OK Zimbabwe 2012 annual report


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OK Zimbabwe 2012 annual report

  1. 1. 2012
  3. 3. 2012 annual report Corporate Information REGISTERED OFFICE OK HOUSE 7 Ramon Road Graniteside P.O. Box 3081 Harare Zimbabwe Telephone: 263 4 757311/9 Telefax: 263 4 757028/39 AUDITORS Deloitte & Touche Chartered Accountants (Zimbabwe) 1 Kenilworth Road Newlands P.O. Box 267 Harare Zimbabwe MAIN BANKERS Standard Chartered Bank Zimbabwe Limited Africa Unity Square Branch Corner Nelson Mandela Avenue / Sam Nujoma Street P.O. Box 2472 Harare Zimbabwe LAWYERS Wintertons Beverley Corner Corner Third Street / Selous Avenue P.O. Box 452 Harare Zimbabwe TRANSFER SECRETARIES Corpserve (Private) Limited 2nd Floor ZB Centre Corner First Street / Kwame Nkrumah Avenue P.O. Box 2208 Harare Zimbabwe2 www.okziminvestor.com
  4. 4. 2012 annual report Directorate and Management BOARD OF DIRECTORS Chairman D.B. Lake Chief Executive Officer V.W. Zireva* Chief Operating Officer A.R. Katsande* Finance Director A.E. Siyavora* W. N. Alexander F.T. Kembo M.T. Rukuni (Mrs) M. Tapera R. van Solt M. C. Jennings (alternate) * Executive Group Secretary H.Nharingo AUDIT COMMITTEE Chairman M.T. Rukuni (Mrs) F.T. Kembo M. Tapera R. van Solt Group Secretary H. Nharingo REMUNERATION COMMITTEE Chairman M. Tapera D.B. Lake W. N. Alexander V.W. Zireva MANAGEMENT COMMITTEE Chief Executive Officer V.W. Zireva Chief Operating Officer A.R. Katsande Finance Director A.E. Siyavora Human Resources Executive M.Z. Chimbghandah Procurement Executive M.R. Chingaira Business Information Executive J. Madondo Operations Executive A. Munodawafawww.okziminvestor.com 3
  5. 5. 2012 annual report Board of Directors ZIMBABWE LIMITED Seated from left M. T. Rukuni (Mrs) V. W. Zireva D. B. Lake A. E. Siyavora A. R. Katsande DIRECTOR CHIEF EXECUTIVE OFFICER CHAIRMAN FINANCE DIRECTOR CHIEF OPERATING OFFICER Standing from left F. T. Kembo R. van Solt M. Tapera W. N. Alexander DIRECTOR DIRECTOR DIRECTOR DIRECTOR M. C. Jennings (not in picture) DIRECTOR (Alternate)4 www.okziminvestor.com
  6. 6. 2012 annual report Organisational Vision VISION STATEMENT CORE VALUES OK will be the dominant retailer in Zimbabwe. Discipline, honesty and integrity We believe in discipline, honesty and integrity. Our OK will establish presence in the region. actions will, at all times, be ethical and fair. These principles, which are fundamental to everything we do, We aim to achieve real growth in turnover and will be consistently applied and will not be compromised. profitability. Respect for the individual We will benchmark with world-class retailers to set the We believe in and have respect for the individual be they standards for quality retailing. an employee, a customer, a supplier, a shareholder or any other stakeholder. We will be the preferred employer in our industry. Teamwork We will strive to retain and grow our customer base We believe that our goals will be achieved best through through the provision of satisfying shopping teamwork. We will always think “we” and not “I”. experiences. Quality service MISSION STATEMENT We have pride in the quality of our service and are committed to excellence of quality in product and Our business is general retailing, providing quality service. merchandise and service while offering value for money to our customers in all market segments in Zimbabwe. Continuous improvement We believe in the principle of continuous improvement We are committed to the development and welfare of and with this we embrace total quality management, our employees. facility improvement and technological advancement. We encourage ingenuity and innovation and above all we We will achieve an optimum return on investment. promote the development of our staff. We will strive to build long-term relationships with our Good corporate citizenship suppliers and the community. We are fully cognisant of our responsibility to society and, through our contributions, sponsorship, environmental concern and other such practices, will always be a good corporate citizen.www.okziminvestor.com 5
  7. 7. 2012 annual report6 6 www.okziminvestor.com
  8. 8. 2012 annual report Financial Highlights For the year ended 31 March 2012 2011 US$ US$ Revenue 412 563 027 257 426 323 EBITDA 19 179 858 8 136 170 Profit before tax 14 980 734 5 319 998 Profit for the year 10 306 497 4 285 700 Headline earnings 10 404 944 4 320 665 Total assets 95 495 906 68 345 295 Market capitalisation 109 587 769 76 876 991 Dividend: cents Interim 0.15 - Final 0.35 0.21www.okziminvestor.com 7
  9. 9. 2012 annual report Chairman’s Statement CHAIRMANS STATEMENT profitability of the Group. OVERVIEW: CONSOLIDATING GROWTH The Group accessed the $5 million convertible loan from the Investec Africa Frontier Private Equity Fund in line The Zimbabwean economy has continued to respond with the existing agreement and the funds will be applied favourably to the multi- currency regime during the year to the ongoing store refurbishment programme. under review. However, re-capitalisation constraints, liquidity challenges and low capacity utilisation GROUP PERFORMANCE continued to hinder significant recovery. Foreign participation in the local economy was to some extent Revenue generated for the period under review limited by the credit crunch experienced in most increased by 60.3% to US$412.6 million from US$257.4 advanced economies and by the country risk factors as million in 2011. Profit before tax was US$15.0 million perceived by potential investors. Despite these compared to US$5.3 million in 2011, while profit after tax challenges, the 2011 Gross Domestic Product grew by an was US$10.3 million compared to US$4.3 million in prior estimated 9.3%, while annual inflation remained year. Net operating expenses increased by 38.7% from relatively low closing the year at 4.9%. US$19.9 million in 2011 to US$27.6 million during the period under review, but the ratio of total operating Most of the products sold in the stores were imported as expenses to sales decreased to 13.3% against 14.8% in the local manufacturing base has yet to recover previous year. The increase in net operating expenses sufficiently to satisfy demand. Some basic products was largely attributable to the increase in electricity were subjected to quota restrictions but this did not tariffs as well as the cost of running larger generators hinder supply as the requisite import permits were during periods of power cuts. The cost of borrowing secured. Although the Group had to import goods, it increased to US$0.5 million compared to US$0.1 million continued to support the local industry and is an active during the same period in the prior year. Capital participant in the “ Buy Zimbabwe” campaign. All the expenditure during the period was US$11.5 million Groups stores were adequately stocked throughout the compared to US$9.4 million in the previous year and was financial year. Prices were generally stable with minimal mainly in respect of store refurbishments, the opening of movement linked to Rand/US Dollar exchange rate the two stores, replacement of plant and equipment and fluctuation since South Africa remains the major source overhauling the operations and distribution vehicle of imported products. fleet. The Group continued to consolidate on growth reported DIVIDEND on in the previous year. Sales were ahead of budget and profitability improved from the previous year. Two The directors declared a final dividend of 0.35 cents stores were added to the stable, namely Bon Marche bringing the aggregate dividend for the year to 0.5 cents. Westgate in August 2011 and OK Kwame Nkrumah in January 2012. The OKmart operation celebrated its first anniversary on 31 March 2012 achieving widespread market acceptance and support and making a commendable contribution to sales growth and8 www.okziminvestor.com
  10. 10. 2012 annual report Chairman’s Statement (cont’d) OUTLOOK The stability experienced in the last financial year is expected to continue with the economy officially forecast to grow by 9.4% in calendar year 2012 and inflation expected to end the year below 5%. Disposable incomes are expected to remain low but improving with the forecast growth in Gross Domestic Product. The importation of products is expected to continue while local manufacturers battle to increase production. The current refurbishment exercise to refresh and modernise the Groups retail outlets continues with OK Marimba, OK Fife Avenue and Bon Marche Avondale set to undergo refurbishment in the first half of the year and an additional four stores are scheduled for renovations before the end of the financial year. These efforts are aimed at making the Groups outlets destinations of choice thereby growing and maintaining our market dominance. The Group will also continue to actively explore growth opportunities through opening new stores in new locations. The Board, management and staff will continue in their endeavours to reward the continued loyalty and support of our shareholders, suppliers and customers. . D. B. LAKE CHAIRMAN 1 June 2012www.okziminvestor.com 9
  11. 11. 2012 annual report Chief Executive’s Report Performance Review previous performance which management believe can be sustained through focus and discipline. Having established a solid base by the end the previous financial year, I am pleased to report that the business OPERATIONS grew significantly for the year to 31 March 2012. The selected results, ratios and statistics in the table below The Group closed the financial year with 53 outlets highlight the vital indicators of that growth. comprising 44 OK stores, 7 Bon Marche’ stores and 2 OKmart stores. We opened one Bon Marche’ store in 2012 2011 Westage shopping centre in August 2011 and an OK outlet on Kwame Nkrumah Avenue in January 2012, both located in Harare. Our ambitious store refurbishment Revenue ($ millions) 412.6 257.4 programme is ongoing and saw the number of Operating income ($ millions) 15.4 5.4 refurbished outlets increasing to fifteen (15). Various EBITDA 19.1 8.1 items of equipment were also upgraded and /or replaced Attributable earnings ($ millions) 10.3 4.3 to improve facilities, while the distribution fleet was Gross margin 16.9% 16.8% increased in order to improve movement of product Overheads to sales 13.3% 14.8% from the central warehouse to the branches. Operating profit to sales 3.7% 2.1% Inventory (millions) 42.3 30.9 As in prior year, most of the products sold were imported Stock turn (times) 9.6 10.5 as the tight liquidity in the economy and the under- Current ratio 1.5 1.5 capitalisation of most local companies continued to limit Employee benefits to sales 5.5% 5.7% manufacturers’ capacity to produce at optimum levels. Although some basic products continued to be imported The Group’s stocking levels increased by 35% against on quotas, generally import permits were not difficult to sales growth of 60% showing overall stock management secure and thus importation of goods was not disrupted. efficiencies. The decline in stock turn to 9.6 from 10.5 times is a result of the longer than normal delivery lead Two years ago we reported on the high levels of times for imported products as well as the impact of the shrinkage that were experienced. Controls in this area OKmart operation that requires an average stock cover of have been improved and the shrinkage as a percentage two months for certain product ranges. To achieve the of sales has been brought below industry levels. The growth in sales we maintained the momentum picked up purchase of bigger generators with adequate capacity to in prior year through these initiatives:- run all equipment in the stores also assisted to reduce the level of markdowns of spoiled products. launching the OKmart brand which attracted ? more business from diverse market segments; OKmart division ? that the product offering to our ensuring customers remained adequate and at As reported last year, the Group took over the two sites competitive prices; that Makro Zimbabwe used to operate from in Bulawayo p ro v i d i n g go o d c u sto m e r s e r v i c e to and Harare and started operations on 31st March 2011. consumers; The Makro business format has largely been maintained continuing the major store refurbishment and this facilitates benchmarking with Makro’s programme; and operations in South Africa. This brand targets diverse engaging in focused promotional activities market segments and has had a good response from consumers, particularly in Harare. The operation is Gross profit margins were maintained in the OK & Bon designed to be a higher volume, lower gross profit Marche’ operations but the current year’s overall level margin and lower overhead operation when compared was diluted by the lower margin contribution of the with the supermarket business. This division exceeded OKmart operation. Operating profit improved because its sales and profit targets in the first year of operation of effective controls over shrinkage, mark-downs and and is anticipated to continue the good performance as overheads. we fine tune the offering. The financial results reflect continuing improvement on10 www.okziminvestor.com
  12. 12. 2012 annual report Chief Executive’s Report (cont’d) HUMAN RESOURCES activities carried out during the reporting period included the OK Mega Value Expo promotion, the Bon As a consequence of increased business activity linked Marche’ Brilliant Buys, the Bon Marche’ Green Apple to store refurbishments, the new stores and vigorous promotion and the OKmart first anniversary campaign. competition for market share, the Group progressively The Bon Marche’ brand has become associated with increased the staff complement in order to enhance power walks and aerobathons, essentially positioning it service delivery to customers. The headcount as at 31 as a brand for health and lifestyle shopping. Efforts March 2012 was 3 458 compared to 3 063 employees in continue to promote the Shop Easy Card for both Bon the prior year. The Group continued with the Marche’ and OK stores as a means of enhancing service management graduate trainee program as part of its delivery and offering customers added convenience. succession planning strategy. COMMUNITY RESPONSIBILITY The industrial relations climate remained calm and positive during the reporting period despite the various The Group’s corporate social responsibility program challenges faced by employees in the difficult economic continues to focus on senior citizens initiatives, environment. The Group continued with the health and education, HIV/AIDS and children in difficult wellness program for staff members across the Group’s circumstances. In line with the social responsibility branch network focusing on health awareness, peer program, the reporting period saw a number of charities education, support and counseling. and other selected beneficiaries receiving some donations as part of our corporate social responsibility INFORMATION TECHNOLOGY efforts. These include Help Age, Manhinga Village and Jairos Jiri Association. Contributions to the Mayors’ A high level of connectivity is essential to operate the real Christmas cheer funds were made in most cities and time business system. Accordingly, the number of towns. These were mostly in the form of Shop Easy Cards branches on fibre optic links has been increased to forty- to facilitate their grocery shopping and cash to assist with four, with an additional five branches to be connected in administrative costs. The Senior Citizen Discount that the coming financial year. The few of the branches that the Group offered in the past is being resuscitated. Most are not in areas with fibre optic lines have been recently the Group has begun involvement with the re- connected via satellite. To ensure uninterrupted forestation drive in the country and has contributed processing in the branches, uninterrupted power supply towards that cause. (UPS) units have been installed in the stores. I reported last year that work was under way to migrate the CORPORATE GOVERNANCE business from Mach4 to a newer system. There has been a delay in finalizing this but work is in progress to move The Group remains committed to principles of Corporate the business information to the new software and Governance and best practices which endorse a culture platform. of business ethics, openness, transparency, integrity and accountability in its dealings with all its stakeholders. PROMOTIONS The Group’s structures, operations, policies and procedures are continuously assessed and updated for The Group successfully launched the 24th Edition of the compliance with the law and generally accepted OK Grand Challenge Jackpot Promotion on 12th April standards of good corporate governance. Our current 2012 and the promotion has received very positive practices are consistent with the standards of good support from both customers and suppliers. The level of corporate governance and with the standards set by interest from our supplier partners was such that we had regulatory authorities and are covered in detail to limit participating product lines to lead brands and elsewhere in this report. excluded complimentary lines. Other promotionalwww.okziminvestor.com 11
  13. 13. 2012 annual report Chief Executive’s Report (cont’d) RISK MANAGEMENT since local manufacturers are yet to increase production capacity to adequate levels. The Group will continue The Group operates a formalized and thorough process with strategies to grow the business and enhance of identifying, monitoring and managing business risks. shareholder value through some of the following: This is aimed at protecting assets and earnings against exceptional financial losses and legal liabilities as well as ? adequate availability of stock and a Ensuring seizing opportunities. The Board reviews all business wide range of products on offer; risks on a quarterly basis and ensures that action plans or Cost containment, improved productivity and ? strategies have been put in place to manage identified efficiency in all areas of operations; risks. The Group constituted a Risk Management Upgrading and expanding store network to ? Committee to spearhead the implementation of the enhance customer convenience and increase Enterprise-wide Risk Management systems and work is brand loyalty. continuing to ensure full implementation of risk-based audits in the Group. I wish to heartily thank all management and staff for their contributions during the financial year just ended. I Operational risks are managed through formalized also wish to express my gratitude to our customers, procedures and controls, well-trained personnel and suppliers, business partners and other stakeholders for Information Technology back-up facilities. Emphasis is their continued support. placed on continuous review and improvement of systems and procedures as well as specific internal and . external audits. Sufficient resources and manpower are made available at all units to continually monitor and report on risk. The installation of enhanced CCTV systems in all outlets is part of the program for the ensuing year as this is seen as a critically important part in risk management. Live TV monitors will be included in the exercise in most units. The environment we are operating in is still harsh and therefore the process of risk management has become a vital component of the management process. OUTLOOK V.W. ZIREVA The prevailing macro-economic stability is expected to CHIEF EXECUTIVE OFFICER hold over the next year although the economy will continue to grow at a sluggish pace. Liquidity challenges are likely to persist while disposable incomes will remain generally low. Product supply will be adequate although the bulk of merchandise will continue to be imported12 www.okziminvestor.com
  14. 14. 2012 annual report Group Profile HISTORICAL BACKGROUND developed its own brands through the OK Pot O Gold, OK Value, Bon Marche Premier Choice labels and OK Zimbabwe Limited was first incorporated as Shoppers’ Choice. Springmaster Corporation in 1953. In 1984, the name was changed to Deltrade Limited and this was in turn, MANAGEMENT STRUCTURE subsequently changed to the current name in July 2001. The Company controls numerous subsidiaries that are The Group is controlled by a Board of Directors and dormant. managed by a Management Committee, comprising seven departmental executives (including three The inaugural branch opened at OK First Street (Harare) Executive Directors). The Management Committee in 1942 and the second branch in Bulawayo in 1952. A reports to the Board through the Chief Executive Officer. further five outlets were opened across the country by the end of 1960. HEALTH AND SAFETY In 1977, Delta Corporation acquired the business The Group continues to provide both preventative and operations in Springmaster Corporation (now OK curative health delivery services to its employees. Zimbabwe Limited), which they held until the de-merger Outreach programmes to family members of the sick and in October 2001. bedridden employees revealed a growing need for generic as well as systematic counselling services, which OK Zimbabwe Limited has established itself as a were provided through professionals. customer-oriented organization providing comprehensive access to a broad range of retail products EDUCATION and allied services developed in response to its customers requirements for convenience and value. Staff development is one of our core values. A substantial number of our employees are enrolled on various BUSINESS OPERATIONS education and training programmes at tertiary and professional levels. These programmes provide The Group is a leading supermarket retailer whose succession material for technical and managerial business covers three major categories, comprising positions in the Group. groceries, basic clothing and textiles and house ware products. The groceries category includes dry groceries, TRAINING butchery, delicatessen, takeaway, bakery, provisions and fruit and vegetable sections. The bakeries and fruit and The Retail Management Development Programme vegetable operations are currently outsourced to comprising the Internal Management Trainees and Innscor and Favco, respectively. Another specialist area is Graduate Management Trainees remains the school wear. cornerstone of our management development endeavors. For the general staff our focus has been on OK Zimbabwe Limited trades under three highly the sharpening of skills and competencies. recognized brand names, OK stores, Bon Marche stores, and a new brand OKmart was introduced at the start of CORPORATE SOCIAL RESPONSIBILITY the financial year. The diversified distribution channel allows the Group to target all segments of the desired OK Zimbabwe Limited has shown commitment to the market. In this regard, the Group has specifically profiled community by sponsoring or donating to causes in the its stores in terms of design, product range, services and areas of health, education, students employment, other offerings in a way that effectively caters for the charities, sports and the environment. Childrens Homes, specific requirements in the low, middle and high income Old Peoples Homes, Hospice Centres and Disabled consumer categories. Peoples Associations and re-forestation efforts are amongst the beneficiaries of OK Zimbabwes Social OK Zimbabwe Limited has maintained its position as one Responsibility efforts. Through its network of branches, of the dominant supermarket retailers in the countrys OK Zimbabwe Limited is involved in various local competitive retail sector, despite the effect of liquidity community activities. The branches are proud to be able constraints and low disposable incomes. The Group has to make a positive contribution to the communities inwww.okziminvestor.com 13
  15. 15. 2012 annual report Report of the Directors The Directors have pleasure in presenting their Eleventh Annual Report and the Audited Financial Statements of the Group for the year ended 31 March 2012. YEARS RESULTS US$ Profit for the year and earnings attributable to shareholders 10 306 497 FIXED ASSETS Capital expenditure for the year to 31 March 2012 totaled US$11.5 million. SHARE CAPITAL The authorised share capital of the Group was US$200,000 made up of 2,000,000,000 ordinary shares of US$0.0001 each while the issued share capital was US$104,369 made up of 1,043,693,040 ordinary shares of US$0.0001 each. RESERVES The movements in the Reserves of the Group are shown in the Statement of Changes in Equity and in the Notes to the Financial Statements. DIRECTORS Messrs. N.W. Alexander, R. van Solt and M.C. Jennings retire by rotation in accordance with Article 100 of the Articles of Association and, being eligible, offer themselves for re-election. Mr. H. Nkala was appointed to the Board on 8 June 2012 and in terms of section 107 of the Articles of Association, he retires from the Board. Being eligible, he offers himself for re-election. AUDITORS Members will be asked to approve the auditors fees for the past financial year and to appoint auditors of the Group for the ensuing year. ANNUAL GENERAL MEETING The Eleventh Annual General Meeting of the Group will be held at 10:00 on Friday 27 July 2012 in the OKmart Functions Room, First Floor, OKmart 30 Chiremba Road, Hillside, Harare. BY ORDER OF THE BOARD D.B. LAKE V.W. ZIREVA H. NHARINGO Chairman Chief Executive Officer Group Secretary 1 June 201214 www.okziminvestor.com
  16. 16. 2012 annual report Corporate Governance INTRODUCTION Any service rendered by Directors and all Directors interests in OK Zimbabwe are required to be conducted The primary objective of any system of corporate on an arms length basis. Full disclosure of any such governance is to ensure that directors, executives and arrangements by all current executive and non-executive managers, to whom stewardship of companies is Directors must be made in accordance with legal entrusted by the shareholders, carry out their requirements. Each year, Directors are required to responsibilities faithfully, effectively and efficiently. submit in writing whether they have any interest in any contract of significance with the Group, which could give The Board is committed to principles of corporate rise to a conflict of interest. governance and best practices which endorse a culture of business ethics, openness, transparency, integrity and AUDIT COMMITTEE accountability in its dealings with all stakeholders. The Groups structures, operations, policies and procedures The Committee consists of four Non-Executive Directors are continuously assessed and updated for compliance with the Chief Executive Officer and with the Finance with the law and generally accepted standards of good Director attending as ex-officio. The internal and corporate governance. external auditors attend the meetings and have unrestricted access to the Chairman of the Committee. BOARD OF DIRECTORS The Committee meets at least twice a year. The function of the Audit Committee is to advise the Board on all The Groups Articles of Association provide for the matters relating to corporate governance and regulatory appointment of independent directors. The Board issues. In particular, it monitors financial controls, currently comprises three Executive Directors and six accounting policies, accounting systems and assesses Non-Executive Directors who were chosen for their wide the processes for identifying, monitoring and managing range of professional and commercial competencies. business risks. It reviews any significant abnormal The Chairman of the Board is a non-executive director. transactions, ensures there are no restrictions on external auditors work and follows up matters reported The Board of Directors is responsible for giving direction or unresolved with the auditors. It reviews the Groups to the Group through the setting of the overall strategy, financial statements and external audit fees before key policies and risk parameters. It is also responsible for submission to the Board for consideration and approval. approving strategic and operational budgets, significant The Audit Committee monitors the Internal Audit acquisitions and disposals and interim and annual Charter, plans, programs, reports and recommends the operating results. The implementation of the overall appointment of external auditors. strategy, policies and the management of risk are monitored using key performance indicators and best REMUNERATION COMMITTEE practice benchmarks. Executive management presents structured reports, to allow the Board to monitor The Committee consists of three Non-Executive performance. The Board has constituted Audit and Directors and the Chief Executive Officer. The Remuneration Committees to assist it in the discharge of Remuneration Committee is responsible for making its responsibilities. recommendations on all major policy issues, including Board appointments and the remuneration policy of In terms of the Groups Articles of Association, Directors Executive Directors and senior management. The are not precluded from entering into or being interested objective of the policy is to ensure that the right caliber of in contracts or arrangements with the Group. However, a management is recruited and retained. The Committee Director who is in any way, whether directly or indirectly, also considers, at Board level, remuneration levels and interested in a contract or proposed contract which has conditions of service of staff to ensure that these are fair, been or is to be entered into by the Group, is required to appropriate and in line with the market and the Groups declare the nature and extent of this interest. A Director remuneration philosophy. is not permitted to vote in respect of any contract or arrangement in which he or she is interested.www.okziminvestor.com 15
  17. 17. 2012 annual report Corporate Governance (cont’d) ETHICS Directors and employees are required to observe the highest ethical standards ensuring that business practices are conducted in a manner which, in all reasonable circumstances, is beyond reproach. In this regard, the Group has a detailed code of ethics for all levels of employees. In line with the Zimbabwe Stock Exchange Listing Requirements, the Group observes a closed period prior to the publication of its interim and year-end financial results, during which period Directors, officers and employees may not deal in the shares of the Group. Where appropriate, this restriction is also extended to include other sensitive periods. EQUAL OPPORTUNITY The Group is committed to providing equal opportunities for its employees regardless of race, tribe, place of origin, political opinion, colour, creed or sex. EMPLOYEE PARTICIPATION The Group recognises the need for orderly consultation and discussions through workers committees, works councils, departmental and liaison meetings and other collective bargaining fora. These structures, which are designed in consultation with employee representatives, are intended to achieve good employer/employee relations as well as promoting productivity, safety and loss control. SAFETY, HEALTH AND ENVIRONMENT The Group aims to create wealth and to contribute to development by operating its business with due regard for economic, social, cultural and environmental issues. Safety, health and environmental issues, therefore, receive special attention.16 www.okziminvestor.com
  18. 18. 2012 annual report Accounting Philosophy OK Zimbabwe Limited is dedicated to achieving meaningful and responsible reporting through comprehensive disclosure and explanation of its financial results. This is done to assist objective corporate performance measurement, to enable returns on investment to be assessed against the risks inherent in their achievement and to facilitate appraisal of the full potential of the Group. The core determinant of meaningful presentation and disclosure of information is its validity in supporting managements decision making process. While the accounting philosophy encourages the pioneering of new techniques, it endorses the fundamental concepts underlying both the financial and management accounting disciplines as enunciated by the Institute of Chartered Accountants of Zimbabwe, the International Accounting Standards Committee and the International Federation of Accountants. The Group is committed to regular reviews of accounting standards and to the development of new and improved accounting practices. This is done to ensure that the information reported to the management and stakeholders of the Group continues to be internationally comparable, relevant and reliable. This includes, wherever it is considered appropriate, the early adoption of accounting standards.www.okziminvestor.com 17
  19. 19. 2012 annual report Directors’ Responsibility for Financial Reporting OK Zimbabwe Limiteds Directors are required by the compliance signed by the Chief Executive Officer and a Companies Act (Chapter 24:03) to maintain adequate comprehensive programme of internal audits. In accounting records and to prepare financial statements addition, the Groups external auditors review on a test for each financial period, which present a true and fair basis aspects of the internal financial control systems view of the state of the affairs of the Group at the end of that they deem relevant during the course of their the reporting period and of the profit and cash flows for statutory examination of the Group. the period. In preparing the accompanying financial statements, generally accepted accounting practices The Audit Committee meets regularly with the Groups have been applied, accounting policies have been used, internal and external auditors and executive and reasonable and prudent judgments and estimates management to review accounting, auditing, internal have been made in compliance with International control and reporting matters. Financial Reporting Standards. The financial statements incorporate full and responsible disclosure in line with The financial statements were reviewed by the Board of the accounting philosophy of the Group. Directors and are approved and signed on their behalf by: The Directors have reviewed the Groups budget and cash flow forecast for the year to 31 March 2013. On the basis of this review, and in the light of the current financial position and existing borrowing facilities, the Directors are satisfied that OK Zimbabwe Limited is a D. LAKE V. W. ZIREVA going concern and has continued to adopt the going Chairman Chief Executive Officer concern basis in preparing the financial statements. The Groups external auditors, Deloitte & Touche, have 1 June 2012 audited the financial statements and their report appears on page 19. The Board recognises and acknowledges its responsibility for the Groups system of internal financial control, policy on business conduct, which covers ethical behaviours, compliances with legislation and sound accounting practice, underpins the Groups internal financial control policies and procedures, clearly defined lines of accountability and delegation of authority, and comprehensive financial reporting and analysis against approved budgets. The responsibility for operating the system is delegated to the Executive Directors and senior management who confirm that they have reviewed its effectiveness. They consider that it is appropriately designed to provide reasonable, but not absolute, assurance that assets are safeguarded against material loss or unauthorized use and the transactions are properly authorized and recorded. The effectiveness of the internal financial control system is monitored through management reviews, representation letters on18 www.okziminvestor.com
  20. 20. 2012 annual report Report of the Independent Auditors to the members of OK Zimbabwe Limited We have audited the accompanying consolidated financial statements of OK Zimbabwe Limited and its subsidiary (together “the Group”) as set out on pages 20 to 44, which comprise the consolidated statement of financial position at 31 March 2012, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and the notes to the consolidated financial statements, which include a summary of significant accounting policies and other explanatory notes. DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards (IFRS) and in the manner required by the Companies Act (Chapter 24:03) and the relevant Statutory Instruments (SI 33/99 and SI 62/96). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. AUDITORS’ RESPONSIBILITY Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. OPINION In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of OK Zimbabwe Limited at 31 March 2012, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS statemen In our opinion, the financial statements have, in all material respects, been properly prepared in compliance with the disclosure requirements of the Companies Act (Chapter 24:03) and the relevant Statutory Instruments (SI 33/99 and SI62/96). DELOITTE & TOUCHE Chartered Accountants Harare, Zimbabwe 1 June 2012www.okziminvestor.com 19
  21. 21. 2012 annual report Consolidated Statement of Comprehensive Income For the year ended 31 March 2012 2011 NOTE US$ US$ Revenue 5 412 563 027 257 426 323 Changes in trade inventories (11 099 826) (13 794 294) Merchandise and consumables used (331 301 261) (200 120 241) Employee benefits expense (22 536 574) (14 635 678) Depreciation expense 6.2 (3 760 891) (2 714 625) Share option expense (816 081) (791 153) Net operating expense (27 596 909) (19 948 787) Finance costs (470 751) (101 547) Profit before taxation 6 14 980 734 5 319 998 Taxation 7.1 (4 674 237) (1 034 298) Profit for the year 10 306 497 4 285 700 Other comprehensive income Gains on revaluations of property, plant and equipment 1 934 563 3 059 920 Fair value adjustment on available for sale equity investments (3 804) (2 791) Income tax relating to components of other comprehensive income (498 150) (787 901) Other comprehensive income for the year net of tax 1 432 609 2 269 228 Total comprehensive income for the year 11 739 106 6 554 928 Weighted average number of ordinary shares in issue 1 027 421 409 996 967 989 Share performance : cents : attributable earnings 24 1.00 0.43 : headline earnings basis 24 1.01 0.43 : net asset value 4.62 3.8520 www.okziminvestor.com
  22. 22. 2012 annual report Consolidated Statement of Financial Position As at 31 March 2012 2011 US$ US$ NOTE (restated) Assets Non-current assets Property, plant and equipment 9 36 777 506 27 288 949 Goodwill 10 400 000 400 000 Long-term investments 11 230 121 406 141 37 407 627 28 095 090 Current assets Inventories 12 42 321 270 30 890 226 Trade and other receivables 13 3 962 593 2 805 607 Short-term loans 14 80 994 10 093 Cash and cash equivalents 11 723 422 6 544 279 58 088 279 40 250 205 Total assets 95 495 906 68 345 295 Equity and Liabilities Equity Shareholders equity 47 514 911 38 376 228 Non-current liabilities Deferred taxation 15 4 802 031 3 252 906 Long-term borrowings 16 5 000 000 - 9 802 031 3 252 906 Current liabilities Trade and other payables 17 36 910 141 26 049 315 Current tax liabilities 18.4 1 268 823 666 846 38 178 964 26 716 161 Total equity and liabilities 95 495 906 68 345 295 For and on behalf of the Board: D.B. Lake V.W. Zireva Nharingo H. Nharing (Chairman) (Chief Executive Officer) (Group Secretary) 1 June 2012www.okziminvestor.com 21
  23. 23. 22 Consolidated Statement of Changes in Equity For the year ended 31 March 2012 NOTE Share Share Share Share based Investment Revaluation Non Retained Total capital premium allotment payment reserve reserve distributable earnings reserve reserve reserve Balance as at 1 April 2010 (as previously reported) 73 210 3 215 127 - 811 373 43 497 856 834 10 469 975 1 040 339 16 510 355 Prior year adjustment 19 - - - - - - (437 235) - (437 235) Balance as at 1 April 2010 (restated) 73 210 3 215 127 - 811 373 43 497 856 834 10 032 740 1 040 339 16 073 120 Profit for the year - - - - - - - 4 285 700 4 285 700 Other comprehensive income for the year net of income tax - - - - (2 791) 2 272 019 - - 2 269 228 Impairment of property, plant and equipment - - - - - (170 858) - (170 858) Recognition of share based payments - - - 791 153 - - - - 791 153 Share capital awaiting allotment - - 586 189 - - - - - 586 189 Rights issue expenses paid - (868 842) - - - - - - (868 842) Share buy-back costs - - - - - - - (182 395) (182 395) Transfer of reserve on shares exercised - - - (636 371) - - - 636 371 - Issue of shares 28 345 15 564 588 - - - - - - 15 592 933 Balance as at 31 March 2011 101 555 17 910 873 586 189 966 155 40 706 3 128 853 9 861 882 5 780 015 38 376 228 Profit for the year - - - - - - - 10 306 497 10 306 497 Other comprehensive income for the year, net of income tax - - - - (3 804) 1 436 413 - - 1 432 609 Dividend paid - - - - - - - (3 665 094) (3 665 094) Recognition of share based payments - - - 816 081 - - - - 816 081 Share capital allotted 519 585 670 (586 189) - - - - - - Transfer of reserve on shares exercised - - - (302 887) - - - 302 887 - Issue of shares 2 295 246 295 - - - - - - 248 590 Balance as at 31 March 2012 104 369 18 742 838 - 1 479 349 36 902 4 565 266 9 861 882 12 724 305 47 514 911www.okziminvestor.com 2012 annual report
  24. 24. 2012 annual report Consolidated Statement of Cash Flows For the year ended 31 March 2012 2011 NOTE US$ US$ Cash generated from operating activities Cash generated from trading 18.1 20 094 386 8 943 885 Working capital changes 18.2 (1 798 105) (2 975 952) Cash generated from operations 18 296 281 5 967 933 Net finance costs 18.3 (438 233) (83 538) Taxation paid 18.4 (3 021 285) (920 037) Dividend paid 18.5 (3 665 094) - Net cash generated from operating activities 11 171 669 4 964 358 Cash utilised in investment activities Investment to maintain operations : Replacement of property, plant and equipment (8 418 975) (8 127 334) Proceeds from disposal of property, plant and equipment 82 742 42 259 Decrease in long-term investments 172 216 - (8 164 017) (8 085 075) Investment to expand operations: Additions to property, plant and equipment (3 077 099) (1 139 833) Net cash invested (11 241 116) (9 224 908) Financing activities Decrease in short-term borrowings - (7 122 221) Increase in long-term borrowings 5 000 000 - Proceeds from rights issue - 15 022 509 Rights issue expenses - (868 842) Share buy-back - (182 395) Proceeds from share options exercised 248 590 282 898 Net financing raised 5 248 590 7 131 949 Net increase in cash and cash equivalents 5 179 143 2 871 399 Cash and cash equivalents at the beginning of year 6 544 279 3 672 880 Cash and cash equivalents at the end of year 11 723 422 6 544 279www.okziminvestor.com 23
  25. 25. 2012 annual report Notes to the Consolidated Financial Statements For the year ended 31 March 2012 1. General information OK Zimbabwe Limited is a listed Group registered and conducting business in Zimbabwe. The Group is a leading supermarket retailer whose business covers three major categories, comprising groceries, basic clothing and textiles and house-ware products. At the reporting date, the Group was operating from fifty three shops countrywide, had one wholly owned subsidiary and joint ownership of a boat. 2. Application of new and revised International Financial Reporting Standards (IFRSs) 2.1 New and revised IFRSs affecting amounts reported in the current year (and/or prior years) The following new and revised IFRSs have been applied in the current year and have affected the amounts reported in these financial statements. Details of other new and revised IFRSs applied in these financial statements that have had no material effect on the financial statements are set out in section 2.2. New and revised IFRSs affecting presentation and disclosure only Amendments to IAS 1 Presentation of Financial Statements (as part of Improvements to IFRSs issued in 2010) The amendments to IAS 1 clarify that an entity may choose to disclose analysis of other comprehensive income by item in the statement of changes in equity or in the notes to the financial statements. In the current year, for each component of equity, the Group has chosen to present such an analysis by item in the statement of changes in equity. Such amendments have been applied retrospectively. 2.2 New and revised IFRSs applied with no material effect on the consolidated financial statements The following new and revised IFRSs have also been adopted in these consolidated financial statements. The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements. IAS 24 Related Party Disclosures (as revised in 2009) IAS 24 Related Party Disclosures IAS 24 (as revised in 2009) has been revised on the following two aspects: (a) IAS 24 (as revised in 2009) has changed the definition of a related party and (b) IAS 24 (as Revised in 2009) introduces a partial exemption from the disclosure requirements for government-related entities. The Company and its subsidiaries are not government-related entities. Amendments to IFRS 3 Business Combinations As part of Improvements to IFRSs issued in 2010 IFRS 3 was amended to clarify that the measurement choice regarding non-controlling interests at the date of acquisition is only available in respect of non-controlling interests that are present ownership interests and that entitle their holders to a proportionate share of the entitys net assets in the event of liquidation. All other types of non-controlling interests are measured at their acquisition-date fair value, unless another measurement basis is required by other Standards. In addition, IFRS 3 was amended to provide more guidance regarding the accounting for share-based payment awards held by the acquirees employees. Specifically, the amendments specify that share-based payment transactions of the acquiree that are not replaced should be measured in accordance with IFRS 2 Share-based Payment at the acquisition date (market-based measure).24 www.okziminvestor.com
  26. 26. 2012 annual report Notes to the Consolidated Financial Statements For the year ended 31 March 2012 Amendments to IAS 32 Classification of Rights Issues The amendments address the classification of certain rights issues denominated in a foreign currency as either equity instruments or as financial liabilities. Under the amendments, rights, options or warrants issued by an entity for the holders to acquire are classified as equity instruments in the financial statements of the entity provided that the offer is made pro rata to all of its existing owners of the same class of its non-derivative equity instruments. Before the amendments to IAS 32, rights, options or warrants to acquire a fixed number of an entitys equity instruments for a fixed amount in foreign currency were classified as derivatives. The amendments require retrospective application. The application of the amendments has had no effect on the amounts reported in the current and prior years because the Group has not issued instruments of this nature. Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement IFRIC 14 addresses when refunds or reductions in future contributions should be regarded as available in accordance with paragraph 58 of IAS 19; how minimum funding requirements might affect the availability of reductions in future contributions; and when minimum funding requirements might give rise to a liability. The amendments now allow recognition of an asset in the form of prepaid minimum funding contributions. The application of the amendments has not had material effect on the Groups consolidated financial statements. IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments The Interpretation provides guidance on the accounting for the extinguishment of a financial liability by the issue of equity instruments. Specifically, under IFRIC 19, equity instruments issued under such arrangement will be measured at their fair value, and any difference between the carrying amount of the financial liability extinguished and the consideration paid will be recognised in profit or loss. The application of IFRIC 19 has had no effect on the amounts reported in the current and prior years because the Group has not entered into any transactions of this nature. 2.3 New and revised IFRSs in issue but not yet effective The Group has not applied the following new and revised IRFSs that have been issued but are not yet effective. Amendments to IFRS 7 Disclosure - Transfers of Financial Assets : Effective for annual periods beginning on or after 1 July 2011 IFRS 9 Financial Instruments : Effective for annual periods beginning on or after 1 January 2013 IFRS 10 Consolidated Financial Statements : Effective for annual periods beginning on or after 1 January 2013 IFRS 11 Joint Arrangements : Effective for annual periods beginning on or after 1 January 2013. IFRS 12 Disclosure of Interests in Other Entities : Effective for annual periods beginning on or after 1 January 2013. IFRS 13 Fair Value Measurement : Effective for annual periods beginning on or after 1 January 2013. Amendments to IAS 1 Presentation of Items of Other Comprehensive Income : Effective for annual periods beginning on or after July 2012. Amendments to IAS 12 Deferred Tax - Recovery of Underlying Assets : Effective for annual periods beginning on or after 1 January 2012.www.okziminvestor.com 25
  27. 27. 2012 annual report Notes to the Consolidated Financial Statements For the year ended 31 March 2012 IAS 19 (as revised in 2011) Employee Benefits : Effective for annual periods beginning on or after 1 January 2013. IAS 27 (as revised in 2011) Separate Financial Statements: Effective for annual periods beginning on or after 1 January 2013. IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures : Effective for annual periods beginning on or after 1 January 2013. IAS 32 (as revised in 2011) Financial Instruments: Presentation: Effective for annual periods beginning on or after 1 January 2014. IFRIC 20 Stripping costs in the production phase of surface mine: Effective for annual periods beginning on or after 1 January 2013. The Directors have not accessed the impact of these amendments on the consolidated financial statements. 3 Significant accounting policies 3.1 Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and the requirements of the Companies Act ( Chapter 24:03) and relevant Statutory Instruments (SI33/99 and SI62/96). 3.2 Basis of preparation The financial statements have been prepared on the historical cost basis except for the fair valuation of certain non-current assets and financial instruments. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The principal accounting policies of the financial statements, set out below, have been consistently followed in all material respects. 3.3 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities including special purpose entities controlled by the Company (its subsidiaries). Control is achieved where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. 3.4 Business combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRSs. Changes in the fair value of contingent consideration classified as equity are not recognised.26 www.okziminvestor.com
  28. 28. 2012 annual report Notes to the Consolidated Financial Statements For the year ended 31 March 2012 Where a business combination is achieved in stages, the Groups previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of. The acquirees identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 (2008) are recognised at their fair value at the acquisition date, except that: ? tax assets or liabilities and liabilities or assets related to employee benefit arrangements are deferred recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively; ? or equity instruments related to the replacement by the Group of an acquirees share-based liabilities payment awards are measured in accordance with IFRS 2 Share-based Payment; and ? disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets assets (or Held for Sale and Discontinued Operations are measured in accordance with that Standard. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date and is subject to a maximum of one year. 3.5 Interest in joint venture A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control (i.e. 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). When a group entity undertakes its activities under joint venture arrangements directly, the Groups share of jointly controlled assets and any liabilities incurred jointly with other venturers are recognised in the financial statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Groups share of the output of jointly controlled assets, and its share of joint venture expenses, are recognised when it is probable that the economic benefits associated with the transactions will flow to/from the Group and their amount can be measured reliably. When a group entity transacts with a jointly controlled entity of the Group, unrealised profits and losses are eliminated to the extent of the Groups interest in the joint venture. 3.6 Goodwill Goodwill arising on acquisition of assets is initially measured and recognised at cost as determined on the acquisition date less accumulated impairment losses if any. This goodwill is subsequently reviewed for impairment at least on an annual basis and any resulting impairment is recognised immediately in profit or loss.www.okziminvestor.com 27
  29. 29. 2012 annual report Notes to the Consolidated Financial Statements For the year ended 31 March 2012 3.7 Foreign currency transactions and balances While the Groups records are maintained in United States Dollars, some of its transactions are conducted in other major foreign currencies. Foreign assets and liabilities are converted to United States Dollars at the rates of exchange ruling at the end of the financial period. Transactions in foreign currencies are translated to United States Dollars at rates of exchange ruling at the time of the transactions. Transaction and translation gains or losses arising on conversion or settlement are dealt with in profit or loss in the determination of the operating income. 3.8 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. 3.9 Property, plant and equipment Property, plant and equipment are stated in the statement of financial position at cost or revalued amount less any subsequent accumulated depreciation and impairment. Methods of valuation used are as follows: Industrial land and buildings open market value Residential land and buildings open market value Other property, plant and equipment cost and directors’ valuation Revaluations are performed with sufficient regularity such that the carrying amounts do not differ materially from those that would be determined using fair values at the end of the reporting period. Any revaluation increase arising on the revaluation of such land and buildings is recognised in other comprehensive income, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously expensed. A decrease in the carrying amount arising on the revaluation of such land and buildings is recognised in statement of comprehensive income to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset. Depreciation on revalued buildings is recognised in profit or loss. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings. No transfer is made from the revaluation reserve to retained earnings except when an asset is derecognised. Properties in the course of construction for production, supply or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Groups accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Freehold land is not depreciated. Plant, motor vehicles, fixtures and equipment are stated at cost and directors’ valuation less accumulated depreciation and accumulated impairment. These assets are depreciated over their estimated useful lives, which are as follows: Freehold property 20 years Leasehold improvements lease tenure28 www.okziminvestor.com