced last year have proved to be protracted. The Company's Board is pursuing these initiatives with some of the discussions and/or negotiations now at a fairly advanced stage. More detailed information will be given in due course. OUTLOOK The Group expects a resurgent performance from the Seed business driven by recovery of sales volumes in Zimbabwe and complemented by growth in the East African business and the establishment of operations in West Africa, although this is still at a prospective stage. Performance in the FMCG business will depend on timely availability of funding. Demand for this company's products is good but consistent and continuous running of the plant to ensure lower unit costs is critical. Cotton business performance will depend on striking a competent balance between intake volumes, inputs scheme recoveries, seed cotton buying prices and the dynamics of global lint prices, as well as procuring a final and lasting resolution to the long outstanding funding issues in this business. Overall, the Group has good prospects for growth in all businesses. However, funding of these businesses, particularly the Cotton and FMCG businesses, is the nexus to realising this potential. DIVIDEND Due to the lower than expected performance by the Group, the Directors have not declared a dividend. ACKNOWLEDGEMENTS I wish to extend my gratitude and appreciation and that of the Board to the Group Chief Executive, his management team and staff across the Group for their dedicated service and contribution. I also want to take this opportunity to thank my colleagues on the Board for their valuable contributions and wise counsel. BL Nkomo CHAIRMAN 26 June 2013 15 AICO Africa Limited 2013 CHAIRMAN’S STATEMENT (Continued)
  • 16. 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 24 to 60, 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 financial statements for the year ended 31 March 2013 have been approved by the Board of Directors and are signed on its behalf by: BL Nkomo P St L Devenish CHAIRMAN GROUP CHIEF EXECUTIVE 26 June 2013 16 AICO Africa Limited 2013 DIRECTORS’ RESPONSIBILTY STATEMENT
  • 17. “Tomorrow belongs to the people who prepare for it today” (unknown)
  • 18. Patrick Devenish OVERVIEW The year ended 31 March 2013 was not a good one for AICO. Cottco had to make a write-off provision of US$12 million due to under recoveries on its inputs programme and this has led to a substantial loss being reported for the year. Olivine, while posting an improved performance, still showed a loss and this position is likely to remain unchanged in the absence of a recapitalisation. Seed Co had reduced profits due to a reduction of sales in Zimbabwe, necessitated primarily by a tightening of credit terms due to the deteriorating liquidity position. The spinning entity Scottco was disposed of during the year albeit at a reduced price while Exhort, the frozen vegetable business, remains held for sale. Politics remains a key factor in AICO's activities. The uncertainty regarding the date of elections in Zimbabwe is inhibiting economic activity and FDI in particular has been affected. In the region, developments have been mostly good with an internationally acceptable outcome of the Kenyan elections, continued progress toward a more stable economy in Malawi and ongoing stability in Tanzania. Zambia is a concern as decisions tending toward reintroduction of exchange controls have unnerved investors. The global economy is in considerably better shape than this time last year. The American economy is growing again, the powers that be have determined that the European crisis is over and the Chinese economy is still growing at a pace acceptable to their government. The weather was on balance a little kinder to AICO companies last year. OPERATIONS REVIEW COTTCO It is very disappointing to have to report a loss in Cottco as management felt that this business had really turned the corner. The write off in inputs recoveries was mainly due to side marketing by farmers, a phenomenon we thought was behind us. The drop in lint prices reported on last year caused huge turmoil in the industry and one of the effects was a very late start to the buying season. This led to a secondary market in seed cotton trading where people like storekeepers and teachers bought from farmers who had to raise cash for school fees and the like. When the new owners of the seed cotton sold to the ginners there was no audit trail to recover the inputs. This resulted in inputs scheme recoveries that were well below expectation and the impairment of US$12 million. Operationally, Cottco is running very efficiently and David Machingaidze and his team are continuously cutting costs and streamlining. SEED CO The ongoing tightening of liquidity and resultant increase in debtors in Zimbabwe meant that Seed Co had to be much more cautious in the extension of credit and this, coupled with a reduction in NGO and Government programmes, led to a reduction in volumes to 2011 levels. Business in the region was close to forecast levels and profitability was improved in nearly all companies. The Malawian factory is now under construction and the finalisation of this project will lead to similar improvements in costs and efficiencies to those experienced in the new Zambian plant. A raft of new facilities has been established in East Africa and we expect significant return from these investments over the coming years. Research has delivered some exciting new varieties over the year and new breeding technologies will lead to a much faster new product development cycle. In spite of the disappointment of reduced profits management is very optimistic about the growth prospects of Seed Co and, under the guidance of Morgan Nzwere, exciting things are expected. 18 AICO Africa Limited 2013 GROUP CHIEF EXECUTIVE’S REPORT
  • 19. OLIVINE Olivine is still wrestling with shortage of working capital, aged and inefficient equipment, utility problems and imported competition. All of these problems can only be fixed by an injection of capital. The soya bean crop in Zimbabwe was considerably larger this year and Olivine was able to capture a meaningful share of this. This allowed the business to produce substantially higher volumes of core products, which improved capacity utilisation and allowed the generation of a more realistic but still below par gross margin. Management, under Jonas Mushangari, have done a great job of keeping the ship sailing and there is strong shared belief that, with the required resources, Olivine can be a great company again. PEOPLE The year to March 2013 was a very difficult year for many businesses in Zimbabwe and it is to the credit of the managers of the three business units that they have survived the year intact and ready to go for the new year. Training and development plans are ongoing and continue to yield benefits. Retention of key people is on course and several individuals have put their hands up and been there when the company needed them. CORPORATE GOVERNANCE Strict adherence to protocols has delivered good results in as far as governance is concerned and we feel that the correct levels of tension are maintained in the relationships between the various arms of management and control. Appreciation is due to our boards of directors and various committees in this regard. OUTLOOK AND STRATEGY AICO has been under cautionary for some time now and it is hoped that the patience of shareholders will soon be rewarded as discussions with interested parties are approaching finality. The Group is now correctly structured into its three operating units and the injection of capital and the acquisition of technical skills will, if it happens, allow AICO to achieve the plans for which it was created. APPRECIATION It remains for me to thank the AICO, Cottco, Seed Co and Olivine management teams for the unwavering commitment and support they have given over this and preceding years. This also applies to our Group and subsidiary Chairmen and Directors whose guidance and counsel are always much appreciated. P St L Devenish GROUP CHIEF EXECUTIVE 26 June 2013 19 AICO Africa Limited 2013 GROUP CHIEF EXECUTIVE’S REPORT (Continued)
  • 20. 20 AICO Africa Limited 2013 DIRECTORS’ REPORT The Directors have pleasure in presenting their report together with the audited financial statements for the year ended 31 March 2013. PRINCIPAL ACTIVITIES AICO Africa Limited (AICO) is a diversified agro-industrial conglomerate with interests in cotton ginning and marketing, fast moving consumer goods and production and marketing of planting seed. The Company was incorporated in July 2008 and was subsequently reverse listed on the Zimbabwe Stock Exchange on 1 September 2008 in place of The Cotton Company of Zimbabwe Limited and thus emerged as the new investment holding entity for the Group. DIRECTORS' RESPONSIBILITY STATEMENT The Directors believe that the financial information that has been presented fairly reflects the underlying performance of the Group and its entities for the years then ended and its financial position as of those dates. SHARE CAPITAL The authorised share capital of the Company is 1,500,000,000 ordinary shares of US$0.01 per share, of which 534,125,676 are issued and fully paid. Movements in the issued share capital for the year were as follows: 31 March 31 March 2013 2012 Number of Number of shares shares Issued share capital as at 1 April 2012 534,125,676 531,289,029 Share options exercised - 2,836,647 Issued share capital as at 31 March 2013 534,125,676 534,125,676 RESERVES The movements in the reserves of the Group are as shown in the statement of changes in equity. DIRECTORS' SHAREHOLDING The details of Directors' shareholding are shown in the shareholder analysis report accompanying the financial statements. IMPAIRMENT The income statement includes impairment losses of US$19.2 million for the Group, US$14.2 million of which was in the Cotton business, while US$3.8 million was in the Seed business. Impairment losses were in respect of trade and other receivables, inventories, inputs scheme receivables as well as property, plant and equipment. OPERATING RESULTS The results for the year are summarised below and are set out in more detail in the accompanying financial statements. Commentary on these results is also provided in the Chairman's and Group Chief Executive's reports. 31 March 31 March 2013 2012 US$'000 US$'000 (Loss)/profit before taxation (537) 18,073 Income tax expense (1,538) (2,716) (Loss)/profit after tax - continuing operations (2,075) 15,357 Loss after tax from discontinued operations (16) (509) (Loss)/profit for the year (2,091) 14,848 Attributable to: Equity holders of the parent (6,711) 6,156 Minority interest 4,620 8,692 (2,091) 14,848 Share capital 5,341 5,341 Capital reserves 21,190 26,515 Retained earnings 46,777 51,695 Equity attributable to equity holders of the parent 73,308 83,551 Non-controlling interest 39,944 41,243 Total equity 113,252 124,794 CAPITAL EXPENDITURE Capital expenditure for the year ended 31 March 2013 amounted to US$10.9 million and capital expenditure for the following year is budgeted at US$16.9 million. DISPOSAL OF INTEREST IN SUBSIDIARY During the year under review, the Company disposed of its entire shareholding in Scottco (Private) Limited for US$7.50, being 75% of the issued ordinary shares in that business. The Company recorded a loss on disposal of US$10,823 in the process. US$3.0 million of the Company's investment in Scottco had been impaired in prior year. This disposal also resulted in a reduction in consolidated Group reserves of US$3.3 million.
  • 21. 21 AICO Africa Limited 2013 DIRECTORS’ REPORT (Continued) DISCONTINUED OPERATIONS The intended sale of the frozen vegetables business, Exhort Enterprises (Private) Limited, and/or its assets has not yielded desired results. There has been a lot of interest but the liquidity challenges appear to have imposed a dearth of capacity to fund the acquisition of this asset. This business was discontinued three years ago and only a minimal cost is required to maintain the property and other assets therein. Loss for the year amounted to US$16,000 being the cost of maintaining the discontinued operation. There was no trading in this business during the year under review and there are no plans to resume operations in the interim. TREASURY The fund raising and Group restructuring initiatives announced last year have proved to be quite protracted. The Company's board is still pursuing these initiatives with some of the discussions and/or negotiations now at a fairly advanced stage. Review of these as well as other options is ongoing and more detailed information will be given in due course. DIVIDENDS Due to the prevailing liquidity challenges and concurrent funding requirements in the Group, the Directors have not declared a dividend. DIRECTORS In terms of Article 32.1 of the Company's Articles of Association, Messrs I Chagonda, JP Rooney and F Rwodzi retire by rotation. The retiring Directors, being eligible, offer themselves for re-election. AUDITORS Members will be asked to approve the remuneration of the auditors for the year ended 31 March 2013 and to consider the reappointment of KPMG as auditors for the ensuing year. For and on behalf of the Board P Manamike COMPANY SECRETARY 26 June 2013
  • 22. AICO Africa Limited 2012 AICO Africa Limited 2011 We have audited the accompanying financial statements of AICO Africa Limited (the Company) and its subsidiaries (the Group), set out on pages 24 to 60, which comprise the statement of financial position at 31 March 2013 and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes. Directors' responsibility for the financial statements The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act (Chapter 24:03) of Zimbabwe, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud and error. Auditor's responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. 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 judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purposes 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 financial statements present fairly, in all material respects, the financial position of the Company and Group at 31 March 2013, and the Company and Group's financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act (Chapter 24:03) of Zimbabwe. Emphasis of matter Without qualifying our opinion, we draw attention to note 30, which indicates that the Group's joint venture, Olivine Holdings (Private) Limited (Olivine), incurred a loss before tax of US$5,795,291 (2012: US$11,798,783 loss) for the year ended 31 March 2013 and has been facing working capital challenges. These conditions, along with other matters as set forth in note 30 to the financial statements, indicate the existence of material uncertainty which may cast significant doubt on Olivine's ability to continue as a going concern. This note also indicates the basis of preparation of Olivine's financial statements. KPMG Chartered Accountants (Zimbabwe) Harare 2 July 2013 KPMG Mutual Gardens 100 The Chase (West), Emerald Hill P O Box 6, Harare Zimbabwe Telephone +263 (4) 303700 +263 (4) 302600 Fax +263 (4) 303699 KPMG, a Zimbabwean partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG international, a Swiss co-operative. INDEPENDENT AUDITOR’S REPORT
  • 23. AICO Africa Limited 201223 “Knowledge is like a garden; if it is not cultivated, it cannot be harvested.”(unknown)
  • 24. 24 AICO Africa Limited Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 Notes Continuing operations Revenue 263,922 293,292 - - Cost of sales (169,539) (203,442) - - Gross profit 94,383 89,850 - - Other operating income 3,246 5,424 19,201 3,520 Operating expenses (73,446) (56,737) (2,518) (9,041) Administration expenses (27,314) (24,498) (2,498) (2,912) Distributing and selling expenses (16,528) (14,339) (9) (88) Other operating expenses (29,604) (17,900) (11) (6,041) Profit/(loss) from operations 1 24,183 38,537 16,683 (5,521) Investment income 2 552 3,147 813 754 Other gains and losses 3 120 752 - - Interest expense (25,392) (24,363) (1,176) (1,889) (Loss)/profit before taxation (537) 18,073 16,320 (6,656) Taxation 4 (1,538) (2,716) 431 1,289 (Loss)/profit after taxation from continuing operations (2,075) 15,357 16,751 (5,367) Loss from discontinued operations 5 (16) (509) - - (Loss)/profit for the year (2,091) 14,848 16,751 (5,367) Attributable to: Equity holders of the parent (6,711) 6,156 16,751 (5,367) Non-controlling interest 4,620 8,692 - - (2,091) 14,848 16,751 (5,367) Basic (loss)/earnings per share (US cents) 6 (1.26) 1.16 3.14 (1.00) Diluted (loss)/earnings per share (US cents) 6 (1.21) 1.11 3.01 (0.98)
  • 25. 25 AICO Africa Limited Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 (Loss)/profit for the period (2,091) 14,848 16,751 (5,367) Other comprehensive income Impairment charge against revaluation reserve - (2,374) - - Revaluation of property, plant and equipment 1,208 (196) - - Exchange differences on translating foreign oparations (7,268) (2,995) - - Losses on available for sale investments - - (32,386) (33,134) Movement in capital reserve - - 4,879 - Income tax on other comprehensive income (311) 662 (3,043) 3,858 Other comprehensive loss for the period (6,371) (4,903) (30,550) (29,276) Total comprehensive (loss)/income for the period (8,462) 9,945 (13,799) (34,643) Total comprehensive (loss)/income attributable to: Equity holders of the parent (9,389) 2,743 (13,799) (34,643) Non-controlling interest 927 7,202 - - (8,462) 9,945 (13,799) (34,643) STATEMENTS OF COMPREHENSIVE INCOME for the year ended 31 March 2013
  • 26. 26 AICO Africa Limited STATEMENTS OF FINANCIAL POSITION as at 31 March 2013 Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 Notes ASSETS Non-current assets Intangible assets 20 25 - - Property, plant and equipment 7 103,321 105,017 167 270 Investment property 8 332 332 - - Other financial assets 17 1,157 268 - - Deferred tax asset 12 - - - 1,970 Investments held in subsidiaries 9 - - 106,282 138,680 Investment held in joint venture 10 - - 12,460 6,825 Other receivables 11 997 - - - Total non-current assets 105,827 105,642 118,909 147,745 Current assets Biological assets 13 620 844 - - Inventories 14 70,343 80,803 - - Inputs scheme receivables 15 10,610 29,197 - - Prepayments for current assets 6,311 7,824 15 12 Trade and other receivables 16 86,332 70,239 116 114 Other financial assets 17 52 13 - - Assets classified as held for sale 26 1,454 5,318 - - Bank and cash balances 18 6,735 12,662 542 294 Balances owed by Group companies 21 - - 6,062 19,958 Total current assets 182,457 206,900 6,735 20,378 Total assets 288,284 312,542 125,644 168,123 EQUITY AND LIABILITIES Capital and reserves Share capital 22 5,341 5,341 5,341 5,341 Capital reserves 22 21,190 26,515 104,544 134,997 Retained earnings/(accumulated losses) 46,777 51,695 9,732 (7,019) Equity attributable to equity holders of the parent 73,308 83,551 119,617 133,319 Non-controlling interest 39,944 41,243 - - Total equity 113,252 124,794 119,617 133,319 Non-current liabilities Borrowings 23 11,805 11,659 - - Deferred tax liabilities 12 14,144 16,313 641 - Finance lease liabilities - third party 25 314 66 - - Total non-current liabilities 26,263 28,038 641 - Current liabilities Borrowings 23 62,595 66,280 3,984 3,753 Trade and other payables 24 30,683 26,309 273 368 Finance lease liabilities - third party 25 985 285 - - Taxation payable 2,461 4,211 40 70 Bank overdrafts 18 51,578 59,716 - - Liabilities classified as held for sale 26 467 2,909 - - Balances owed to Group companies 21 - - 1,089 30,613 Total current liabilities 148,769 159,710 5,386 34,804 Total equity and liabilities 288,284 312,542 125,644 168,123 B Nkomo CHAIRMAN 26 June 2013 P St L Devenish GROUP CHIEF EXECUTIVE 26 June 2013
  • 27. 27 AICO Africa Limited GROUP STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2013 Attributable to equity holders of the parent NON- TOTAL Share Capital Retained Total CONTROLLING EQUITY capital reserves earnings INTEREST US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Balance as at 31 March 2011 5,313 33,049 42,233 80,595 35,957 116,552 Changes in equity for 2012 Share-based payment transactions 28 145 735 908 446 1,354 Acquisition of interest in foreign subsidiary - - 16 16 16 32 Disposal of interest in foreign subsidiary - (1) - (1) (31) (32) Impairment of investment in subsidiary - (3,000) - (3,000) - (3,000) Dividend paid and recieved within the Group - - 2,290 2,290 - 2,290 Dividend paid - - - - (2,347) (2,347) Total comprehensive (loss)/income for the year (net of tax) - (3,678) 6,421 2,743 7,202 9,945 Net movement for the year 28 (6,534) 9,462 2,956 5,286 8,242 Balance as at 31 March 2012 5,341 26,515 51,695 83,551 41,243 124,794 Changes in equity for 2013 Share-based payment transactions - 97 - 97 86 183 Acquisition of interest in foreign subsidiary - (45) (50) (95) 95 - Disposal of interest in local subsidiary - (2,454) - (2,454) (822) (3,276) Dividend paid and recieved within the Group - - 1,598 1,598 - 1,598 Dividend paid - - - - (1,585) (1,585) Total comprehensive (loss)/income for the year (net of tax) - (2,923) (6,466) (9,389) 927 (8,462) Net movement for the year - (5,325) (4,918) (10,243) (1,299) (11,542) Balance as at 31 March 2013 5,341 21,190 46,777 73,308 39,944 113,252
  • 28. 28 AICO Africa Limited Share Capital Retained Total capital reserves earnings equity US$'000 US$'000 US$'000 US$'000 Balance as at 31 March 2011 5,313 164,128 (1,652) 167,789 Changes in equity for 2012 Share-based payment transactions 28 145 - 173 Total comprehensive loss for the year (net of tax) - (29,276) (5,367) (34,643) Net movement for the year 28 (29,131) (5,367) (34,470) Balance as at 31 March 2012 5,341 134,997 (7,019) 133,319 Changes in equity for 2013 Share-based payment transactions - 97 - 97 Total comprehensive (loss)/income for the year (net of tax) - (30,550) 16,751 (13,799) Net movement for the year - (30,453) 16,751 (13,702) Balance as at 31 March 2013 5,341 104,544 9,732 119,617 COMPANY STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2013
  • 29. 29 AICO Africa Limited STATEMENTS OF CASH FLOWS for the year ended 31 March 2013 Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 Notes Cash flows from operating activities Operating cash flows before reinvesting in working capital 19 31,277 48,535 (1,165) (794) Working capital movements 20 17,860 (47,001) (16,909) (6,109) Interest paid (24,090) (22,942) - - Net taxation paid (5,433) (5,990) - (20) Net cash generated from/(utilised in) operations 19,614 (27,398) (18,074) (6,923) Cash flows from investing activities Interest received 297 2,551 - - Dividend received - 1 18,143 2,290 Proceeds from disposal of property, plant and equipment 130 628 - - Proceeds from sale of investments 175 2,128 - - Acquisition of property, plant and equipment (10,931) (17,822) (53) (8) Acquisition of other investments (953) 358 - - Net cash (outflow)/inflow from investing activities (11,282) (12,156) 18,090 2,282 Cash flows from financing activities Proceeds from issue of share options 22 568 - 423 Net third party borrowings (paid)/raised (3,652) 17,386 232 3,753 Increase in finance lease liabilities (205) (487) - - Dividends paid (1,585) (2,347) - - Net cash (outflow)/inflow from financing activities (5,420) 15,120 232 4,176 Net increase/(decrease) in cash and cash equivalents 2,912 (24,434) 248 (465) Cash and cash equivalents Balance at the beginning of the year (47,054) (22,620) 294 759 Effect of exchange rate fluctuations on cash held (701) - - - Cash and cash equivalents at the end of the year 18 (44,843) (47,054) 542 294
  • 30. GROUP PRIMARY SEGMENT REPORTS for the year ended 31 March 2013 Business segment Discontinued ContinuingCotton FMCG Seed Spinning Other Total Consolidation Total operations operationsbusiness business business business eliminations US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 31 March 2013 Continuing operations Revenue 138,009 24,362 110,642 - - 273,013 (9,091) 263,922 - 263,922 Profit/(loss) from operations 7,828 (984) 19,283 - 16,760 42,887 (18,724) 24,163 20 24,183 Investment income 1,379 61 217 - 814 2,471 (1,919) 552 - 552 Other gains/(losses) 18 (66) 381 - (215) 118 - 118 2 120 Interest expense (16,832) (1,873) (7,418) - (1,176) (27,299) 1,907 (25,392) - (25,392) Income tax expense (171) 880 (2,912) - 431 (1,772) 240 (1,532) (6) (1,538) (Loss)/profit for the year (7,778) (1,982) 9,551 - 16,614 16,405 (18,496) (2,091) 16 (2,075) Other information Segment assets 109,051 24,380 157,449 - 126,402 417,282 (128,998) 288,284 (1,387) 286,897 Segment liabilities (86,580) (13,952) (76,486) - (7,825) (184,843) 9,811 (175,032) 467 (174,565) Segment net assets 22,471 10,428 80,963 - 118,577 232,439 (119,187) 113,252 (920) 112,332 Capital expenditure 824 403 9,651 - 53 10,931 - 10,931 - 10,931 Depreciation 3,532 1,083 3,605 - 156 8,376 - 8,376 - 8,376 30 AICO Africa Limited
  • 31. GROUP PRIMARY SEGMENT REPORTS for the year ended 31 March 2013 Business segment Discontinued Continuing Cotton FMCG Seed Spinning Other Total Consolidation Total operations operations business business business business eliminations US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 31 March 2012 Continuing operations Revenue 170,904 19,238 117,708 4,463 - 312,313 (14,558) 297,755 (4,463) 293,292 Profit/(loss) from operations 19,212 (1,526) 27,029 (2,469) (5,529) 36,717 1,343 38,060 477 38,537 Investment income 4,096 57 891 4 754 5,802 (2,651) 3,151 (4) 3,147 Other gains/(losses) 1,267 (2) (175) (4) (340) 746 - 746 6 752 Interest expense (18,519) (2,316) (4,289) (633) (1,889) (27,646) 2,651 (24,995) 632 (24,363) Income tax expense (1,106) 1,691 (4,371) 485 1,318 (1,983) (131) (2,114) (602) (2,716) Profit/(loss) for the year 4,950 (2,096) 19,085 (2,617) (5,686) 13,636 1,212 14,848 509 15,357 Other information Segment assets 156,537 24,139 156,940 3,837 167,126 508,579 (196,037) 312,542 (5,190) 307,352 Segment liabilities (104,865) (18,527) (75,022) (2,785) (34,124) (235,323) 47,575 (187,748) 2,909 (184,839) Segment net assets 51,672 5,612 81,918 1,052 133,002 273,256 (148,462) 124,794 (2,281) 122,513 Capital expenditure 7,414 594 9,802 4 8 17,822 - 17,822 - 17,822 Depreciation 3,249 1,719 2,970 216 179 8,333 - 8,333 - 8,333 31 AICO Africa Limited
  • 32. 32 AICO Africa Limited GROUP SECONDARY SEGMENT REPORTS for the year ended 31 March 2013 Geographical segment Discontinued Continuing Rest of Europe operations operations Zimbabwe Africa and Asia Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 31 March 2013 Revenue from external customers 93,436 76,831 93,655 263,922 - 263,922 Segment assets 217,239 71,045 - 288,284 (1,387) 286,897 Capital expenditure 4,668 6,263 - 10,931 - 10,931 31 March 2012 Revenue from external customers 98,710 96,984 102,061 297,755 (4,463) 293,292 Segment assets 283,640 28,902 - 312,542 (5,190) 307,352 Capital expenditure 9,063 8,759 - 17,822 - 17,822 Composition of geographical segments Segment Operating companies Products and services Zimbabwe AICO Africa Limited Investment company The Cotton Company of Zimbabwe Limited Ginning of seed cotton and selling of lint and by-products of the ginning process Seed Co Limited Development, production and selling of broad acre crop seeds Quton Seed Company (Private) Limited Development, production and selling of cotton seeds Exhort Enterprises (Private) Limited Manufacturing and selling of fast moving consumer goods Olivine Industries (Private) Limited Manufacturing and selling of fast moving consumer goods Zambrano Investments (Private) Limited Investment company Rest of Africa Cottco International (Proprietary) Limited Investment company Seed Co International and subsidiaries Development, production and selling of broad acre crop seeds Europe and Asia None None Sales for segments outside Zimbabwe are made by all Group companies and are not limited to companies operating outside the Zimbabwe geographical segment. Basis of pricing inter-segment sales Inter-segment transfers, segment revenue, segment expenses and segment results include transfers between business segments and geographical segments. Such transfers are accounted for at market prices charged to unaffiliated customers for similar goods and services. Those transfers are eliminated on consolidation.
  • 33. “Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence.”(Helen Keller)
  • 34. ACCOUNTING POLICIES 34 AICO Africa Limited 1. REPORTING ENTITY AICO Africa Limited (the “Company” or “AICO”) is a limited liability company incorporated in Zimbabwe and is listed on the Zimbabwe Stock Exchange. The consolidated financial statements of the Company as at, and for the year ended, 31 March 2013 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”), and the Group's interest in a jointly controlled entity. The principal activities of the Group are: the buying and ginning of seed cotton, the marketing of cotton lint and ginned seed, the production and selling of crop planting seeds, the production and selling of fast moving consumer goods (“FMCGs”), the procurement and selling of crop inputs. 2. BASIS OF PREPARATION The basis of preparation for the financial statements is International Financial Reporting Standards. (a) Statement of compliance The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations. The financial statements were approved by the Board of Directors on 26 June 2013. (b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for the following: • property, plant and equipment held at valuation; • financial instruments at fair value through profit or loss are measured at fair value; • available-for-sale financial assets are measured at fair value; • biological assets are measured at fair value less estimated costs to sell; and • investment property is measured at fair value. The methods used to measure fair value are discussed further in notes 7, 8, 9,10 and 13. (c) Functional and presentation currency These consolidated financial statements are presented in United States dollars (US dollars), which is the Group's functional currency. All financial information presented in US dollars has been rounded to the nearest thousand. (d) Use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about significant areas of estimation uncertainty and critical judgement in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes: Note 1.1 Cost of sales Note 7 Property, plant and equipment Note 8 Investment property Note 9 Investments held in subsidiaries Note 10 Investment held in joint venture Note 13 Biological assets Note 29.4 Share-based payments 3. SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies set out below have been applied consistently by all entities within the Group. The accounting policies adopted by the Group are consistent with those used in the preparation of prior year consolidated financial statements.
  • 35. (a) Basis of consolidation Subsidiaries Subsidiaries are those entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are presently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries are in line with those of the Group. Acquisitions from entities under common control Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the date that common control was established. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group's consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity. Associates Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity. Associates are accounted for using the equity method (equity accounted investee's) and are recognised initially at cost. The consolidated financial statements include the Group's share of the income and expenses and equity movements of equity accounted investee's, after adjustments to align accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group's share of losses exceeds its interest in an equity accounted for investee, the carrying amount of that interest is reduced to nil, and the recognition of losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. 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 venturer 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 combinations (see below). Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised gains and losses or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. b) Adoption of new and revised reporting standards At the date of authorisation of the financial statements of AICO Africa Limited for the year ended 31 March 2013, the following standards and interpretations were in issue but not yet effective: Standard/Interpretation Subject Effective date IAS 1 amendment Presentation of Financial Statements: Presentation of Items Annual periods beginning on or after of Other Comprehensive Income 1 July 2012 35 AICO Africa Limited ACCOUNTING POLICIES IAS 27 Separate Financial Statements (2011) Annual periods beginning on or after 1 January 2013 IAS 19 amendments Employee Benefits: Defined Benefit Plans Annual periods beginning on or after 1 January 2013 IFRS 10, IFRS 11 and Consolidated Financial Statements, Joint Arrangements and Annual periods beginning on or after IFRS 12 amendment Disclosure of Interests in Other Entities: Transition Guidance 1 January 2013 IFRS 13 Fair Value Measurement Annual periods beginning on or after 1 January 2013 IFRS 12 Disclosure of Interests in Other Entities Annual periods beginning on or after 1 January 2013 IFRS 11 Joint Arrangements Annual periods beginning on or after 1 January 2013 IFRS 10 Consolidated Financial Statements Annual periods beginning on or after 1 January 2013
  • 36. Standard/Interpretation Subject Effective date IAS 28 Investments in Associates and Joint Ventures (2011) Annual periods beginning on or after 1 January 2013 36 AICO Africa Limited ACCOUNTING POLICIES c) Property, plant and equipment Property, plant and equipment is measured at cost or valuation less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labour and any other costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Items of property, plant and equipment are revalued at least once every five years, or earlier if it becomes apparent that their carrying amount has declined below their recoverable amount to a material extent. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The cost of the day-to-day servicing of property, plant and equipment is recognised in profit or loss when incurred. Depreciation is recognised in profit or loss on a straight line basis over the useful life of each item of property, plant and equipment as follows: Buildings 15 - 50 years Plant and machinery 20 - 40 years Mobile equipment 5 - 50 years Motor vehicles 5 - 5 years Office and depot equipment 5 - 10 years Land and capital work in progress are not depreciated. Depreciation methods, useful lives and residual values of items of property, plant and equipment are reassessed at each reporting date. Depreciation is not charged when the carrying amount of an item of property, plant and equipment becomes equal to or less than the residual value. All applicable standards and interpretations will be adopted at their effective dates. IFRS 9 (2010) Financial Instruments Annual periods beginning on or after 1 January 2015 IFRS 9 (2009) Financial Instruments Annual periods beginning on or after 1 January 2015 IFRS 10, IFRS 12 and Investment Entities Annual periods beginning on or after IAS 27 amendment 1 January 2014 IAS 32 Offsetting Financial Assets and Financial Liabilities Annual periods beginning on or after 1 January 2014 7 individual amendments Improvements to International Annual periods beginning on or after to 5 standards Financial Reporting Standards (2012) 1 January 2013 IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine Annual periods beginning on or after 1 January 2013 IFRS 7 amendment Disclosures - Offsetting Financial Assets and Financial Annual periods beginning on or after Liabilities 1 January 2013 IFRS 1 amendment Government Loans Annual periods beginning on or after 1 January 2013
  • 37. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 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. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. f) Investment property Investment property, which is property held for capital appreciation, 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. g) Biological assets Biological assets are measured at fair value less costs to sell, with any change therein recognised in profit or loss. Costs to sell include all costs that would be necessary to sell the assets. In cases where, upon initial recognition of a biological asset, the fair value of such asset is not available and alternative estimates of fair value are determined to be unreliable, then such a biological asset is measured at cost less accumulated depreciation and accumulated impairment losses. Thereafter, once the fair value of such biological asset becomes reliably measurable, it is subsequently measured at fair value less costs to sell. 37 AICO Africa Limited ACCOUNTING POLICIES d) Research and development costs Research and development costs are recognised in profit or loss in the period in which they are incurred. e) Impairment Financial assets A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of financial assets other than those at amortised cost is calculated as the difference between its carrying amount and its current fair value. Significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For available for sale financial assets that are equity securities, the reversal is recognised directly in equity. For other financial assets the reversal is recognised in profit or loss. Non-financial assets The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset's recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated at each reporting date.
  • 38. 38 AICO Africa Limited ACCOUNTING POLICIES h) Inventories and stores Inventories are measured at the lower of cost and net realisable value. Cost is determined on the following bases: Inventory category Basis of valuation Seed cotton Actual weighted average cost. Packaging, stores and consumables At weighted average cost. Lint and ginned seed The proportion that the realised value of each product bears to the weighted average costs of the seed cotton, ginning and other direct production costs. Planting seed Actual seed cost, other direct material costs and processing related costs. Linters and delinted seed The proportion that the realised sales value of each product bears to the weighted average costs of the ginned seed and other direct mechanical delinting costs. FMCG's Actual weighted average cost. i) Foreign currencies Foreign currency transactions Foreign currency transactions (which are currencies other than the functional currency), on initial recognition, are translated at the exchange rates ruling on the date of the transaction. Subsequent to that, all foreign currency denominated financial assets and liabilities are translated at each balance sheet date, using the exchange rates ruling at that date. Accordingly, foreign currency denominated income and expenses are recorded at exchange rates ruling on the date of the transaction. Exchange differences are recognised in profit or loss in the period in which they arise. Translation of foreign operations Assets, liabilities, income and expenses of foreign operations, are translated into US dollars at exchange rates ruling at the reporting date. The income and expenses of foreign operations, excluding operations in hyperinflationary economies, are translated to US dollars at exchange rates ruling on the date of the transaction. Foreign currency differences arising from translation of foreign operations are recognised directly in equity as a non-distributable foreign currency translation reserve (FCTR). When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit or loss. j) Financial instruments The Group's financial instruments are classified into the following categories: fair value through profit or loss (FVTPL), held-to-maturity, and loans and receivables. Classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. The Group does not hold or issue derivative financial instruments. Financial assets - recognition and measurement Financial assets are recognised initially at fair value, when the Group has rights or other access to economic benefits. Subsequent to initial recognition, these instruments are measured as set out below: Financial assets at fair value through profit or loss (FVTPL) A financial asset is classified as at FVTPL where it is held for trading. A financial asset is classified as held for trading if: it has been acquired principally for the purpose of selling in the near future; or it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short term profit taking. Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Financial assets at FVTPL consist of listed securities. The fair value is determined with reference to market prices.
  • 39. Loans and receivables Trade receivables, inputs scheme receivables, loans and other receivables are measured at fair value on initial recognition, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Held-to-maturity debt securities At subsequent reporting dates, debt securities for which the Group has expressed the intention and ability to hold to maturity (held- to-maturity debt securities) are measured at amortised cost using the effective interest rate method, less any impairment losses. An impairment loss is recognised in the profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the investment's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods when an increase in the investment's recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised. Cash and cash equivalents Cash and cash equivalents comprises cash balances, call deposits and investments in money market instruments. The carrying amount of cash and cash equivalents approximates their fair value. Any gain or loss arising from marking to market is recognised in profit or loss. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management strategy are included as a component of cash and cash equivalents. Financial liabilities - recognition and measurement Financial liabilities are recognised when there is an obligation to transfer benefits and that obligation is a contractual liability to deliver cash or another financial asset or to exchange financial instruments with another entity on potentially unfavourable terms. Where these criteria no longer apply, a financial liability is no longer recognised. Financial liabilities are recognised, initially, at fair value. Subsequent to initial recognition, these instruments are measured as set out below: Borrowings Borrowings are recorded at amortised cost and less any payments made. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. Capitalisation of borrowing costs ceases when substantially all activities necessary to prepare the qualifying asset for its intended use or sale are complete. Trade and other payables Trade and other payables are stated at cost adjusted for payments made to reflect the value of the anticipated economic outflow of resources. Offset If a legally enforceable right exists to set-off recognised amounts of financial assets and liabilities, which are in determinable monetary amounts and the Group intends to settle on a net basis, the relevant financial assets and liabilities are offset. k) Prepayments Prepayments are stated at cost. Cost is determined by reference to the actual amount paid. l) Leases Leased assets Leases in terms of which the Group assumes substantially all risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and, except for investment property, the leased assets are not recognised in the Group's statement of financial position. Investment property held under an operating lease is recognised in the Group's statement of financial position at its fair value. 39 AICO Africa Limited ACCOUNTING POLICIES
  • 40. Lease payments Payments made under the operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. Determining whether an arrangement contains a lease At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset. At inception or upon reassessment of the arrangement, the Group separates payments and other considerations required by such an arrangement into those for the lease and those for the other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently, the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Group's incremental borrowing rate. m) Provisions A provision is recognised in the statement of financial position when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risk specific to the liability. n) Taxation Income tax Income tax comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity. Current tax Current tax is the expected tax payable on the taxable income for the year, using rates enacted or substantially enacted at the reporting date and any adjustments to tax payable in respect of previous years. Deferred tax Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not provided for on the initial recognition of assets or liabilities that affect neither accounting nor taxable profit or loss. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the unused tax losses and credits can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. o) Employee benefits Pensions Pensions are provided for employees through pension funds to which both the Group and its employees contribute. The schemes include both the Group schemes and the national social security schemes of the respective countries in which the Group entities operate. The pension fund is a defined contribution plan. Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss as they are incurred. Equity compensation benefits The fair value of any options granted to employees of the Group is determined at the grant date using the Black-Scholes-Merton valuation model. The fair value of share options granted to employees is recognised as an expense with a corresponding increase in equity over the period in which the options are expected to vest. The amount recognised as an expense is adjusted to reflect the number of options expected to vest. 40 AICO Africa Limited ACCOUNTING POLICIES
  • 41. Termination Termination benefits for employees are recognised as a liability and an expense in profit or loss when the Group has a demonstrable commitment to either terminate the employment of an employee or group of employees before the normal retirement date, or provide termination benefits as a result of an offer made in respect of voluntary redundancy. The amount recognised as termination benefits is determined by reference the the actual amount to be paid if this is payable within 12 months of the reporting date. Where these benefits are payable more than 12 months after reporting date, they are measured at amortised cost. p) Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Group's primary format for segment reporting is based on the Group's business segments. q) Revenue Revenue from the sale of goods is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer and is measured at the fair value of the consideration received or receivable. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, measurement of the associated costs incurred to earn the revenue or the possible return of the goods. r) Intangible assets Goodwill Goodwill is stated at cost less any accumulated impairment losses. Goodwill arising on business combinations represents the excess of the cost of acquisition over the fair value of the net identifiable assets acquired. The excess of the fair value of assets acquired over the purchase consideration is recognised directly in profit or loss on recognition. Goodwill is tested for impairment on an annual basis. Business combinations involving entities under the common control of the Group do not give rise to goodwill in the consolidated financial statements. Instead, surpluses or deficits arising between the fair value of assets acquired and the purchase consideration are recognised directly in equity as a non-distributable reserve. s) Earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees. 41 AICO Africa Limited ACCOUNTING POLICIES
  • 42. 42 AICO Africa Limited Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 1 Profit/(loss) from operations Profit/(loss) from operations is stated after charging: 1.1 Cost of sales 169,539 203,442 - - Inventories consumed 129,018 162,961 - - Other 40,521 40,481 - - 1.2 Other costs Staff costs 30,112 32,277 - - Depreciation of property, plant and equipment 8,376 8,333 156 179 Impairment losses 19,203 5,467 - 6,042 Property, plant and equipment 687 654 - - Trade and other receivables 3,566 3,049 - - Inputs scheme receivables 12,111 1,764 - - Impairment of intercompany balances - - - 6,042 Inventory 2,803 - - - Other 36 - - - Remuneration of directors 942 912 304 270 Fees 727 645 205 171 Other 215 267 99 99 Auditors' remuneration 719 565 15 14 2 Investment income Interest revenue - third party 552 3,147 813 754 Dividends received - - - - Total 552 3,147 813 754 Interest received - third party Bank deposits 502 954 813 754 Other loans and recievables 50 2,191 - - Held-to-maturity investments - 2 - - Total 552 3,147 813 754 Investment income earned on financial assets analysed by category Loans and receivables including bank and cash balances 491 3,145 813 754 Held-to-maturity investments - 2 - - Investment income earned on non-financial assets 61 - - - Total 552 3,147 813 754 NOTES TO THE FINANCIAL STATEMENTS
  • 43. 43 AICO Africa Limited Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 3 Other gains and losses Loss on disposal of property, plant and equipment 35 3 - - Gains on disposal of investments 1 - - - Foreign exchange losses - (48) - - Foreign exchange gains 211 1,052 - - Changes in fair value of financial assets and liabilities (127) (161) - - Changes in fair value of investment property - (94) - - Total 120 752 - - Changes in fair value of financial assets and liabilities Change in fair value of financial assets designated at FVTPL 7 (176) - - Realised gains on financial assets 89 15 - - Total 96 (161) - - 4 Taxation 4.1 Charge/(credit) based on (loss)/profit for the year Current income tax 3,341 6,678 - - Deferred income tax (note 12) (2,173) (4,144) (431) (1,315) Residents' tax on interest 370 185 - 26 Capital gains tax - (3) - - Net tax charge/(credit) 1,538 2,716 (431) (1,289) 4.2 Reconciliation of tax charged/(credited) to (loss)/profit Standard tax on (loss)/profit 5,972 4,218 4,202 (1,714) Effect of: - Revenue that is exempt from tax (976) (2,023) - - - Revenue that is taxed at special rates 95 222 - - - Expenses that are not deductable in determining taxable profit 1,454 652 - - - Unused tax losses and tax offsets not recognised as tax assets (4,701) 340 (4,633) 425 - Subsidiaries taxed at non-standard rates of tax (71) (486) - - - Recognition of previously unrecognised deferred tax losses (235) (207) - - Total tax charge/(credit) 1,538 2,716 (431) (1,289) Standard rate of tax 25.75% 25.75% 25.75% 25.75% Effective income tax rate 286.41% 15.03% 2.65% 19.37% NOTES TO THE FINANCIAL STATEMENTS
  • 44. 44 AICO Africa Limited NOTES TO THE FINANCIAL STATEMENTS 5 Discontinued operations In compliance with the requirements of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the assets and liabilities of the discontinued operations amounting to US$1.5 million and US$0.5 million, respectively, have been included in the Group Statement of Financial Position as 'assets classified as held for sale', and as 'liabilities classified as held for sale'. During the year, discontinued operations recorded a loss of US$16,089 which has been included in the Group Income Statement as 'loss from discontinued operations'. The analysis of the performance of the discontinued operations is shown below. Exhort Total Enterprises Scottco Salamax Discontinued (Pvt) Limited (Pvt) Limited (Pty) Limited operations 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 2013 2012 2013 2012 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 5.1 Results of discontinued operations Revenue - - - 4,463 - - - 4,463 Other operating income - 2,703 - 3 - - - 2,706 Expenses (20) (707) - (6,935) - (3) (20) (7,645) (Loss)/profit from operations (20) 1,996 - (2,469) - (3) (20) (476) Other expenses (2) (2) - (633) - - (2) (635) (Loss)/profit before tax (22) 1,994 - (3,102) - (3) (22) (1,111) Income tax credit 6 117 - 485 - - 6 602 (Loss)/profit after tax (16) 2,111 - (2,617) - (3) (16) (509) 5.2 Cash flows from discontinued operations Net cash utilised in operations - (3) - (155) - (3) - (161) Net cash inflow from investing activities - - - 58 - - - 58 Net cash inflow from financing activities - - - - - - - - Net decrease in cash and cash equivalent - (3) - (97) - (3) - (103) Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 6 (Loss)/earnings per share The calculation is based on the following data: Weighted average number of ordinary shares in issue (thousands) For the purposes of basic (loss)/earnings per share 534,126 532,673 534,126 532,673 Add dilutive impact of shares 22,443 20,061 22,443 20,061 For the purposes of diluted (loss)/earnings per share 556,569 552,734 556,569 552,734 (Loss)/earnings per share from continuing operations Earnings for the purposes of basic and diluted (loss)/earnings per share (6,711) 6,156 16,751 (5,367) Basic (loss)/earnings per share (US cents) (1.26) 1.16 3.14 (1.00) Diluted (loss)/earnings per share (US cents) (1.21) 1.11 3.01 (0.98)
  • 45. 45 AICO Africa Limited Land and Plant and Capital work Total buildings equipment in progress US$'000 US$'000 US$'000 US$'000 7 Property, plant and equipment 7.1 Group Cost/valuation 31 March 2011 81,680 45,328 1,065 128,073 Additions 1,822 15,624 376 17,822 Disposals - (2,128) - (2,128) Transfers in/(out) 5,453 (4,899) (561) (7) Transfer to assets classified as held for sale - (2,121) - (2,121) Exchange rate movements (2,656) (1,397) - (4,053) 31 March 2012 86,299 50,407 880 137,586 Additions 3,132 8,508 293 11,933 Disposals - (295) - (295) Capitalised during the period - - (1,002) (1,002) Transfers in/(out) - 171 (171) - Acquisitions through business combinations 57 64 - 121 Revaluation 698 510 - 1,208 Exchange rate movements (3,515) (2,303) - (5,818) 31 March 2013 86,671 57,062 - 143,733 Accumulated depreciation and impairment 31 March 2011 7,789 16,081 - 23,870 Charge for the year 2,043 6,290 - 8,333 Impairment reversals from profit or loss - 2,374 - 2,374 Disposals - (1,511) - (1,511) Transfer to assets classified as held for sale - (286) - (286) Exchange rate movements (7) (204) - (211) 31 March 2012 9,825 22,744 - 32,569 Charge for the year 2,243 6,133 - 8,376 Impairment charges to profit or loss - 50 - 50 Disposals - (199) - (199) Acquisitions through business combinations 1 30 - 31 Exchange rate movements (6) (409) - (415) 31 March 2013 12,063 28,349 - 40,412 Carrying amount at 31 March 2011 73,891 29,247 1,065 104,203 Carrying amount at 31 March 2012 76,474 27,663 880 105,017 Carrying amount at 31 March 2013 74,608 28,713 - 103,321 Capital commitments Authorised and contracted for - - - - Authorised and not contracted for 6,044 10,831 - 16,875 Total 6,044 10,831 - 16,875 Financing of capital commitments Capital commitments will be financed out of a combination of own resources of the Group and borrowings from both local and offshore financial institutions. Proceeds from insurance payouts There were no material proceeds from insurance payouts during the year. NOTES TO THE FINANCIAL STATEMENTS Revaluation of Olivine Holdings (Private) Limited land, buildings and plant Land, buildings and plant in Olivine Holdings (Private) Limited were revalued as at 31 March 2013 by an independent valuer to US$2.3 million, US$16.9 million and US$10 million, respectively. Land and buildings were valued at fair value. The fair value was derived from comparable evidence of recent market transactions on an arm’s length basis. The plant was valued using the market comparable approach where the plant was of a general nature and could be used by any industry, and the cost approach where it is of a specialised nature. A revaluation surplus amounting to US$2.5 million, of which the Group’s share at 49.31% is US$1.2 million, was realised on revaluation of land, buildings and plant. The surplus is recognised in the statement of changes in equity and is non-distributable to the shareholders.
  • 46. 46 AICO Africa Limited Land and Plant and Capital work Total buildings equipment in progress US$'000 US$'000 US$'000 US$'000 7.2 Company Cost/valuation 31 March 2011 152 515 - 667 Additions - 8 - 8 Disposals - - - - Capitalised this year - - - - Transfers in/(out) - - - - Reclassified to investment property - - - - Revaluation - - - - Exchange rate movements - - - - 31 March 2012 152 523 - 675 Additions - 53 - 53 Disposals - - - - Capitalised this year - - - - Transfers in/(out) - - - - Reclassified to investment property - - - - Revaluation - - - - Exchange rate movements - - - - 31 March 2013 152 576 - 728 Accumulated depreciation and impairment 31 March 2011 72 154 - 226 Charge for the year 80 99 - 179 Impairment charges to profit or loss - - - - Impairment reversals from profit or loss - - - - Transfers in/(out) - - - - Disposals - - - - Revaluation - - - - Exchange rate movements - - - - 31 March 2012 152 253 - 405 Charge for the year - 156 - 156 Impairment charges to profit or loss - - - - Impairment reversals from profit or loss - - - - Transfers in/(out) - - - - Disposals - - - - Revaluation - - - - Exchange rate movements - - - - 31 March 2013 152 409 - 561 Carrying amount at 31 March 2011 80 361 - 441 Carrying amount at 31 March 2012 - 270 - 270 Carrying amount at 31 March 2013 - 167 - 167 Capital commitments Authorised and contracted for - - - - Authorised and not contracted for - 227 - 227 Total - 227 - 227 7 Property, plant and equipment (continued) Significant estimates and judgements Residual values and useful lives of items of property, plant and equipment are reviewed annually at the reporting date. Residual values are determined by reference to an active market of similar items of property, plant and equipment taking into account the operating conditions and expected wear and tear. Where an active market does not exist, the residual value is assumed to be nil at which point the useful lives of affected assets are extended to levels consistent with this assumption. Useful lives of items of property, plant and equipment are determined with reference to expected duration of the assets' utility to the Group, taking into account the operating conditions, expected wear and tear and the Group’s asset replacement policy. Encumbrances Refer to note 23. NOTES TO THE FINANCIAL STATEMENTS
  • 47. 47 AICO Africa Limited Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 8 Investment property Balance at 31 March 2012 332 310 - - Change in fair value - 22 - - Balance at 31 March 2013 332 332 - - The investment property comprises a residential property that is leased to a third party. Investment property has been stated at fair value which has been determined based on a valuation performed by an accredited independent valuer as at 31 March 2013 and 31 March 2012, respectively. The valuer is an industry specialist in valuing these types of investment properties. The fair value of the property has not been determined on transactions observable in the market because of the nature of the property and lack of comparable data. Instead, the valuation model is in accordance with that recommended by the International Valuation Standards Committee. Company 31 March 31 March 31 March 31 March 2013 2013 2013 2012 9 Investments held in subsidiaries Proportion US$'000 US$'000 Principal Place of Proportion of of voting activity incorporation interests power held Name of subsidiary The Cotton Company of Zimbabwe Limited Ginning Zimbabwe 100.00% 100.00% 36,622 36,622 Seed Co Limited Seed Zimbabwe 50.14% 50.14% 69,196 101,360 Scottco (Private) Limited Spinning Zimbabwe 75.00% 75.00% - 11 Exhort Enterprises (Private) Limited Vegetables Zimbabwe 100.00% 100.00% 5 5 Cottco International (Proprietary) Limited Investment Mauritius 100.00% 100.00% - - Zambrano Investments (Private) Limited Investment Zimbabwe 100.00% 100.00% 459 682 106,282 138,680 The investments in subsidiaries are designated as available-for-sale financial assets. The fair values of the unlisted subsidiaries have been determined with reference to their net asset values. The Group disposed of its entire stake in the Spinning business, Scottco (Private) Limited, at a loss of US$10,823. The investment in Scottco (Private) Limited had been impaired by US$3.0 million in the previous year. The disposal also resulted in a US$3.3 million downward adjustment in reserves. Seed Co Limited (Seed Co) is listed on the Zimbabwe Stock Exchange (ZSE). On 31 March 2013, the market value of the Company's shares in Seed Co amounted to US$69.2 million. On the date the financial statements were approved, the market value of the Company's shares in Seed Co was US$78.4 million. There are no indications of impairment on the fair values determined. Company 31 March 31 March 31 March 31 March 2013 2013 2013 2012 10 Investment held in joint venture Proportion US$'000 US$'000 Principal Place of Proportion of of voting activity incorporation interests power held Name of entity Olivine Holdings (Private) Limited FMCGs Zimbabwe 49.31% 49.31% 12,460 6,825 The investment held in joint venture is designated as an available-for-sale financial asset. The fair value of the joint venture has been determined with reference to the consideration paid on the acquisition date and an additional capital injection that has been carried out since then. During the year, the Group invested an additional US$5.6 million through a rights issue to bring the total investment to US$12.5 million and the shareholding to 49.31% (2012: 49%). There are no indications of impairment on this investment. The increase in shareholding was a result of one of the shareholders in Olivine Holdings (Private) Limited (Olivine) not following their rights in full. Significant judgement The Company holds a 49.31% shareholding in Olivine. The Industrial Development Corporation of Zimbabwe Limited (IDC) holds the other 50.69%. The Olivine board of directors is composed of eleven directors of which four directors are appointed as representatives of the Company, five as representatives of IDC, while two are executive directors appointed by the board of directors. IDC appoints the chairman who is their representative but the chairman does not have a casting vote in board meetings. Each shareholder effectively has four voting directors on the board. While there is a management contract that delegates the operational management of Olivine to the Company, 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 Company, therefore, regards Olivine as a jointly controlled entity and the Company's proportionate share of the loss for the year amounted to US$1,978,689 after tax. NOTES TO THE FINANCIAL STATEMENTS
  • 48. 48 AICO Africa Limited 10 Investment held in joint venture (continued) Group 31 March 31 March 2013 2012 US$'000 US$'000 The effect of Olivine Holdings (Private) Limited on the Group's assets and liabilities at the reporting date is given below: Property, plant and equipment 14,741 14,181 Other intangibles 8 8 Inventories 4,710 5,542 Inputs scheme receivables - 385 Prepayments 549 867 Trade and other receivables 2,760 1,545 Bank and cash balances 206 221 Deferred tax liabilities (659) (1,239) Borrowings (6,593) (6,283) Trade and other payables (3,098) (2,001) Taxation - (219) Finance lease liabilities (82) - Overdraft (590) (1,614) Balances owed to Group companies (2,732) (6,698) Net identifiable assets and liabilities 9,220 4,695 11 Other receivables Non-current receivable: Office of Foreign Assets Control (OFAC) 997 - NOTES TO THE FINANCIAL STATEMENTS The long term receivable arose as a result of funds that were withheld and frozen by Standard Chartered Bank, New York, in compliance with directives from the United States of America Office of Foreign Assets Control (OFAC). One of Olivine's shareholders, Industrial Development Corporation of Zimbabwe Limited, is under American economic sanctions. The amounts withheld have no fixed repayment date and are interest bearing, but the interest rate is not known. Group Group Assets Liabilities Net Net 31 March 31 March 31 March 31 March 2013 2013 2013 2012 12 Deferred tax assets/(liabilities) US$'000 US$'000 US$'000 US$'000 12.1 Deferred tax assets and liabilities are attributed to the following: Temporary differences Property, plant and equipment - (23,997) (23,997) (23,323) Unrealised exchange gains - (83) (83) (83) Exchange differences on translating foreign subsidiaries - (244) (244) 1,315 Finance leases 80 - 80 49 Provisions 1,866 - 1,866 190 Increase in share-based payment reserve - (56) (56) - Fair value through profit or loss financial assets 75 - 75 75 Prepayments - (791) (791) - Assessable tax losses 9,112 - 9,112 9,040 Unrealised profits in inventories 225 - 225 130 Reversal of impairment - (331) (331) (331) Fair value adjustments for available for sale investments - - - (3,375) 11,358 (25,502) (14,144) (16,313) 12.2 Movement in temporary differences during the year are attributed to the following: Recognised in Recognised Total Discontinued Continuing 31 March profit or loss in equity 31 March operations operations 2012 2013 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Group Temporary differences Property, plant and equipment (23,323) 1,090 (1,325) (23,558) (439) (23,997) Finance leases 49 31 - 80 - 80 Unrealised exchange gains (83) - - (83) - (83) Unrealised profits in inventories 130 95 - 225 - 225 Exchange differences on translating foreign subsidiaries 1,315 - (1,559) (244) - (244) Provisions 190 1,676 - 1,866 - 1,866 Fair value through profit or loss financial assets 75 - - 75 - 75 Prepayments - (791) - (791) - (791) Reversal of impairment (331) - - (331) - (331) Assessable tax losses 9,040 72 - 9,112 - 9,112 Change in fair value of available for sale investments (3,375) - 3,375 - - - Increase in share-based payment reserve - - (56) (56) - (56) (16,313) 2,173 435 (13,705) (439) (14,144)
  • 49. 49 AICO Africa Limited 12.4 Movement in temporary differences during the year are attributed to the following: Company Recognised in Recognised Total Discontinued Continuing 31 March profit or loss in equity 31 March operations operations 2012 2013 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Temporary differences Property, plant and equipment (53) 12 - (41) - (41) Prepayments (3) (1) - (4) - (4) Assessable tax losses 1,872 420 - 2,292 - 2,292 Fair value through profit or loss financial assets 154 - (3,042) (2,888) - (2,888) 1,970 431 (3,042) (641) - (641) Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 13 Biological assets Balance at 31 March 2012 844 403 - - Seasonal crops planted - at cost 620 844 - - Harvested plants transferred to inventories (844) (403) - - Balance at 31 March 2013 620 844 - - Biological assets consist of certified hybrid seed plantings grown for own research purposes in the Seed business and comprise of maize and soya crops. No fair valuation of these assets was performed as the biological assets concerned are purely for own consumption. Consequently, these assets are stated at cost. Harvested plants transferred to inventory include cotton seed plantings from a small corporate farming project in the Cotton business, which has since been put on hold. There are no biological assets in this business. All biological assets of the Group are plantings effected in the last five months of the financial year and are expected to grow and be harvested between April 2013 and June 2013. No depreciation was charged as a result. There were no indications of impairment or potential impairment of biological assets during the year under review. Company Assets Liabilities Net Net 31 March 31 March 31 March 31 March 2013 2013 2013 2012 12 Deferred tax assets/(liabilities) (continued) US$'000 US$'000 US$'000 US$'000 12.3 Deferred tax assets and liabilities are attributed to the following: Temporary differences Property, plant and equipment - (41) (41) (53) Fair value through profit or loss financial assets - (2,888) (2,888) 154 Prepayments - (4) (4) (3) Assessable tax losses 2,292 - 2,292 1,872 2,292 (2,933) (641) 1,970 NOTES TO THE FINANCIAL STATEMENTS
  • 50. 50 AICO Africa Limited Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 14 Inventories Raw materials 49,263 59,585 - - Work in progress 1,360 1,598 - - Finished goods 2,193 2,761 - - Consumable stores 13,723 13,136 - - Bought-in merchandise 3,804 3,723 - - 70,343 80,803 - - Net realisable value provision Opening balance (4,084) (4,818) - - Current year decrease in provision 337 734 - - Closing balance (3,747) (4,084) - - Inventories charged to profit or loss 129,018 162,961 - - Inventories encumbered by borrowings are disclosed in note 23. 15 Inputs scheme receivables Inputs scheme receivables 27,000 33,476 - - Allowance for doubtful debts (16,390) (4,279) - - 10,610 29,197 - - Movement in the allowance for doubtful debts Balance at the beginning of the year (4,279) (3,690) - - Current year increase in provision (12,111) (589) - - Balance at the end of the year (16,390) (4,279) - - Ageing of inputs receivables provided for Year 2013 (3,680) (1,220) - - Year 2012 (9,438) (1,448) - - Year 2011 (1,768) (1,611) - - Prior 2010 (1,504) - - - (16,390) (4,279) - - Inputs scheme receivables arise when the Group advances inputs to farmers who grow crops for the Group under contract and these are then recovered from the farmers as they sell their contracted crop. These receivables are seasonal. All past due inputs receivables were provided for. 16 Trade and other receivables Trade receivables 89,450 72,177 - - Other receivables 5,915 3,678 116 114 Allowance for doubtful debts (9,033) (5,616) - - 86,332 70,239 116 114 Ageing of past due trade and other receivables not provided for 0-30 days 13,727 12,359 - - 30-60 days 5,682 4,308 - - 60-90 days 4,364 4,294 - - +90 days 34,773 35,249 - - 58,546 56,210 - - Movement in the allowance for doubtful debts Balance at the beginning of the year (5,616) (9,867) - - Current year (increase)/decrease in provision (3,417) 4,251 - - Balance at the end of the year (9,033) (5,616) - - Ageing of trade and other receivables provided for 60-90 days (1) (77) - - +90 days (9,032) (5,539) - - (9,033) (5,616) - - Trade receivables encumbered by borrowings are disclosed in note 23. All trade receivables in currencies other than the US dollar are listed in note 27. NOTES TO THE FINANCIAL STATEMENTS
  • 51. 51 AICO Africa Limited Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 17 Other financial assets Financial assets designated at fair value through profit or loss (FVTPL) Non-derivative financial assets designated as FVTPL 8 34 - - Held-to-maturity investments carried at amortised cost Short term money market investments 860 247 - - Long term loans 341 - - - 1,209 281 - - Other financial assets profile Financial assets designated as current 52 13 - - Financial assets designated as non-current 1,157 268 - - 1,209 281 - - 18 Cash and cash equivalents Bank and cash balances 6,735 12,662 542 294 Bank overdrafts (51,578) (59,716) - - Total (44,843) (47,054) 542 294 Included in the bank overdraft is an amount of US$45.6 million due by Seed Co Limited secured by inventory and accounts receivables. 19 Operating cash flows before reinvesting in working capital (Loss)/profit for the period (2,091) 14,848 16,751 (5,367) Adjustment for: Income tax expense/(credit) recognised in profit or loss 1,538 2,716 (431) (1,289) Finance costs recognised in profit or loss 25,392 24,362 1,175 1,889 Investment revenue recognised in profit or loss (297) (2,551) (813) - Dividend received - - (18,143) (2,290) Gain on sale or disposal of property, plant and equipment (35) (38) - - Gain on sale or disposal of a business (3,286) - - - Loss on revaluation of investment property - 91 - - Gain on revaluation of fair value through profit or loss financial assets - (22) - - Impairment loss recognised on trade and other receivables 3,071 - - - Depreciation and amortisation of non-current assets 8,379 8,336 156 179 Impairment of non-current assets recognised in profit or loss 50 - - - Net foreign exchange (gain)/loss (1,606) 539 - - Expense recognised in profit or loss in respect of equity settled share-based payments 180 786 140 384 Impairment of investment in subsidiary - - - 3,000 Impairment of intercompany balances - - - 2,700 Other non-cash items (18) (532) - - 31,277 48,535 (1,165) (794) 20 Working capital movements Change in inventories 14,547 (27,550) - - Change in inputs scheme receivables 18,587 (7,808) - - Change in prepayments (1,625) 6,195 (3) (9) Change in intercompany receivables 70 (70) 13,761 (16,354) Change in trade and other receivables (17,494) (27,124) (2) (111) Change in trade and other payables 5,517 9,356 (123) 306 Change in intercompany payables - - (30,542) 10,059 Change in borrowings - third party (1,742) - - - 17,860 (47,001) (16,909) (6,109) NOTES TO THE FINANCIAL STATEMENTS
  • 52. 52 AICO Africa Limited Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 21 Group companies Balances owed by Group companies - The Cotton Company of Zimbabwe Limited - - 729 8,354 - Exhort Enterprises (Private) Limited - - 22 - - Salamax (Pty) Limited - - - 6 - Olivine Holdings (Private) Limited - - 5,277 11,553 - Cottco International (Pty) Limited - - 6 2 - Seed Co Limited - - 23 38 - Yucatan Holdings (Pty) Limited - - 5 5 Total - - 6,062 19,958 Balances owed to Group companies - The Cotton Company of Zimbabwe Limited - - (680) (30,442) - Yucatan Holdings (Pty) Limited - - (39) (39) - Zambrano Investments (Private) Limited - - (353) (115) - Cottco International (Pty) Limited - - (17) (17) - - (1,089) (30,613) Net amounts owed by/(to) Group companies - - 4,973 (10,655) Significant transactions with Group companies Interest paid to The Cotton Company of Zimbabwe Limited - - (1,155) (1,858) Management fees received from Group companies - - 923 962 Terms and conditions All transactions with related parties are at arms length. Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 22 Capital and reserves 22.1 Share capital Authorised share capital Number of ordinary shares ('000) 1,500,000 1,500,000 1,500,000 1,500,000 Nominal value per share (US dollar) 0.01 0.01 0.01 0.01 Total value of shares (US$'000) 15,000 15,000 15,000 15,000 22.2 Issued and fully paid Number of shares At the beginning of the year ('000) 534,126 531,289 534,126 531,289 Share options exercised ('000) - 2,837 - 2,837 At the end of the year ('000) 534,126 534,126 534,126 534,126 Nominal value per share (US dollar) 0.01 0.01 0.01 0.01 Total value of shares (US$'000) 5,341 5,341 5,341 5,341 The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets. Subject to the right of the shareholders to take up new shares in proportion to their existing holdings and to Section 183 of the Companies Act (Chapter 24:03), unissued shares are under the control of the Directors. Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 22.3 Capital reserves Capital reserves at the beginning of the period 26,515 33,049 134,997 164,128 Movement for the year (5,325) (6,534) (30,453) (29,131) Balance at the end of the year 21,190 26,515 104,544 134,997 A detailed analysis of movements in capital reserves are shown in the statements of comprehensive income (page 25) and the statements of changes in equity (pages 27 and 28). NOTES TO THE FINANCIAL STATEMENTS
  • 53. 53 AICO Africa Limited Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 23 Borrowings Current borrowings Unsecured - at amortised cost - Bank loans 11,230 23,758 3,984 3,753 - Other entities - 2,886 - - Secured - at amortised cost - Bank loans 51,365 39,636 - - - Other entities - - - - Total current borrowings 62,595 66,280 3,984 3,753 Non-current borrowings Unsecured - at amortised cost - Bank loans 1,913 - - - - Other entities - - - - Secured - at amortised cost - Bank loans 9,892 11,659 - - - Other entities - - - - Total non-current borrowings 11,805 11,659 - - Total borrowings Current 62,595 66,280 3,984 3,753 Non-current 11,805 11,659 - - Total borrowings 74,400 77,939 3,984 3,753 Unsecured borrowings - Bank loans 13,143 23,758 3,984 3,753 - Other entities - 2,886 - - 13,143 26,644 3,984 3,753 Secured borrowings - Bank loans 61,257 39,636 - - - Other entities - 11,659 - - 61,257 51,295 - - Maturity profile of borrowings Due within 1 year 0-3 months 53,559 43,119 3,984 3,753 3-6 months 7,675 17,044 - - 6-12 months 1,361 6,117 - - 62,595 66,280 3,984 3,753 Due after 1 year 1 - 2 years 4,818 2,905 - - 2 - 3 years 4,094 2,905 - - 3 - 4 years 2,893 2,905 - - 4 - 5 years - 2,944 - - 11,805 11,659 - - Total borrowings 74,400 77,939 3,984 3,753 Included in short term borrowings are the following amounts: • US$56 million due by The Cotton Company of Zimbabwe Limited (Cottco) to a syndicate of banks secured as follows: (i) A special notarial covering bond over the company's cotton stocks and receivables worth US$20 million. (ii) A notarial general covering bond over the company's cotton stocks and receivables for US$126.5 million. (iii) A notarial deed of cession of book debts for US$3.5 million. (iv) A cession of the company's insurance policies covering cotton inventories. (v) A pledge of the company's cotton stocks, both present and future, for US$10 million. (vi) Sales contracts with a value of US$12 million. • US$13.4 million due by Olivine Holdings (Private) Limited to a syndicate of banks secured as follows: (i) US$1 million loan secured by a mortgage bond on the Bulawayo and Mutare Depot, being Stand 5108, Bulawayo Township, valued at US$600,000 and Stand 830, Umtali Township, valued at US$170,000, respectively. The loan is also secured by Notarial General Covering Bonds over movable property. (ii) US$5.7 million loan secured by a pledge over inventories valued at US$12.5 million. (iii) US$500,000 loan secured by Notarial General Covering Bonds over plant and machinery. (iv) US$8 million secured by trade receivables pledged as security on Notarial General Covering Bonds. • US$1.5 million due by Seed Co Limited secured by inventory and accounts receivables. Seed Co also has a Bostwana banking facility of US$7.8 million secured as follows: (i) Deed of hypothecation for United States dollar equivalent of BWP26.6 million (2012: BWP26.6 million) which approximates to US$4.1 million (2012: US$4.1 million), generally binding all movable assets, which include seed stocks and book debts. (ii) Unrestricted cession of stocks and book debts and contract money due. (iii) Investment property with a carrying amount of US$338,106 (2012: US$338,106). NOTES TO THE FINANCIAL STATEMENTS
  • 54. 54 AICO Africa Limited NOTES TO THE FINANCIAL STATEMENTS 23 Borrowings (continued) The Company issued limited gurantees to certain banks in return for the advancement of loans to certain Group companies as follows: (i) Seed Co Limited - US$10 million (2012: US$9 million). (ii) The Cotton Company of Zimbabwe Limited - US$111.2 million (2012: US$172.4 million). (iii) Olivine Holdings (Private) Limited - US$8.7 million (2012: US$14.1 million). Group Company 31 March 31 March 31 March 31 March 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 24 Trade and other payables Trade 18,136 12,597 - Other 12,547 13,712 273 368 30,683 26,309 273 368 The Group's exposure to currency and liquidity risk related to trade and other payables is disclosed in note 27. 25 Finance lease liabilities - third party The Group has entered into commercial leases in respect of certain motor vehicles and plant and equipment. These leases have an average life of three years with no renewal option included in the contracts. There are no restrictions placed upon the Group by entering into these leases. Future minimum lease payments under the finance leases together with the present value of the net payments are as follows: Minimum lease payments Within one year 308 285 - - In second to fifth year inclusive 1,113 66 - - 1,421 351 - - Less unearned finance expense (122) - - - Present value of minimum lease payments 1,299 351 - - Allowance for uncollectable lease payments - - - - 1,299 351 - - Present value of minimum lease payments Within one year 985 285 - - In second to fifth year inclusive 314 66 - - 1,299 351 - - Less unearned finance expense - - - - Present value of minimum lease payments 1,299 351 - - Allowance for uncollectable lease payments - - - - 1,299 351 - - Included in the financial statements are: Current finance lease payables 985 285 - - Non-current finance lease payables 314 66 - - 1,299 351 - - 26 Assets and liabilities classified as held for sale 26.1 Assets held for sale Due to discontinued operations 1,387 5,190 - - Other 67 128 - - Total assets classified as held for sale 1,454 5,318 - - Exhort Total Enterprises Scottco discontinued (Pvt) Limited (Pvt) Limited operations 31 March 31 March 31 March 31 March 31 March 31 March 2013 2012 2013 2012 2013 2012 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 26.2 Effects of discontinued operations on the financial position of the Group Property, plant and equipment 1,372 1,372 - 1,835 1,372 3,207 Inventories 14 14 - 1,592 14 1,606 Trade and other receivables 1 1 - 376 1 377 Assets classified as held for sale 1,387 1,387 - 3,803 1,387 5,190 Deferred tax liabilities 439 444 - - 439 444 Trade and other payables 28 28 - 2,437 28 2,465 Liabilities classified as held for sale 467 472 - 2,437 467 2,909 Net assets 920 915 - 1,366 920 2,281 -
  • 55. 55 AICO Africa Limited 27 Financial instruments The Group finances its operations by a mixture of retained profits and financial instruments in US dollars and foreign currencies. The Group borrows in both local and international debt markets in US dollars and foreign currencies, mainly at fixed rates of interest. In the normal course of its operations, the Group is exposed to currency, interest rate, liquidity and credit risks. The Group has developed a comprehensive risk management process to control and monitor the risks. 27.1 Currency risk The Group undertakes certain transactions denominated in currencies other than the US dollar, hence exposure to exchange rate fluctuations arise. The currencies giving rise to currency risks are primarily the Malawi Kwacha, Zambian Kwacha, Botswana Pula, South African Rand and Euro. The exposure to foreign currency fluctuations is managed by, where possible, matching foreign liabilities with foreign assets or revenue contracts that generate sufficient foreign currency receipts to provide a hedge against the exposure. The Board of Directors is tasked with managing the foreign currency exposures arising in consultation with the central treasury function. All material purchases and sales in foreign currencies are transacted through the central treasury. The Group's exposure to foreign currency risk was as follows based on notional amounts: Group 31 March 31 March 2013 2012 '000 '000 Trade and other receivables Rand 10,695 789 Euro - - Botswana Pula 18,854 - Malawi Kwacha - 835,568 Zambian Kwacha 28,699 116,845 Bank and cash balances Rand 47 17 Euro - 1 Botswana Pula 5,055 - Malawi Kwacha - 243,305 Zambian Kwacha 4,552 7,119,377 Trade and other payables Rand (1,015) (1,289) Euro - (2) Botswana Pula (17,846) - Malawi Kwacha - (409,652) Zambian Kwacha (5,416) (9,723,653) Borrowings - third party Rand - - Euro - - Botswana Pula - - Malawi Kwacha - (58,800) Zambian Kwacha (7,761) (80,639,716) Net balance sheet exposure Rand 9,727 (483) Euro - (1) Botswana Pula 6,063 - Malawi Kwacha - 610,421 Zambian Kwacha 20,074 (83,127,147) NOTES TO THE FINANCIAL STATEMENTS
  • 56. 56 AICO Africa Limited 27.2 Sensitivity analysis The Group's assets and liabilities are predominately US dollars. The net exposure of the Group to other currencies when expressed in US dollars is insignificant, and has been summarised below. Also summarised is the charge to profit or loss that would result in a movement of any of the foreign currencies by 10%. The Company has no foreign currency exposure. Group 31 March 2013 31 March 2012 currency currency '000 US$'000 '000 US$'000 Rand 9,727 1,047 (483) (60) Euro - - (1) (1) Botswana Pula 6,063 745 - - Malawi Kwacha - - 610,421 3,694 Zambian Kwacha 20,074 4 (83,127,147) (15,957) 1,796 (12,324) Charge to profit or loss if an exchange rate of any of the above currencies moved by 10%: Rand 105 (6) Euro - - Botswana Pula 75 - Malawi Kwacha - 369 Zambian Kwacha - (1,596) 180 (1,233) A change in exchange rate by 10% either way will result in a loss or gain amounting to US$0.2 million dollars. 27.3 Interest rate risk The Goup borrows in both local and offshore markets. Exposure to interest rate risk on borrowings and receivables is managed on a proactive basis. The interest rate risk profile of liabilities of the Group by currency, as at 31 March 2013, is as follows: Total Floating rate Fixed rate 31 March 31 March 31 March 31 March 31 March 31 March 2013 2012 2013 2012 2013 2012 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Financial liabilities 74,400 77,939 - - 74,400 77,939 27.4 Credit risk Credit risks arise on cash and cash equivalents, investments and trade receivables. The risk on cash and cash equivalents is managed by only investing with financially sound institutions and by setting prudent exposure limits for each institution. The risk arising on trade receivables is managed through normal credit limits, continual review and exception reporting. Adequate provision is made for doubtful debts. At the reporting date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position. 27.5 Liquidity risk The Group manages liquidity through the management of working capital and cash flows. A balance between continuity of funding and flexibility is maintained through the use of borrowings from a range of institutions with varying debt maturities. 27.6 Capital management The Board of Directors’ policy is to maintain a strong capital base so as to maintain creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total shareholders’ equity. Due to the prevailing operating economic conditions, the Board of Directors has set any net positive return in each operating period as acceptable in terms of maintenance of capital. There were no changes in the Group’s approach to capital management during the year. The Group is not subject to externally imposed capital requirements. 27.7 Carrying amounts and fair values of financial assets and liabilities as at 31 March 2013 The carrying amounts of financial assets and liabilities approximate their fair values. NOTES TO THE FINANCIAL STATEMENTS Foreign Foreign
  • 57. 57 AICO Africa Limited 28 Related party transactions 28.1 Group companies Group companies comprise of The Cotton Company of Zimbabwe Limited, Seed Co Limited, Olivine Holdings (Private) Limited, Cottco International (Proprietary) Limited, Exhort Enterprises (Private) Limited, Zambrano Investments (Private) Limited and Yucatan Holdings (Proprietary) Limited. Transactions and balances during and at year end have been disclosed in note 21. 28.2 Key management personnel Name Bekithemba Nkomo Chairman Pat Devenish Group Chief Executive Bernard Mudzimuirema Group Finance Director Catherine Chitiyo Non-executive Director Albert Nhau Non-executive Director Innocent Chagonda Non-executive Director Lawrence Preston Non-executive Director Patrick Rooney Non-executive Director Farai Rwodzi Non-executive Director David Machingaidze Managing Director (The Cotton Company of Zimbabwe Limited) Dacyl-Ray Rambanepasi Head of Finance (The Cotton Company of Zimbabwe Limited) Morgan Nzwere Group Chief Executive (Seed Co Limited) John Matorofa Group Finance Director (Seed Co Limited) Dennias Zaranyika Managing Director (Seed Co Zimbabwe) Grace Bwanali Managing Director (Seed Co Zambia) David Clements Managing Director (Seed Co Tanzania) Dellings Phiri Managing Director (Seed Co Malawi) Edward Mhandu Managing Director (Quton Seed Company (Private) Limited) Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity directly or indirectly. 28.3 Transactions with key management personnel Loans to key management personnel During the year, no loans were advanced to key management personnel. Compensation of key management personnel 31 March 31 March 2013 2012 US$'000 US$'000 Short term employee benefits 686 652 Termination benefits - - Share-based payments 140 384 Total compensation paid to key management personnel 826 1,036 Amounts due to/(by) companies related to key management personnel There were no amounts due to or by companies related to key management personnel at the balance sheet date. Transactions with companies related to key management personnel There were no transactions between the Company and companies related to key senior management personnel during the year. NOTES TO THE FINANCIAL STATEMENTS
  • 58. 58 AICO Africa Limited Transaction value Balances 31 March 31 March 31 March 31 March 2013 2012 2013 2012 28 Related party transactions (continued) US$'000 US$'000 US$'000 US$'000 28.4 Transactions with and between Group companies Cotton Sales to Group companies - Aico Africa Limited - - - 29,707 - Seed Co Limited 3,692 3,626 50 337 - Scottco (Private) Limited - 466 - 7 - Cottco International (Proprietary) Limited - - - 735 - Salamax (Proprietary) Limited - - - 50 - Olivine Holdings (Private) Limited - 2,734 213 1,906 Total 3,692 6,826 263 32,742 Purchases from Group companies - Aico Africa Limited - - - 7,584 - Seed Co Limited 5,554 4,924 - 2,341 - Cottco International (Proprietary) Limited - - - 18 Total 5,554 4,924 - 9,943 Other transactions with Group companies Charges to Group companies - Aico Africa Limited 1,175 1,869 723 - - Cottco International (Proprietary) Limited - - 349 - Total 1,175 1,869 1,072 - Charges from Group companies - Aico Africa Limited 17,464 1,031 745 - - The Cotton Company Zimbabwe Limited - - 492 - - Cottco International (Proprietary) Limited - - 18 - Total 17,464 1,031 1,255 - Net charges to/(from) Group companies - Aico Africa Limited (16,289) 838 (22) - - The Cotton Company Zimbabwe Limited - - (492) - - Cottco International (Proprietary) Limited - - 331 - Total (16,289) 838 (183) - Seed Sales to Group companies - Aico Africa Limited - - 23 - - The Cotton Company Zimbabwe Limited 5,554 4,924 1,033 914 - Olivine Holdings (Private) Limited - 329 75 - Total 5,554 5,253 1,131 914 Purchases from Group companies - Aico Africa Limited - - - 38 - The Cotton Company Zimbabwe Limited 3,692 3,626 111 - Total 3,692 3,626 111 38 Other transactions with Group companies - - - - Charges from Group companies - Aico Africa Limited 1,598 104 - - Total 1,598 104 - - Net charges to/(from) Group companies - Aico Africa Limited (1,598) (104) - - Total (1,598) (104) - - FMCG Sales to Group companies - The Cotton Company Zimbabwe Limited - - - 22 Total - - - 22 Purchases from Group companies - Aico Africa Limited - - - 5,603 - The Cotton Company Zimbabwe Limited - 2,734 - 934 - Seed Co Limited - 329 75 161 Total - 3,063 75 6,698 Other transactions with Group companies Charges to Group companies - Aico Africa Limited - 1,031 - - Total - 1,031 - - NOTES TO THE FINANCIAL STATEMENTS
  • 59. 59 AICO Africa Limited Transaction value Balances 31 March 31 March 31 March 31 March 2013 2012 2013 2012 28 Related party transactions (continued) US$'000 US$'000 US$'000 US$'000 28.4 Transactions with and between Group companies (continued) Charges from Group companies - Aico Africa Limited 796 - 5,252 - - The Cotton Company Zimbabwe Limited - - 213 - - Seed Co Limited - 329 - - Total 796 329 5,465 - Net charges to/(from) Group companies - Aico Africa Limited (796) 1,031 (5,252) - - The Cotton Company Zimbabwe Limited - - (213) - - Seed Co Limited - (329) - - Total (796) 702 (5,465) - Other Purchases from Group companies - The Cotton Company Zimbabwe Limited - 466 680 - - Olivine Holdings (Private) Limited - - - 341 Total - 466 680 341 Other transactions with Group companies Charges to Group companies - The Cotton Company Zimbabwe Limited 17,464 756 791 8,378 - Seed Co Limited 1,598 104 23 38 - Scottco (Private) Limited - - - 341 - Cottco International (Proprietary) Limited - - - 2 - Salamax (Proprietary) Limited - - - 6 - Olivine Holdings (Private) Limited 796 - 5,277 5,661 Total 19,858 860 6,091 14,426 Charges from Group companies - Aico Africa Limited - The Cotton Company Zimbabwe Limited 1,175 1,869 1,455 31,267 - Cottco International (Proprietary) Limited - - - 17 - Zambrano Investments (Private) Limited - - 115 - - Olivine Holdings (Private) Limited - 1,031 - - Total 1,175 2,900 1,570 31,284 Net charges to/(from) Group companies - The Cotton Company Zimbabwe Limited 16,289 (1,113) (664) (22,889) - Seed Co Limited 1,598 104 23 38 - Scottco (Private) Limited - - - 341 - Cottco International (Proprietary) Limited - - - (15) - Salamax (Proprietary) Limited - - - 6 - Zambrano Investments (Private) Limited - - (115) - - Olivine Holdings (Private) Limited 796 (1,031) 5,277 5,661 Total 18,683 (2,040) 4,521 (16,858) NOTES TO THE FINANCIAL STATEMENTS
  • 60. NOTES TO THE FINANCIAL STATEMENTS 60 AICO Africa Limited 29 Employee benefits 29.1 Defined contribution plans Contributions to defined contribution pension plans are recognised as an expense in the income statement when incurred. 29.2 National Social Security Scheme This is a defined contribution plan enacted under the National Social Security Act, 1989. Both the Group companies and the employees contribute to the scheme. 29.3 Share-based payment plans The Directors of the Company may allot or grant options up to 52.9 million shares to senior management. Each set of options is exercisable over three years, beginning two years after the date the options are granted. The exercise price of the options is based on the middle market share price derived from the Zimbabwe Stock Exchange prices for the trading day immediately preceding the date of the offer. The following table illustrates the number and exercise prices of the share options, as well as the movement in the share options during the year: 31 March 2013 31 March 2012 Number of Average Number of Average options price options price '000 US cents '000 US cents 29.4 Number of share options Balance of options at the beginning of the year 15,497 0.20 21,320 0.21 Options granted during the year 7,644 0.09 - - Options exercised during the year - - (2,836) 0.15 Options forfeited during the year (696) 0.25 (2,987) 0.23 Balance of options outstanding at the end of the year 22,445 0.21 15,497 0.20 The Group uses the Black-Scholes-Merton model to value share options which, in management’s view, presents a fairer basis of valuation. The current year charge to the income statement amounted to US$180,302 (last year: US$786,268). Of this amount, US$40,393 (last year: US$401,875) was charged to and in subsidiaries. 30 Going concern Olivine Holdings (Private) Limited (Olivine), incurred a loss before tax amounting to US$5,795,291 (2012: US$11,798,783 loss) and has been facing working capital constraints which ordinarily is an indicator of going concern uncertainty. The company has a net current liability position of US$3,965,789 (2012: US$7,746,408) at year end which indicates that the company will not be able to pay its short term liabilities when they fall due. Olivine was significantly affected by working capital constraints and significant borrowings, which resulted in a downturn of business activity and high interest costs as well as the freezing of US$2 million by the United States Office of Foreign Assets Control (OFAC) on account of United States of America economic sanctions (refer to note 11). These conditions give rise to a material uncertainty which may cast significant doubt about Olivine's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the ordinary course of business. However, management has assessed the ability of Olivine to continue as a going concern and believe that the preparation of Olivine’s financial statements on a going concern basis is still appropriate, underwritten by the following plans to improve profitability and working capital adequacy: • The company's financial performance and net current liability position has improved by 51% and 49%, respectively, from the previous financial year. The 2014 budget shows the company reporting a marginal profit of US$392,000. The budget is underpinned by the business concentrating on production of margarines and toilet soaps, which are high margin products. • During the year, shareholders injected US$11,270,000 into the business as equity. The funds were used for working capital and repayment of expensive short term debt. The company is currently on a recapitalisation exercise where investors are being invited to inject equity into the business. • Management is conducting a voluntary retrenchment exercise. This will result in a reduction in staff costs in the 2014 financial year. Therefore, the Olivine financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that Olivine's plans will be effective, as well as that the realisation of assets and settlement of liabilities will occur in the ordinary course of business.
  • 61. SHAREHOLDERS’ ANALYSIS as at 31 March 2013 61 AICO Africa Limited SHAREHOLDERS ANALYSIS As at 31 March 2013 2013 2012 Number of Number of Number of Number of Shareholders % Shares held % Shareholders % Shares held % SHAREHOLDERS PROFILE 0-100 3,531 25.50% 197,788 0.04% 3,490 25.40% 196,191 0.04% 101-200 2,232 16.12% 335,915 0.06% 2,216 16.13% 333,284 0.06% 201-500 2,912 21.03% 891,275 0.17% 2,895 21.07% 884,027 0.17% 501-1 000 2,278 16.45% 1,566,734 0.29% 2,268 16.51% 1,559,004 0.29% 1 001-5 000 1,820 13.14% 4,018,757 0.75% 1,856 13.51% 4,093,132 0.77% 5 001-10 000 427 3.08% 2,961,819 0.55% 417 3.03% 2,877,811 0.54% 10 001-50 000 373 2.69% 8,239,438 1.54% 357 2.60% 7,774,553 1.46% 50 001-100 000 91 0.66% 6,529,287 1.22% 86 0.63% 6,080,718 1.14% 100 001-1 000 000 125 0.90% 27,830,963 5.21% 91 0.66% 19,745,409 3.70% 1 000 001-10 000 000 17 0.12% 12,583,271 2.36% 16 0.12% 11,330,370 2.12% 10 000 001-100 000 000 35 0.25% 122,286,147 22.89% 38 0.28% 123,026,450 23.03% Above 100 000 000 8 0.06% 346,684,282 64.92% 10 0.06% 356,224,727 66.68% Total 13,849 100.00% 534,125,676 100.00% 13,740 100.00% 534,125,676 100.00% ANALYSIS BY CATEGORY Banks, insurance companies, nominees and pension funds 442 3.19% 274,325,765 51.36% 477 3.47% 281,717,884 52.74% Local companies 862 6.22% 31,300,756 5.86% 867 6.31% 43,133,963 8.08% Individuals and trusts 12,462 89.98% 23,749,019 4.45% 12,322 89.68% 17,142,533 3.21% Non-resident investors 83 0.61% 204,750,136 38.33% 74 0.54% 192,131,296 35.97% Total 13,849 100.00% 534,125,676 100.00% 13,740 100.00% 534,125,676 100.00% Resident 13,766 99.39% 329,375,540 61.67% 13,666 99.46% 341,994,380 64.03% Non-resident 83 0.61% 204,750,136 38.33% 74 0.54% 192,131,296 35.97% Total 13,849 100.00% 534,125,676 100.00% 13,740 100.00% 534,125,676 100.00% MAJOR SHAREHOLDERS National Social Security Authority 118,625,935 22.21% 118,379,052 22.16% Stanbic Nominees 112,551,517 21.07% 21,165,096 3.96% Old Mutual Life Assurance Company Zimbabwe Limited 72,995,043 13.67% 83,798,468 15.69% Burket Associates Limited Nnr 40,266,667 7.54% 40,266,667 7.54% Caperal Limited Nnr 27,119,370 5.08% 27,119,370 5.08% Standard Chartered Nominees (Private) Limited 18,163,011 3.40% 27,193,612 5.09% Mining Industry Pension Fund 12,032,187 2.25% 12,025,616 2.25% Old Mutual Zimbabwe Limited 10,217,869 1.91% - 0.00% Fed Nominees 9,011,602 1.69% 10,065,224 1.88% Datvest Nominees (Private) Limited 8,644,511 1.62% 8,034,804 1.50% Manrique Investments (Private) Limited 5,933,334 1.11% 5,933,334 1.11% Stanbic Nominees 5,249,628 0.98% - 0.00% Tagnel Investments (Private) Limited 4,333,334 0.81% 4,333,334 0.81% Extern Investments (Private) Limited 3,666,667 0.69% 3,666,667 0.69% Equivest Nominees (Private) Limited 3,597,421 0.67% 3,960,180 0.74% Crisbibe Investments (Private) Limited 3,333,334 0.62% 3,333,334 0.62% Local Authorities Pension Fund 2,817,115 0.53% 2,804,799 0.53% Figurent Investments (Private) Limited 2,000,000 0.37% - 0.00% Hamburgh Investments (Private) Limited 2,000,000 0.37% - 0.00% Morray Investments Holdings Limited 2,000,000 0.39% - 0.00% Barclays Bank of Zimbabwe Limited - 0.00% 81,930,801 15.34% Msasa Nominees (Private) Limited - 0.00% 5,638,370 1.06% Kensington Acquisitions Limited Nnr - 0.00% 4,386,077 0.82% Edwards Nominees - 0.00% 3,037,750 0.57% TN Capital (Private) Limited - 0.00% 2,778,686 0.53% Sub-total 464,558,545 86.98% 469,851,241 87.97% Other shareholders 69,567,131 13.02% 64,274,435 12.03% Total 534,125,676 100.00% 534,125,676 100.00% SHAREHOLDERS’ CALENDAR Annual General Meeting August 2013 Publication of Interim Results for the 6 months to September 2013 November 2013 Publication of Audited full year results for the 12 months to March 2014 June 2014
  • 62. 62 AICO Africa Limited SUBSIDIARIES The Cotton Company of Zimbabwe Limited 1 Lytton Road, Workington, Harare P O Box 2697, Harare Tel: 04-771981-5, 748682-3 Tellular lines: 0912 233 547/8 Fax: 04-753854, 708573, 707203, 748900 Email: cottco@cottco.co.zw www.thecottoncompany.com Seed Co Limited Shamwari Road, Stapleford, Harare P O Box WGT 64, Westgate, Harare Tel: 04-308881-8, 308891-7, Fax: 04-304841 Exhort Enterprises (Private) Limited Corner Mutiti Drive/J. Tongogara Road, Ruwa Tel: 073-2491/2, 073-2744, Fax 073-2251 Cottco International (Proprietary) Limited Ebene House, 3rd Floor, 33 Cybercity, Ebene, Mauritius Tel: +230 467 4693, F ax: +230 466 8443 HEAD OFFICE 1st Floor, SAZ Building, Northend Close, Northridge Park, Borrowdale, Harare. Box BW537, Borrowdale, Harare Tel: 263-4-852795, 853054-6, 853059 Fax: 263-4-850705 Email: info@aicoafrica.com JOINT OPERATIONS Olivine Holdings (Private) Limited 36 Birmingham Road, Southerton, Harare P O Box 797, Harare Tel: 04-754568, 757100, 754556 Corporate Directory

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