UNAUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013
UNAUDITED GROUP FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013
Publication of results
The Group was unable to publish its results for the year ended 31 December 2013 by 31 March 2014 due to the
pending registration of the scheme of arrangement with the High Court of Zimbabwe, as detailed in note 6 to the
financial information. These results are therefore preliminary and the audited financial statements will be published
once the scheme of arrangement has been registered.
Lack of sufficient working capital, and generally difficult economic conditions, particularly in the second half of the
year, negatively affected the Group’s performance. Consequently, group net sales marginally declined by 0.7% to
$33 323 560 (2012: $33,566,502).
Gross margins declined to 25.1% (2012: 29.1%) due to poor product mix and general increase in competitive
pressure at the Merchandising division.
Operating loss of $6,415,694 (2012: $4,911,939) is after making the following provisions totaling $2,407,514:
impairment of trade and other debtors $1,002,638; retrenchment costs $857,142; and loss on disposal of property
Net finance charges remained prohibitively high at $3,071,250 (2012: $2,729,075). The group was heavily geared
throughout the year. During the last quarter of 2013, short term borrowings and long term loans were reduced by
$933,912 and $2,578,052 respectively following disposal of properties. These debt reductions will result in future
savings in interest charges of $652 778 annually.
The tax charge of $2,084,418 comprises of $187,044 capital tax relating to disposal of investments and properties;
$431 382 deferred tax charge for the year; and $1,465,992 write down of the deferred tax asset carried forward from
previous years following a re-assessment of the potential utilization of the underlying assessed losses during their
remaining tax lives. The deferred tax asset write-down has no impact on the Group’s cash flows.
Merchandising division gross sales declined by 8.5% to $20,847,733 in the year under review compared to
$22 786 531 for prior year. Performance was severely affected by chronic shortage of stocks, especially in the
second half of the year. Inability of the division to pay suppliers on time resulted in suspension of delivery of all key
products. The division was not in a position to source products on cash basis because of a weak balance sheet.
Inability of the division to offer a balanced product mix and competitive pressures resulted in margins declining from
29.5% to 23.1%.
Zimtile sales grew by 9.7% to $9 788 871 (2012: $8 921 801) on the back of a 17.1% growth in concrete tile sales
volumes. However, bricks and pavers sales volumes declined by 11.0% due to lack of sufficient working capital to
consistently run both the tile and brick plants. Margins improved to 25.7% from 23.6% due to improved efficiencies
and higher tile production volumes. Additional pallets were sourced during the year, resulting in an increase in
available production capacity at the Harare tile plant. Zimtile is a long standing trusted brand in the concrete tile
PG Glass sales remained flat at $2 920 852 (2012: $2 870 047). After recoding a 22.0% increase in sales in the first
half of the year, the unit frequently ran out of glass material in the second half. Margins improved from 33.5% in 2012
In view of the deteriorating position of the Group’s balance sheet, the board of directors proposed High Court
sanctioned schemes of arrangement.
The results and impact of the proposals are summarized below:
a) Scheme with secured lenders involves property-debt swaps and restructuring of facilities over three years.
Of the $4,500,843 owed to secured lenders as at 31 December 2013, $3,535,760 will be settled through
property-debt swaps. The balance of $965,083 will be repaid over a period of 36 months, with a three
months grace period, from the date of registration of the scheme. An all inclusive interest rate of 12% per
annum will apply. The scheme will lead to a reduction in gearing and annualized interest savings of
b) The secured creditor scheme involving $1,346,234 was approved. The secured creditor is prepared to
continue supplying products to the Group provided all agreed trading terms are honoured.
c) 100% of the debenture holders approved the conversion of $6,720,000 debentures into ordinary equity. This
will lead to an annualized interest saving of $672,000 and an improvement in equity by $6,720,000.
d) Concurrent creditors owed $10.5 million as at 30 September 2013 approved the scheme of arrangement
under which balances owed to them as at that date will be repaid over a 30 month period, after an initial
grace period of 6 months from the date of registration of the scheme. This scheme of arrangement will have
a positive impact on cash and allow the Group to allocate funds to develop new business.
e) Shareholders unanimously approved the above schemes at an Extra Ordinary General Meeting held on 14
March 2014. In addition, shareholders also approved the following
The raising of $1million in equity through a private placement.
The raising of $1.5million in working capital through facilities with local financial institutions, of
which $1.1million has already been secured.
The disposal of additional properties which are excess to requirements. Subsequent to year end,
disposals of properties valued at $1million have been concluded.
The schemes are awaiting registration with the High Court of Zimbabwe, and being subsequent to the year end, the
financial statements as at 31 December 2013 do not reflect the effects of the scheme of arrangement.
The board is also implementing the following initiatives in the new financial year:
a) Divisionalisation of subsidiaries to achieve tax efficiency and reduce overheads.
b) Centralisation of back offices which has since been completed.
c) Consolidation of PG Timbers and PG Building Supplies was effected on 1 January, 2014 resulting in further
rationalization of branches to 15 from 22.
d) Staff complement was reduced to 497 as at 31 December, 2013 from 652 the previous year. Additional staff
rationalization to be done before 2014 half year-end.
e) Merchandising division to focus on processing and distribution of the following core products: timber;
boards, doors, glass and selected hardware items.
f) Strengthening PG management.
g) Establishing strategic linkages and partnerships at the Merchandising division.
21 May 2014
ABRIDGED GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2013
Continuing operations USD USD
Net revenue 33,323,560 33,566,502
Operating loss (6,415,694) (4,911,939)
Retrenchment costs (867,142) -
Fair value gain on investment property - 433,513
Re-measurement gain from disposal of associate 875,546 1,211,734
Fair value gain on remaining investment in Manica Boards & Doors (Private) Limited 416,927 -
Impairment reversal/ (loss) on property, plant & equipment 561 (66,550)
Loss before tax from continuing operations (5,989,802) (3,333,242)
Share of loss of associate (181,303) (959,415)
Loss before interest and tax (6,171,105) (4,292,657)
Net finance costs (3,071,250) (2,729,075)
Loss before taxation from continuing operations (9,242,355) (7,021,732)
Tax (2,084,418) (935,472)
Loss for the year from continuing operations (11,326,773) (7,957,204)
Profit after tax for the period from discontinued operations - 10,430
Loss for the year (11,326,773) (7,946,774)
Earnings per share
Shares in issue (m's) 478 478
Basic loss per share (cents) (2.37) (1.66)
Diluted basic loss per share (cents) (1.54) (1.02)
ABRIDGED GROUP STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2013
Unaudited as at Audited as at
Non-current assets 13,088,901 18,909,560
Current assets 9,621,424 17,510,036
Total assets 22,710,325 36,419,596
EQUITY AND LIABILITIES
Total equity (10,050,443) 1,568,208
Non-current liabilities 7,797,413 10,556,852
Current liabilities 24,963,355 24,294,536
Total equity and liabilities 22,710,325 36,419,596
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2013
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$
Balance as at 31 December 2011 478,330 4,044,666 193,336 7,725 7,795,621 (1,193,634) (2,205,381) 9,120,663 (429,179) 8,691,484
Loss for the year - - - - - - (7,946,774) (7,946,774) - (7,946,774)
Other comprehensive income - - - - 393,017 - - 393,017 - 393,017
Total comprehensive income - - - - 393,017 - (7,946,774) (7,553,757) - (7,553,757)
Carrying value of acquired non-controlling interests - - - - - - - - 429,179 429,179
Exchange difference on foreign subsidiary - - - 1,302 - - - 1,302 - 1,302
Balance as at 31 December 2012 478,330 4,044,666 193,336 9,027 8,188,638 (1,193,634) (10,152,155) 1,568,208 - 1,568,208
Revaluation of land and buildings - - - - (293,538) - - (293,538) (293,538)
Loss for the year - - - - - - (11,326,773) (11,326,773) (11,326,773)
Total comprehensive income - - - - (293,538) - (11,326,773) (11,620,311) - (11,620,311)
Exchange difference on foreign subsidiary - - - 1,660 - - - 1,660 1,660
Balance as at 31 December 2013 478,330 4,044,666 193,336 10,687 7,895,100 (1,193,634) (21,478,928) (10,050,443) - (10,050,443)
ABRIDGED GROUP STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013
Year Ended Year Ended
Cash utilized in operations (695,321) (955,633)
Proceeds from disposal of property, plant and equipment 4,600,420 1,301,446
Acquisition of property, plant and equipment (521,444) (943,385)
Proceeds from disposal of investment in Manica Boards & Doors 3,539,569 -
Loss of control due to a rights issue by a subsidiary - (45,205)
Net cash inflow from investing activities 7,618,545 312,856
Net (repayment of) / proceeds from borrowings (4,416,411) 2,441,524
Acquisition of non-controlling interest - (108,000)
Net finance costs (2,796,346) (2,449,834)
Net cash utilised in financing activities (7,212,757) (116,310)
Net decrease in cash and cash equivalents (289,533) (759,086)
Effect of exchange rate changes on cash and cash equivalents - (2,988)
Cash and cash equivalents at the beginning of the year 386,169 1,148,243
Cash and cash equivalents at the end of the year 96,636 386,169
31 Dec 13
31 Dec 12
Merchandising 20,847,733 22,786,532
Concrete 9,788,871 8,921,801
Glass 2,920,852 2,870,047
Gross sales 33,557,456 34,578,380
Inter-segment sales (233,896) (1,011,878)
Total 33,323,560 33,566,502
Capital expenditure 521,444 943,386
Depreciation on property, plant and equipment 747,703 773,793
Amortization of intangible assets 16,436 16,436
Interest bearing debt 10,146,876 13,890,984
Issued share capital 478,330 478,330
No of shares in issue (m's) 478 478
Dilution due to share options and convertible debenture (m's) 213 213
NOTES TO THE ABRIDGED CONSOLIDATED FINANCIAL STATEMENTS
1. Statement of compliance
The Group’s financial results have been prepared in conformity with International Financial Reporting Standards
(‘IFRS’) promulgated by the International Accounting Standards Board (IASB), which include standards and
interpretations approved by the IASB as well as International Accounting Standards (IAS) 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
as modified by the revaluation of property, plant, equipment and investment property stated at fair value. The
financial statements are presented in the United States Dollar which is the functional currency of the Group.
2. Accounting policies and comparatives
The principal accounting policies of the Group have been consistently applied in all material respects and are
consistent with those of previous financial periods.
3. Disposal of part of investment in Manica Boards & Doors (Private) Limited (MBD)
PG Industries (Zimbabwe) Limited disposed 18.9% of its 27.9% investment in Manica Boards & Doors (Private)
Limited. The transaction also involved liquidation of an equivalent portion of the loan investment in MBD. The
remaining 9% Shareholding is included in non-current assets held for sale.
4. Non-current assets held for sale
Included in current assets as at 31 December 2013 are properties and investments reclassified to assets held for
sale at a value of $4,449,211. There was appropriate board and shareholder approval for the disposal and these
assets are currently being marketed by various property agencies contracted to the Group.
5. Significant accounting estimates and judgments
In the process of applying the Group’s accounting policies, management made certain judgments and estimates
that have a significant effect on the amounts recognised in the financial results. A detailed analysis of the
significant accounting estimates and judgments will be presented in the Group’s annual report.
6. Going Concern
The Group has continued to incur significant losses over the past 4 years and reported a net loss of $11,326,773
for the year ended 31 December 2013 (2012:$7,946,774). As at 31 December 2013 the Group’s current liabilities
exceeded current assets by $15,341,931 (2012:$6,784,500), and it continued to face working capital constraints.
As at 31 December 2013 the Group had a negative equity position of $10,050,443. These conditions give rise to
a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern
and therefore it may be unable to realize its assets and discharge its liabilities in the ordinary course of business.
In response to the above, management have undertaken the following significant actions
The Group entered into a scheme of arrangement with concurrent creditors, a secured creditor, secured
lenders and debenture holders. The scheme of arrangement was approved by shareholders on 14
March 2014, and now awaits approval by the High Court of Zimbabwe.
Under the scheme of arrangement with concurrent creditors, balances owed as at 30 September 2013
will be paid over a 30 month period, after an initial grace period of 6 months from the date of registration
of the Scheme with the High Court of Zimbabwe. This scheme of arrangement with creditors will
provide the much need cash-flow relief to the Group.
The Group’s secured creditor, Sherwood International, agreed to the continuation of the relationship
based on the current terms.
Debenture holders agreed to convert their $6 720 000 debentures into equity. The debentures were
due for conversion or repayment in December 2015. The conversion will result in annual interest
savings of $672 000.
Secured lenders agreed to new term sheets which will result in the elimination of $3,535 760 short term
loans in property-debt swap deals, and will also result in the restructuring of the remaining short term
borrowings to term facilities with an all-in rate of 12% per annum over a 36 months repayment period.
The property for debt swap and restructuring of remaining borrowings will result in future interest
savings of $634,759 per year.
To support the above balance sheet restructuring initiatives, the Group has proposed to raise an
additional $3.5m of capital in the form of $1 million of new equity capital through a private placement,
$1.5 million through facilities with local financial institutions, of which $1.1million has already been
secured, and property disposals of $1million.
Implementation of the scheme of arrangement with debenture holders and injection of the $1million in
new equity will result in improvement in shareholder funds by $7,720,000.
Further rationalization of operations were undertaken in January 2014, which involved the merging of
PG Building Supplies and PG Timbers operations, and the merger of the various divisional Head
Offices into a single shared service center. This rationalization will result in significant cost savings
The financial statements have, therefore, been prepared on the basis that the Group will continue to be a going
concern. This basis presumes that the group’s plans will be effective and the Group will realize its assets and
discharge its liabilities in the ordinary course of business.