ContentsOverviewCorporate History 1Our Mission and Values 2Group Profile 3Our Business Portfolio, Products and Markets 4Highlights of our Performance 5Governance, Ethics & EngagementsChairman’s Statement 7Management‘s Review of Operations 11Our Governance and Ethics Approach 16Our Sustainability Approach 24Principal Risks and Opportunities 25Stakeholder Engagement 27PerformanceOur Sustainability Performance 30Directors` Responsibility andApproval of Financial Statements 38Company Secretary’s Certification 40Directors’Report 41Independent Auditor’s Report 43Annual Financial Statements 44 - 76Shareholders‘ Information 77Notice to Shareholders’ 78Shareholders’Diary 79AnnexuresGlossary of Terms 80GRI Index 81Corporate Information coverScope of this ReportWe are pleased to present the annual report forTurnall Holdings Limited,a company listed on the Zimbabwe Stock Exchange (ZSE) whichincludes Turnall Fibre Cement, a Building and Piping Products Companyfor the year ended 31 December 2012. We published our previousannual report for the reporting period ended 31 December 2011.This report is targeted at a broad range of our stakeholders with the aimof presenting a balanced review of material issues from our operations.The report includes our Harare and Bulawayo Factory operations. Therehave been very little changes in the company since our previousreporting.This is our first report prepared using Global Reporting Initiatives (GRI)Sustainability Reporting Framework (G3.1) in measuring our progresstowards sustainability. This report is prepared meeting GRI ApplicationLevel-C reporting requirements. Our sustainability reporting process wassupported with technical guidance from the Institute for SustainabilityAfrica ( Insaf).Our sustainability reporting is integrated with our financial reports asencouraged by King Code of Corporate Governance (King III) anddevelopment from the International Integrated Reporting Council (IIRC).Our financial statements are prepared in accordance with InternationalFinancial Reporting Standards (IFRS) and are audited by KPMG CharteredAccountants (Zimbabwe). An independent auditors’ report on thefinancial statements contained in this report appears on page 43 of ourfinancial statements.Forward looking StatementsCertain statements in this report constitute‘forward looking statements’.Such statements involve known and unknown risks, uncertainties andother factors that may cause the actual results, performances, objectivesor achievements of Turnall Holdings Limited to be materially differentfrom future results, performance, objectives or achievements expressedor implied in forward looking statements.The performance of Turnall Holdings Limited is subject to effects ofchanges in the operating environment and other factors. TurnallHoldings Limited undertakes no obligation to update publicly or torelease any revision of these forward looking statements to reflect theevents or circumstances after the date of publication of these pages orto reflect the occurrence of unanticipated events.We would welcome your feedback on our reporting and anysuggestions you have in terms of what you would like to seeincorporated in our report for 2013. To do so, please contact:email@example.com..................................................................... ....................................................................Herbert Nkala John JereChairman Managing Director
1A n n u a l R e p o r t 2 0 1 2Corporate HistoryKey Features of Our Corporate JourneyFor more than 50 years, Turnall has been a regional market leader in the manufacture and supply of fibrecement products made from select quality Chrysotile Asbestos.Alfred Porter, a dynamic Australian, who was both an engineer and entrepreneur and a specialist in thefield of Asbestos Cement, saw the great potential of starting the industry in the country. Porter CementIndustries was under way and the Harare Works produced its first Asbestos Cement sheets, which wereused to provide cover for the machine that made them.Highlights of some important dates in the growth and development of our company and the establishmentof the Asbestos Cement industry in Zimbabwe are listed below:1949: Bulawayo produces its first asbestos cement sheets.1953: Turnall & Newall bought “Alfie” Porter out, and over the next few years introduced modern techniques and expertise and built new offices and laboratories.1962: Bulk cement silos that were once at Arriba installed at both the Harare and Bulawayo plants.1974: Bulawayo sheeting plant re-commissioned.1977: A second sheeting machine built and installed in Harare.1992: Brand new sheeting line purchased from Lamort, France, installed at Harare factory as the third sheeting line.1996: Environment-friendly Fibre Treatment facilities installed at both Harare and Bulawayo factories. Further upgrades were done to sheeting machines.2002: Completed three tier change rooms in compliance with ILO 162 Convention.2002: Certified to an integrated Quality and Environmental Management System (ISO 9001: 2000 and ISO 14001:1996).2003: Certified to OHSAS 18001:1999 Occupational Health and Safety Management System.2004: A computerised Enterprise Resource Planning system was introduced. Integration of the three certified systems incorporating the aids management system and the Social Accountability Standard among other resumes.2006: Awarded, in recognition of Business Excellence, the Confederation of Zimbabwe Industries (CZI), Industrialist of the Year Award-Second Runner Up.2008: Started manufacture of asbestos free products destined for the export market.2010: Won awards for the Best Manufacturing Company and Overall Best Quoted Company on the Zimbabwe Stock Exchange, sponsored by Zimbabwe Independent and African Banking Corporation of Zimbabwe Limited.2011: Awarded the 2011 Superbrand in the construction sector category.
2 T u r n a l l H o l d i n g s L i m i t e dOur Mission and Values“... we provide high qualityaffordable constructionmaterials to help themachieve their dreams...”ValuesWe’ll find time to genuinely care, opening our doors tosupport, encourage & develop our People.Our priority is to focus on our customers - we will beguided by their needs.We are honest in ALL our business dealings & we willhonour our commitments.We communicate in an Open, Frank & Direct way, faceto face, regularly challenging our thinking to ensurewe are creative in our business approach.A sense of humour is important to us: we don’t takeourselves too seriously. However we take our work &our customers very seriously.We will manage and make decisions with facts.MissionWe are passionate about the quality of life of ourcustomers; we provide high quality affordableconstruction materials to help them achieve theirdreams.
3A n n u a l R e p o r t 2 0 1 2Group ProfileDORMANTSUBSIDIARIES Hastt Corporation Limited Hastt Discs (Private) Limited100% Turnall Fibre Cement 100%100%100%100%Acacia Holdings LimitedOPERATINGSUBSIDIARYTractor and Equipment(Private) LimitedT u r n a l l H o l d i n g s L i m i t e d 3A n n u a l R e p o r t 2 0 1 2
4 T u r n a l l H o l d i n g s L i m i t e dOur Business Portfolioand ProductsTurnall Fibre CementThe operating subsidiary comprises two main sub-divisionsnamely; Turnall Building Products Turnall Piping ProductsKey markets include the low-income housing sector forbuilding products and local authorities and municipalitiesfor piping products.Main raw materials are chrysotile fibre and cement.Manufacturing takes place in Bulawayo and Harare.Markets Zimbabwe South Africa Mozambique Zambia
5A n n u a l R e p o r t 2 0 1 2Highlights of Our Performance20112012US$ US$Share Price VS Industrial IndexSharePriceIndustrialIndexGroup SummaryRevenue 42 508 441 51 865 260 Profit after taxation 1 059 915 3 968 057 Total assets 67 980 841 63 616 390Total liabilities 38 445 441 35 140 905ProfitabilityAfter tax return on assets (%) 1.6 6.2Gross profit margin (%) 29.11 30.08Operating profit margin (%) 10.17 14.17Return on shareholders equity (%) 3.59 13.93Return on total assets (%) 1.56 6.24Effective rate of tax (%) 12.00 23.00Nominal rate of tax (%) 25.75 25.75Share PerformanceClosing market capitalisation (000) 25 683 49 303Basic earnings per share (cents) 0.21 0.81Diluted earnings per share (cents) 0.21 0.81Net asset value per share (cents) 5.99 5.78Closing share price (cents) 0.05 0.10Highest share price (cents) 0.12 0.15Closing price/earnings ratio (times) 0.25 0.13Liquidity and LeverageInterest cover (times) 1.39 3.30Current ratio 1.13:1 1.15:1
6 T u r n a l l H o l d i n g s L i m i t e dInstallation of Concrete TilePlant to be commissioned inmid June 2013.6 T u r n a l l H o l d i n g s L i m i t e d
7A n n u a l R e p o r t 2 0 1 2“...I am pleased to report thatthe efforts by government toresuscitate the local chrysotilefibre mines started bearing somefruits towards the end of the year.While the output quantities arestill very much subdued, we areconfident that these will improvein due course once the mines’re-capitalisation program has beencompleted....”ChairmanHerbert NkalaChairman`s Statement
8 T u r n a l l H o l d i n g s L i m i t e dIt is my pleasure to present the Turnall Holdings Limited results for the year ended 31 December 2012.Operating EnvironmentThe results were achieved against a subdued economic environment which was characterised byliquidity constraints and high interest rates ranging between 18 and 25 percent per annum. The highinterest rates persisted for most of the year, exerting a significant strain on working capital for a greaternumber of companies in the country.As the year started, there was a general expectation that the economy would grow, with the Ministerof Finance forecasting a GDP growth of 9.4 percent. This growth did not materialise due to a number offactors, chief among them, the generally poor agricultural season. Government, as a result, revised theGDP growth downwards to 4.4 percent.Agriculture, comprising mainly of cotton and tobacco, traditionally contributing close to 42 percent ofthe company’s volumes, was negatively affected by the delayed onset of rains in the 2011/2012 season.In addition, a number of projects that were lined up by the Government for both sewer and waterreticulation did not materialise as a result of funding limitations.In light of the above factors, the company made the strategic decision towards the end of the firstquarter to re-align it’s operations to prevailing economic conditions. The company, thus maintaineda strong focus on assets and cash flow management and cost control rather than grow volumes.Concerted efforts were also made to minimise debtor delinquency through close monitoring ofthe debtors’ trading operations. The focus on improving working capital management resulted in areduction in sales and production levels, negatively impacting profitability and margins.The company continued to import chrysotile fibres from Brazil, China and Russia which furtherincreased the strain on working capital.I am pleased to report that the efforts by Government to resuscitate the local chrysotile fibre minesstarted bearing some fruits towards the end of the year. While the output quantities are still very muchsubdued, we are confident that these will improve in due course once the mines’ re-capitalisationprogram has been completed.Financial performanceRevenue totalling US$42.5 million was 18.04 percent below the previous year’s level of US$51.9 million.Operating profit was US$4.32 million compared to US$7.35 million for the same period last year.Chairman`s Statement (cont`d)
9A n n u a l R e p o r t 2 0 1 2Chairman`s Statement (cont`d)Gross profit margin was 29.11 percent compared with 30.08 percent in 2011, with an operating profitmargin of 10.17 percent compared to 14.17 percent a year earlier.Turnall generated net income of US$1.06 million on revenue of US$42.5 million representing a netprofit margin of 2.49 percent, compared with net income of US$3.97 million against revenue of US$51.9million representing a net profit margin of 7.65 percent for 2011. Net finance charges were US$3.11million compared to US$2.23 million in the previous year.Capital projectsNotwithstanding the economic challenges, the company has continued to believe in strategicallypositioning the business through a capital expenditure program to enhance both technology andproduct offering for the future.Thus over and above the Newtec non-asbestos plant commissioned in 2011 specifically for the exportmarket,anumberofnewinitiativesarebeingimplementedandthesewillseethecompanycommissiontwo plants in its Harare factory as follows:• Concrete Tile Plant to be commissioned in mid June 2013.• Pavers Production Plant to be commissioned in June 2013.We are confident that the state of the art Tile Plant will enable us to compete in the high end segmentof the roofing market and offer price competitive products on the back of improved technology andmachinery.The company, in view of its long term goal of becoming a one stop-shop for all building products, willcontinue with its research and development and has plans to build onto this vision by introducingmore complimentary products in the next three years.Sustainability PerformanceWe are moving towards an integrated approach in managing our sustainability impacts andopportunities. The company adopted the Global Reporting Initiatives (GRI)’s Sustainability ReportingFramework as a business model in addressing and managing our economic, environmental, social andgovernance aspects of our operations.To this effect, a core sustainability team which was established in 2011 played a critical role in the yearunder review in identifying and advising management of our economic, environmental, and socialimpacts and opportunities, and their disclosure for accountability to the public and our stakeholders.
10 T u r n a l l H o l d i n g s L i m i t e dAs such, we have produced our first sustainability report using and meeting the requirements of theGlobal Reporting Initiative (GRI) Sustainability Reporting Framework (G3.1: Level C).This report is integrated with our financial performance in our annual report for 2012.The report reflectsour sustainability performance in material issues relating to our stakeholder engagement, economic,environmental and social performance as well as our governance and ethics approach during the yearunder review.Future OutlookLiquidity constraints are expected to continue as well as the lack of affordable medium to long termfunding. We, however, believe that our investment in human capital, technology and our focus onworking capital management and cost control will steer the company in a positive direction.Market risk remains substantial due to economic uncertainty and low growth remains entrenched inthe Zimbabwean economy. We continue to be on the lookout for opportunities, considering that ourbusiness is well capitalised, and has greater latitude to access funding to finance working capital andexpansion programmes in the short to medium term.Exports and Pipes continue to offer real opportunities for sales volume growth during 2013. A numberof projects, originally ear-marked for 2012 have now received funding and supply into these projects isexpected to resume during the first quarter of 2013.We believe the future of this business relies heavily on the value created by its people. As part of thestrategic focus, considerable time and money has been budgeted and will be spent on human capitaldevelopment and retention.AppreciationI would like to express my appreciation to all the employees at various levels of the company for theirdiligence and contribution. I would also like to record my appreciation for the support and co-operationreceived from the distributors, agents, suppliers, bankers and all other stakeholders.Last but not least, I wish to thank my fellow Board Members, Management and the Shareholders fortheir continued support and wise counsel.Herbert NkalaChairman18 March 2013Chairman`s Statement (cont`d)
11A n n u a l R e p o r t 2 0 1 2“...the companycontinued to capacitatethe operations to ensurestrategic positioning...”Managing DirectorJohn JereManagement`s Reviewof Operations
12 T u r n a l l H o l d i n g s L i m i t e dManagement`s Reviewof Operations (cont`d)OverviewThemacro-economicenvironmentobtaininginthecountryremainedchallengingowingtotheliquidityconstraints that persisted. Interest rates remained unsustainable for businesses ranging between 18and 25 percent. The economy grew by 4.4 percent against the 9 percent originally forecasted by theMinister of Finance in his budget.Capacity utilisation thus remained subdued in the economy owing to the above factors. Companiesfaced difficulties in paying back the borrowings taken up in previous years resulting in increasedfinance charges and at the same time inability to restock and/or recapitilise businesses either toexpand product lines or to increase efficiencies by replacing aging plant and equipment. The ability ofcustomers to pay within the stipulated credit terms was also affected by the above factors leading tofurther cash flow constraints for the businesses.For Turnall Holdings Limited, the challenging environment was, however, not devoid of opportunitieswhich the company used to good effect. Whilst the volumes and the margins remained largelyconstrained, the company continued to capacitate the operations to ensure strategic positioning. Thecompany acquired a concrete tile plant as well as a paver making machine. Both machines are beinginstalled and commissioning is expected in June this year.Financial PerformanceRevenue totaling US$42.5 million was 18.04 percent below the previous year’s level of US$51.9 million.Operating profit was US$4.64 million compared to US$7.35 million for the same period last year.Gross profit margin was 29.11 percent compared with 30.08 percent in 2011, with an operating profitmargin of 10.91 percent compared to 14.17 percent a year earlier.Turnall generated net income of US$1.06 million on revenue of US$42.5 million representing a netprofit margin of 2.49 percent, compared with net income of US$3.97 million against revenue of US$51.9million representing a net profit margin of 7.65 percent for 2011. Net finance charges were US$3.11million compared to US$2.23 million in the previous year.The company closed the period with net borrowings of US9.3 million.Attributable profit at US$1.06 million represented basic earnings per share of 0.21 cents.
13A n n u a l R e p o r t 2 0 1 2Management`s Review of Operations (cont`d)The Galvanised Corrugated Iron sheets line at the Harare FactoryThe company closed the year with total assets of US$67.98million compared to US$63.62 million for the year ended 31December 2011.Divisional PerformanceBuilding ProductsLocal Building Products sales decreased by 6 percent to69 202 tonnes representing a 94 percent contribution tooverall volumes. The reduced volumes were largely due to thesubdued demand given the generally low disposible incomesand reduced government expenditure.Exports at 2 285 tonnes were significantly lower than thebudgeted plan of 5 705 tonnes due to delays on the finalisationof the financial instruments that where being established toensure payment for products delivered.TheGalvanisedCorrugatedIronSheets(GCIS)volumesdeclinedby 78 percent to 469 tonnes.Piping ProductsPipe volumes decreased by 66 percent to 1 609(2011 - 4 699 tonnes). Performance was largelyaffected by lack of funding of major projects andmunicipality water programmes.Raw materialsThe company continued to import most of thefibre requirements from China, Russia and Brazil.This continued to place a significant strain onworking capital.The local chrysotile fibre mines started deliveringsome fibres towards the end of the year.While theoutput quantities are still very much subdued,we are confident that these will improve in duecourse once the mines’ re-capitalisation programhas been completed.
14 T u r n a l l H o l d i n g s L i m i t e dStakeholder EngagementCritical to our strategy is building and maintaining strong relationships with key stakeholders. Thecompany has developed a comprehensive stakeholder engagement strategy to manage stakeholderissues. Stakeholder engagement shall remain a corporate culture and strategy for Turnall HoldingsLimited in helping identify opportunities, risks and material issues associated with our operations.Sustainability PerformanceWe are moving towards an integrated approach for managing our sustainability impacts andopportunities. The company adopted the Global Reporting Initiatives (GRI) Sustainability ReportingFramework as a business model to address and manage economic, environmental, social andgovernance aspects of the company operations. To this effect, a core sustainability team establishedin 2011 played a critical role in the year under review in identifying and advising management of oureconomic, environmental, and social impacts and opportunities, and their disclosure for accountabilityto public and our stakeholders.As such, we have produced our first sustainability report using and meeting requirements of theGlobal Reporting Initiative (GRI) Sustainability Reporting Framework (G3.1: Level C) covering mainlyour Harare and Bulawayo operations. This report now forms an integral part of our annual report for2012 and beyond. The report reflects our sustainability performance in material issues relating to ourstakeholder engagement; economic, environmental and social performance as well as our approach togovernance and ethics during the year under review.The company will continue to improve performance in reported sustainability indicators in the comingyears. Furthermore, we hope to consider progressional reporting on other sustainability indicatorsconsidered material to our stakeholders and the business. Management remains committed to oursustainability goals and public disclosure of Human Capital.Key to the success of Turnall Holdings is our human capital. The company maintains good workingrelationships with employees through various engagement platforms. The company continues tocommit resources towards staff development and skill upgrade in all areas of our business.Legislative EnvironmentI am pleased to advise that Turnall Holdings Limited has continued to uphold its ISO14001, ISO9001and OHSAS 18001 certification. We continue to comply with relevant legislative requirements of theEnvironmental Management Act (20:27), Labour Act, Companies Act and other related legislations.Management`s Reviewof Operations (cont`d)
15A n n u a l R e p o r t 2 0 1 2Future prospectsThechairman’sremarksonthecompany’sfutureprospectscannotbeoveremphasised.Thechallengingenvironment obtaining towards the end of 2012 has continued into the first quarter of 2013. Targetedvolumes have been met for the first quarter although pricing has proved to be a thorn in the flesh.Volume forecast for 2013 is expected to firm in the second half of the year on the back of increasedgovernment expenditure and agricultural activity.Continued availability of Chrysotile fibre from the local mines will go a long way in underpinning bothgrowth and profitability of the company.AppreciationThese results for 2012 could not have been achieved without strong working relationships built overseveral years with shareholders, the board, customers, suppliers and other business partners. I wishto express my gratitude and trust that, through their continued support, Turnall Holdings Limited willcontinue to grow and fulfill its mission. I also would like to extend my profound appreciation to themanagement team and all Turnall employees, for the effort and commitment to company values andideals during an otherwise challenging year.J. A. JereManaging Director18 March 2013Installation of Concrete Tile Plant to be commissioned in mid June 2013.Management`s Review of Operations (cont`d)
16 T u r n a l l H o l d i n g s L i m i t e dHerbert NkalaNon-Executive: ChairmanJohn MushayavanhuNon-Executive DirectorJames MutizwaNon-Executive: Deputy ChairmanRobert DubeExecutive: Finance DirectorLinda ManyengaNon-Executive Director-IndependentCA (Z)A seasoned Chartered Accountant, Mr Dubejoined Turnall in 2002.Dip Eng (France) MBA (UK)He joined Turnall in 2001 as Group Technical Director andwas then promoted through various positions toDip Mgt, MBA (UK)He was appointed Non-Executive Director in 2005.He heads one of the top banking groupsin the country. He is also a Non-Executive Directorof several companies.She was appointed Non-Executive Director in 2002.She is a Trade Unionist and was a boardmember of the National Social Security Authority (NSSA).John JereExecutive: Managing DirectorBSc Hon (Wales, UK) MBA (UZ)He was appointed Non-Executive Chairman of Turnall in2005. He is a Non-Executive Director ofnon-listed companies.BL Hon LLB (UZ).He was appointed Non-Executive Director in 2005 and isalso a Legal Practioner based in Harare.He is a Non-Executive Director of several companies.several listed andManaging Director.DirectorateOur Governance &Ethics Approach
17A n n u a l R e p o r t 2 0 1 2Celestine GadzikwaNon-Executive Director-IndependentKiritkumar NaikNon-Executive Director-IndependentRita LikukumaNon-Executive Director-IndependentChirandu DhlembeuNon-Executive Director-IndependentRodgers DhliwayoNon-Executive Director-IndependentMSc Dev Econ, MBL (UNISA)He was appointed Non-ExecutiveDirector of Turnall in 2005. He holdsDirectorships in other companies.Dip Mech Eng (UK)He was appointed to the Turnall board in 2010. He holdsDirectorships in other companies.MSc Env Health (Scotland). He was appointed Non-Executive Director in 2011.He is a Director of Occupational Safety andHealth for the National Social SecurityAuthority (NSSA).Peter MoyoNon-Executive Director-IndependentFCISHe is a qualified Chartered Secretary. He was appointedNon-Executive Director in 2009. He is also aNon-Executive Director of several companies.LLB Hon (UZ), FZiMHe is a Corporate Lawyer. He was appointedNon-Executive Director in 2005. He holdsDirectorships in other companies.BSc Econ (UZ), MBA (UK)She was appointed Non-Executive Director ofTurnall in 2009. She is also a Non-ExecutiveDirector of several companies.Our Governance &Ethics Approach (cont`d)
18 T u r n a l l H o l d i n g s L i m i t e dOur Governance &Ethics Approach (cont`d)Human Resources DirectorElizabeth MamukwaBA (UNISA) MBA(Nottingham UK)She joined Turnall in 2004from SMM Holdings, whereshe was Group Human.evitucexEsecruoseRTechnical DirectorFrancis ChigwedereBSc Eng (UNZA), MBA (UZ)He joined Turnall FibreCement in 2002 as anEngineering Manager androse through the ranks tobecome Technical.6002nirotceriDManaging DirectorJohn Jere*see Board of Directors.Finance DirectorRobert Dube*see Board of Directors.Management
19A n n u a l R e p o r t 2 0 1 2Governance and Management ApproachWe recognise that good corporate governance is key to the long term success and integrity of ourcompany. As such, we are committed to highest standards of ethical and sustainable business practicesto enable management of risks and opportunities arising from our operations.To reflect our commitment to good corporate governance and sustainable business practice, wehave included in the report our first sustainability report using the Global Reporting Initiatives (GRI)’sSustainability Reporting Framework Guidelines. As custodians of good governance and strategydirection, we strive to ensure that there is a clear allocation of responsibilities to demonstrate balanceof power and authority. The company endeavors to improve its corporate governance systems towardalignment with voluntary codes such as King III Code of Corporate Governance.Business EthicsTurnall Holdings Limited is a member of the Tipp-off Anonymous service provided by Deloitte andTouché Chartered Accountants (Zimbabwe). More than 80 percent of our staff has been trained onhow to use this service in case they pick or are aware of any corrupt act impacting on the company’sprofitability. Where incidents of corruption are identified, we carry out investigations through our RiskDepartment. Depending on the nature of the case, we may also involve our external auditors, KPMGChartered Accountants (Zimbabwe) and the Zimbabwe Republic Police.Mechanisms for Stakeholders’Communication with the BoardTurnall Holdings Limited has a formal platform for engaging and communicating with stakeholders.The systems include formal meetings with investors, annual general meeting, press announcementson interim and year-end results, presentations, company website, annual reporting to shareholdersand use of proxy forms.Board & Management EthicsTurnall Holdings Limited believes that it is the responsibility of the Board and Management to leadby example in observing personal ethical practices detrimental to the business. As such, all Directorsand management are required to declare interests which might be deemed in conflict with theirappointment or contract with the company.Board StructureThe structure of our Board is such that 83 percent is Non - Executive and 17 percent is Executive. Of the10 Non-Executive directors, 7 are independent.Board ExpertiseBoard members possess skills that include finance, legal, labour, engineering, health and economics.The main responsibility of our board is to support good corporate governance, strategy formulationand guide policy implementation. Some members are further allocated responsibilities withinOur Governance &Ethics Approach (cont`d)
20 T u r n a l l H o l d i n g s L i m i t e dsubcommittees in areas of strategic strength and expertise. During the year, no major changes in theBoard structure took place which could be deemed significant to the group’s operations and strategies.Sub-Committees Membership and RoleStrategic to the implementation of key policies, decisions and guidance are our committees that workclosely with management. Our committees include the Executive, Audit, New Business Development,Marketing & Chrysotile and Human Resources. It is the group’s ambition that committees are aligned toa corporate governance code that we intend to adopt like King III.CommitteeExecutiveAudit and FinanceNew Business DevelopmentCompositionMr. H Nkala (Chairman)(two Executive Directors &ten Non - Executive Directors)Mr. J Mutizwa (Chair)(two other Non ExecutiveDirectors)Mr. J Mushayavanhu (Chair)(two other Non ExecutiveDirectors)Role & ResponsibilitiesFormulating, directing andimplementation of operationaldecisions. The Executive meetsquarterly.Review records from theExecutive Committee, internalauditors and the group externalauditors in relation to interimand annual financial statementsas well as accounting andinternal controls systems.Recommend appointment andreviews of external auditors’remuneration. The committeemeets quarterly.Identify potential newbusiness portfolios. Conductsand appraise new projectsidentified to fit with thebusiness’overall vision andmission. The committee meetsat least three times a year.Our Governance &Ethics Approach (cont`d)
21A n n u a l R e p o r t 2 0 1 2CommitteeMarketing & ChrysotileHuman ResourcesCompositionMrs. R Likukuma (Chair)(four Other Non - ExecutiveDirectors)Mr. H Nkala (Chair)(three other Non - ExecutiveDirectors)Role & ResponsibilitiesUnderstanding developmentssurrounding asbestos lobbyand impact on business so as toadequately update and advisethe Board. The committeemeets at least three times a year.Discuss and advise on matterspertaining to Human ResourcesPolicy, staff retention andremuneration of both non -executive, executive directorsand staff. The committee meetsat least three times a year.Our Governance &Ethics Approach (cont`d)
22 T u r n a l l H o l d i n g s L i m i t e dOur Governance &Ethics Approach (cont`d)Herbert NkalaJames MutizwaJohnMushayavanhuLinda ManyengaCelestineGadzikwaRita LikukumaPeter MoyoChiranduDhlembeuKiritkuma NaikRoger DhliwayoJohn JereRobert DubeChairmanNon - ExecutiveDeputy ChairmanNon - ExecutiveNon - ExecutiveIndependentNon - ExecutiveIndependentNon - ExecutiveIndependentNon - ExecutiveIndependentNon - ExecutiveIndependentNon - ExecutiveIndependentNon - ExecutiveIndependentNon - ExecutiveManagingDirectorExecutiveFinance Director 01/09/2005 09/10/2002 01/09/2005 09/10/2002 18/09/2009 18/09/2009 27/03/2005 01/09/2005 23/09/2010 09/12/2011 20/11/2003 01/09/20054/44/44/44/44/44/44/43/ 44/43/ 44/44/44/48/107/104/44/44/69/103/65/64/69/1010/10Declaration of Directors’InterestsDuring the year under review, no directors had any material interests during their contract within thecompany which could cause significant conflict of interests with the business’objectives.The beneficialinterests of the Directors and their families in the shares of the company are given in the financialstatements section.Meeting Attendance during 2012As part of our performance and commitment, board members are expected to attend meetings whichare crucial to the company. These meetings shape the strategic direction and value creation by thecompany and its units. Attendance and information of board members is outlined below:Date of FirstAppointmentAttendanceto BoardMeetingsAttendanceto CommitteeMeetingsPositionDirector
23A n n u a l R e p o r t 2 0 1 2“a core sustainability team established in 2011 played acritical role in the year under review in identifying andadvising management of our economic, environmental,and social impacts and opportunities, and theirdisclosure for accountability to the publicand our stakeholders.”Sustainability
24 T u r n a l l H o l d i n g s L i m i t e dOur SustainabilityApproachWe strive to operate our business in a socially and environmentally responsible manner. The companycontinues to strengthen its systems to address both environmental and social aspects associatedwith our operations. The company adopted implementation of the Global Reporting initiatives (GRI)’sSustainability Reporting Framework by setting up a Sustainability Team with responsibility to assistin identifying and managing material issues, risks and opportunities associated with our operations.To this effect, two Sustainability teams were set up in our Harare and Bulawayo factories and are led byMr. Robert Dube (Finance Director) and Mr. Francis Chigwedere (Technical Director) respectively. In theperiod under review, our sustainability teams in Harare and Bulawayo received training on sustainabilitymanagement and reporting. The teams comprise representatives from Finance & Administration,Human Resources, Sales & Marketing, Engineering, Production and World Class Practices (Quality,Environment and Health and Safety) departments.In keeping with reasonable expectations and interest of a wide range of our stakeholders who includescustomers, suppliers, regulators, employees, shareholders, investors, government, communities andothers in general, Turnall Holdings Limited adopted an inclusive strategy which requires continuousengagement with stakeholders. Our stakeholder engagement process helps us capture materialissues from our stakeholders that help us balance the long term social, environmental and economicinterests with the principle to maximise earnings of the company and business value while respondingto concerns of our stakeholders.The process of identifying indicators reported in this report involved an assessment of the overallbusiness and key issues of concern from our stakeholders. In the process of identifying material issuesandchoiceofindicators,thesustainabilityteamwasguidedbyGRI-SustainabilityReportingFrameworkguidelines. In defining the boundary of reporting in this report, the company’s approach is to reportfor the entire company covering operating subsidiaries (with exception of dormant subsidiaries) andwhere we have material controlling influence and impacts.Data measurementData measurement in this report is according to specific indicators selected, particurarly where graphsand tables are presented. In most indicators, quantitative data is provided. Where the latter is notprovided, qualitative data is provided to relevant indicators. Data measurement is according to systemsand policies of Turnall Holdings Limited.LimitationsFor the specific indicators reported, no major limitations were encountered in providing required data.
25A n n u a l R e p o r t 2 0 1 2Principal Risks andOpportunitiesOur ApproachWe believe that our operations are subject to risk and opportunities material to the business andimplementation of our strategies. Therefore, we apply a Risk Management (RM) framework which isa process applied strategy set across the company. The framework is designed to identify potentialrisks and manage those risks within our group’s risk appetite in order to enhance the outcome of ourcorporate objectives. Our Risk framework considers challenges, opportunities and uncertainties thatmay impact our strategic and financial objectivesRisk & OpportunityThreats of products ban in foreign marketsThe anti asbestos campaign led to the banningof asbestos products in some of our foreignmarkets.The non asbestos plant we have installed isnot able to produce quantities that will meetdemand for all our markets.Loss of consumer confidenceThe confidence of consumers on our productsdepends on maintaining high quality. Therefore,failing to provide appropriate quality could leadto loss of confidence.Mitigation Measure and ActionWe are upgrading the capacity of our non-asbestos plant so that it produces to meetdemand.We are also in the process of installing a concretetile machine that will produce concrete basedroofing materials.As Turnall, we ensure and monitor theproduction and safe use of asbestos containingmaterials in Zimbabwe under the guidance ofNational Chrysotile Task Force (NCTF).We depend on continuous monitoring of ourproduction processes and upgrading wherenecessary. Product performance on the marketis also continuously monitored. We haveestablished good relationships with key suppliersto ensure provision of high quality raw materials.Periodical schedules to monitor our equipmentefficiencies are also in place.
26 T u r n a l l H o l d i n g s L i m i t e dRisk & OpportunityIncreased competitionWe face intensifying competition from small localproducers and imports supplying at a low cost toour markets. The opening of the global marketsand the introduction of the multi-currencysystem has attracted intensifying competitionfrom foreign competitors. Competition couldlead to a reduction in the rate at which we addnew customers especially in the export market.Recovery of the construction industryEconomic and political developments inZimbabwe show possibilities of future economicrecovery that could lead to the rise in demandfor housing and infrastructural developmentrequiring pipe and tile materials.Access to financial capitalAs the demand of our products is increasingin our markets, the organisation encounterchallenges in accessing affordable finances toenable meeting working capital requirementsnecessary to meet our market demands.Water supply challengeOur manufacturing processes depend on reliablewater supply by local authorities. Further, thedepletion of ground water sources in cities weoperate may cause challenges for our futureproductionMitigation Measure and ActionWe continue focusing on high quality customerservice and the value of our products. We areenhancing distribution channels to get closerto customers and using targeted promotionswhere appropriate to attract and retain specificcustomers by offering competitive prices. Weclosely monitor and model competitor behavior,customer partnerships and products by offeringto understand future intentions so as to be moreproactive. We continue to build strong customerrelations by offering free technical support.The company has resuscitated the pipemanufacturing plant. Neccessary resources tofund production have been secured.We are continuously having regular meetingswith financial institutions to ensure that there isalways interim financial arrangement for urgentneeds when required.The company is hoping that with investmentbeing directed towards water issues in thecities, reliability of water supply will improve.The company is, however, looking into variousoptions to manage water use and sources.Principal Risks andOpportunities (cont`d)
27A n n u a l R e p o r t 2 0 1 2Critical to our strategy is building and maintaining strong relationships with key stakeholders.Our stakeholders include Customers, Suppliers, Financial Institutions, Government, Regulators,Shareholders, Investors, Employees, Local Authorities, Civil Society, Communities, Economic sectorrepresentative bodies and others. These stakeholders are identified following a due process basedon how the company impacts on them and how they can impact on the company both directly andindirectly. The prioritisation of these stakeholders is conducted following an internal due processsupported with guidance provided in the Global Reporting Initiatives (GRI)’s Sustainability reportingframework.The company developed a system of engaging with key internal and external stakeholders so as tocapture material issues that the company can improve on. In so doing, the company used a broad rangeof strategies that included one on one formal and informal meetings, presentations, media, workshops,circulars, conferences and consultations to name a few. Outcomes of these key engagements arereviewed to provide appropriate responses and action as reflected below:Stakeholder Method of Frequency Material Issues Action Taken Engagement Raised /PlannedStakeholder EngagementEmployeesShareholdersSuppliersCustomers • Works council meetings• Management meetings • NECs meeting• SHEQ meeting• Board meetings • Analyst briefing• Annual general meetings• Media• Meetings• Written correspondences• Supplier evaluations • Meetings• Correspondence through emailContinuouslyQuarterlyand annuallyContinuouslyContinuouslyBusinessperformanceand conditionsof serviceBusinessperformanceQuality of service/product andpayment modelsCustomer service,promotions,transportationissues, pricingand productperformanceImprovementof identifiedperformance gapsImprovementof identifiedperformance gapsConforming to theagreed issuesImprovementon the identifiedperformancegaps
28 T u r n a l l H o l d i n g s L i m i t e dStakeholder EngagementStakeholder Method of Frequency Material Issues Action Taken Engagement Raised /PlannedFinancialInstitutionsGovernmentRegulatorsLocal Authority • Meetings• Analyst briefing• Environmental• cluster meetingsContinuouslyThree times peryear and as perdevelopmentsthat merit ameetingAt least quarterlyAt least half yearlyBusinessperformanceand investmentoptionsBusinessperformance andEnvironmental,Safety and Health,Impact of policyissuesEmployee wellnessand welfare,environment,process, productand service qualityWaste and watermanagementImprovementof identifiedperformancegaps andfostering effectivepartnershipsImprovementof identifiedperformance gapsand adoptionof new policies,standards andor legislation asappropriateRegularperformancemonitoringthrough activeengagementsto enhanceimprovementsImprovedrelations andwaste and watermanagementpracticesCivil Society(NGOs, TradeUnions, N.E.C) Community/Society (Academic)Institutions,Cluster, Media, • Meetings• Written correspondences,• Meetings and workshops/ conferences• Seminars and meetings• Road shows • Meetings factory toursAtleasttwiceayearAs necessarySafe use of asbestosenvironmentalstewardship andconditions ofemployment.Perception aboutAsbestos, companyvisibilityImproved relationsRespond andact upon anyconcerns raised
29A n n u a l R e p o r t 2 0 1 2“We continue to be on the lookout for opportunities,considering that our business is well capitalised, and hasgreater latitude to access funding to finance workingcapital and expansion programmes in the short tomedium term.”New Product Initiatives
30 T u r n a l l H o l d i n g s L i m i t e dOur Sustainability PerformanceMaterialsSource OUR ENVIRONMENT PERFORMANCEChallenges • Resources management: Water and Energy use. • Greenhouse gas emissions. • Waste management and emissions.Policy and Management ApproachTurnallHoldingsLimited operateswithinregulationsandbestpracticesonenvironmentalmanagement.The company has an environmental policy which guides management in articulating and managingwaste and discharge from operations. Our environmental management systems (EMS) are fully alignedwith ISO14001: Environmental Management Systems and the Environmental Management Act (EMA)Zimbabwe. This allows various audits to be carried out during operations for measuring performanceand continuous improvement in managing our environmental and climate impacts.PerformanceMaterial Use 2012 2011 (Tonnes) (Tonnes)Cement 53 640 60 712Fibre 7 866 9 056Ground Hard Waste (GHW) 2 756 2 577Total Material use 64 262 72 345The above reflects a decrease in material use to support production to meet our market demand. Totalmaterial use decreased by 11percent from 2011.Water Usage 2012 2011 m3 m3 Municipal 32 003 24 272Underground Borehole 113 275 120 818Total water usage 145 278 145 090Our water usage during the year was within the same range as that of the previous year, due tocontinued efforts to manage water usage in many of our processes. Municipal water usage increasedby 32 percent while underground borehole water usage decreased by 6 percent. Overall water usageincreased by 0.1 percent from 2011.
31A n n u a l R e p o r t 2 0 1 2Energy Use (by Primary Source)Coal (Tonnes) 1,111 1,521Petrol (Litres) 138,588 130,721Diesel (Litres) 378,783 317,220Energy efficiency remains a priority of Turnall Holdings Limited. Increased energy use in the periodis compounded by national challenges in electricity supply and rail transportation systems. As such,the company relied on use of alternative energy generation during national load shedding and roadtransportation.Energy Use (by Secondary Source)Harare 3,087 3,690Bulawayo 3,241 2,115Total Usage (Megawatt) 6,328 5,805Total electricity use for the year increased by 9 percent from 2011. The increase was managed byalternative energy use as referred above.Emissions and WasteGreenhouse Gas (GHG) Emission – CO2eThe drop by 14 percent in emissions is attributed to continuous efforts towards managing greenhousegas emission and accurate quantification of our emissions. Our CO2e calculation included electricity asdirect energy consumption using a regional factor of electricity used.Our SustainabilityPerformance (cont`d)02,0004,0006,0008,00010,0007,5668,79320112012Electricity (Megawatt) 2012 2011Energy Type 2012 2011
32 T u r n a l l H o l d i n g s L i m i t e dOur SustainabilityPerformance (cont`d)Waste Disposal Disposal 2012 2011 Method (Tonnes) (Tonnes)Sludge Landfill 4,365 7,005In managing the reduction of waste disposal through landfill, Turnall Holdings opted to findingalternative use of sludge waste by degrading some of the waste for other purposes. Our tonnage tolandfill reduced by 38 percent from 2011.CertificationThe company upheld its ISO14001: Environmental Management Systems certification for the periodunder review similar to 2011.OUR SOCIAL PERFORMACEHuman Capital MaintenanceChallenges • Building a stable workforce. • Match operations with workforce. • Providing equal opportunities. • Providing a safe working environment with minimum incidences. • Maintaining a health workforce.Policy and Management ApproachTurnall Holdings Limited recognises the value of the development of its employees in the long termcompany’s prosperity and sustainability. We therefore embrace the duty to treat them in a respectable,fair, human way and provide equal opportunities to all. We follow the principle of engaging ouremployees through collective bargaining and regular constructive meetings. We continue to observeprovisionofconditionsofservicestipulatedinthelawsoftheRepublicofZimbabwethroughtheLabourAct (Zimbabwe) and other international provisions through the International Labour Organisation’sDeclaration on Fundamental Principles and Rights at Work.The company employs policies appropriate to the business and markets meant to attract, retain andmotivate the quality of staff through training, development, information sharing and progressivecooperation. The company provides equal opportunity, without discriminating against gender, race,physical ability or HIV/Aids status. The company continues to enhance and apply its HIV/Aids policyadopted in 2010. Our HIV/Aids policy commits the company to maintain confidentiality over status,provide education and awareness, provide counseling, prevent spreading and promote safe sex.Waste
33A n n u a l R e p o r t 2 0 1 2Our SustainabilityPerformance (cont`d)PerformanceTotal Workforce AnalysisEmployment Type 2012 2011Permanent 427 445Contract 293 277Graduate Trainees 2 7Apprentice 8 18Attachment Students 6 3Total 736 750Workforce Distribution by RegionTotal Workforce Distribution by Gender01002003004005006007008002012Female2011MaleEmployment 2012 Total 2011 TotalType Harare Bulawayo Harare Bulawayo Permanent 248 179 427 257 188 394Contract 128 165 293 137 140 277Graduate Trainees 2 - 2 5 2 7Apprentice 4 4 8 11 7 18Attachment Students 5 1 6 2 1 3
34 T u r n a l l H o l d i n g s L i m i t e dOur SustainabilityPerformance (cont`d)GenderGender Distribution Statistics 2012 2011Male 698 715Female 38 35Total Workforce 736 750Our policy provides for equal opportunities between men and women, and we continue to encouragewomen to apply for any engagement opportunities that may arise in our company. Our current statusreflects that majority of our workforce is predominantly male.Health & SafetyIssues 2012 Total 2011 Total Harare Bulawayo Harare Bulawayo Rate of Injuries 3 3 6 7 9 16Lost days 41 116 157 156 158 314Work related fatalities - - - - - -Turnall Holdings Limited credits the continued efforts to maintain high standards to our workforce.The rate of our injuries went down by 63 percent from 2011. This also correlated with the number oflost days that went down by 50 percent from 2011. The company did not experience any work relatedfatalities for the past 2 years and this is credited to our workforces observing high standards of safetyprocedures during operations. All injuries and lost days were from males. No injuries or lost days wererecorded from female workforce.CertificationDuring the year under review, the company upheld its OHSAS18001: Occupational Health and SafetyStandards certification, similarly to the prior year, 2011.PRODUCTS RESPONSIBILITYChallenges • Safety of Products to customers. • Products quality. • Adequate products information.
35A n n u a l R e p o r t 2 0 1 2Policy and Management ApproachTurnall Holdings Limited recognises the importance of supplying customers and markets withhigh quality and safe products. This recognition requires appropriate systems to be in place forthe management of products safety, quality and labeling information. As such, Turnall HoldingsLimited has quality management systems administered through the Department of Production andWorld Class Practices (Quality, Environment and Health & Safety). This department is responsible forimplementation and management of quality control and safety procedures during production. Ourprocedures are aligned to ISO9001 standards of Quality Management Systems and these require auditsto be carried out during production to ensure products quality control measures and productionprocess adhere to set procedures.PerformanceDuring the year under review, Turnall Holdings upheld its ISO9001: Quality Management Systemscertification, similar to the prior year 2011.OUR ECONOMIC PERFORMANCEChallenges • Negative global financial uncertainty. • Rising cost of production. • High cost of access to finance • Depressed local construction industry market. • Exchange rate variation in foreign markets.This section provides a brief summary of selected economic performance of the Company in 2012.Complete economic performance is provided in the financial statements section of this report.Key Economic Value GeneratedTurnover 42 508 441 51 865 260Net Profit before Interest and Tax (NPBIT) 1 209 889 5 122 279Cash Flow from operating activities 5 385 485 (3 178 822 )Our SustainabilityPerformance (cont`d)Direct Economic Value 2012 2011
36 T u r n a l l H o l d i n g s L i m i t e dFinancial Support from GovernmentThe company acknowledges that in some instances government may assist companies in distressedpositions due to economic factors beyond their control. Through coordination of the Ministries ofFinance, Industry & Commerce, Economic Planning and Reserve Bank, a fund has been set to supportdistressed and struggling Industries and Companies. Turnall Holdings Limited did not receive any suchfinancial assistance from government during the year under review and prior.Defined Contribution Pension PlanThe company makes contributions to the SMM Holdings Pension Fund which is a Defined Contributionpension scheme for employees. The company contributed US$633 481 in 2012 and US$673 875 in2011.National Pension SchemeAll employees are required under the National Social Security Act (NSSA) to contribute to a nationaldefined contribution scheme. Contributions are made by both employer and employees according tospecific contribution legislated from time to time. The company contributed US$175 023 in 2012 andUS$179 055 in 2011.Our SustainabilityPerformance (cont`d)
37A n n u a l R e p o r t 2 0 1 2TURNALLSHOPAs a way of ensuring that customers have easy access tothe company’s products, Turnall Holdings Limited hasembarked on a project to roll out factory shops in areaswhere the company is not fully represented.The year under review saw the successful opening ofRenkini Bulawayo shop and the Rusape shop.Customer Convenience
38 T u r n a l l H o l d i n g s L i m i t e dThe Directors are responsible for preparing the Annual Report and the company’s financial statementsin accordance with applicable laws and regulations.The Companies Act (Chapter 24:03) requires the directors topreparethecompany’sfinancialstatementsforeach financial year.The company’s financial statements are required to present fairly, in all material respects, the financialposition of the company and its financial performance and cash flows for that period in accordancewith International Financial Reporting Standards (IFRS’s) and in the manner required by the Companies Act(Chapter 24.03) of Zimbabwe.In preparing of the company financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; state whether the financial statements have been prepared in accordance with IFRS’s; and prepare the financial statements on the going concern basis unless it is inappropriate to presume thatthe company will continue in business in the foreseable future.The directors are responsible for keeping proper accounting records which disclose with reasonableaccuracy at any time, the financial position of the company and enable them to ensure that its financialstatements comply with the Companies Act (chapter 24:03).They have general responsibility for takingsuch steps as are reasonably open to them to safeguard the assets of the company and to prevent anddetect fraud and other irregularities.The auditors are responsible for reporting on whether the company’s annual financial statements arefairly presented in accordance with the applicable International Financial Reporting Framework, andin the manner required by the Company’s Act (chapter 23:03) of Zimbabwe.Statement of complianceThe financial statements of the company have been prepared in conformity with International FinancialReporting Standards (IFRS’s), promulgated by the International Accounting Standards Board (IASB),which includes standards and interpretations approved by the IASB as well as International AccountingStandards (IAS’s) and Standing Interpretations Committee (SIC) interpretations issued under previousconstitutions.Directors’Responsibilityand Approval of Financial StatementsFor the year ended 31 December 2012
39A n n u a l R e p o r t 2 0 1 2Sustainabilty reportingThe company has set its goal and commitment to providing access to relevant, high quality informationon the company’s economic, environmental and social aspects related to its activities, which allowassessment of the company’s sustainability and governance through sustainability reporting. Thecompany is striving to align its practices with global best practices reflected in voluntary frameworkssuch as the Global Reporting Framework and the King III code of corporate governance.The company’sfinancial statements for the coming period are expected to be accompanied by a sustainability reportprepared according to the requirements of GRI Sustainability Reporting Framework, ApplicationLevel - C.The sustainability Reporting Advisors are responsible for providing technical guidance and compliancecheck on selected sustainability performance indicators and reporting process in accordance with theGlobal Reporting Initiatives (GRI) Sustainability Reporting Framework – G3.1.Approval of company financial statementsThe company’s annual financial statements were approved by the board of directors on 18 March 2013.H. Nkala J. JereChairman Managing Director18 March 2013 18 March 2013Directors’Responsibilityand Approval of Financial Statements (cont`d)For the year ended 31 December 2012
40 T u r n a l l H o l d i n g s L i m i t e dCompany Secretary’sCertificationFor the year ended 31 December 2012I certify that, to the best of my knowledge and belief, thecompany has lodged with the Registrar of Companiesall such returns as are required to be lodged by a publiccompany in terms of the Companies Act (Chapter 24:03)of the Republic of Zimbabwe, and that all such returns aretrue, correct and up to date.R. S. DubeCompany SecretaryHarare18 March 2013
41A n n u a l R e p o r t 2 0 1 2Directors’ReportFor the year ended 31 December 2012The Directors have pleasure in presenting their report, together with the audited financial statementsof the company for the year ended 31 December 2012.Annual ResultsEarnings attributable to shareholders were US$1 059 915 for the period ended 31 December 2012(2011: US$3 968 057).Going ConcernThe directors believe that the company has sufficient resources and expected cash flows to continueas a going concern.DividendAt a meeting held on 7 March 2013, the Board of Directors resolved not to declare a final dividend forthe year to 31 December 2012 in view of the need to build resources for both working capital and newprojects that will enhance the company’s medium to long-term competitive advantage and capacity torespond to developments in its chosen markets.Investment in property, plant and equipmentCapitalexpenditurefortheyeartotaledUS$2.6million.US$2.5millionwasspentonplantandmachineryand US$0.05 million was spent on motor vehicles and office equipment. Share capitalAt 31 December 2012, the authorised share capital comprised of 690 000 000 ordinary shares. Issuedshare capital comprised of 493 040 308 ordinary shares. The details of the authorised and issued sharecapital are set out in note 10 of the financial statements.Directors and their interestsNames of the Directors are set on page 16 -17.Messrs J.Mushayavanhu, P. C. C. Moyo as well as Ms. L. Manyenga retire from the Board in terms of Article95 of the company’s Articles of Association. All of them being eligible, offer themselves for re-election.No director had, during or at the end of the year, any material interests in any contract with thecompany which could be considered to be significant in relation to company’s business. Related partytransactions are given on page 67, while the beneficial interests of the Directors and their families inthe shares of the company are given on page 77.
42 T u r n a l l H o l d i n g s L i m i t e dSubstantial shareholdersAccording to information received by the Directors, the following are the only shareholders beneficiallyholding directly or indirectly, at 31 December 2012, in excess of 5% of the issued share capital of thecompany:FBC Bank Limited 47.90%FBC Holdings Limited 10.42%National Social Security Authority 9.79%Equivest Nominees 5.17%AuditorsMessrs KPMG offer themselves for re-appointment as auditors of the company for the year ending31 December 2013 and shareholders will be asked to consider their re-appointment and approve theirremuneration for the year ended 31 December 2012.Employment policiesThe continued motivation of employees and management towards overall productivity enhancementis a fundamental feature of the group’s operating philosophy and is key to management of risk. Thisis achieved through training, development, information sharing and progressive co-operative levels,including short and long-term incentives, where appropriate.The company has employed policies which are appropriate to its business and markets and whichattract, retain and motivate the quality of staff necessary to compete actively in the market. Thesepolicies are required to provide equal employment opportunities, without discriminating againstgender, race or physical ability.Payment of suppliersThe company agrees terms and conditions with suppliers before business takes place and its policy andpractice is to pay agreed invoices in accordance with the terms of payment.By order of the BoardR. S. DubeCompany Secretary18 March 2013Directors’Report (cont`d)For the year ended 31 December 2012
43A n n u a l R e p o r t 2 0 1 2Independent Auditor’s ReportTo The Members of Turnall Holdings LimitedWe have audited the accompanying financial statements of Turnall Holdings Limited as set out on pages 44 to 76, which comprise thestatement of financial position at 31 December 2012, and the statements of comprehensive income, changes in equity and cash flowsfor the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies andother explanatory notes.Directors’responsibility for the financial statementsThe company’s Directors are responsible for the preparation and fair presentation of these financial statements in accordance withInternational Financial Reporting Standards and in the manner required by the Companies Act (Chapter 24:03) of Zimbabwe, andfor such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free frommaterial misstatement, whether due to fraud or error.Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordancewith International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform theaudit 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 thefinancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevantto the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate inthe circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by theDirectors, 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.OpinionIn our opinion, the financial statements present fairly, in all material respects, the financial position of Turnall Holdings Limited at31 December 2012, and its financial performance and cash flows for the year then ended in accordance with International FinancialReporting Standards, and in the manner required by the Companies Act (Chapter 24:03) of Zimbabwe.KPMG Chartered Accountants (Zimbabwe)Harare18 March 2013KPMGMutual Gardens100 The Chase (West)Emerald HillP O Box 6 HarareZimbabweTel +263 (4) 303700 +263 (4) 302600Fax +263 (4) 303699KPMG, a Zimbabwean partnership and a member firm of theKPMG network of independent member firms affiliated with KPMGInternational Cooperative (“KPMG International”), a Swiss entity.
44 T u r n a l l H o l d i n g s L i m i t e dStatement ofComprehensive IncomeYear ended 31 December 2012 Note 2012 2011 US$ US$ Turnover 2 42 508 441 51 865 260Cost of sales 3 (30 133 932 ) (36 265 512 ) Gross profit 12 374 509 15 599 748 Other operating income 4 253 761 172 836 Selling and distribution expenses 5 (1 711 288 ) (1 987 399 ) Administrative expenses 5 (6 592 576 ) (6 433 469 ) Results from operating activities 4 324 406 7 351 716 Finance income 6 3 285 76 145 Finance costs 6 (3 117 802 ) (2 305 582 ) Net finance costs (3 114 517 ) (2 229 437 ) Profit from operations before income tax expense 1 209 889 5 122 279 Income tax expense 7 (149 974 ) (1 154 222 ) Profit for the year 1 059 915 3 968 057 Other comprehensive income, net of income tax - -Total comprehensive income for the period 1 059 915 3 968 057 Number of shares in issue (000s) 9 493 040 493 040 Basic earnings per share (cents) 9 0.21 0.81
45A n n u a l R e p o r t 2 0 1 2NoteStatement ofFinancial PositionAs at 31 December 2012Chairman Director18 March 2013 18 March 2013 2012 2011 US$ US$ASSETSNon-current assetsProperty, plant and equipment 13 31 685 103 31 509 622 Investment property 13.6 291 325 297 550 31 976 428 31 807 172Current assetsInventories 11 18 757 112 14 812 361 Short term investments 21.4.2 19 958 19 585 Trade and other receivables 12 16 233 953 16 217 424 Cash and cash equivalents 14 993 390 759 848 36 004 413 31 809 218 Total assets 67 980 841 63 616 390 EQUITY AND LIABILITIESCapital and reservesShare capital 10.2 4 930 403 4 930 403 Share premium 181 908 181 908 Non-distributable reserve 7 655 239 7 655 239 Revaluation reserve 7 639 504 7 639 504 Retained earnings 9 128 346 8 068 431 29 535 400 28 475 485 Non-current liabilitiesLoans and borrowings 8 - 1 138 295 Deferred taxation 7.4 6 604 514 6 454 677 6 604 514 7 592 972 Current liabilitiesLoans and borrowings 8 10 779 318 12 455 545 Trade and other payables 15 18 472 943 12 149 775 Provisions 16 605 494 584 343 Taxation 1 488 266 2 126 818 Bank overdraft 14 494 906 231 452 31 840 927 27 547 933 Total liabilities 38 445 441 35 140 905 Total equity and liabilities 67 980 841 63 616 390
46 T u r n a l l H o l d i n g s L i m i t e dStatement ofChanges in EquityYear ended 31 December 2012 Non- Share Share Revaluation distributable Retained capital premium reserve reserve earnings Total US$ US$ US$ US$ US$ US$ Balance at 1 January 2011 4 930 403 181 908 7 639 504 7 655 239 4 953 334 25 360 388Total comprehensive incomefor the yearProfit for the year - - - - 3 968 057 3 968 057Dividend paid - - - - (852 960 ) (852 960 ) Balance at 31 December 2011 4 930 403 181 908 7 639 504 7 655 239 8 068 431 28 475 485 Total comprehensive incomefor the yearProfit for the year - - - - 1 059 915 1 059 915 Balance at 31 December 2012 4 930 403 181 908 7 639 504 7 655 239 9 128 346 29 535 400
47A n n u a l R e p o r t 2 0 1 2Statement ofCash FlowsYear ended 31 December 2012 Note 2012 2011CASH FLOWS FROM OPERATING ACTIVITIES US$ US$ Profit for the year 1 059 915 3 968 057 Adjustments for: Depreciation of property, plant and equipment 13.2 2 422 240 1 856 542Depreciation of investment property 13.6 6 225 6 225Net finance costs 6 3 114 517 2 229 437 Unrealised exchange losses (126 110 ) (255 612 ) Loss on disposal of property, plant and equipment 6 438 - Net change in other investments (373 ) 1 544 Income tax expense 7 149 974 1 154 222 Operating cash flows before reinvestment in working capital 6 632 826 8 960 415 Increase in inventories (3 944 751 ) (6 776 345 ) Increase in trade and other receivables (16 530 ) (7 542 534 ) Increase in provisions, trade and other payables 6 344 320 6 185 992 9 015 865 827 528 Withholding tax paid (137 ) (1 160 ) Income tax paid (638 551 ) (2 030 000 ) Realised exchange (losses)/gains (2 956 ) 74 780Interest paid (2 988 736 ) (2 049 970 ) (3 630 380 ) (4 006 350 ) Net cash flows from operating activities 5 385 485 (3 178 822 ) CASH FLOWS FROM INVESTING ACTIVITIESInterest received 3 285 1 365 Acquisition of property, plant and equipment 13 (2 604 160 ) (4 415 003 ) Net cash flows from investing activities (2 600 875 ) (4 413 638 ) CASH FLOWS FROM FINANCING ACTIVITIES (Decrease)/increase in loans and borrowings (2 814 522 ) 7 828 107 Dividend paid - (852 960 ) Net cash flows from financing activities (2 814 522 ) 6 975 147 DECREASE IN CASH AND CASH EQUIVALENTS 14 (29 912 ) (617 313 )
48 T u r n a l l H o l d i n g s L i m i t e dThe principal accounting policies of the company, which are set out below, have been consistentlyfollowed in all material respects.BASIS OF PREPARATIONStatement of complianceThe financial statements of the company have been prepared in accordance with InternationalFinancial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB)which includes standards and interpretations approved by the IASB as well as International AccountingStandards (IAS’s) and Standing Interpretations Committee (SIC) interpretations issued under previousconstitutions. The financial statements are based on statutory records that are maintained under thehistoric cost convention and are expressed in United States dollars (US$).SIGNIFICANT ACCOUNTING POLICIESAdoption of new and revised financial reporting standards and interpretationsThe following revised standards issued by the International Financial Reporting InterpretationsCommittee (IFRIC) are effective for the current year.IAS 12 Deferred tax - Recovery of Underlying Assets.FRS 1 Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters.IFRS 7 Transfers of Financial Assets.The adoption of these revised standards in the current year has not led to any changes in thecompany’s accounting policies. These standards do not have any financial effect on the recognition ormeasurement of transactions and events, nor the financial position or performance of the company.Their effects are limited to the nature and extent of disclosure to be made by the company.The following standards and interpretations were in issue but not yet effective:IAS 1 amendment Presentation of Financial Statements: Presentation of Items of Other Comprehensive Income - Annual periods beginning on or after 1 July 2012.IAS 19 amendment Employee Benefits: Defined benefit plans - Annual periods beginning on or after 1 January 2013.IAS 27 Separate Financial Statements (2012) - Annual periods beginning on or after 1 January 2013.IAS 28 Investments in Associates and Joint Ventures (2012) - Annual periods on or after 1 January 2013.IAS 32 Offsetting Financial Assets and Financial Liabilities - Annual periods beginning on or after 1 January 2015.Statement ofAccounting Policies31 December 2012
49A n n u a l R e p o r t 2 0 1 2IFRS 1 amendment Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters - Annual periods beginning on or after 1 July 2012.IFRS 9 (2009) Financial Instruments - Annual periods beginning on or after 1 January 2015.IFRS 9 (2011) Financial Instruments - Annual periods beginning on or after 1 January 2015.IFRS 10 Consolidated Financial Statements - Annual periods beginning on or after 1 January 2013.IFRS 11 Joint Arrangements - 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 13 Fair Value Measurement - Annual periods beginning on or after 1 January 2013.IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine - Annual periods beginning on or after 1 January 2013.IAS 19, IFRS 11 and IFRIC 20 are not applicable to the business of the entity and will, therefore, have noimpactonfuturefinancialstatements.TheDirectorsareoftheopinionthattheimpactoftheapplicationof the applicable standards and interpretations will be as follows:Amendment to IAS 1 - Presentation of Financial Statements: Presentation of items of otherComprehensive IncomeThe amendment to IAS 1 will be adopted by the company for the first time for its financial reportingperiod ending 31 December 2013.The company will present those items of other comprehensive income that may be reclassified to profitor loss in the future separately from those that would never be reclassified to profit or loss. The relatedtax effects for the two sub-categories will be shown separately.This is a change in presentation and will have no impact on the recognition or measurement of itemsin the financial statements.This amendment will be applied retrospectively and the comparative information will be restated.IFRS 9 (2009) - Financial InstrumentsIFRS 9 (2009) will be adopted by the company for the first time for its financial reporting period ending31 December 2015. The standard will be applied retrospectively, subject to transitional provisions.Statement ofAccounting Policies (cont`d)31 December 2012SIGNIFICANT ACCOUNTING POLICIES (cont`d)Adoption of new and revised financial reporting standards and interpretations (cont`d)
50 T u r n a l l H o l d i n g s L i m i t e dIFRS 9 (2009) addresses the initial measurement and classification of financial assets and will replace therelevant sections of IAS 39.Under IFRS 9 (2009), there are two options in respect of classification of financial assets, namely, financialassets measured at amortised cost or at fair value. Financial assets are measured at amortised costwhen the business model is to hold assets in order to collect contractual cash flows and when they giverise to cash flows that are solely payments of principal and interest on the principal outstanding. Allother financial assets are measured at fair value. Embedded derivatives are no longer separated fromhybrid contracts that have a financial asset host.The impact on the financial statements for the company cannot be reasonably estimated as at31 December 2012.IFRS 9 (2011) - Financial InstrumentsIFRS 9 (2011) will be adopted by the company for the first time for its financial reporting period ending31 December 2015. The standard will be applied retrospectively, subject to transitional provisions.IFRS 9 (2011) addresses the measurement and classification of financial liabilities and will replace therelevant sections of IAS 39.Under IFRS 9 (2011), the classification and measurement requirements of financial liabilities are thesame as per IAS 39, except for the following two aspects: Under IFRS 9 (2011), derivative liabilities that are linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured, are measured at fair value.IFRS 9 (2011) incorporates the guidance in IAS 39 dealing with fair value measurement and accountingfor derivatives embedded in a host contract that is not a financial asset, as well as the requirements ofIFRIC 9 - Reassessment of Embedded Derivatives.Statement ofAccounting Policies (cont`d)31 December 2012SIGNIFICANT ACCOUNTING POLICIES (cont`d)Adoption of new and revised financial reporting standards and interpretations (cont`d)Fairvaluechangesforfinancialliabilities(otherthanfinancialguaranteesandloancommitments)designated at fair value through profit or loss, that are attributable to the changes in the creditrisk of the liability, will be presented in other comprehensive income. The remaining amountof the fair value change is recognised in profit or loss. However, if this requirement creates orenlarges an accounting mismatch in profit or loss, then the whole fair value change is presentedin profit or loss. The determination as to whether such presentation would create or enlargean accounting mismatch is made on initial recognition and is not subsequently reassessed.
51A n n u a l R e p o r t 2 0 1 2IFRS 13-Fair Value MeasurementIFRS 13 provides a single source of guidance on how fair value is measured, and replaces the fair valuemeasurement guidance that is currently dispersed throughout IFRS. Subject to limited exceptions,IFRS 13 is applied when fair value measurements or disclosures are required or permitted by otherIFRSs. IFRS 13 is effective for annual periods beginning on or after 1 January 2013 with early adoptionpermitted.The impact on the financial statements for 31 December 2015 cannot be reasonably estimated as at31 December 2012.Use of accounting judgements, estimates and assumptionsThe preparation of financial statements requires management to make judgements, estimates andassumptions 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 accountingestimates are recognised in the period in which the estimates are revised and in any future periodsaffected. Information about significant areas of estimation uncertainty and critical judgement inapplying accounting policies that have the most significant effect on the amounts recognised in thefinancial statements is included in the following notes: Statement ofAccounting Policies (cont`d)31 December 2012SIGNIFICANT ACCOUNTING POLICIES (cont`d)Adoption of new and revised financial reporting standards and interpretations (cont`d)Valuation of property, plant and equipmentThe company reviews its estimates for residual values, useful lives and methods ofdepreciation of all plant and equipment annually. Residual values of each asset have beenassessed by reviewing the fair value of the assets after taking into account age, usageand obsolescence. In determining recoverable amount of the assets, expected cashflows are discounted to their present values. In determining useful lives, managementconsiders technology changes, local operating environment and the use of each asset. Current and deferred taxationSignificantjudgementisrequiredtodeterminethetotalprovisionforcurrentanddeferredtaxes.There are many transactions and calculations for which the ultimate tax determination andtiming of payment is uncertain. In particular, when calculating deferred taxation, the effectivetax rate applicable on the temporary differences in property, plant and equipment depends onthe method by which the carrying amount of property, plant and equipment will be realised.
52 T u r n a l l H o l d i n g s L i m i t e dStatement ofAccounting Policies (cont`d)31 December 2012RevenueRevenue represents amounts invoiced to customers for goods supplied and services rendered, net ofvalue added tax and allowances for defective goods. Revenue from the sale of goods in the courseof ordinary activities is measured at the fair value of the consideration received or receivable, net ofreturns, trade discounts and volume rebates. Revenue is recognised when significant risks and rewardsof ownership have been transferred to the customer, recovery of the consideration is probable,the associated costs and possible return of goods can be estimated reliably, there is no continuingmanagement involvement with the goods, and the amount of revenue can be measured reliably. If it isprobable that discounts will be granted and the amount can be measured reliably, then the discount isrecognised as a reduction of revenue as the sales are recognised.The timing of the transfer of risks and rewards varies depending on the individual terms of the salesagreement. For domestic sales, transfer of risks and rewards usually occurs when the product isdelivered to the customer’s designated place of business, however, for international sales, transferoccurs on loading the goods onto the relevant carrier at the Turnall Holdings Limited premises.Basis of consolidationSubsidiariesSubsidiaries are those enterprises controlled by the company. Control exists when the company hasthe power, directly or indirectly, to govern the financial and operating policies of an enterprise soas to obtain benefits from its activities. The financial statements of subsidiaries are included in theconsolidated financial statements from the date that control commences until the date that controlceases.Transactions eliminated on consolidationIntra-group balances and transactions, and any unrealised gains from intra-group transactions,are eliminated in preparing the consolidated financial statements. Unrealised gains arising fromtransactionswithassociatesandjointlycontrolledentitiesareeliminatedtotheextentofthecompany’sinterest in the enterprise, against the investment in the associate. Unrealised losses are eliminated inthe same way as unrealised gains, but only to the extent that there is no evidence of impairment.Property, plant and equipmentItems of property, plant and equipment are measured at cost less accumulated depreciation andimpairment losses.SIGNIFICANT ACCOUNTING POLICIES (cont`d)
53A n n u a l R e p o r t 2 0 1 2Statement ofAccounting Policies (cont`d)31 December 2012Property, plant and equipment (cont’d)Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributableto bringing the asset to a working condition for its intended use, and the costs of dismantling andremoving the items and restoring the site on which they are located. Purchased software that is integralto the functionality of the related equipment is capitalised as part of that equipment.When parts of an item of property, plant and equipment have different useful lives, they are accountedfor as separate items (major components) of property, plant and equipment. Gains and losses ondisposal of an item of property, plant and equipment are determined by comparing the proceeds fromdisposal with the carrying amount of property, plant and equipment, and are recognised net withinother income in profit or loss.The cost of replacing a part of an item of property, plant and equipment is recognised in the carryingamount of the item if it is probable that the future economic benefits embodied within the part willflow to the company, and its cost can be measured reliably. The carrying amount of the replaced part isderecognised.The costs of the day-to-day servicing of property, plant and equipment are recognised inprofit or loss as incurred.Items of property, plant and equipment are revalued at least once every three years or earlier ifit becomes apparent that their carrying amount has declined below their recoverable amount to amaterial extent.Gross carrying amounts of property, plant and equipment are determined by revaluation on a netreplacement basis. Revaluation surpluses are realised on disposal of the assets.Subsequent costsThe cost of replacing part of an item of property, plant and equipment is recognised in the carryingamount of the item if it is probable that the future economic benefits embodied within the part willflow to the company and its cost can be measured reliably.DepreciationDepreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives ofeach part of an item of property, plant and equipment, since this most closely reflects the expectedpattern of consumption of the future economic benefits embodied in the asset. The depreciation ratesare shown below:Industrial buildings 2.5% per annumPlant and machinery 7.5 - 20% per annumFurniture, fittings and office equipment 10 - 20% per annumMotor vehicles 20 - 25% per annum SIGNIFICANT ACCOUNTING POLICIES (cont`d)
54 T u r n a l l H o l d i n g s L i m i t e dStatement ofAccounting Policies (cont`d)31 December 2012Property, plant and equipment (cont’d)The residual values and useful lives, if not insignificant, are reassessed annually.Expenditure on additions and improvements to property, plant and equipment is capitalised for majorprojects on the basis of measured work completed and qualifying for recognition.Impairment of assetsFinancial assetsA financial asset is considered to be impaired if objective evidence indicates that one or more eventshave 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 thedifference between its carrying amount and the present value of the estimated future cash flowsdiscounted at the original effective interest rate. An impairment loss in respect of financial assets iscalculated 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 financialassets are assessed collectively in groups that share similar credit risk characteristics. All impairmentlosses are recognised in profit or loss.An impairment loss is reversed if the reversal can be related objectively to an event occurring after theimpairment loss was recognised. For available for sale financial assets that are equity securities, thereversal is recognised directly in equity. For other financial assets the reversal is recognised in profit orloss.Non-financial assetsThe carrying amounts of the company’s non-financial assets, other than inventories and deferred taxassets, are reviewed at each reporting date to determine whether there is any indication of impairment.If any such indication exists then the assetís recoverable amount is estimated.An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceedsits recoverable amount. A cash-generating unit is the smallest identifiable asset group that generatescash flows that largely are independent from other assets and groups. Impairment losses are recognisedin profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first toreduce the carrying amount of any goodwill allocated to the units and then to reduce the carryingamount of the other assets in the unit (group of units) on a pro-rata basis.SIGNIFICANT ACCOUNTING POLICIES (cont`d)
55A n n u a l R e p o r t 2 0 1 2Statement ofAccounting Policies (cont`d)31 December 2012Impairment of assets (cont’d)The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fairvalue less costs to sell. In assessing value in use, the estimated future cash flows are discounted to theirpresent value using a pre-tax discount rate that reflects current market assessments of the time valueof money and the risks specific to the asset.For intangible assets that are not yet available for use, the recoverable amount is estimated at eachreporting date. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss.TaxationIncome tax on the estimated taxable income for the year comprises current and deferred tax. Incometax is recognised in the statement of comprehensive income except to the extent that it relates toitems recognised directly to equity, in which case it is recognised in equity.Current tax is the expected tax payable on the taxable income for the year, using tax rates enactedor substantially enacted at the balance sheet date, and any adjustment to tax payable in respect ofprevious years.Deferred tax liabilities are recognised for all taxable temporary differences, unless the deferred taxliability arises from: Goodwill The initial recognition of an asset or liability in a transaction which: - is not a business combination, and - at the time of the transaction, affects neither accounting profit nor taxable profit.Deferred tax assets are recognised for all deductable temporary differences to the extent that it isprobable that taxable profit will be available against which the deductable temporary differences canbe utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in atransaction which is not a business combination.Deferred tax is calculated based on the tax rates that are expected to apply to the period when theasset or liability is settled. The effect on deferred tax of any changes in tax rates is charged to thestatement of comprehensive income, except to the extent that it relates to the items previouslycharged or credited directly to equity.SIGNIFICANT ACCOUNTING POLICIES (cont`d)
56 T u r n a l l H o l d i n g s L i m i t e dStatement ofAccounting Policies (cont`d)31 December 2012InventoriesInventories are stated at the lower of cost and net realisable value. Net realisable value is the estimatedselling price in the ordinary course of business, less the estimated costs of completion and sellingexpenses.The cost of inventories is based on the weighted average basis and includes expenditure incurred inacquiring the inventories and bringing them to their existing location and condition.ProvisionsA provision is recognised in the statement of financial position when the company has a legal orconstructive obligation as a result of a past event, and it is probable that an outflow of economicbenefits will be required to settle the obligation. If the effect is material, provisions are determined bydiscounting the expected future cash flows at a pre-tax rate that reflects current market assessments ofthe time value of money and, where appropriate, the risks specific to the liability. The unwinding of thediscount is recognised as finance costs.Foreign currenciesForeign currency transactions (which are currencies other than the functional currency), on initialrecognition, are translated at the exchange rates ruling on the date of the transaction. Subsequent tothat, all foreign currency denominated financial assets and liabilities are translated at each reportingdate, using the exchange rates ruling at that date. Accordingly, foreign currency denominated incomeand 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.Financial instrumentsNon-derivative financial instruments carried in the statement of financial position comprise: cash andcash equivalents, trade and other receivables, trade and other payables, provisions and amounts owingto and from related parties. These instruments are recognised initially at fair value plus, for instrumentsnot at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initialrecognition non-derivative financial instruments are measured as described below:Trade and other receivablesTrade and other receivables are measured at amortised cost using the effective interest rate method. Aprovision for impairment of trade receivables is established when there is objective evidence that theCompany will not be able to collect all amounts due according to the original terms of receivables.Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy orfinancial re-organisation and default or delinquency in payments are considered indicators that thetrade receivables are impaired. When a trade receivable is uncollectible, it is written off against theSIGNIFICANT ACCOUNTING POLICIES (cont`d)
57A n n u a l R e p o r t 2 0 1 2Statement ofAccounting Policies (cont`d)31 December 2012Financial Instruments (cont’d)allowance for trade receivables. Subsequent recoveries of amounts previously written off are creditedagainst the trade receivables impairment provision in the statement of comprehensive income.Cash and cash equivalentsCash and cash equivalents comprise cash on hand, deposits held on call with banks, and investments inmoney market instruments. Cash and cash equivalents are measured at fair value, with any impairmentor appreciation in value of foreign currency denominated balances arising from changes in exchangerates, being written off or credited against the exchange gains and losses account in the statement ofcomprehensive income. In the statement of financial position, bank overdrafts are shown under currentliabilities.Trade payables, other payables and amounts owing to and from related partiesThese financial liabilities are measured at amortised cost using the effective interest rate method.OffsetIf a legally enforceable right exists to set-off recognised amounts of financial assets and liabilities,which are in determinable monetary amounts and the company intends to settle on a net basis, therelevant financial assets and liabilities are offset.Pension costsA defined contribution plan is a post-employment benefit plan under which an entity pays fixedcontributions into a separate entity and will have no legal or constructive obligation to pay furtheramounts. Obligations for contributions to defined contribution pension plans are recognised as anemployeebenefitexpenseinprofitorlossintheperiodsduringwhichservicesarerenderedbyemployees.Share based payment transactionsThe share option programme allows Turnall Fibre Cement employees to acquire shares of TurnallHoldings Limited. The share-based payment transactions are recognised as employee expenses withcorresponding increases in equity.Where the fair value of the options cannot be measured reliably, theentity shall adopt the intrinsic value method, which is the difference between the market value andexercise price of the underlying instrument.Borrowing costsBorrowing costs that are directly attributable to the acquisition, construction or production of aqualifying asset are capitalised and included in the cost of that qualifying assets. These compriseborrowing costs that would have been avoided if the expenditure on the qualifying asset had not beenmade. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.SIGNIFICANT ACCOUNTING POLICIES (cont`d)