2011   ANNUAL   REPORT
ContentsOur Mission and Values                           1Group Profile                                    2Our Business P...
Our Mission and Values                                    Mission                                    We are passionate abo...
Group Profile                                         S       A                                             Z             ...
Our Business Portfolio and ProductsTurnall Fibre CementThe operating subsidiary comprises two main sub-divisions namely:  ...
Board of Directors               Chairman                               Managing Director        Herbert Nkala            ...
Board of Directors  Non-Executive Director                                    Non-Executive Director Celestine Gadzikwa   ...
Chairman’s Statement                                         “...we are set to produce and register our first             ...
Chairman’s Statement (continued)and reverse the current cash outflows towards fibre imports.     the PTA loan for the Newt...
Chairman’s Statement (continued)    EXTERNAL RECOGNITION                                              South Africa and els...
Regional Markets                                              “...The plant to manufacture                                ...
Group Management     Human Resources Director              Technical Director         Managing Director           Finance ...
Management’s Review of Operations“...Local Building Products sales increased 18% to73 812 tonnes representing an 88% contr...
Management’s Review of Operations (continued)     Profit before tax of US$5.1 million was achieved representing           ...
Management’s Review of Operations (continued)FUTURE OUTLOOKThe year 2012 has started on positive note with volumes forthe ...
Director’s Report     The Directors have pleasure in presenting their report,           SUBSTANTIAL SHAREHOLDERS     toget...
Review of Operations                                                      Sustainability                                  ...
Sustainability Reporting     SUSTAINABILITY                                                    HUMAN CAPITAL     We strive...
Award Recognition                                       “In recognition of the company’s                                  ...
Our Commitment and Responsibility to Reporting     RESPONSIBILITY                                                       ST...
Statement of Corporate GovernanceTurnall Holdings Limited is committed to an open approach           The Audit Committee a...
Statistical Analysis     31 December 2011     	                   2011	2010	     	                   US$	US$     Share per...
KPMG                                                  Tel	   +263 (4) 303700                                              ...
Statement of Comprehensive Income     Year ended 31 December 2011     	 Note	                                             ...
Statement of Financial Position                                                                                        31 ...
Statement of Changes in Equity     Year ended 31 December 2011     	                                      			Non-     	   ...
Statement of Cash Flows                                                                            Year ended 31 December ...
Statement on Accounting Policies     31 December 2011     The principal accounting policies of the Company, which are set ...
Statement on Accounting Policies                                                                                          ...
Statement on Accounting Policies     31 December 2011     SIGNIFICANT ACCOUNTING POLICIES (continued)     Adoption of new ...
Statement on Accounting Policies                                                                                          ...
Statement on Accounting Policies     31 December 2011     SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)     Property, plant ...
Statement on Accounting Policies                                                                                          ...
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
Turnall holdings 2011 Annual Report
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Turnall holdings 2011 Annual Report

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Turnall holdings 2011 Annual Report

  1. 1. 2011 ANNUAL REPORT
  2. 2. ContentsOur Mission and Values 1Group Profile 2Our Business Portfolio and Products 3Board of Directors 4Chairman’s Statement 6Group Management 10Management‘s Review of Operations 11Directors’ Report 14Sustainability Reporting 16Our Commitment and Responsibility to Reporting 18Statement of Corporate Governance 19Statistical Analysis 20Independent Auditor’s Report 21Statement of Comprehensive Income 22Statement of Financial Position 23Statement of Changes In Equity 24Statement of Cash Flows 25Statement on Accounting Policies 26Notes to the Financial Statements 34Shareholder’s Information 47Notice to Shareholders 48Shareholders’ Diary 49Notes 50Corporate Information
  3. 3. Our Mission and Values Mission We are passionate about the quality of life of our customers; we provide high quality affordable construction materials to help them achieve their dreams. Values We’ll find time to genuinely care, opening our doors to support, encourage & develop our People. Our priority is to focus on our customers - we will be guided by their needs. We are honest in ALL our business dealings & we will honour our commitments. We communicate in an Open, Frank & Direct way, face to face, regularly challenging our thinking to ensure we are creative in our business approach.“...we provide high quality A sense of humour is important to us: we don’t take ourselvesaffordable construction materials too seriously. However we take our work & our customers veryto help them achieve their seriously.dreams...” We will manage and make decisions with facts.
  4. 4. Group Profile S A Z www.turnall.co.zw OPERATING SUBSIDIARY DORMANT SUBSIDIARIES Turnall Fibre Cement Acacia Holdings Limited Hastt Corporation Limited Hastt Discs (Pvt) Limited Tractor and Equipment (Pvt) Limited2 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  5. 5. Our Business Portfolio and ProductsTurnall Fibre CementThe operating subsidiary comprises two main sub-divisions namely: Turnall Building Products Turnall Piping ProductsKey markets include the low-income housing sector for building products and localauthorities and municipalities for piping products.Main raw materials are chrysotile fibre and cement. Manufacturing takes place inBulawayo and Harare.Dormant SubsidiariesAcacia Holdings LimitedHastt Corporation LimitedHastt Discs (Private) LimitedTractor and Equipment (Private) Limted ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 3
  6. 6. Board of Directors Chairman Managing Director Herbert Nkala John Jere Non-Executive Director Non-Executive Director BSc Hon (Wales, UK) Deputy Chairman Dip Eng (France) Finance Director John Mushayavanhu Linda Manyenga MBA (UZ) James Mutizwa MBA (UK) She is a Trade Unionist Robert Dube Dip Mgt, MBA (UK) He was appointed BL Hon LLB (UZ) He joined Turnall and was a board CA (Z) He heads one of the top Non-Executive A Legal Practioner in 2001 as Group member of the National A seasoned Chartered banking groups in the Chairman of Turnall in based in Harare. Technical Director and Social Security Authority. Accountant, Mr Dube country. He is also a 2005. He is a Non- He is also a Non- was then promoted joined Turnall in 2002. Non-Executive Director of Executive Director of Executive Director of through various several companies. several listed and non- several companies. positions to Managing listed companies. Director.4 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  7. 7. Board of Directors Non-Executive Director Non-Executive Director Celestine Gadzikwa Peter Moyo FCIS Non-Executive Director LLB Hon (UZ), FZiM Non-Executive DirectorHe is a qualified Chartered Rita Likukuma He is a Corporate Non-Executive Director Kiritkumar Naik Non-Executive Director Secretary. He is also a BSc Econ (UZ), MBA (UK) Lawyer. He holds Chirandu Dhlembeu Dip Mech Eng (UK) Rodgers Dhliwayo Non-Executive Director of She was appointed He was appointed to the MSc Env Health (Scotland) Directorships in other MSc Dev Econ, MBL several companies. Non-Executive Director (UNISA) Turnall board in 2010. He He is a Director of companies. of Turnall in 2005. She He was appointed Non- holds Directorships in Occupational Safety and is also a Non-Executive Executive Director of other companies. Health for the National Director of several Turnall in 2005. He holds Social Security Authority companies. Directorships in other (NSSA). companies. ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 5
  8. 8. Chairman’s Statement “...we are set to produce and register our first sustainability report using and meeting the Global Reporting Initiative (GRI) Sustainability Reporting Framework...” INTRODUCTION It is my pleasure to present the Turnall Holdings Limited results for the year ended 31 December 2011. OPERATING ENVIRONMENT The results for the year to 31 December 2011 were achieved in a stable but challenging economic environment characterised largely by tight liquidity, working capital constraints and generally high interest rates which ranged between 18 and 25% per annum. Most companies, according to the CZI survey conducted last year, cited the cost of borrowing as representing a significant threat to their efforts to raise working capital and refurbish plant and machinery. Despite these constraints, capacity utilisation levels within the manufacturing sector grew to 57%, reflecting an overall improvement in economic activity. Chairman The improved economic environment as reflected in a GDP growth of 9.3% Herbert Nkala came largely from the growth in mining, agriculture and the financial services sector. The construction industry, while growing a mere 1%, saw increased activity levels in the mortgage backed property development sector. These initiatives and the proceeds from tobacco and cotton pushed private home construction and other infrastructural upgrade activities to a three year high. However, due to the unavailability of chrysotilefibre on the local market following the continued closure of the local chrysotile asbestos mines, the company was burdened throughout 2011 by the need to import chrysotile fibre from Brazil and Russia at a landed price of US$1 300 per tonne which is almost double the price the local mines would charge for the fibre. The importation of fibre impacted the business on two fronts. Firstly, margins were negatively affected in an effort to maintain prices at affordable levels in the targeted low cost housing segment. Secondly, the company was forced to maintain high fibre stockholding levels in order to deal with the long lead times. The company, as a result, kept a 2 to 3 months stockholding of fibre, and in the process, tied cash resources in fibre stocks. The company is keenly following current efforts by the relevant authorities to speedily expedite the opening of the local mines. The re-opening of the chrysotile asbestos mines will bring working capital relief to the company6 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  9. 9. Chairman’s Statement (continued)and reverse the current cash outflows towards fibre imports. the PTA loan for the Newtech plant. As at year-end, fibre raw material stocks were US$5.5 million.Despite these challenges, growth during 2011 remained akey strategic objective and I am pleased to report that the An attributable profit of US$4.0 million was achievedcompany posted a good set of results, with volumes at 83 representing an increase of 16.1% over the same period last910 tonnes growing by 23% over the same period last year. year. Basic earnings per share were recorded at 0.80 cents against last year’s 0.69 cents.Export volumes at 3 312 tonnes grew by 18% over the sameperiod last year. The Newtech machine in Bulawayo, whichproduces the non-asbestos product, was installed and STAKEHOLDER ENGAGEMENTcommissioned in the latter part of the year and exports into Critical to our strategy is building and maintaining strongSouth Africa commenced, in earnest, in November 2011 relationships with key stakeholders. The company hasthree years after the asbestos ban in 2008. developed a comprehensive stakeholder engagementPipes volumes at 4 700 tonnes grew by 55% over the same strategy to manage stakeholder issues.period last year with growth mainly coming from water andsewer reticulation projects that were undertaken by localauthorities and ZINWA. SUSTAINABILITY We strive to operate our business in a socially and environmentally responsible manner. The company continuedPERFORMANCE OVERVIEW to strengthen its systems to address both environmentalThe company achieved a turnover from continuing operations and social aspects associated with our operations. To thisof US$51.9 million representing an increase of 48.8% over effect, the company established a core team supported bythe same period last year. Export contribution to the overall management to take responsibility of sustainability mattersrevenue growth at 3.2%, was on the low side and this was and the disclosure process. We are set to produce andlargely due to delays in the commissioning of the Newtech register our first sustainability report using and meeting theplant. Global Reporting Initiative (GRI) Sustainability Reporting Framework (G3.1: Level C) for the 2012 results.Operating profit from continuing operations at US$7.4 millionincreased by 40.0% compared to the same period last year.The operating margin of 14.2% was below the prior year LEGISLATIVE ENVIRONMENTmargin of 15.1%. Since dollarisation three years ago, costs I am pleased to advise that Turnall Holdings Limited hasin the business have adjusted upwards to reflect true costs continued to uphold its ISO14001, ISO9001 and OHSASin labour and other areas of the business. The inevitable 18001 certification. We continue to comply with relevantupward adjustments in the company’s cost base coupled legislative requirements of the Environmental Managementwith the high cost of fibre imports impacted negatively on Act (20:27),Labour Act, Companies Act and other relatedmargins. Cost containment programs and a drive towards legislations.higher factory productivity became critical in the company’sefforts to maintain margins. NEW TECHNOLOGY PLANT COMMISSIONEDProfit before tax of US$5.1 million was achieved, representing The plant to manufacture non-asbestos products wasan increase of 5.4% over the same period last year after net successfully commissioned in the latter part of 2011. Asfinance charges of US$2.2 million. The company closed highlighted earlier, commercial production and exports intothe period with net short-term borrowings of US$11.8 South Africa commenced in November 2011. The tonnagemillion comprising of US$9.3 million secured largely for the sold into the export market relating to this product amountedpurposes of purchasing chrysotile fibres from Brazil and to 2 276 tonnes.Russia and US$2.5 million representing the current potion of ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 7
  10. 10. Chairman’s Statement (continued) EXTERNAL RECOGNITION South Africa and elsewhere in the region. The company is In recognition of the company’s good performance in the excited about the prospect of growing exports into the region 2010 financial year, the company won two awards for the Best during 2012. We continue to target the South African Rural Manufacturing Company and Overall Best Quoted Company Development Program (RDP) housing projects and to date on the Zimbabwe Stock Exchange (ZSE), sponsored by we have made in-roads into this segment. Supplies into a 6 Zimbabwe Independent and BancABC. The company also 500 housing unit project valued at R15m in Kwa-Zulu Natal won the 2011 Superbrand award in the construction sector (KZN) started this January 2012. category. The company started the year on a positive note meeting its targets for January 2012. Demand is expected to improve DIRECTORATE with the early opening of the tobacco floors. Mr. R. Dhliwayo was appointed to the Board as a Non- Executive Director during the course of the period. He brings Plant capacity utilisation has remained relatively high at 75% with him vast industrial experience in occupational health during the first two months. and safety. APPRECIATION FUTURE OUTLOOK I would like to thank our customers, suppliers, all stakeholders, Government is projecting a 9.4% growth in 2012 with this my fellow Board members, management and all staff at growth coming mainly from mining, agriculture (tobacco, Turnall, for their support and commitment during the year. cotton, maize) and the financial services sector. The financial services sector is set to grow by 23% in 2012. It is envisaged DIVIDEND that growth in the financial services sector during 2012 will At a meeting held on 23 February 2012, the Board of Directors benefit the company through increased mortgage lending resolved not to declare a final dividend for the year to 31 and funding for infrastructural developments around water December 2011 in view of the need to build resources for and sewer reticulation. both working capital and new projects that will enhance the These projections give us optimism about the company’s company’s medium to long-term competitive advantage and performance during 2012. Agriculture has in the last three capacity to respond to developments in its chosen markets. years contributed close to 50% of the company’s volumes. We also are optimistic that the infrastructural development plans in place for 2012, will sustain growth in pipe sales and Herbert Nkala help diversify financial streams outside Building Products, Chairman the company’s major growth driver. Harare Growth in export volumes is also anticipated from regional markets given the number of projects that are underway in 1 March 20128 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  11. 11. Regional Markets “...The plant to manufacture non-asbestos products was successfully commissioned in the latter part of 2011... commercial production and exports into South Africa commenced in November 2011.” Chairman Herbert NkalaANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 9
  12. 12. Group Management Human Resources Director Technical Director Managing Director Finance Director Marketing Director Elizabeth Mamukwa Francis Chigwedere John Jere Robert Dube Edwin Kondo BA (UNISA) MBA BSc Eng (UNZA), MBA (UZ) *see Board of Directors *see Board of Directors BSc (UZ), MBA (Nottingham UK) He joined Turnall Fibre (Derbyshire UK) She joined Turnall in 2004 Cement in 2002 as an He joined Turnall in 2007 from SMM Holdings, where Engineering Manager and from CAFCA where he was she was the Group Human rose through the ranks to the Regional Marketing Resources Executive. become, the Technical Manager (Africa). Director in 2006.10 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  13. 13. Management’s Review of Operations“...Local Building Products sales increased 18% to73 812 tonnes representing an 88% contribution to overall volumes...”OVERVIEWThe macro-economic environment obtaining in the country remainedgenerally stable as evidenced by a number of growth indicators. Theeconomy grew by 9.3% in line with the Minister of Finance’s 2011 budgetstatement. The growth was largely driven by growth in agriculture, miningand financial services.Capacity utilization in the manufacturing sector grew to 57% according toan industry survey carried out by the Confederation of Zimbabwe Industries(CZI). A construction industry growth of 1% saw increased activity levels inmortgage backed property developments.However, despite the positive economic climate, companies were affectedby liquidity constraints for the greater part of the year. Business wasoverwhelmed by working capital challenges in view of the high interestrates obtaining in the economy, which on average, ranged between 18 – Managing Director25%. Given such a high level cost of borrowing, companies encountered John Jeredifficulties paying back loans and at the same time could not re-stock orre-capitalise plant and machinery.The liquidity challenges affected most companies’ capacity to meet theirdebt obligations and ability by customers to pay within the stipulated creditterms.Despite these constraints, Turnall Holdings Limited volumes grew by 23%for the year under review from 67 700 tonnes to 83 600 tonnes.FINANCIAL PERFORMANCEThe company achieved a turnover from continuing operation of US$51.9million representing an increase of 48.8% over the same period last year.Exports contribution in the overall growth at 3.2% was on the lower side dueto delays in commissioning the asbestos free plant in Bulawayo.Profit from continuing operations at US$7.4 million increased by 40.4%compared to the same period last year. The operating margin of 14.2%achieved was below the prior year margin of 15.1%. The inevitable upwardadjustments in the company’s cost base, coupled with high cost of fibreimports impacted negatively on the margins. ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 11
  14. 14. Management’s Review of Operations (continued) Profit before tax of US$5.1 million was achieved representing GROWING MARKETS an increase of 5.4% over the same period last year after The commissioning of the plant to manufacture the asbestos finance charges of US$2.2 million. The company closed the free product in the latter part of 2011 has renewed the period with net borrowings of US9.3 million. company’s export thrust into the South African, Botswana and Mozambique export markets. Export volumes are An attributable profit of US$4.0 million was achieved expected to grow progressively starting January 2012. representing a basic earnings per share of 0.81 cents. Total assets were valued at US$63.6 million. STAKEHOLDER ENGAGEMENT Critical to our strategy is building and maintaining strong DIVISIONAL PERFORMANCE relationships with key stakeholders. The company has developed a comprehensive stakeholder engagement Building Products Division Local Building strategy to manage stakeholder issues. Products sales increased 18% SUSTAINABILITY to 73 812 tonnes We strive to operate our business in a socially and representing an environmentally responsible manner. The company continued 88% contribution to strengthen its systems to address both environmental to overall volumes. and social aspects associated with our operations. To this Volumes were effect, the company established a core team supported by mainly driven management to take responsibility of sustainability matters by tobacco and and the disclosure process. We are set to produce and cotton sales, register our first sustainability report using and meeting the mining activities Global Reporting Initiative (GRI) Sustainability Reporting as well as civil Framework (G3.1: Level C) for the 2012 results. servants salaries. Mortgage loans from banks also enabled developers to undertake construction projects. LEGISLATIVE ENVIRONMENT Exports at 3 300 tonnes were significantly lower than I am pleased to advise that Turnall Holding Limited has the budgeted plan of 12 400 tonnes due to delays on commissioning the asbestos free plant in Bulawayo, continued to uphold its ISO14001, ISO9001 and OHSAS 18001 certification. We continue to comply with relevant The Galvanised Corrugated Iron Sheets (GCIS) grew by 77% legislative requirements of the Environmental Management to 2 088 tonnes over the prior year. Act (20:27),Labour Act, Companies Act and other related legislations. Piping Products Division Pipe volumes increased EXTERNAL RECOGNITION by 55% to 4 700 (2010- In recognition of the company’s good performance in the 2122 tonnes). However, this was below the target 2010 financial year, the company won two awards for the Best plan of 7 000 tonnes Manufacturing Company and Overall Best Quoted Company due to delays on the on the Zimbabwe Stock Exchange (ZSE), sponsored by disbursement of funding Zimbabwe Independent and BancABC. for major projects and The company also won the 2011 Superbrand award in the municipality water construction sector category. programmes.12 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  15. 15. Management’s Review of Operations (continued)FUTURE OUTLOOKThe year 2012 has started on positive note with volumes forthe first quarter growing by 7.2% ahead of the same periodlast year. The liquidity constraints continue to affect businessactivities in general making it difficult to access workingcapital from banks. Volume forecast for 2012 is expected tofirm in the second half of the year on the back of increasedagricultural activity.APPRECIATIONI would like to take this opportunity to thank the Board forgiving the management team strategic direction at criticalmoments during the year and secondly, extend my profoundappreciation to shareholders, customers, suppliers, businesspartners, fellow managers and Turnall employees, for theirsupport.J. A. JereManaging Director1 March 2012 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 13
  16. 16. Director’s Report The Directors have pleasure in presenting their report, SUBSTANTIAL SHAREHOLDERS together with the audited financial statements of the group According to information received by the Directors, the for the year ended 31 December 2011. following are the only shareholders beneficially holding directly or indirectly, at 31 December 2011, in excess of 5% of the issued share capital of the company: ANNUAL RESULTS FBC Nominees 58.73% Earnings attributable to shareholders were US$3 968 057 for National Social Security Authority 9.58% the period ended 31 December 2011 (2010: US$3 417 678). Equivest Nominees (Private) Limited 7.63% DIVIDEND At a meeting held on 23 February 2012, the Board of Directors AUDITORS resolved not to declare a final dividend for the year to 31 Messrs KPMG offer themselves for reappointment as auditors December 2011 in view of the need to build resources for of the group for the year ending 31 December 2012 and both working capital and new projects that will enhance the shareholders will be asked to consider their reappointment company’s medium to long-term competitive advantage and and approve their remuneration for the year ended 31 capacity to respond to developments in its chosen markets. December 2011. INVESTMENT IN PROPERTY, PLANT AND EQUIPMENT EMPLOYMENT POLICIES Capital expenditure for the year totaled US$4.4 million. The continued motivation of employees and management US$4.3 million was spent on plant and machinery and towards overall productivity enhancement is a fundamental US$0.1 million was spent on computers. feature of the group’s operating philosophy and is key to management of risk. This is achieved through training, SHARE CAPITAL development, information sharing and progressive co- At 31 December 2011, the authorised share capital operative levels, including short and long-term incentives, comprised of 690 000 000 ordinary shares. Issued share where appropriate. capital comprised of 493 040 308 ordinary shares. The The group has employed policies which are appropriate details of the authorised share capital are set out in note 10 to its business and markets and which attract, retain and of the financial statements. motivate the quality of staff necessary to compete actively in the market. These policies are required to provide equal DIRECTORS AND THEIR INTERESTS employment opportunities, without discriminating against Names of the Directors are set on page 4-5. gender, race or physical ability. Messrs J.P. Mutizwa, C.M. Gadzikwa, and C.E. Dhlembeu retire from the Board in terms of Article 95 of the Company’s PAYMENT OF SUPPLIERS Articles of Association. Mr. R. Dhliwayo was appointed to The group agrees terms and conditions with suppliers before the Board during the course of the year and retires in terms business takes place and its policy and practice is to pay of Article 101 of the Company’s Articles of Association. agreed invoices in accordance with the terms of payment. Members being eligible, offer themselves for re-election. By order of the Board No director had, during or at the end of the year, any material interests in any contract with the group which could be considered to be significant in relation to group’s business. R.S. Dube The beneficial interests of the Directors and their families in Secretary the shares of the company are given on page 47. 1 March 201214 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  17. 17. Review of Operations Sustainability “The company continued to strengthen its systems to address both environmental and social aspects Chairman associated with our operations.” Nkala Herbert Asbestos Plant in Harare. Producing 100sheets/min ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 15
  18. 18. Sustainability Reporting SUSTAINABILITY HUMAN CAPITAL We strive to operate our business in a socially and Turnall Holdings recognises the value of the development environmentally responsible manner. The company continues of our employees in the long term group’s prosperity and to strengthen its systems to address both environmental and sustainability. We therefore embrace our duty to treat them in social aspects associated with operations while building the a respectable, fair and human way. We follow the principles company’s value from any identified opportunities. To this of engaging our employees through collective bargaining effect, a core sustainability team led by Mr Robert Dube arrangements and regular constructive and meaningful (Finance Director) and Mr Francis Chigwedere (Technical meetings. We also continue to observe standards that Director) in management has been set. provide employees with a safe working environment and continuing to develop their capacity through regular training. At operational level, the Harare factory sustainability team The group upheld its OHSAS18001 certification during the was set up comprising representatives from Finance & period. Administration, Human Resources, Sales & Marketing, Engineering, Production and World Class Practices (Quality, ENVIRONMENT Environment and Health & Safety) departments. A similar Turnall Holdings recognises that the global fall out from Bulawayo factory sustainability team is expected to be set in climate change will negatively impact business operations the coming year. and markets in which we operate. The group is committed to complying with environmental legislation and voluntary The main purpose of these teams is to help management environmental management systems. The group continues in identifying any related sustainability impacts and to work on various initiatives to manage waste, energy opportunities arising from our business operations in relation and water use and emission levels. The group upheld its to economic, environmental and social issues. The teams ISO14001 Certification during the period. will also spearhead our sustainability reporting process for the coming periods with the support of our technical PRODUCTS STEWARDSHIP sustainability reporting partner. We expect to produce our Our products continue to be important to the long term first Sustainability Report in the annual report for the year sustainability of the group, customers and markets. The ending 31 December 2012. group maintains systems which identify, analyses, evaluates and treats impacts and risks during production processes STAKEHOLDERS ENGAGEMENT to guarantee the quality of our products and safety to our The reasonable expectation and interests of a wide range customers. During the period, the group upheld its ISO9001 of our stakeholders who include customers, suppliers, certification. regulators, employees, shareholders, investors, governments, communities and others, in general, inform us of strategic COMMUNITY RESPONSIBILITY issues deemed material to the long term sustainability of Turnall Holding recognises the importance of social lives Turnall Holdings. Engaging stakeholders helps us to balance that support and motivates the moral of our employees the long term social, environmental and economic interests and society. During the year, the group continued to with the principle to maximise earnings of the company and support various community initiatives toward sustainable enhance business value. To this effect, the company has development and improving community livelihoods and devised an inclusivity strategy which will capture all material quality of life. The group will continue to pay attention to stakeholder engagements, material issues raised and how issues of HIV/Aids affecting communities and employees. we respond to them.16 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  19. 19. Award Recognition “In recognition of the company’s good performance in the 2010 financial year, the company won two awards for the Best Manufacturing Company and Overall Best Quoted Company on the Zimbabwe Stock Exchange (ZSE), sponsored by Zimbabwe Independent and BancABC. The company also won the 2011 Superbrand award in the construction sector category.” Chairman Herbert Nkala 2010 2010ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 17
  20. 20. Our Commitment and Responsibility to Reporting RESPONSIBILITY STATEMENT OF COMPLIANCE The Directors are responsible for preparing the Annual The financial statements have been prepared in conformity Report and the group financial statements in accordance with International Financial Reporting Standards (IFRS’s), with applicable laws and regulations. promulgated by the International Accounting Standards Board (IASB), which includes standards and interpretations The Companies Act (Chapter 24:03) requires the directors approved by the IASB as well as International Accounting to prepare the group financial statements for each financial year. Standards (IAS’s) and Standing Interpretations Committee The group financial statements are required to present fairly, (SIC) interpretations issued under previous constitutions. in all material respects, the financial position of the group and its financial performance and cash flow for that period SUSTAINABILITY REPORTING The Company has set its goal and commitment to providing in accordance with International Financial Reporting standards access to relevant, high quality information on the group’s (IFRS’s) and in the manner required by the Companies Act economic, environmental and social aspects related (Chapter 24.03) of Zimbabwe. to the company’s activities, which allow assessment of the company’s sustainability and governance through In preparation of the group financial statements, the directors sustainability reporting. The group is striving to align its are required to: practices with global best practices reflected in voluntary select suitable accounting policies and then apply them frameworks such the Global Reporting Framework and consistently; the King III code of corporate governance. The Group’s make judgments and estimates that are reasonable and financial statements for coming period are expected to be prudent; accompanied by a sustainability report prepared according state whether they have been prepared in accordance with to the requirements of GRI Sustainability Reporting IFRS’s; and Framework, Application Level- C. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and parent company will continue in business in the foreseable H. Nkala future. Chairman The directors are responsible for keeping proper accounting 1 March 2012 records which disclose with reasonable accuracy at any time, the financial position of the group and enable them to ensure that its financial statements comply with the Companies Act (chapter 24:03). They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.18 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  21. 21. Statement of Corporate GovernanceTurnall Holdings Limited is committed to an open approach The Audit Committee also recommends the appointment ofto corporate governance. This assurance ensures that, in and reviews the external auditors’ remuneration. The externalprotecting and adding value to Turnall Holdings Limited’s auditors have unrestricted access to the audit committee.financial and human resource investment, the group is beingmanaged ethically, according to prudently determined risk NEW BUSINESS DEVELOPMENT COMMITTEEparameters and in compliance with the best international This is chaired by Mr. J. Mushayavanhu, a Non-Executivepractices. The code, which Turnall Holdings Limited applied, Director and includes two other Non-Executive Directors.was prepared by the Audit Committee and approved by the The committee meets at least three times a year to identifyBoard on 6 March 2003.. potential new businesses in order to diversify Turnall Holdings’ current product portfolio in the construction sector.THE BOARD It also conducts and appraises new projects identified toThe Board comprises two executive directors and eight non- fit with the business overall vision and mission as well asexecutive directors. The Chairman of the Board is a non- formulating business proposals for approval by the Board.executive director. The executive directors generally haveresponsibility for making and implementing operational MARKETING AND CHRYSOTILE COMMITTEEdecisions in running the group’s businesses. Non-executive This Committee is chaired by Mrs. R. Likukuma, a Non-directors support the skills and experience of the executive Executive Director and has four other Non-Executivedirectors, contributing to formulation of policy and decision- Directors. The committee meets at least three times a yearmaking through their knowledge of, and experience in, other to understand developments surrounding the asbestosbusinesses and sectors. lobby and their impact on the business. The committee also updates the Board members on developments surroundingThe Board, which meets at least quarterly, sets the the anti-asbestos lobby on the regional and internationalstrategic objectives of the group, determines investments front as well as analysing the effectiveness of the sales andand environmental policies and approves major capital marketing strategies of the business with particular emphasisexpenditure, acquisitions and investments. The Board on pricing issues, exports and new markets.also agrees on performance criteria and delegates tomanagement the detailed planning and implementation HUMAN RESOURCES COMMITTEEof the agreed policy, in accordance with appropriate risk The Human Resources Committee is chaired by Turnallparameters. It monitors compliance with policies, and Holdings Chairman Mr. H. Nkala and includes two Non-achievement against objectives, by holding management Executive Directors. The Managing Director is also a memberaccountable for its activities through the measurement and of the Committee. The committee meets at least three timescontrol of operations by regular reports to the Board including a year to discuss issues pertaining to the company’s Humanquarterly performance reporting and budget updates. Resources Policy, staff retention and the remuneration of both non executive and executive directors as well as staffAUDIT COMMITTEE remuneration.The committee is chaired by Mr J.P. Mutizwa, a non-executivedirector and includes two other non-executive directors. Thecommittee meets at least quarterly and reviews records from H. Nkalathe Executive Committee, the internal auditors, and the group Chairmanexternal auditors in relation to the interim and annual financialstatements, as well as to the accounting and internal control 1 March 2012systems. ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 19
  22. 22. Statistical Analysis 31 December 2011 2011 2010 US$ US$ Share performance Weighted avarage number of shares (000) 493 040 493 040 Closing market capitalisation (000) 49 304 34 513 Basic earnings per share (cents) 0.81 0.69 Diluted earnings per share (cents) 0.81 0.69 Net asset value per share (cents) 5.78 7.15 Closing share price (cents) 0.10 0.07 Highest share price (cents) 0.15 0.07 Closing price/earnings ratio (times) 0.13 0.10 Profitability Gross profit margin (%) 30.08 31.91 Operating profit margin (%) 14.17 15.06 Return on shareholders equity (%) 13.93 13.48 Return on total assets (%) 6.24 7.25 Effective rate of tax (%) 23.00 30.00 Nominal rate of tax (%) 25.75 25.75 Liquidity and leverage Interest cover (times) 3.30 13.72 Current ratio 1.15:1 1.50:120 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  23. 23. KPMG Tel +263 (4) 303700 Mutual Gardens +263 (4) 302600 100 The Chase (West) Fax +263 (4) 303699 Emerald Hill P O Box 6 Harare ZimbabweIndependent Auditor’s ReportTo The Members of Turnall Holdings LimitedWe have audited the Companying financial statements of Turnall Holdings Limited as set out on pages 22 to 46, which comprisethe statement of financial position at 31 December 2011, and the statements of comprehensive income, changes in equityand cash flows for the year then ended, and the notes to the financial statements, which include a summary of significantaccounting policies and other explanatory notes.Directors’ responsibility for the financial statementsThe Company’s Directors are responsible for the preparation and fair presentation of these financial statements in accordancewith International Financial Reporting Standards and in the manner required by the Companies Act (Chapter 24:03) of Zimbabwe,and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that arefree from material 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 inaccordance with International Standards on Auditing. Those standards require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance 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 misstatementof the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internalcontrol relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’sinternal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the financial statements present fairly, in all material respects, the financial position of Turnall Holdings Limitedat 31 December 2011, and its financial performance and cash flows for the year then ended in accordance with InternationalFinancial Reporting Standards, and in the manner required by the Companies Act (Chapter 24:03) of Zimbabwe.KPMG Chartered Accountants (Zimbabwe)Harare1 March 2012 KPMG, a Zimbabwean partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 21
  24. 24. Statement of Comprehensive Income Year ended 31 December 2011 Note 2011 2010 US$ US$ Turnover 2 51 865 260 34 856 966 Cost of sales 3 (36 265 512 (23 733 248 ) ) Gross profit 15 599 748 11 123 718 Other operating income 4 172 836 274 553 Selling and distribution expenses 5 (1 987 399 ) (1 416 249 ) Administrative expenses 5 (6 433 469 ) (4 731 642 ) Results from operating activities 7 351 716 5 250 380 Finance income 6 76 145 22 015 Finance costs 6 (2 305 582 ) (413 214 ) Net finance costs (2 229 437 ) (391 199 ) Profit from operations before income tax expense 5 122 279 4 859 181 Income tax expense 7 (1 154 222 ) (1 441 503 ) Profit for the year 3 968 057 3 417 678 Other comprehensive income, net of income tax Other comprehensive income - - Total comprehensive income for the period 3 968 057 3 417 678 Number of shares in issue (000s) 9 493 040 493 040 Basic earnings per share (cents) 9 0.81 0.6922 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  25. 25. Statement of Financial Position 31 December 2011 Note 2011 2010 US$ US$ ASSETSNon-current assetsProperty, plant and equipment 13 31 807 172 29 254 936 Current assetsInventories 11 14 812 361 8 036 016 Trade and other receivables 12 16 217 424 8 674 890 Short term investments 21.4.2 19 585 21 129Cash and cash equivalents 14 759 848 1 149 058 Total current assets 31 809 218 17 881 093 Total assets 63 616 390 47 136 029 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 8 068 431 4 953 334 Total equity attributable to equity holders of the company 28 475 485 25 360 388 Non-controlling interest - - Total equity 28 475 485 25 360 388 Non-current liabilitiesLoans and borrowings 8 1 138 295 2 842 991 Deferred taxation 7.4 6 454 677 7 037 481 Total non-current liabilities 7 592 972 9 880 472 Current liabilitiesLoans and borrowings 8 12 455 545 2 922 741 Trade and other payables 15 12 149 775 5 876 935 Provisions 16 584 343 671 191 Taxation 2 126 818 2 420 953 Bank overdraft 14 231 452 3 349 Total current liabilities 27 547 933 11 895 169 Total liabilities 35 140 905 21 775 641Total equity and liabilities 63 616 390 47 136 029Chairman Director1 March 2012 1 March 2012 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 23
  26. 26. Statement of Changes in Equity Year ended 31 December 2011 Non- Share Share Revaluation distributable Retained capital premium reserve reserve earnings Total US$ US$ US$ US$ US$ US$ Balance at 31 December 2009 (as previously stated) - - 6 582 675 12 494 688 1 535 656 20 613 019 Prior year revaluation reserve understated - - 1 056 829 - - 1 056 829 Balance as at 1 January 2010 (restated) - - 7 639 504 12 494 688 1 535 656 21 669 848 Total comprehensive income for the year Profit for the year - - - - 3 417 678 3 417 678 Share capital changes Share capital 4 839 449 - - (4 839 449 ) - - Share options exercised 90 954 181 908 - - - 272 862 Balance at 31 December 2010 4 930 403 181 908 7 639 504 7 655 239 4 953 334 25 360 388 Total comprehensive income for the year Profit for the year - - - - 3 968 057 3 968 057 Dividend 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 48524 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  27. 27. Statement of Cash Flows Year ended 31 December 2011 Note 2011 2010 US$ US$CASH FLOWS FROM OPERATING ACTIVITIESProfit for the year 3 968 057 3 417 678Adjustments for: Depreciation of property, plant and equipment 13 1 862 767 1 605 439 Net interest costs 6 2 229 437 391 199 Unrealised exchange losses (180 832 ) (52 790 ) Loss on disposal of property, plant and equipment - 24 925 Net change in other investments 1 544 3 579 Income tax expense 7 1 154 222 1 441 503Operating cash flows before reinvestment in working capital 9 035 195 6 831 533 Increase in inventories (6 776 345 ) (4 643 201 )Increase in trade and other receivables (7 542 534 ) (5 454 915 )Increase in provisions, trade and other payables 6 185 992 3 366 615 902 308 100 032 Withholding tax paid (1 160 ) (1 596 )Income tax paid (2 030 000 ) (316 959 )Interest paid (2 049 970 ) (354 173 ) (4 081 130 ) (672 728 )Net cash flows from operating activities (3 178 822 ) (572 696 )CASH FLOWS FROM INVESTING ACTIVITIESInterest received 1 365 15 764Proceeds from disposal of property, plant and equipment - 54 567Acquisition of property, plant and equipment 13 (4 415 003 ) (4 356 570 )Net cash flows from investing activities (4 413 638 ) (4 286 239 )CASH FLOWS FROM FINANCING ACTIVITIES Loans and borrowings 7 828 107 4 735 046Exercise of share options - 272 862 Dividends paid (852 960 ) -Net cash flows from financing activities 6 975 147 5 007 908 (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS 14 (617 313 ) 148 973 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 25
  28. 28. Statement on Accounting Policies 31 December 2011 The principal accounting policies of the Company, which are set out below, have been consistently followed in all material respects. BASIS OF PREPARATION Statement of compliance The financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS’s), promulgated by the International Accounting Standards Board (IASB), which includes standards and interpretations approved by the IASB as well as International Accounting Standards (IAS’s) and Standing Interpretations Committee (SIC) interpretations issued under previous constitutions. The financial statements are based on statutory records that are maintained under the historical cost convention and expressed in United States dollars (US$). SIGNIFICANT ACCOUNTING POLICIES Adoption of new and revised financial reporting standards and interpretations The following revised standards issued by the International Accounting Standards Board (IASB) are effective for the current year. These are: IFRS 1 Presentation of financial statements - Presentation of Statement of Changes in Equity. IAS 24 Related Party Disclosures (revised 2009). The adoption of these revised standards in the current year has not led to any changes in the Company’s accounting policies. These standards do not have any financial effect on the recognition or measurement 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. There are new or revised Accounting Standards and Interpretations in issue that are not yet effective. These include the following standards and interpretations that are applicable to the business of the entity and may have an impact on future financial statements: IAS 1 amendment Presentation of Financial Statements: Presentation of Items of Other Comprehensive Income - Annual periods beginning on or after 1 July 2012. IAS 27 Separate Financial Statements (2011) - Annual periods beginning on or after 1 January 2013. IFRS 7 amendment Disclosures - Transfers of Financial Assets - Annual periods beginning on or after 1 July 2011. IFRS 9 Financial Instruments - Annual periods beginning on or after 1 January 2013. IFRS 10 Consolidated Financial Statements - 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 19 Extinguishing Financial Liabilities with Equity Instruments - Annual periods beginning on or after 1 July 2011. The Directors are of the opinion that the impact of the application of these standards and interpretations will be as follows:26 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  29. 29. Statement on Accounting Policies 31 December 2011SIGNIFICANT ACCOUNTING POLICIES (continued)Adoption of new and revised financial reporting standards and interpretations (continued)Amendment to IAS 1 - Presentation of Financial Statements: Presentation of items of other Comprehensive IncomeThe amendment to IAS 1 will be adopted by Turnall Holdings Limited for the first time for its financial reporting period ending31 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 related tax effects for thetwo sub-categories will be shown separately. This is a change in presentation and will have no impact on the recognitionor measurement of items in the financial statements. This amendment will be applied retrospectively and the comparativeinformation will be restated.IAS 27 (2011) - Separate Financial StatementsIAS 27 (2011) will be adopted by Turnall Holdings Limited for the first time for its financial reporting period ending 31December 2013. IAS 27 (2011) supersedes IAS 27 (2008). IAS 27 (2011) carries forward the existing accounting anddisclosure requirements for separate financial statements, with some minor clarifications. The adoption of IAS 27 (2011) willnot have a significant impact on the Company’s separate financial statements.Amendments to IFRS 7 - Financial Instruments: DisclosuresThe amendments to IFRS 7 will be adopted by Turnall Holdings Limited for the first time for its financial reporting periodending 31 December 2012. In terms of the amendments additional disclosure will be provided regarding transfers of financialassets that are:• Not derecognised in their entirety; and• Derecognised in their entirety but for which the Company retains continuing involvement.IFRS 9 (2010) - Financial InstrumentsIFRS 9 (2010) will be adopted by Turnall Holdings Limited for the first time for its financial reporting period ending 31December 2012. The standard will be applied retrospectively, subject to transitional provisions. IFRS 9 (2010) addresses themeasurement and classification of financial liabilities and will replace the relevant sections of IAS 39. Under IFRS 9 (2010),the classification and measurement requirements of financial liabilities are the same as per IAS 39, except for the followingtwo aspects:• Fair value changes for financial liabilities (other than financial guarantees and loan commitments) designated at fair value through profit or loss, that are attributable to the changes in the credit risk of the liability will be presented in other comprehensive income. The remaining amount of the fair value change is recognised in profit or loss. However, if this requirement creates or enlarges an accounting mismatch in profit or loss, then the whole fair value change is presented in profit or loss. The determination as to whether such presentation would create or enlarge an accounting mismatch is made on initial recognition and is not subsequently reassessed.• Under IFRS 9 (2010) 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 (2010) incorporates the guidance in IAS 39 dealing with fair value measurement and accounting for derivatives embedded in a host contract that is not a financial asset, as well as the requirements of IFRIC 9-Reassessment of Embedded Derivatives.IFRS 10 - Consolidated Financial StatementsIFRS 10 will be adopted by Turnall Holdings Limited for the first time for its financial reporting period ending 31 December2013. The standard will be applied retrospectively if there is a change in the control conclusion between IAS 27/SIC 12 andIFRS 10.IFRS 10 introduces a single control model to assess whether an investee should be consolidated. This control model requiresentities to perform the following in determining whether control exists: ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 27
  30. 30. Statement on Accounting Policies 31 December 2011 SIGNIFICANT ACCOUNTING POLICIES (continued) Adoption of new and revised financial reporting standards and interpretations (continued) IFRS 10 - Consolidated Financial Statements (continued) • Identify how decisions about the relevant activities are made; • Assess whether the entity has power over the relevant activities by considering only the entity’s substantive rights; • Assess whether the entity is exposed to variability in returns; and • Assess whether the entity is able to use its power over the investee to affect returns for its own benefit. Control should be assessed on a continuous basis and should be reassessed as facts and circumstances change. The impact on the financial statements for Turnall Holdings Limited cannot be reasonably estimated as at 31 December 2011. IFRS 12 - Disclosure of Interests in Other Entities IFRS 12 will be adopted by Turnall Holdings Limited for the first time for its financial reporting period ending 31 December 2013. IFRS 12 combines, in a single standard, the disclosure requirements for subsidiaries, associates and joint arrangements, as well as unconsolidated structured entities. The required disclosures aim to provide information to enable users to evaluate: • The nature of, and risks associated with, an entity’s interests in other entities; and • The effects of those interests on the entity’s financial position, financial performance and cash flows. The adoption of the new standard will increase the level of disclosure provided for the entity’s interests in subsidiaries, joint arrangements, associates and structured entities. IFRS 13 - Fair Value Measurement IFRS 13 will be adopted by Turnall Holdings Limited for the first time for its financial reporting period ending 31 December 2013. The standard will be applied prospectively and comparatives will not be restated. IFRS 13 introduces a single source of guidance on fair value measurement for both financial and non-financial assets and liabilities by defining fair value, establishing a framework for measuring fair value and setting out disclosures requirements for fair value measurements. The key principles in IFRS 13 are as follows: • Fair value is an exit price; • Measurement considers characteristics of the asset or liability and not entity-specific characteristics; • Measurement assumes a transaction in the entity’s principle (or most advantageous) market between market participants; • Price is not adjusted for transaction costs; • Measurement maximises the use of relevant observable inputs and minimises the use of unobservable inputs; and • The three-level fair value hierarchy is extended to all fair value measurements. The impact on the financial statements for Turnall Holdings Limited cannot be reasonably estimated as at 31 December 2011. Use of accounting judgements, estimates and assumptions The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.28 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  31. 31. Statement on Accounting Policies 31 December 2011SIGNIFICANT ACCOUNTING POLICIES (continued)Use of accounting judgements, estimates and assumptions (continued)Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognisedin the period in which the estimates are revised and in any future periods affected. Information about significant areas ofestimation uncertainty and critical judgement in applying accounting policies that have the most significant effect on theamounts recognised in the financial statements is included in the following notes:• Valuation of property, plant and equipment The Company reviews its estimates for residual values, useful lives and methods of depreciation of all property, plant and equipment annually. Residual values of each property, plant and equipment item has been assessed by reviewing the fair value of the assets after taking into account age, usage and obsolescence. In determining recoverable amount of the assets, expected cash flows are discounted to their present values. In determining useful lives, management considers technology changes, local operating environment and the use of each asset.• Current and deferred taxation Significant judgement is required to determine the total provision for current and deferred taxes. There are many transactions and calculations for which the ultimate tax determination and timing of payment is uncertain. In particular, when calculating deferred taxation, the effective tax rate applicable on the temporary differences in property, plant and equipment depends on the method by which the carrying amount of property, plant and equipment will be realised.RevenueRevenue represents amounts invoiced to customers for goods supplied and services rendered, net of value added taxand allowances for defective goods. Revenue from the sale of goods is recognised when the significant risks and rewardsof ownership have been transferred to the buyer. Revenue is measured at the fair value of the consideration received orreceivable. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due,measurement of the associated costs incurred to earn the revenue or the possible return of the goods.Basis of consolidationSubsidiariesSubsidiaries are those enterprises controlled by the Company. Control exists when the Company has the power, directly orindirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financialstatements of subsidiaries are included in the consolidated financial statements from the date that control commences untilthe date that control ceases.Transactions eliminated on consolidationIntra-group balances and transactions, and any unrealised gains from intra-group transactions, are eliminated in preparingthe consolidated financial statements. Unrealised gains arising from transactions with associates and jointly controlled entitiesare eliminated to the extent of the Company’s interest in the enterprise, against the investment in the associate. Unrealisedlosses are eliminated in the 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 and impairment losses.Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assetsincludes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a workingcondition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they arelocated. ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 29
  32. 32. Statement on Accounting Policies 31 December 2011 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property, plant and equipment (continued) Purchased software that is integral to 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 accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income in profit or loss. The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Items of property, plant and equipment are revalued at least once every three years or earlier if it becomes apparent that their carrying amount has declined below their recoverable amount to a material extent. Gross carrying amounts of property, plant and equipment are determined by revaluation on a net replacement basis. Revaluation surpluses are realised on disposal of the assets. Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. Depreciation Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The depreciation rates are shown below: Industrial buildings 2.5% per annum Plant and machinery 7.5 - 20% per annum Furniture, fittings and office equipment 10 - 20% per annum Motor vehicles 20 - 25% per annum 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 major projects on the basis of measured work completed and qualifying for recognition. Impairment of assets Financial assets A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of financial assets is calculated as the difference between its carrying amount and its current fair value.30 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011
  33. 33. Statement on Accounting Policies 31 December 2011SIGNIFICANT ACCOUNTING POLICIES (continued)Impairment of assets (continued)Significant financial assets are tested for impairment on an individual basis. The remaining financial assets, are assessedcollectively in groups that share similar credit risk characteristics.All impairment losses are recognised in profit or loss.An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss wasrecognised. For available for sale financial assets that are equity securities, the reversal is recognised directly in equity.For other financial assets the reversal is recognised in profit or loss.Non-financial assetsThe carrying amounts of the Company’s non-financial assets, other than inventories and deferred tax assets, are reviewed ateach reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’srecoverable amount is estimated.An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverableamount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independentfrom other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses recognised in respectof cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then toreduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs tosell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discountrate that reflects current market assessments of the time value of money and the risks specific to the asset.For intangible assets that are not yet available for use, the recoverable amount is estimated at each reporting date. Animpairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverableamount. Impairment losses are recognised in profit or loss.TaxationIncome tax on the estimated taxable income for the year comprises current and deferred tax. Income tax is recognised inthe statement of comprehensive income except to the extent that it relates to items recognised directly to equity, in whichcase it is recognised in equity.Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enactedat the balance sheet date, and any adjustment to tax payable in respect of previous years.Deferred tax liabilities are recognised for all taxable temporary differences, unless the deferred tax liability 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 deductible temporary differences to the extent that it is probable that taxable profitwill be available against which the deductible temporary differences can be utilised, unless the deferred tax asset arises fromthe initial recognition of an asset or liability in a transaction which is not a business combination. ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 ANNUAL REPORT 2011 31

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