Half-year Report

11 September 2017

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

Unaudited results for the six months ended 30 June 2017

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 six months ended 30 June 2017.

The Company's interim financial statements for the half year ended 30 June 2017 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)

Osbourne Majuru/Munashe Nyengerai

+263 4 751805

Cenkos Securities plc (Nominated adviser and broker)

Nicholas Wells/Elizabeth Bowman/Harry Hargreaves

 +44 20 7397 8900

Financial review for the six months ended 30 June 2017

The Directors present the interim unaudited results for the six-month period ended 30 June 2017.

Performance

The Group achieved a profit after tax ("PAT") of $3.6 million for the half year ended 30 June 2017 (June 2016: $2.3 million). During the current six month period the financial performance of Lion Assurance Company Limited ("LAC") has been presented under discontinued operations. LAC was classified as a disposal group held for sale on 31 December 2016. The agreement to dispose the Group's interest in LAC was entered into on 22 May 2017 and the transaction was closed on 31 August 2017. LAC made a PAT of $0.51 million during the current six month period (June 2016: $0.56 million).

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 clusters 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

Profit from continuing operations of the insurance cluster was $6.2 million for the six months ended 30 June 2017 (June 2016: $6.2 million). The improved performance of Botswana Insurance Company Limited and Grand Reinsurance Company (Private) Limited was offset by the decline in performance of the Zimnat Life Assurance Group.

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:

The key performance ratios of the insurance businesses as at year end were as follows:

The claims and combined ratios are measures of profitability. The claims ratio is calculated by expressing the net claims expense as a percentage of earned premiums. The combined ratio is calculated by taking the sum of the net claims expense and operating expenses and dividing them by earned premium.

Hotels

The performance of Cresta Zimbabwe improved by $0.2 million for the six month period ended 30 June 2017 when compared to the same period last year as a result of cost reduction initiatives. Occupancy for the current six month period (52%) was static when compared to prior year and revenue per available room (RevPar) declined from $37 during the prior half year to $33 as a result of continuing price wars in the industry. The Group's share of the performance of Cresta Marakanelo declined by $0.2 million due to a 7% reduction in occupancy.

The key performance indicators of the hotel businesses as at year end were as follows:

The occupancy rate refers to the rooms sold during the year expressed as a percentage of the total rooms that were available to sell. Revenue per available room (RevPar) measures the financial performance of the hotel by multiplying the average daily rate charged for a room by the occupancy rate.

Agro chemicals

The agro chemicals segment is comprised of investments in Sable Chemical Industries Limited ("Sable") and Zimbabwe Fertiliser Company Limited ("ZFC"). The Group has a 22.5% interest in ZFC and accounts for it as an associate. The Group has a 50.6% interest in Sable, which is accounted for as a subsidiary.

Sable commenced production under the full importation model in November 2016. The revenues earned by the business therefore remain depressed resulting in a loss before tax of $1.5 million (30 June 2016: $1.8 million).

Joina City

The key performance indicators of Joina City ("Joina") as at 30 June 2017 were as follows:

The 6% decline in Joina's occupancy was mainly driven by the unit's decision to cancel the lease contracts of non performing tenants. Although the ratio of debtors as a percentage of revenue increased by 10%, this ratio is expected to improve as a result of the unit's strategy which focuses on retaining performing tenants.

Occupancy rate refers to the ratio of leased space compared to the total amount of available space.

Cash flow for the six-month period

The Group recorded a decline in cash and cash equivalents of $0.8 million from 31 December 2016 with cash flows from operations of $7.4 million (30 June 2016 $1.4 million). The decline in cash and cash equivalents was driven by cash utilized in investing activities of $9.3 million. The cash utilised in investing activities was mainly the result of the purchase of financial instruments of $15.4 million. Net cash from financing activities includes proceeds from borrowings of $2.4 million, the repayment of borrowings of $1.5 million and the payment of dividends to non-controlling shareholders amounting to $0.2 million.

Financial position

The total assets of the Group at 30 June 2017 amounted to $313 million (31 December 2016: $288 million). Of these assets $297 million (31 December 2016: $273 million) were attributable to continuing operations. LAC had assets amounting $16 million (31 December 2016: $14.8 million) that were classified as held for sale.

The total liabilities of the Group amounted to $205 million (31 December 2016: $185 million). Of these liabilities $195 million (31 December 2016: $176 million) were attributable to continuing operations. LAC had liabilities amounting to $10.3 million (31 December 2016: $9.4 million) that were classified as held for sale.

The net asset value per share attributable to equity holders of the parent as at 30 June 2017 was $0.65 (31 December 2016: $0.63).

Principal risks and uncertainties

The Group's business activities together with the factors likely to affect its future development, performance and position are set out below.

The principal risks and uncertainties affecting the business relate to the political and economic environment of Zimbabwe, where its investments are predominantly held. There is a further risk that investments made by the Group will not result in the originally 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.

The Group's liquidity risk was affected by exchange control regulations put in place by the Reserve Bank of Zimbabwe during the year under review. In terms of Exchange Control Operational Guide 8, a foreign payments priority list has to be followed when making foreign payments. Any foreign payments that are made by Zimbabwean companies are ranked based on the RBZ prioritization criteria.

Going concern

Management have prepared cash flow forecasts indicating that there is adequate operating cash for the period to December 2018. 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 statement of comprehensive income for the six months ended 30 June 2017

Interim consolidated statement of financial position as at 30 June 2017

MASAWARA PLC

Unaudited interim consolidated statement of changes in equity for the six months ended 30 June 2017

Unaudited consolidated statement of cash flows for the six months ended 30 June 2017

Notes to the interim financial statements for the six months ended 30 June 2017 

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 investment portfolio of the Company includes Joina City (a multi-purpose property situated in Harare that earns rental income), Masawara Mauritius Limited (a diversified investment company that holds investments in insurance, agro-chemical and hospitality businesses), iWayAfrica Zimbabwe (Private) Limited (a broadband internet service company) and Telerix Communications (Private) Limited (a company that has a license that allows it to construct, operate and maintain a public data internet access and Voice Over IP network in Zimbabwe).

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

2. Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRSIC) as adopted by the European Union (EU), and in compliance with the requirements of the Companies (Jersey) Law 1991.

The consolidated interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 31 December 2016 and any publications made by Masawara Plc during the interim period. The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.

The consolidated financial statements have been prepared on a historical cost basis, except for property, available-for-sale financial assets, and financial assets that have been measured at fair value. The consolidated financial statements are presented in United States Dollars and all values are rounded to the nearest thousand dollars ($ '000), except when otherwise indicated.

Going concern

Management have prepared cash flow forecasts indicating that there is adequate operating cash for the period to December 2018. 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.

3 Significant events

The following significant event that has a material effect on the financial statements of the Group took place during the six months period ended 30 June 2017.

3.1 Disposal Group held for sale and discontinued operations

The assets and liabilities related to Lion Assurance Company Limited ("LAC") were classified as held for sale on 31 December 2016. The share purchase agreement for the sale of the Group's investment in LAC was entered into on 22 May 2017. LAC is part of the Insurance segment. The sale was completed on 31 August 2017. The fair value less costs to dispose exceeds the carrying amount of LAC. In accordance with IFRS 5 Non- Current Assets Held for Sale which requires a disposal group to be measured at the lower of its fair value less costs to dispose or carrying amount, LAC has been measured at its carrying amount. The fair value has been determined in relation to the selling price of LAC. The transaction is at arms-length.

The assets and liabilities of the disposal group classified as held for sale are as follows:

The analysis of the financial performance of the disposal group held for sale for the six months ended 30 June 2017 is as follows:

4 Cash generated from operating activities

5 Segment information

The chief operating decision maker i.e. the Investment Advisor's executive committee classifies the Group's business units into different clusters i.e. hotels, insurance, technology, agrochemicals and property (Joina City) for the purpose of monitoring the operating results of business units and resource allocation to business units. Segmentation of business units into different clusters is based on the type of product and service offering by the different companies. There have been no changes to the measurement methods used to determine segment information from those used during the previous year.

6 Financial assets fair value hierarchy

As detailed per the 31 December 2016 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 presents the Group's financial assets that are carried at fair value at 30 June 2017 and 31 December 2016:

30 June 2017

7 Events after the reporting period

The disposal of the Group's investment in Lion Assurance Company Limited was completed on 31 August 2017 and the purchase consideration of $5.6 million has been received by the Group.