TIDMMASA

RNS Number : 2228L

Masawara Plc

30 September 2016

30 September 2016

Masawara plc ("Masawara", the "Company" or the "Group")

Interim results for the six months ended 30 June 2016

Masawara, an investment company focused on acquiring interests in companies based in Zimbabwe and the southern African region, is pleased to announce its unaudited results for the half year ended 30 June 2016.

The Company's interim financial statements for the half year ended 30 June 2016 may be viewed on, or downloaded from, the Company's website at www.masawara.com.

Contact details

Masawara plc

(Masawara Zimbabwe (Private) Limited, the Company's Investment Advisor in Zimbabwe)

Rutendo Maziva/Oliver Lutz

+263 4 751805

Cenkos Securities plc (Nominated adviser and broker)

Nicholas Wells/Elizabeth Bowman/Harry Hargreaves

+44 20 7397 8900

Financial review

The Directors present the interim unaudited results for the six-month period ended 30 June 2016. The results for the six-month period ended 30 June 2016 are set out in the financial statements on pages 7 to 17.

Performance

The Group achieved a profit after tax of $2.3 million for the half year ended 30 June 2016 compared to a profit after tax of $6.1 million during the same period last year. The prior year's results do not include the performance of Sable Chemical Industries Limited ("Sable"), which was an associate until 24 June 2015 when a change in control resulted in the business being consolidated as a subsidiary. A bargain purchase gain of $5.2 million was recognised in the prior year results. After taking into account once -off items and unusual transactions in the current and prior years, the adjusted profit after tax increased from $317,000 to $4.1 million in the six months ended 30 June 2016.

Consolidated unaudited proforma income statement for the six months ended 30 June 2016

 
                                                          June 
                                                           2016     June 2015 
                                                       ----------  ----------  ------- 
                                                              Unaudited         Growth 
                                                       ----------------------  ------- 
                                                         US$ '000    US$ '000 
  INCOME 
 
  Gross insurance premium revenue                          41,459      40,318       3% 
 
  Insurance premium ceded to reinsurers 
   on insurance contracts                                (14,789)    (16,193)      -9% 
 -----------------------------------------------  ---  ----------  ----------  ------- 
 
  Net insurance premium revenue                            26,670      24,125      11% 
 
  Fees and commission income                               10,325      10,096       2% 
 
  Hotel revenue                                             6,697       6,770      -1% 
  Manufacturing revenue                            a        4,133           -        - 
 
  Rental income from investment properties                    780         990     -21% 
 -----------------------------------------------  ---  ----------  ----------  ------- 
 
  Net total revenue                                        48,605      41,981      16% 
  Gain on bargain purchase of Sable                                                  - 
   Chemical Industries Limited                                  -       5,206 
 
  Investment income                                         2,861       4,442     -36% 
 
  Unwinding of financial guarantee 
   - Telerix Communications (Private) 
   Limited                                                    231         242      -5% 
  Other operating income                           a        1,599         969      65% 
 -----------------------------------------------  ---  ----------  ----------  ------- 
 
  Total other income                                        4,691      10,859     -57% 
  EXPENSES 
  Insurance claims and loss adjustment 
   expense                                               (13,629)    (16,900)     -19% 
 
  Insurance claims and loss adjustment 
   recovered from insurers                                    849       4,763     -82% 
 -----------------------------------------------  ---  ----------  ----------  ------- 
 
  Net insurance claims                                   (12,780)    (12,137)       5% 
  Expenses for the acquisition of insurance 
  contracts                                               (5,307)     (6,600)     -20% 
 
  Hotel cost of sales                                     (2,591)     (2,659)      -3% 
  Manufacturing expenses                           a      (3,455)           -        - 
 
  Property expenses                                         (804)       (720)      12% 
 
  Operating and administrative expenses            a     (22,466)    (21,861)       3% 
 
  Net realised and unrealised losses                        (166)       (875)     -81% 
  Total net insurance claims and operating 
   expenses                                              (47,569)    (44,852)       6% 
  Finance costs                                    a      (1,933)     (1,115)      73% 
 -----------------------------------------------  ---  ----------  ----------  ------- 
  Profit before share of profit of 
   associates and tax                                       3,794       6,873     -45% 
 
  Share of profit of other associates                          45         453     -90% 
 -----------------------------------------------  ---  ----------  ----------  ------- 
 
  Profit before tax                                         3,839       7,326     -48% 
 
  Income tax expense                                      (1,564)     (1,203)      30% 
 -----------------------------------------------  ---  ----------  ----------  ------- 
 
  Profit for the period                                     2,275       6,123     -63% 
 -----------------------------------------------  ---  ----------  ----------  ------- 
  Add back impact of Sable Chemical                         1,822           - 
   Limited                                         a 
  Add back non-recurring items: 
  Gain on bargain purchase of Sable 
   Chemicals Limited                               b            -     (5,206) 
  Interest income on loan notes                    c            -     (1,800) 
  Impairment of Telerix Communications 
   (Pvt) Ltd loan notes                            d            -       1,200 
  Adjusted profit before tax                       e        4,097         317   1,192% 
 -----------------------------------------------  ---  ----------  ----------  ------- 
 
 

Notes

a. These are the line items affected by the inclusion of Sable's results in 2016. Sable was consolidated from 24 June 2015 and had no impact on the prior year's results. Included in other operating income, administrative expenses and finance costs are $1.0 million, $3.1 million and $494,000 respectively, related to Sable.

b. The gain on bargain purchase was as a result of the Group taking control of Sable on 24 June 2015.

c. The interest income on the Telerix Communications (Pvt) Ltd loan notes did not recur in the current year as the loan notes were fully impaired in December 2015.

d. An impairment loss was realised on the Telerix Communications (Pvt) Ltd loan notes in the prior year.

e. The unusual and significant non-recurring items in 2016 and 2015 have been excluded to arrive at the adjusted profit before tax.

Group's performance by segment

Masawara Plc, classifies the Group's business units into different clusters i.e. insurance, hotels, agrochemicals, property (Joina City) and technology for the purpose of monitoring the operating results of business units and resource allocation to business units. The following shows the Group's performance by segment:

Insurance

Most of the insurance sector companies registered growth in profit after tax when compared to the same period in the prior year. This was primarily as a result of the lower claims ratios across all businesses and the introduction of new products in the life assurance business. Minerva Risk Advisors Private Limited also registered strong growth in the healthcare broking line. For the rest of the year, the insurance segment is expected to continue to register growth compared to the previous year, albeit at a lower rate.

 
 Profit after tax                             US$'000      US$'000 
                                            June 2016    June 2015 
----------------------------------------  -----------  ----------- 
 Botswana Insurance Company Limited               915          948 
 Lion Assurance Company (Uganda)                  562          753 
 Zimnat Lion Insurance Company Limited 
  (Zimbabwe)                                      897          444 
 Zimnat Life Assurance Group (Zimbabwe)         2,729        1,535 
 Grande Reinsurance Company (Zimbabwe)            777          146 
 Minerva Risk Advisors Private Limited 
  (Zimbabwe)                                      878          683 
                                   6,757          4,509 
 ---------------------------------------  ------------- 
 
 

For the companies operating in Botswana and Uganda, the results in their functional currencies of Botswana Pula (BWP) and Ugandan Shillings (UGX) were as follows:

 
 Profit after tax                 BWP'000      BWP'000   Growth 
                                June 2016    June 2015 
----------------------------  -----------  -----------  ------- 
 Botswana Insurance Company 
  Limited                          10,041        9,132      10% 
 
 
 Profit after tax                         UGX'000      UGX'000   Growth 
                                        June 2016    June 2015 
------------------------  -----------------------  -----------  ------- 
 Lion Assurance Company 
  (Uganda)                              1,899,907    2,268,166     -16% 
 

The key performance ratios of the insurance businesses for the six months were as follows:

 
                                Claims ratio   Claims ratio      Combined      Combined 
                                   June 2016      June 2015    ratio June    ratio June 
                                                                     2016          2015 
-----------------------------  -------------  -------------  ------------  ------------ 
 Botswana Insurance Company 
  Limited                                55%            57%           93%          100% 
 Lion Assurance Company 
  (Uganda)                               30%            35%           84%           91% 
 Zimnat Lion Insurance 
  Company Limited (Zimbabwe)             42%            43%           84%           88% 
 Zimnat Life Assurance 
  Company (Zimbabwe)                     25%            29%           70%           78% 
 Grande Reinsurance Company 
  (Zimbabwe)                             22%            25%           73%           81% 
 

Hotels

The performance of the Zimbabwe hotels incurred a loss after tax in the current year, albeit a 24% improvement on the prior year. There was significant rate cutting in the Zimbabwe hotel market, resulting in a decline in revenue per available room (RevPAR) in order to protect market share. Cresta Marakanelo registered growth in profit after tax, driven by improved profitability of the resort hotel Cresta Mowana, which was at break even during the prior year. The hotel segment is expected to register limited growth for the full year ending 31 December 2016, as a result of the competitive environment in Zimbabwe.

 
 Profit/(loss) after tax                   US$'000      US$'000 
                                         June 2016    June 2015 
-------------------------------------  -----------  ----------- 
 Cresta Hotels (Private) Limited 
  (Zimbabwe)                                 (232)        (307) 
 Cresta Marakanelo Limited (Group's 
  35% share)                                   456          320 
                                       -----------  ----------- 
                                               224           13 
                                       -----------  ----------- 
 
 Cresta Marakanelo Limited (Botswana 
  and Zambia)                                1,303          914 
 
 
 Profit after tax                        BWP'000      BWP'000   Growth 
                                       June 2016    June 2015 
---------------------------  -------------------  -----------  ------- 
 Cresta Marakanelo Limited 
  (Botswana and Zambia)                   14,296        8,808      62% 
 

The key performance indicators of the hotel businesses for the half year were as follows:

 
                                 Occupancy    Occupancy       RevPAR       RevPAR 
                                 June 2016    June 2015    June 2016    June 2015 
-----------------------------  -----------  -----------  -----------  ----------- 
 Cresta Hotels Private 
  Limited (Zimbabwe)                   53%          52%          $37          $43 
 Cresta Marakanelo (Botswana 
  and Zambia)                          60%          62%          $54          $49 
 

Agro chemicals

 
 Profit/(loss) after tax                 US$'000      US$'000 
                                       June 2016    June 2015 
-----------------------------------  -----------  ----------- 
 Sable Chemical Industries Limited       (1,822)      (1,504) 
 ZFC (Group's 22.5% share)                 (577)           95 
                                         (2,399)        1,409 
                                     -----------  ----------- 
 

Sable became a subsidiary of the Group on 30 June 2015, prior to that date Sable was accounted for as an associate. The Group's share of Sable's losses for the six months ended 30 June 2015 were not recognised in the Group's accounts as the investment in Sable was impaired. The Sable electrolysis plant was decommisioned during the last quarter of the previous financial year, and has in the current year, moved to a new business model relying on the importation of ammonia in order to manufacture ammonium nitrate fertiliser. The business was under care and maintenance during the period under review. It sold a significant portion of the inventory carried forward from the prior year. Sable has raised some working capital finance and production is expected to recommence during October of 2016. Efforts to raise additional financing are ongoing.

Joina City

Joina City continued to be affected by the liquidity challenges in the market, which in turn had an impact on debtors' collections for the period. Major refurbishments were commenced at Joina City during the first six months of the year hence the non-payment to shareholders in the current period. The remainder of the year will see the completion of the refurbishments with improved occupancies anticipated in 2017. Emphasis will be placed on improving debtors' collections.

The key performance indicators of Joina City for the six months were as follows:

 
                                            Debtors       Debtors           Payments           Payments 
              Occupancy     Occupancy          as %          as %    to shareholders    to shareholders 
                   June          June    of revenue    of revenue          June 2016          June 2015 
                   2016          2015          June          June 
                                               2016          2015 
---------  ------------  ------------  ------------  ------------  -----------------  ----------------- 
 Joina 
  City              60%           62%           28%           22%                  -           $450,000 
 Group's 
  share             n/a           n/a           n/a           n/a                  -           $179,918 
 

Technology

In July 2015 regulatory approvals were obtained for the merger of the operations of Dandemutande, (a wholly owned subsidiary of Telerix Communications (Private) Limited ("Telerix")), iWay Africa (an associate of the Group) and Africa Online. The merger resulted in an increased revenue base and a broader product and service offering. The business registered a 164% growth in earnings before interest, tax, depreciation and amortization (EBITDA) compared to the same period last year, on the back of the cost rationalization that began after its merger. The strategies employed have moved the business from a loss to a profit position at EBITDA level. The Directors believe the business is now on a firm foundation to grow organically and in-organically through market consolidations.

The Group did not recognize its share of Telerix results for the six months, as the Group's investment in Telerix was reduced to $nil during the year ended 31 December 2012.

Cash flow for the six-month period

The Group recorded an overall increase in cash and cash equivalents of $3.2 million from December 2015. $1.4 million was generated from operating activities, $0.6 million was generated from investing activities and $1.0 million was generated from financing activities.

Net cash flows used in investing activities was mainly attributable to the following investing activities:

-- Cash outflow of $3.5 million for the purchase of investment property and an outflow of $0.6 million for the acquisition of property, plant and equipment;

   --      $2.6 million proceeds received from the disposal of an interest in a subsidiary; and 
   --      net cash inflow of $2.2 million from the sale of financial instruments. 

Financial position

Total assets increased from $288.2 million as at 31 December 2015 to $297.8 million as at 30 June 2016. The Group had cash and cash equivalents of $29.1 million as at 30 June 2016 (31 December 2015: $25.9 million). Total liabilities increased from $188.6 million as at 31 December 2015 to $193.8 million as at 30 June 2016. The net asset value per share attributable to equity holders of the parent as at 30 June 2016 was $0.64 (31 December 2015: $0.61).

Principal risks and uncertainties

The principal risks and uncertainties affecting the business relate to the political and economic environment of Zimbabwe, where the investments are predominantly held. There is a further risk that investments made by the Group will not result in the envisaged cash generation or capital appreciation. This risk is managed by the careful evaluation of all proposed investments, with detailed due diligence work being undertaken, before any investments are made and ongoing monitoring of existing investments.

There is a risk that the illiquidity of the Zimbabwean equity and bond markets may affect the valuation of the Group's investment in investment properties in the short to medium term. The prevailing liquidity challenges in Zimbabwe may also affect the Group's ability to remit dividends from the Zimbabwean operations to the off-shore holding companies and the Masawara Plc shareholders. The operating entities may also experience significant delays in remitting payments to offshore suppliers, which may have an adverse impact on the businesses.

The economic conditions in Zimbabwe have continued to deteriorate, and this is not expected to improve during the rest of the current financial year. The Group's management will continue to focus on finding opportunities to grow and increase

market share. The property segment and the investments in listed equities are expected to be adversely affected by the prevailing conditions in the Zimbabwe market, with possible fair value losses being recorded during the second half of the financial year.

Going concern

Management have prepared cash flow forecasts indicating that there is adequate operating cash for the period to December 2017. The Directors reviewed the cash flow forecasts prepared by management when assessing the ability of the Group to continue operating as a going concern. Based on the review of the Group's cash flow forecasts, the Directors believe that the Group will have sufficient resources to continue to trade as a going concern for a period of at least 12 months from the date of approval of these financial statements and accordingly, the financial statements have been prepared on the going concern basis.

Unaudited interim consolidated income statement for the six months ended 30 June 2016

 
                                                  June 2016      June 2015 
                                              -------------  ------------- 
                                                               Unaudited 
                                              ---------------------------- 
                                                   US$ '000       US$ '000 
 INCOME 
 Gross insurance premium revenue                     41,459         40,318 
 Insurance premium ceded to reinsurers 
  on insurance contracts                           (14,789)       (16,193) 
--------------------------------------------  -------------  ------------- 
 Net insurance premium revenue                       26,670         24,125 
 Fees and commission income                          10,325         10,096 
 Hotel revenue                                        6,697          6,770 
 Manufacturing revenue                                4,133              - 
 Rental income from investment properties               780            990 
--------------------------------------------  -------------  ------------- 
 Net total revenue                                   48,605         41,981 
 
 Gain on bargain purchase of Sable 
  Chemical Industries Limited                             -          5,206 
 Investment income                                    2,861          4,442 
 Unwinding of financial guarantee 
  - Telerix Communications (Private) 
  Limited                                               231            242 
 Other operating income                               1,599            969 
--------------------------------------------  -------------  ------------- 
 Total other income                                   4,691         10,859 
 
 EXPENSES 
 Insurance claims and loss adjustment 
  expense                                          (13,629)       (16,900) 
 Insurance claims and loss adjustment 
  recovered from insurers                               849          4,763 
--------------------------------------------  -------------  ------------- 
 Net insurance claims                              (12,780)       (12,137) 
 Expenses for the acquisition of insurance 
  contracts                                         (5,307)        (6,600) 
 Hotel cost of sales                                (2,591)        (2,659) 
 Manufacturing expenses                             (3,455)              - 
 Property expenses                                    (804)          (720) 
 Operating and administrative expenses             (22,466)       (21,861) 
 Net realised and unrealised losses                   (166)          (875) 
 Total net insurance claims and operating 
  expenses                                         (47,569)       (44,852) 
 
 Finance costs                                      (1,933)        (1,115) 
--------------------------------------------  -------------  ------------- 
 Profit before share of profit of 
  associates and tax                                  3,794          6,873 
 Share of profit of other associates                     45            453 
--------------------------------------------  -------------  ------------- 
 Profit before tax                                    3,839          7,326 
 Income tax expense                                 (1,564)        (1,203) 
--------------------------------------------  -------------  ------------- 
 Profit for the period                                2,275          6,123 
--------------------------------------------  -------------  ------------- 
 
 Profit for the year attributable 
  to: 
 Equity holders of parent                             2,104          4,673 
 Non-controlling interests                              171          1,450 
--------------------------------------------  -------------  ------------- 
 Profit for the period                                2,275          6,123 
--------------------------------------------  -------------  ------------- 
 
 
                                June 2016   June 2015 
                                      US$         US$ 
 Earnings per share 
 Basic earnings per share            0.02        0.04 
 Diluted earnings per share          0.02        0.04 
 

Unaudited interim consolidated statement of other comprehensive income for the six months ended 30 June 2016

 
 
                                                 June 2016   June 2015 
                                                ----------  ---------- 
                                                       Unaudited 
                                                ---------------------- 
                                                   US$'000     US$'000 
 
  Profit for the period                              2,275       6,123 
 
   Other comprehensive income, net tax: 
 
 Items that may be subsequently reclassified 
  to profit or loss 
 Exchange differences on translation 
  of foreign operations                                317     (2,449) 
 Change in value of available-for-sale 
  financial assets                                    (11)         (4) 
----------------------------------------------  ----------  ---------- 
                                                       306     (2,453) 
 
 Total comprehensive income for the 
  period                                             2,581       3,670 
----------------------------------------------  ----------  ---------- 
 
 Total comprehensive income attributable 
  to: 
 Equity holders of parent                            2,334       3,146 
 Non-controlling interests                             247         524 
----------------------------------------------  ----------  ---------- 
 Total comprehensive income for the 
  period                                             2,581       3,670 
----------------------------------------------  ----------  ---------- 
 

Interim consolidated statement of financial position as at 30 June 2016

 
                                                 December 
                                     June 2016       2015 
                                    ----------  --------- 
                                     Unaudited    Audited 
                                    ----------  --------- 
                                       US$'000    US$'000 
 ASSETS 
 Non-current assets 
 Property, plant and 
  equipment                             34,724     35,503 
 Intangible assets                       3,349      3,660 
 Investment properties                  50,344     46,832 
 Investment in associates 
  and joint venture                     12,528     12,593 
 Financial assets                       48,358     52,285 
 Deferred tax asset                      1,080      1,080 
 Total non-current assets              150,383    151,953 
----------------------------------  ----------  --------- 
 Current assets 
 Inventory                              10,700     13,999 
 Reinsurance assets                     23,512     23,910 
 Deferred acquisition 
  costs                                  4,273      2,966 
 Insurance receivables                  19,317     13,927 
 Trade and other receivables            60,527     55,529 
 Cash and cash equivalents              29,102     25,912 
----------------------------------  ----------  --------- 
 Total current assets                  147,431    136,243 
----------------------------------  ----------  --------- 
 
 Total assets                          297,814    288,196 
----------------------------------  ----------  --------- 
 EQUITY AND LIABILITIES 
 Share capital                           1,235      1,235 
 Share premium                          80,102     80,102 
 Treasury shares                         (232)      (232) 
 Group restructuring 
  reserve                              (9,283)    (9,283) 
 Other reserves                        (3,718)    (3,999) 
 Non-distributable reserve                (65)        370 
 Revaluation reserve                     (241)          - 
 Retained earnings                      11,146      7,205 
 Equity attributable to equity 
  holders of the parent                 78,944     75,398 
 Non-controlling interest               25,028     24,221 
 Total equity                          103,971     99,619 
----------------------------------  ----------  --------- 
 Non-current liabilities 
 Financial liabilities                  18,604     17,412 
 Deferred tax liabilities                8,103      7,989 
 Investment contracts                   34,015     33,012 
 Total non-current liabilities          60,722     58,413 
----------------------------------  ----------  --------- 
 Current liabilities 
 Financial liabilities                  19,421     19,083 
 Insurance contract liabilities         53,144     48,841 
 Deferred income                         1,684      1,395 
 Income tax liability                      166        220 
 Insurance payables                      5,677      3,749 
 Provisions                              1,772      5,032 
 Trade and other payables               51,257     51,844 
 Total current liabilities             133,121    130,164 
 Total liabilities                     193,843    188,577 
----------------------------------  ----------  --------- 
 Total equity and liabilities          297,814    288,196 
----------------------------------  ----------  --------- 
 

MASAWARA PLC

Interim consolidated statement of changes in equity for the six months ended 30 June 2016

 
                                                                                                   Attributable to the equity holders of the parent 
                                                                                                                       US$ '000 
                                    -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------  ------------ 
                  Share                    Share             Treasury              Group            Retained        Other                 Non                 Revaluation            Total        Non-controlling      Total 
                 Capital                  Premium             Shares            Restructure         Profit/        Capital           Distributable              Reserve                              Interest         Equity 
                                                                                  Reserve            (Loss)        Reserve             Reserves                                                       US$'000         US$'000 
 Balance at 1 January 
  2015 (audited)             1,235               80,110             (333)                (9,283)       13,547              35                     (695)                      -           84,616            18,897       103,513 
 Profit for the 
  period                         -                    -                 -                      -        4,673               -                         -                      -            4,673             1,450         6,123 
 Other comprehensive 
  income for the 
  period                         -                    -                 -                      -            -         (1,527)                         -                      -          (1,527)             (926)       (2,453) 
---------------------  -----------  -------------------  ----------------  ---------------------  -----------  --------------  ------------------------  ---------------------  ---------------  ----------------  ------------ 
 Total comprehensive 
  income for the 
  period                         -                    -                 -                      -        4,673         (1,527)                         -                      -            3,146               524         3,670 
---------------------  -----------  -------------------  ----------------  ---------------------  -----------  --------------  ------------------------  ---------------------  ---------------  ----------------  ------------ 
 Dividend paid                   -                    -                 -                      -            -               -                         -                      -                -             (119)         (119) 
 Share based payment 
  transactions                   -                    -                 -                      -            -              74                         -                      -               74                 -            74 
---------------------  -----------  -------------------  ----------------  ---------------------  -----------  --------------  ------------------------  ---------------------  ---------------  ----------------  ------------ 
 Total contributions 
  by and 
  distributions 
  to owners of the 
  parent recognized 
  in equity                      -                    -                 -                      -            -              74                         -                      -               74             (119)          (45) 
---------------------  -----------  -------------------  ----------------  ---------------------  -----------  --------------  ------------------------  ---------------------  ---------------  ----------------  ------------ 
 Additional 
  non-controlling 
  interest - Sable               -                    -                 -                      -            -               -                         -                      -                -             5,003         5,003 
 Purchase of 
  additional 
  shares in TA 
  Holdings                       -                    -                 -                      -      (1,293)               -                         -                      -          (1,293)           (8,859)      (10,152) 
 Reserves transfers              -                    -                 -                      -        (404)           (236)                       422                      -            (218)               239            21 
---------------------  -----------  -------------------  ----------------  ---------------------  -----------  --------------  ------------------------  ---------------------  ---------------  ----------------  ------------ 
 Total changes in 
  ownership interests 
  that do not result 
  in change in 
  control                        -                    -                 -                      -      (1,697)           (236)                       422                      -          (1,511)           (3,617)       (5,128) 
---------------------  -----------  -------------------  ----------------  ---------------------  -----------  --------------  ------------------------  ---------------------  ---------------  ----------------  ------------ 
 Balance at 30 June 
  2015 (unaudited)           1,235               80,110             (333)                (9,283)       16,523         (1,654)                     (273)                      -           86,325            15,685       102,010 
---------------------  -----------  -------------------  ----------------  ---------------------  -----------  --------------  ------------------------  ---------------------  ---------------  ----------------  ------------ 
 
 
 Balance at 1 January 
  2016 (audited)             1,235               80,102             (232)                (9,283)        7,205         (3,999)                       370                      -           75,398            24,221        99,619 
 Profit for the 
  period                         -                    -                 -                      -        2,104               -                         -                      -            2,104               171         2,275 
 Other comprehensive 
  income for the 
  period                         -                    -                 -                      -            -             281                         -                      -              281                75           356 
---------------------  -----------  -------------------  ----------------  ---------------------  -----------  --------------  ------------------------  ---------------------  ---------------  ----------------  ------------ 
 Total comprehensive 
  income for the 
  period                         -                    -                 -                      -        2,104             281                         -                      -            2,385               246         2,631 
---------------------  -----------  -------------------  ----------------  ---------------------  -----------  --------------  ------------------------  ---------------------  ---------------  ----------------  ------------ 
 Dividend paid                   -                    -                 -                      -            -               -                         -                      -                -             (880)         (880) 
---------------------  -----------  -------------------  ----------------  ---------------------  -----------  --------------  ------------------------  ---------------------  ---------------  ----------------  ------------ 
 Total contributions 
  by and 
  distributions 
  to owners of the 
  parent recognized 
  in equity                      -                    -                 -                      -            -               -                         -                      -                -             (880)         (880) 
---------------------  -----------  -------------------  ----------------  ---------------------  -----------  --------------  ------------------------  ---------------------  ---------------  ----------------  ------------ 
 Sale of share of 
  Botswana Insurance 
  Company to minority 
  interests - Note 
  3.1                            -                    -                 -                      -        1,885               -                     (483)                  (241)            1,161             1,441         2,602 
 Reserves transfers              -                    -                 -                      -         (48)               -                        48                      -                -                 -             - 
 Total changes in 
  ownership interests 
  that do not result 
  in change in 
  control                        -                    -                 -                      -        1,837               -                     (435)                  (241)            1,161             1,441         2,602 
---------------------  -----------  -------------------  ----------------  ---------------------  -----------  --------------  ------------------------  ---------------------  ---------------  ----------------  ------------ 
 Balance at 30 June 
  2016 (unaudited)           1,235               80,102             (232)                (9,283)       11,146         (3,718)                      (65)                  (241)           78,944            25,028       103,971 
---------------------  -----------  -------------------  ----------------  ---------------------  -----------  --------------  ------------------------  ---------------------  ---------------  ----------------  ------------ 
 
 
 
 Unaudited interim consolidated statement 
  of cash flows 
 for the six months ended 30 June 
  2016                                             June 2016   June 2015 
                                                  ----------  ---------- 
                                           Notes         Unaudited 
                                                  ---------------------- 
                                                     US$'000     US$'000 
 
 Cash flows generated from operating 
  activities                                 4           934       1,437 
 Investment income received                            2,769       2,762 
 Finance costs paid                                  (1,826)       (526) 
 Income tax paid                                       (509)       (830) 
----------------------------------------  ------  ----------  ---------- 
 Net cash flows generated from 
  operating activities                                 1,368       2,843 
 
   Cash flows from investing activities 
 Purchase of property, plant and 
  equipment                                            (634)     (1,476) 
 Purchase of financial instruments                  (10,939)    (14,373) 
 Proceeds from sale of financial 
  assets                                              13,119      13,447 
 Loans issued to investee companies                    (140)       (993) 
 Proceeds from repayment of loans 
  granted to related parties                             100          29 
 Purchase of investment property                     (3,502)           - 
 Purchase of intangible assets                          (10)           - 
 Disposal of interest in subsidiary         3.1        2,602           - 
 Proceeds on disposal of equipment                         -         195 
 Purchase of non-controlling interests' 
  shares in TA Holdings Limited                            -     (6,740) 
 Acquisition of subsidiary, net 
  of cash acquired                                         -       3,823 
 Deferred consideration payment 
  to Minet Group                                           -     (1,194) 
 Net cash flows generated from/(used 
  in) investing activities                               596     (7,282) 
 
   Cash flows from financing activities 
 Proceeds from borrowings                              1,875      11,526 
 Dividend paid                                         (880)       (119) 
 Repayment of loans                                        -       (788) 
 Net cash flows generated from 
  financing activities                                   995      10,619 
 Net effect of exchange rate movement 
  on cash and cash equivalents                           231       (434) 
 Net increase in cash and cash 
  equivalents                                          3,190       5,746 
 Cash and cash equivalents at 1 
  January                                             25,912      18,300 
----------------------------------------  ------  ----------  ---------- 
 Cash and cash equivalents at 30 
  June                                                29,102      24,046 
----------------------------------------  ------  ----------  ---------- 
 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHSED 30 JUNE 2016

   1       Corporate information 

Masawara Plc ("the Company") is an investment company incorporated and domiciled in Jersey, Channel Islands, whose shares are publicly traded on the London Stock Exchange's AIM. The company is managed in Jersey and its registered office is located at Queensway House, Hilgrove Street in St Helier, Jersey.

The Group interim financial statements consolidate those of the Company, its subsidiaries and the Group's interest in associates and a joint venture (together referred to as "the Group").

The investment portfolio of the Company has five reportable segments which are listed below:

-- The Joina City segment which comprise of the Group's largest investment property that leases retail and office space at the Joina City building which is located in Harare, Zimbabwe's largest capital city.

-- The hotels segment which comprises of the Group's interest in Cresta Zimbabwe (Private) Limited and Cresta Marakanelo Limited.

-- The insurance segment comprise of the Group's investment in insurance businesses i.e. Zimnat Life Assurance Company Limited and its subsidiaries and joint venture, Zimnat Lion Insurance Company Limited, Grand Reinsurance (Private) Limited, Botswana Insurance Company Limited, Lion Assurance Company Limited and Minerva Risk Advisors (Private) Limited.

-- The agrochemicals segment which comprise of the Group's investment in Sable Chemical Industries Limited and Zimbabwe Fertlizer Company Limited.

-- The technology segment comprising Telerix Communications (Private) Limited, a company that is licensed to construct, operate and maintain public data internet access and Voice Over network in Zimbabwe.

   2       Basis of preparation 

The interim consolidated financial statements for the six months ended 30 June 2016 have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting as adopted by the European Union.

The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's Annual Financial Statements for the year ended 31 December 2015, which have been prepared in accordance with IFRSs as adopted by the European Union. The interim consolidated financial statements have been drawn up using accounting policies and presentation consistent with those applied in the audited accounts for the year ended 31 December 2015, except as described as below.

A number of amendments to IFRSs became effective for the financial year beginning on 1 January 2016 however the Group did not have to change its accounting policies or make material retrospective adjustments as a result of adopting these new standards. The amendments to IFRS effective for periods beginning on 1 January 2016 are as follows:

   --      Annual improvements 2012-2014 (Amends IFRS 5, IFRS 7, IAS 19, IAS 34) 
   --      Amendments to IFRS 11 - Accounting for acquisitions of interests in joint ventures 

-- Amendment to IAS 16 and IAS 38 - Clarification of acceptable methods of depreciation and amortisation

   --      Amendments to IAS 16 and IAS 41 - Agriculture: Bearer plants 
   --      Amendments to IAS 27 - Equity method in separate financial statements 
   --      Amendments to IAS 1 - Disclosure initiative 

-- Amendments to IFRS 10 and IAS 28 - Investment entities: Applying the consolidation principle (Not yet EU endorsed as of 1 May 2016)

Estimates

In preparing these interim financial statements, the significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2015.

Going Concern

Management prepared cash flow forecasts indicating that there is adequate operating cash for the period to December 2017. In assessing the liability of the Group to continue as a going concern, management carried out sensitivity analysis on the cash flow assumptions to reflect a range of other reasonably possible outcomes and concluded that Masawara will be able continue as a going concern. The Directors reviewed the cash flow forecasts prepared by management when assessing the ability of the Group to continue as a going concern. The Directors believe that the Group will have sufficient resources to continue to trade as a going concern for a period of at least 12 months from the date of approval of the financial statements and accordingly, the financial statements have been prepared on the going concern basis.

   3       Significant events 

The following significant events that have a material effect on the financial statements of the Group took place during the six months period ended 30 June 2016.

3.1 Disposal of interest in a subsidiary without change in degree of control (Botswana Insurance Company Limited)

On 24 January 2016, the Group disposed of a 15% interest out of its 62% interest held in Botswana Insurance Company Limited (BIC) at a consideration of $2.6 million. The carrying amount of non controlling interests in BIC on the date of disposal was $6.5 million (representing 35% interest). The transaction resulted in an increase in non controlling interests of $2.8 million and decrease in equity attributable to owners of the parent of $0.2 million. The effect of changes in ownership interest of BIC is summarized as follows:

 
                                                US$ '000 
 
 Consideration received from non controlling 
  shareholder                                      2,602 
 Carrying amount of interest disposed to 
  non controlling shareholder                    (2,804) 
                                               --------- 
 Loss on change in degree of control               (202) 
                                               --------- 
 

3.2 Acquisition of additional interest in a subsidiary without change in degree of control (Lion Assurance Company Limited)

On 24 January 2016, the Group acquired an additional 31% interest in Lion Assurance Limited (LAC) for no consideration. The Group now holds 86% of the equity share capital of LAC. The carrying amount of non controlling interests in LAC on the date of disposal was US$ 1.9 million (representing 43% interest). This resulted in a decrease in non controlling interests and an increase in equity attributable to owners of the parent of US$ 1.4 million both. The effect of changes in ownership interest of LAC is summarized as follows:

 
                                                      US$ '000 
 
 Consideration paid to non controlling shareholder           - 
 Carrying amount of interest disposed by 
  non controlling shareholder                          (1,363) 
                                                     --------- 
 Gain on change in degree of control                   (1,363) 
                                                     --------- 
 
   3.3    Net impact of transactions with non controlling shareholders on the Group's equity 
 
                                            US$ '000 
 Decrease in shareholding in BIC 
 Decrease in non distributable reserve       (1,846) 
 Decrease in revaluation reserve               (241) 
 Increase in retained earnings                 1,885 
                                           --------- 
 Net loss on change in degree of control       (202) 
                                           --------- 
 

3.3 Net impact of transactions with non controlling shareholders on the Group's equity (continued)

 
                                           US$ '000 
 Increase in shareholding in LAC 
 Increase in non distributable reserves       1,363 
 Gain on change in degree of control          1,363 
                                          --------- 
 
   4         Cash generated from operating activities 
                                                                                                                                                                                            June 2016                       June 2015 
 
                                                                Unaudited 
                                                           ------------------- 
                                                            US$'000    US$'000 
 
 Profit before tax                                            3,839      7,326 
 
 Adjustments to reconcile profit before tax to net cash 
  flows from operating activities: 
     Share of profit of associates 
      and joint venture                                        (45)      (453) 
     Unwinding of a financial guarantee 
      - Telerix Communications                                (231)      (242) 
     Investment income                                      (2,861)    (4,409) 
     Finance cost                                             1,933      1,115 
     Depreciation and amortization                            1,127      1,017 
     Amortization of intangible assets                          352          - 
     Loss on disposal of investments                             65          - 
     Net realized and unrealized 
      losses                                                    166          - 
     Gain on bargain on purchase 
      of Sables Chemical Industries                               -    (5,206) 
     Impairment of financial assets                               -      1,249 
     Loss on disposal of property, 
      plant and equipment                                         -       (33) 
     Fair value gain on financial 
      instruments                                                 -      (374) 
     Share-based payment transaction 
      expense                                                     -        271 
 Working capital adjustments: 
     Decrease in inventory                                    3,299         72 
     Decrease/(increase) in reinsurance 
      receivables                                               776    (2,107) 
     Increase in deferred acquisition 
      costs                                                 (1,272)      (624) 
     Increase in insurance receivables                      (5,087)    (4,516) 
     Increase in trade and other 
      receivables                                           (3,940)   (10,013) 
     Increase in loans to Directors 
      and employees                                           (441)       (72) 
     Increase in insurance contract 
      liabilities                                             4,054      5,602 
     Increase in insurance liabilities                        1,253      2,728 
     Increase/(decrease) in deferred 
      income                                                    289       (66) 
     Increase in insurance payables                           2,230      1,664 
     (Decrease)/increase in trade 
      and other payables                                    (4,572)      8,508 
---------------------------------------------------------  --------  --------- 
 Cash generated from operating 
  activities                                                    934      1,437 
---------------------------------------------------------  --------  --------- 
 
 
 
   5 Segment information 
 
   The chief operating decision maker i.e. the Chief Executive Officer, the Chief 
   Operating Officer and the Chief Financial Officer classifies the Group's business 
   units into different clusters i.e. hotels, insurance, technology, agrochemicals 
   and properties for the purpose of monitoring the operating results of business 
   units and resource allocation to business units. The basis of segmenting business 
   units into different clusters is consistent with the same basis described 
   in the Group's financial statements for the year ended 31 December 2015. 
 
                     Joina     Hotels   Insurance   Agrochemicals   Technology      Central   Inter-segment       Total 
                      City                                                                      Adjustments       Group 
 Six months       US$ '000        US$    US$ '000        US$ '000     US$ '000     US$ '000        US$ '000    US$ '000 
 ended                           '000 
 30 June 2016 
 
 Net insurance 
  premium 
  revenue                -          -      26,808               -            -            -           (138)      26,670 
 Fees and 
  commission 
  income                            -      11,633               -                     1,496         (2,804)      10,325 
 Hotel revenue           -      6,697           -               -            -            -               -       6,697 
 Manufacturing 
  revenue                -          -           -           4,133            -            -               -       4,133 
 Rental income 
  from 
  investment 
  properties           821          -           -               -            -            -            (41)         780 
                 ---------  ---------  ----------  --------------  -----------  -----------  --------------  ---------- 
 Total revenue         821      6,697      38,441           4,133            -        1,496         (2,983)      48,605 
                 ---------  ---------  ----------  --------------  -----------  -----------  --------------  ---------- 
 
 Profit/(loss) 
  before 
  tax and 
  equity 
  accounted 
  earnings           (247)      (231)       7,775         (1,494)            -        4,355         (6,364)       3,794 
 Equity 
  accounted 
  earnings               -        521         101           (577)            -            -               -          45 
 Profit/(loss) 
  before 
  tax                (247)        290       7,876         (2,071)            -        4,355         (6,364)       3,839 
                 ---------  ---------  ----------  --------------  -----------  -----------  --------------  ---------- 
 
  As at 30 June 
  2016 
 
 Segment assets     32,402     31,235     190,255          35,914          282       77,870        (70,144)     297,814 
                 ---------  ---------  ----------  --------------  -----------  -----------  --------------  ---------- 
 
 Segment 
  liabilities      (6,695)   (11,143)   (131,313)        (26,334)            -     (43,997)          25,639   (193,843) 
                 ---------  ---------  ----------  --------------  -----------  -----------  --------------  ---------- 
 
 
 
                     Joina     Hotels   Insurance   Agrochemicals   Technology      Central   Inter-segment       Total 
                      City                                                                      Adjustments       Group 
 Six months       US$ '000        US$    US$ '000        US$ '000     US$ '000     US$ '000        US$ '000    US$ '000 
 ended                           '000 
 30 June 2015 
 
 Net insurance 
  premium 
  revenue                -          -      24,610               -            -            -           (485)      24,125 
 Fees and 
  commission 
  income                            -       9,748               -                     1,567         (1,219)      10,096 
 Hotel revenue           -      6,770           -               -            -            -               -       6,770 
 Rental income 
  from 
  investment 
  properties         1,030          -           -               -            -            -            (40)         990 
                 ---------  ---------  ----------  --------------  -----------  -----------  --------------  ---------- 
 Total revenue       1,030      6,770      34,358               -            -        1,567         (1,744)      41,981 
                 ---------  ---------  ----------  --------------  -----------  -----------  --------------  ---------- 
 
 Profit before 
  tax 
  and equity 
  accounted 
  earnings             211      6,089       (308)           5,206            -      (3,305)         (1,020)       6,873 
 Equity 
  accounted 
  earnings               -         20         373              60            -            -               -         453 
 Profit/(loss) 
  before 
  tax                  211      6,109          65           5,266            -      (3,305)         (1,020)       7,326 
                 ---------  ---------  ----------  --------------  -----------  -----------  --------------  ---------- 
 
  As at 31 
  December 
  2015 
 
 Segment assets     32,375     32,219     171,568          46,628          282       86,128        (81,004)     288,196 
                 ---------  ---------  ----------  --------------  -----------  -----------  --------------  ---------- 
 
 Segment 
  liabilities      (6,501)   (10,713)   (119,594)        (34,977)            -     (44,759)          27,967   (188,577) 
                 ---------  ---------  ----------  --------------  -----------  -----------  --------------  ---------- 
 
 
   6          Financial assets fair value hierarchy 

As detailed per the 31 December 2015 annual report, the fair value hierarchy at which a fair value measurement is categorized is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

The following table provides the fair value measurement hierarchy of the Group's financial assets that are carried at fair value.

There have been no transfers between Level 1, level 2 and level 3 during the period.

30 June 2016

 
                                     Level      Level      Level      Total 
                                         1          2          3 
                                  US$ '000   US$ '000   US$ '000   US$ '000 
 
 Available for sale 
 
        *    Debt securities             -        655          -        655 
 Financial assets at 
  fair value through 
  profit or loss 
 
        *    Equity securities      23,306          -      4,217     27,523 
                                 ---------  ---------  ---------  --------- 
 Total assets                       23,306        655      4,089     28,178 
                                 ---------  ---------  ---------  --------- 
 

31 December 2015

 
                                     Level      Level      Level      Total 
                                         1          2          3 
                                  US$ '000   US$ '000   US$ '000   US$ '000 
 
 Available for sale 
 
        *    Debt securities             -        374          -        374 
 Financial assets at 
  fair value through 
  profit or loss 
 
        *    Equity securities      23,989          -      3,780     27,769 
                                 ---------  ---------  ---------  --------- 
 Total                              29,447        374      3,780     28,143 
                                 ---------  ---------  ---------  --------- 
 
   7             Events after the reporting period 

There were no subsequent events or transactions that required recognition or disclosure in the consolidated financial statements.

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR PGUCUBUPQGGB

(END) Dow Jones Newswires

September 30, 2016 02:00 ET (06:00 GMT)

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