28th Sep 2011 11:33
28 September 2011
Masawara plc
("Masawara" or the "Company")
Interim Results for the six months ended 30 June 2011.
Masawara is pleased to present the interim results for the six-month period ended 30 June 2011.
Overview
During the six month period ended 30 June 2011, Masawara Plc concluded the acquisition of a 50% share in Telerix Communications (Private) Limited and through its wholly owned subsidiary, FMI Energy Zimbabwe (Private) Limited, concluded the acquisition of 100% of the shares in Zuva Petroleum One (Private) Limited (formerly known as BP Zimbabwe (Private) Limited) and Zuva Petroleum Two (Private) Limited (formerly known as Shell Zimbabwe (Private) Limited) which collectively own Zuva Petroleum (Private) Limited, formerly known as BP and Shell Marketing Services (Private) Limited. The transaction was financed through the cash resources of Masawara Plc as well as a funding arrangement with a third party, which thereby established joint control over Masawara Energy (Mauritius) Limited, which holds the investment in FMI Energy Zimbabwe (Private) Limited. Another significant event during the period was the successful placing of 24,102,564 new Ordinary Shares at a price of 97.5 US cents per share, raising approximately US$23.5 million before expenses.
Performance
The results for the six-month period ended 30 June 2011 are set out in the financial statements. The Group achieved a profit after tax of US$1.68 million compared to a loss after tax of US$1.38 million incurred during the corresponding period in the previous year. This improvement from the corresponding period was mainly attributable to:
·; Reduced finance charges following the capitalisation of shareholder loans prior to the listing of Masawara Plc.
·; US$3.2 million gain on the bargain purchase of Zuva Petroleum (Private) Limited, that is recognised in the consolidated statement of comprehensive income, based on the provisional accounting for the acquisition.
·; US$550,000 gain on the bargain purchase of additional shares in associate TA Holdings Limited.
·; Improved performance from the associate TA Holdings Limited, which made an overall profit after tax of US$1.66 million (Group's share, profit of US$425,000) compared to a profit of US$170,000 in the same period last year (Group's share, loss of US$309,000).
TA Holdings Limited During the period under review, the Group increased its shareholding in TA Holdings Limited from 30% to 33.38%. As indicated above, TA Holdings Limited recorded an improved performance over the corresponding period in 2010, with the Group's share of profit after tax for the period amounting to US$425,000 (2010: loss US$309,000).
The improved performance of TA Holdings Limited is mainly attributable to: ·; The awarding of a viable electricity tariff to Sable Chemical Industries Limited (an associate of TA Holdings) by the Government of Zimbabwe; ·; A return to underwriting profitability by the Zimbabwean insurance companies; and ·; An increase in fair value of investment properties held by the Zimbabwe insurance companies.
With a view to sustaining this improved performance over the short to medium term, the following measures were implemented by TA Holdings Limited during the period under review: ·; The corporate office was restructured, resulting in a 45% reduction in corporate overheads. The restructuring costs of US$541,000 were accounted for in full in the period under review. ·; Financing arrangements for the refurbishment of one of the key hotel sites in Harare (Cresta Lodge) were finalised and it is anticipated that work will commence during the fourth quarter of 2011. ·; Funds amounting to US$2.5 million were injected into the Zimbabwe insurance companies. The capital is being used to increase underwriting capacity and finance information technology projects. ·; A full review of TA Holding Limited's investments was completed and Board approvals were obtained to exit certain underperforming investments.
Masawara Energy (Mauritius) Limited The Group's 51% share of the joint venture Masawara Energy (Mauritius) Limited's profit after tax for the period amounted to US$3 million. This included a provisional gain of US$3.2 million on the bargain purchase of Masawara Energy (Mauritius) Limited's 100% owned subsidiary Zuva Petroleum (Private) Limited. The US$3,2 million gain was derived from provisional values of property, plant and equipment that are based on the Directors' best estimates, therefore there is a risk that after the independent valuation has been conducted, the value of negative goodwill may increase or decrease.
Following the acquisition on 24 March 2011, Zuva Petroleum (Private) Limited's sales volumes have increased at an average rate of 28% per month. The June 2011 sales volumes were 109% higher than the sales achieved in March 2011. For the period since acquisition the business incurred a loss after tax of US$457,000 (Group's share US$233,000) and initiatives have been put in place to reduce monthly operating costs.
Telerix Communications (Private) Limited The company incurred a loss of US$1,5 million for the period (Group's share US$763,000). The loss is attributable to the costs being incurred and fixed operating expenses relating to the ongoing development of the 4G WiMAX network which, as at the period end, was yet to commence operation and begin generating revenues. The WiMAX network roll-out is currently underway and it is anticipated that once the project is launched and the product is available to the public, the business will rapidly become profitable. Testing of the WiMAX network will commence in November 2011, and run until the official launch targeted for January 2012.
Joina City Rental income for the period of US$556,000 (2010: US$42,000) was predominantly derived from the retail section, as the first tenant of the office tower only started working on fittings in May 2011. The building was fully completed in February 2011 and for the period ended 30 June 2011, property operating expenses were not fully recovered from tenants as the office tower occupancy was only 3%. To date, new tenants representing an additional 20% of the lettable office space have commenced the installation of fittings in the tower.
Based on the most recent independent valuation as at 31 December 2010 the directors have assessed the potential changes to the inputs to the valuation of the investment property and are of the opinion that there has not been a material change to the fair value of the building from the previous reporting date. There is a risk that the illiquidity of the Zimbabwean capital market may affect the valuation of the Group's investment property in the short to medium term. As detailed in the financial statements for the year ended 31 December 2010, there are no buildings that are comparable to the Group's investment property in Zimbabwe, which poses a greater degree of uncertainty than which exists in a more active market in estimating market values of investment property.
New transactions As part of the circular to shareholders accompanying the secondary capital raise, it was stated that the Investment Advisor was assessing an investment opportunity in chrome mining and smelting operation in Zimbabwe that was under detailed due diligence phase at the time. A decision was taken not to proceed with the investment.
Subsequent to 30 June 2011, Masawara Plc acquired additional shares in TA Holdings Limited, thereby increasing its shareholding in the associate to 35.09% (Note 18).
The Group continues to seek investment opportunities in high growth sectors in Zimbabwe and the region, which the Investment Adviser considers will achieve a minimum IRR of 25 per cent.
Cash flow for the six-month period
Cash generated from financing activities of US$30.4 million includes net cash raised from the secondary capital raise of US$22.5 million and a US$7.5 million loan that was advanced to the Group for the acquisition of Zuva Petroleum (Private) Limited. Operating activities utilised US$3.8 million of cash and cash equivalents, which included a US$1.8 million loan that was advanced to the Group joint venture, Masawara Energy (Mauritius) Limited, by Masawara Plc, while US$16.4 million was utilised in investing activities. As a result, the Group recorded an overall increase in cash and cash equivalents of US$10.2 million. The major elements in investing activities were the acquisition of Telerix Communications (Private) Limited and the acquisition of Zuva Petroleum (Private) Limited. Further details of these acquisitions are provided in Note 4 of the financial statements.
Financial position
Non-current assets increased from US$57.6 million as at 31 December 2010 to US$77.2 million as at 30 June 2011 mainly due to the acquisitions concluded during the period under review. The Group had cash and cash equivalents of US$21.7 million at 30 June 2011 (31 December 2010: US$11.5 million), as the proceeds from the secondary capital raise remained largely unutilised.
As a result of the secondary capital raise detailed in Notes 4.5 and 12, shareholders' equity increased from US$60 million as at 31 December 2010 to US$84 million as at 30 June 2011. Total liabilities increased from US$8.4 million as at 31 December 2010 to US$16.3 million as at 30 June 2011 due to the US$7.5 million loan that was obtained, refer to note 13.2 for more details. The net asset value per share attributable to equity holders of the parent as at 30 June 2011 was US$0.68 (31 December 2010: US$0.60)
Shingai Mutasa, Chief Executive commented :
"While the Group's results are satisfactory, there is still some work to be done in guiding the strategy of our underlying investments to achieve improved performance and to drive cash generation. The full impact of these activities should start to be felt toward the end of the year. In addition, we are continuing to pursue high quality investment opportunities in Zimbabwe to add to our portfolio."
| |||||
Unaudited interim consolidated statement of comprehensive income | |||||
for the six months ended 30 June 2011 | |||||
| June 2011 | June 2010 | |||
Unaudited | |||||
Notes | US$ | US$ | |||
Rental income | 14 | 556,211 | 42,008 | ||
Revenue | 556,211 | 42,008 | |||
Share of profit/(loss) of associate | 9 | 425,406 | (338,942) | ||
Share of loss of associate | 9 | (763,312) | - | ||
Gain on bargain purchase of additional shares of associate | 9.2 | 588,819 | - | ||
Share of loss of joint venture | 10 | (232,885) | - | ||
Gain on bargain purchase of joint venture | 10 | 3,226,258 | - | ||
Fair value adjustment of investment property | 8 | - | 639,081 | ||
Other property expenses | 2.3 | (573,273) | (30,378) | ||
Administrative expenses | 2.3 | (712,835) | - | ||
Other operating expenses | 2.3 | (975,741) | (108,068) | ||
Operating profit | 1,538,648 | 203,701 | |||
Finance costs | (246,396) | (1,676,033) | |||
Finance income | 385,780 | 129,000 | |||
Profit/(loss) before tax | 1,678,032 | (1,343,332) | |||
Income tax expense | 16 | - | (31,954) | ||
Profit/(loss) for the period | 1,678,032 | (1,375,286) | |||
Other comprehensive income; | |||||
Share of other comprehensive loss in associates net of tax | 9.1 | (175,408) | (441,732) | ||
Total comprehensive income/(loss) for the period, net of tax | 1,502,624 | (1,817,018) | |||
Profit/(loss) for the period attributable to: | |||||
Equity holders of parent | 1,694,052 | (1,160,376) | |||
Non-controlling interests | (16,020) | (214,910) | |||
Profit/(loss) for the period | 1,678,032 | (1,375,286) | |||
Total comprehensive income/(loss) attributable to:
Equity holders of parent | 1,518,644 | (1,602,108) | ||||||
Non-controlling interests | (16,020) | (214,910) | ||||||
Total comprehensive income/(loss) for the period | 1,502,624 | (1,817,018) | ||||||
| ||||||||
Earnings per share: 5
·; Basic and diluted, on loss for the year attributable to ordinary equity holders of the parent | US$ 0.02 | US$ (0.01) |
Unaudited interim consolidated statement of financial position
as at 30 June 2011
Restated | ||||
Notes | June 2011 | December 2010 | June 2010 | |
Unaudited | Audited | Unaudited | ||
US$ | US$ | US$ | ||
ASSETS | ||||
Non-current assets | ||||
Property, plant and equipment | 6 | 273,613 | 6,750 | 2,650 |
Financial assets | 7 | 5,865,379 | 3,763,733 | 2,097,835 |
Investment property | 8 | 31,812,144 | 31,423,073 | 28,288,216 |
Investment in associates | 9.1 | 20,512,914 | 14,417,450 | 16,719,795 |
Investment in a joint venture | 10 | 18,752,673 | - | - |
Deposits | 10 | - | 8,000,000 | - |
Total non-current assets | 77,216,723 | 57,611,006 | 47,108,496 | |
Current assets | ||||
Other receivables | 11 | 2,537,180 | 307,051 | 284,424 |
Cash resources | 21,654,127 | 11,468,510 | 5,340 | |
Total current assets | 24,191,307 | 11,775,561 | 289,764 | |
Total assets | 101,408,030 | 69,386,567 | 47,398,260 | |
EQUITY AND LIABILITIES | ||||
Share capital | 12 | 1,234,655 | 993,629 | - |
Share premium | 12 | 84,107,336 | 61,869,043 | - |
Group restructuring reserve | (9,283,142) | (9,283,142) | - | |
Retained profit/(loss) | 1,561,980 | (132,072) | 2,014,306 | |
Other capital reserve | 120,048 | 160,931 | 1,867 | |
Non-distributable reserve | (695,244) | (695,244) | (695,244) | |
Revaluation reserve | 6,937,868 | 6,937,868 | 9,006,371 | |
Equity attributable to equity holders of the parent | 83,983,501 | 59,851,013 |
10,327,300 | |
Non-controlling interest | 1,118,747 | 1,134,767 | (141,040) | |
Total equity | 85,102,248 | 60,985,780 | 10,186,260 | |
Non-current liabilities | ||||
Financial liabilities | 13.1 | 5,180,874 | 5,788,731 | 35,720,577 |
Deferred tax | 1,414,819 | 1,414,819 | 1,298,658 | |
Total non-current liabilities | 6,595,693 | 7,203,550 | 37,019,235 | |
Current liabilities | ||||
Financial liabilities | 13.2 | 8,345,179 | - | - |
Accounts payable | 1,364,910 | 1,197,237 | 192,765 | |
Total current liabilities | 9,710,089 | 1,197,237 | 192,765 | |
Total liabilities | 16,305,782 | 8,400,787 | 37,212,000 | |
Total equity and liabilities | 101,408,030 | 69,386,567 | 47,398,260 |
Unaudited interim consolidated statement of changes in equity
for the six months ended 30 June 2011
Attributable to the equity holders of the parent | ||||||||||
US$ '000 | ||||||||||
Share | Share | Group | Retained | Other | Non | Revaluation | Total | Non-controlling | Total | |
Capital | Premium | Restructure | Profit/ | Capital | Distributable | Reserve | Interest | Equity | ||
Reserve | (Loss) | Reserve | Reserves | US$'000 | US$'000 | |||||
Balance at 1 January 2010 | - | - | - | 3,175 | (180) | 8,311 | - | 11,306 | 74 | 11,380 |
Reclassification of NDR | - | - | - | - | - | (9,006) | 9,006 | - | - | - |
Prior year adjustments in associate | - | - | - | - | 652 | - | - | 652 | - | 652 |
Balance at 1 January 2010 (restated) | - | - | - | 3,175 | 472 | (695) | 9,006 | 11,958 | 74 | 12,032 |
Loss for the period | - | - | - | (1,160) | - | - | - | (1,160) | (215) | (1,375) |
Other comprehensive loss for the period | - | - | - | - | (470) | - | - | (470) | - | (470) |
Total comprehensive income | - | - | - | (1,160) | (470) | - | - | (1,630) | (215) | (1,845) |
Balance at 30 June 2010 | - | - | - | 2,015 | 2 | (695) | 9,006 | 10,328 | (141) | 10,187 |
Profit/(loss) for the period | - | - | - | (2,147) | - | - | - | (2,147) | 1,275 | (872) |
Other comprehensive income/ (loss) for the period | - | - | - | - | 193 | - | (2,068) | (1,875) | - | (1,875) |
Total comprehensive income | - | - | - | (2,147) | 193 | - | (2,068) | (4,022) | 1,275 | (2,747) |
Capitalisation of loans | - | 31,183 | - | - | - | - | - | 31,183 | - | 31,183 |
Group restructure | - | (31,183) | (9,283) | - | - | - | - | (40,466) | - | (40,466) |
Issue of share capital | 667 | 39,799 | - | - | - | - | - | 40,466 | - | 40,466 |
Issue of share capital - IPO | 327 | 25,330 | - | - | - | - | - | 25,657 | - | 25,657 |
Issue of share capital in error | 2,000 | - | - | - | - | - | - | 2,000 | - | 2,000 |
Redemption of shares issued | (2,000) | - | - | - | - | - | - | (2,000) | - | (2,000) |
Share issue costs | - | (3,260) | - | - | - | - | - | (3,260) | - | (3,260) |
Share based payment transactions | - | - | - | - | 37 | - | - | 37 | - | 37 |
Other reserve movements in associate | - | - | - | - | (71) | - | - | (71) | - | (71) |
Balance at 31 December 2010 | 994 | 61,869 | (9,283) | (132) | 161 | (695) | 6,938 | 59,852 | 1,134 | 60,986 |
Profit/(loss) for the period | - | - | - | 1,694 | - | - | - | 1,694 | (16) | 1,678 |
Other comprehensive loss for the period | - | - | - | - | (175) | - | - | (175) | - | (175) |
Total comprehensive income | - | - | 1,694 | (175) | - | - | 1,519 | (16) | 1,503 | |
Issue of share capital (Note 12) | 241 | 23,259 | - | - | - | - | - | 23,500 | - | 23,500 |
Share issue costs (Note 12) | - | (1,021) | - | - | - | - | - | (1,021) | - | (1,021) |
Share based payment transactions | - | - | - | - | 134 | - | - | 134 | - | 134 |
Balance at 30 June 2011 | 1,235 | 84,107 | (9,283) | 1,562 | 120 | (695) | 6,938 | 83,984 | 1,118 | 85,102 |
MASAWARA PLC
Unaudited interim consolidated statement of cash flows | ||||
for the six months ended 30 June 2011 | ||||
June 2011 | June 2010 | |||
Notes | Unaudited | |||
US$ | US$ | |||
Operating activities | ||||
Profit/(loss) before tax | 1,678,032 | (1,343,332) | ||
Adjustments to reconcile profit/(loss) before tax to net cash flows from operating activities: | ||||
Share of profit/(loss) of associates | 9 | 337,906 | 338,942 | |
Gain on bargain purchase of additional shares of associate | 9.2 | (588,819) | - | |
Share of loss of joint venture | 10 | 232,885 | - | |
Gain on bargain purchase of joint venture | 10 | (3,226,258) | - | |
Depreciation of equipment | 3,107 | 885 | ||
Share-based payment transaction expense | 134,440 | - | ||
Finance income | (385,780) | (129,000) | ||
Finance cost | 246,396 | 1,676,033 | ||
Fair value adjustment on investment property | - | (639,081) | ||
Working capital adjustments: | ||||
Increase in other receivables | 11 | (2,230,129) | (275,293) | |
Increase in loans and receivables | 7 | (21,921) | - | |
Increase in accounts payable | 167,673 | 49,244 | ||
(3,652,468) | (321,602) | |||
Interest received | 9,768 | - | ||
Interest paid | (152,708) | - | ||
Net cash flows from /(used in) operating activities | (3,795,408) | (321,602) | ||
Investing activities | ||||
Expenditure on under construction investment property | 8 | (389,071) | (1,020,195) | |
Purchase of property, plant and equipment | 6 | (269,964) | - | |
Disposal of debenture investment | - | 611,160 | ||
Acquisition of an associate - Telerix | 9.1 | (5,000,000) | - | |
Acquisition of additional shares in associate | 9.1 | (1,019,959) | - | |
Investment in joint venture | 10 | (7,759,300) | - | |
Purchase of preference shares | 4.4 | (2,000,000) | - | |
Net cash flows used in investing activities | (16,438,294) | (409,035) | ||
Financing activities | ||||
Proceeds from loans | 7,940,000 | 523,511 | ||
Proceeds from issue of share capital | 12 | 23,500,000 | - | |
Share issue expenses | 12 | (1,020,681) | - | |
Net cash flows from financing activities | 30,419,319 | 523,511 | ||
Net increase/(decrease) in cash and cash equivalents | 10,185,617 | (207,126) | ||
Cash and cash equivalents at 1 January | 11,468,510 | 212,466 | ||
Cash & cash equivalents at 30 June | 21,654,127 | 5,340 | ||
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
1. Corporate information
Masawara Plc ("the Company") is an investment company incorporated and domiciled in Jersey, Channel Islands, whose shares are publicly traded on London Stock Exchange's AIM. The registered office is located at Queensway House, Hilgrove Street in St Helier, Jersey and it is managed from Unicorn Centre, 18N Frère Felix de Valois Street, Port Louis in Mauritius.
The investment portfolio of the Company includes, Joina City Property (multi-purpose property situated in Harare that earns rental income), TA Holdings Limited (diversified investment company that holds investments in insurance, agro-chemical and hospitality businesses), Zuva Petroleum (Private) Limited (formerly known as BP & Shell Marketing Services (Private) Limited), importer and distributor of petroleum products in Zimbabwe, and Telerix Communications (Private) Limited (a company that has the license that allows it to construct, operate and maintain a public data internet access and Voice Over IP network in Zimbabwe).
The Group interim financial statements consolidate those of the Company, its subsidiaries and the Group's interest in associates and joint ventures (together referred to as "the Group").
2. Basis of preparation
The interim consolidated financial statements for the six months ended 30 June 2011 have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting.
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 2010. 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 2010 with the exception of adoption of a new accounting policy relating to interests in joint ventures. Refer to the detail of the new accounting policy on Note 2.1.
The Directors have reviewed the forecast cash flows for the Group and are confident that the Group will have sufficient cash 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 Directors have prepared the financial statements on the going concern basis.
2.1 Interests in joint ventures
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control (i.e. when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control).
The results and assets and liabilities of joint ventures are incorporated in these financial statements using the equity method of accounting as permitted by IAS 31 Interests in Joint Ventures , except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in joint ventures are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of individual investments. Losses of a joint venture in excess of the Group's interest in that joint venture (which includes any long-term interests that, in substance, form part of the Group's net investment in the joint venture) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture.
Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the joint venture recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.
2.1 Interests in joint ventures
Upon loss of joint control the Group measures and recognises its remaining investment at its fair value. Any difference between the carrying amount of the former joint controlled entity upon loss of joint control and the fair value of the remaining investment and proceeds from disposal is recognised in profit or loss. When the remaining investment constitutes significant influence, it is accounted for as an investment in an associate.
2.2 Comparative information
FMI Zimbabwe (Private) Limited group was restructured so as to create a new Jersey holding company for the Group called Masawara Plc which was incorporated on 28 June 2010. Masawara Plc issued shares to the existing shareholders of FMI Zimbabwe (Private) Limited in exchange for shares already held in that entity. This transaction falls outside of the scope of IFRS 3 (Revised) Business Combinations so the pooling of interests method was applied and the consolidated financial statements of Masawara Plc as at 31 December 2010 were presented as a continuation of the existing group. Consequently, the comparative information as at 30 June 2010 presented in these interim consolidated financial statements are the results of FMI Zimbabwe (Private) Limited as group restructuring was only effected in August 2010.
2.3 Other property expenses, administrative and other operating expenses
As at June 2010, the retail section of Joina City had been opened for trade for three months and the office tower was not yet completed therefore any costs relating to the office tower were being charged to the property developers. The office tower was completed in February 2011 and subsequently all operating costs are being charged to the Co-owners for onward recovery from the tenants. There was also an additional US$ 82,000 doubtful debts provision made in the current period (June 2010: US$ 2, 800).
The major components of administrative and other expenses are staff costs, directors' fees, audit and advisory fees and consultancy fees relating to due diligence exercises carried out for potential acquisitions. The significant increase in administrative and other operating expenses is attributable to the fact that prior to the restructuring of the group and AIM listing, as detailed in Note 2.2, there were no significant advisory and consultancy services received and there was no significant number of employees employed by FMI Zimbabwe (Private) Limited.
3. Dividends
There were no dividends declared or paid during the six months ended 30 June 2011.
4. 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 2011.
4.1 Acquisition of Zuva Petroleum (Private) Limited (formerly known as BP and Shell Marketing Services (Private) Limited)
Masawara Plc, through its wholly owned subsidiary FMI Energy Zimbabwe (Private) Limited, concluded the acquisition of 100% of the shares in Zuva Petroleum One (Private) Limited (formerly known as BP Zimbabwe (Private) Limited) and Zuva Petroleum Two (Private) Limited (formerly known as Shell Zimbabwe (Private) Limited) which collectively own Zuva Petroleum (Private) Limited ("Zuva"). The transaction was financed through the cash resources of Masawara Plc as well as a funding arrangement with a third party (Alveir Management Limited), which thereby established joint control over Masawara Energy (Mauritius) Limited, which holds the investment in FMI Energy Zimbabwe (Private) Limited. Masawara Plc will therefore equity account for Masawara Energy (Mauritius) Limited as a jointly controlled entity effective from the acquisition date.
This transaction was concluded on 24 March 2011 but an effective acquisition date of 31 March 2011 has been used for accounting purposes. The exclusion of transactions that took place between 24 March 2011 and 31 March 2011 does not have a material effect on the interim Consolidated Statement of Comprehensive Income.
4.1 Acquisition of Zuva Petroleum (Private) Limited (formerly known as BP and Shell Marketing Services (Private) Limited) (continued)
An independent valuation of the property, plant and equipment acquired has not yet been conducted therefore the transaction has provisionally been accounted for. The provisional accounting resulted in a gain on bargain purchase of US$ 6,325,997 being recognized in Masawara Energy (Mauritius) Limited of which Masawara Plc's share was US$ 3,226,258. An independent valuation will be completed before the release of the annual financial statements for the year ending 31 December 2011. The provisional values of property, plant and equipment are based on the Directors' best estimates, and there is therefore a risk that after the independent valuation has been conducted, the value of negative goodwill may increase or decrease.
The provisional fair values of identifiable assets and liabilities of Zuva as at the date of acquisition were as follows:
Notes | Provisional fair value recognized on acquisition | |
Unaudited | ||
US$ | ||
Assets | ||
Property, plant and equipment | 1 | 42,385,089 |
Inventory | 2 | 4,499,906 |
Trade and other receivables | 3 | 6,700,855 |
Income tax asset | 4 | 1,348,000 |
Cash | 3,404,087 | |
58,337,937 | ||
Liabilities | ||
Deferred tax liability | 5 | (5,727,164) |
Trade and other payables | (13,584,218) | |
(19,311,382) | ||
Total identifiable net assets at fair value | 39,026,555 | |
Gain on bargain purchase | 6 | (6,325,997) |
Purchase consideration transferred | 32,700,558 | |
1. The directors have arrived at their best estimate of the provisional fair value of the property, plant and equipment as at 31 March 2011 using an independent desktop valuation conducted by CB Richard Ellis (Private) Limited as at 31 December 2009 as the basis of their valuation. To enable the directors to establish the provisional fair values of these assets, as part of the due diligence process, the company verified assets totalling US$ 38 million representing assets at depots, airfields and retail sites. A physical verification of the balance of Zuva's equipment valued at US$ 9,2 million, which is held on commercial and industrial sites owned by third parties, has not yet been carried out. However, based on a detailed desktop review of the description, location and viability of these sites, a provisional fair value adjustment of US$ 4,9 million has been made in respect of these assets. A professional valuer, CB Richard Ellis (Private) Limited, has been engaged to formally value the property, plant and equipment at 31 March 2011, for the purposes of purchase price allocation before year-end.
2. A stock count was conducted to verify the existence of all the inventories held on the date of acquisition.
3. Trade and other receivables have been recorded at the provisional fair value of US$ 6,700,855, which is based on the gross amount of US$ 9,006,885 adjusted for risk of non recovery by US$ 2,306,000.
4. Zuva was in a loss position for the year ended 31 December 2010 hence it was not liable to pay any corporate tax. The income tax asset emanated from the quarterly tax payments based on projected profits, that were made during the financial year ended 31 December 2010.
5. Net deferred tax liability relates to temporary differences between the carrying amounts and tax bases of items of property, plant and equipment and a deferred tax asset of US$ 328,000 arising from the assessed loss incurred during the year ended 31 December 2010.
6. The gain on bargain purchase of US$ 6,325,997 is likely to change once an independent valuation of immovable property has been completed. The Group's share of gain on bargain purchase included in the share of profit of joint venture is US$ 3,226,258.
4.2 Acquisition of interest in Telerix Communications (Private) Limited
Masawara Plc, through its wholly owned subsidiary Masawara Communications (Mauritius) Limited acquired 50% shareholding in Telerix Communications (Private) Limited ("Telerix"), effective 3 January 2011. Telerix is currently operating as an Internet Service Provider (ISP) in Zimbabwe and intends to expand its services, to include;
·; the wholesaling of international bandwidth to corporate customers and other Internet Service Providers in Zimbabwe;
·; the establishment of fixed, nomadic and ultimately fully mobile broadband services via fibre optic and WiMAX network architecture; and
·; the roll-out a Fourth Generation (4G) network to provide a "last mile" solution for Internet customers initially in Harare and then to the other main centres in Zimbabwe.
Masawara Plc has accounted for Telerix as an associate as it has significant influence in Telerix, determined by the power to participate in the financial and operating policy decisions of the investee but has neither control nor joint control over those policies. According to the Group's accounting policies, detailed in the financial statements for the year ended 31 December 2010, investments in associates are accounted for using the equity method.
The provisional fair values of identifiable assets and liabilities of Telerix as at the acquisition date were as follows:
Notes | Provisional fair value of net assets on acquisition | |
Unaudited | ||
US$ | ||
Assets | ||
Property, plant and equipment | 143,214 | |
Intangible asset | 1 | 12,400,000 |
Capacity purchase agreements | 2 | 7,026,878 |
Trade and other receivables | 3 | 129,641 |
Deferred tax asset | 397,409 | |
Cash | 135,912 | |
20,233,054 | ||
Liabilities | ||
Non-current liabilities Debentures | 4 | (6,236,861) (2,000,000) |
Current liabilities | 5 | (2,753,764) |
(10,990,625) | ||
Total identifiable net assets at fair value | 9,242,429 | |
Share of identifiable net assets at fair value | 4,621,215 | |
Goodwill | 378,785 | |
Purchase consideration transferred | 5,000,000 |
Notes
1. Relates to an Internet Access Provider ("IAP") license obtained from Postal and Telecommunications Regulatory Authority of Zimbabwe. The fair value of the IAP license has provisionally been determined as US$ 12,4 million by an independent professional valuer, Cosmos Capital Limited, with relevant experience in the telecommunications industry in Zimbabwe. The valuation will be concluded before year end.
2. These are agreements with Powertel Communications Private Limited ("Powertel") and SEACOM Limited ("SEACOM") to purchase certain bandwidth capacity on the Powertel and SEACOM systems. The carrying amount of capacity purchase agreements approximates the fair value.
3. The fair value of trade and other receivables amounts to US$ 129,640 and the gross amount of trade and other receivables is US$ 140,884. A provision of US$ 11,244 was made in respect of receivables that may not be recoverable.
4. Included in non-current liabilities is the long term portion of the amounts payable in respect of the IAP license and capacity purchase agreements with Powertel and SEACOM. The carrying amount of non-current liabilities approximates the fair value.
5. Included in current liabilities is the short term portion of the amounts payable in respect of the IAP license and capacity purchase agreements with Powertel and SEACOM and trade and other payables. The carrying amount of current liabilities approximates the fair value.
4.3 Acquisition of additional interest in TA Holdings Limited
The Group acquired an additional 3.38% interest in TA Holdings Limited on 6 May 2011 when Masawara (Mauritius) Limited purchased 5,570,062 shares on the Zimbabwe Stock Exchange for US$ 1,019,959, including brokers fees. The share of net assets of TA Holdings Limited at the date of acquisition was US$ 1,608,778 and the difference of US$ 588,819 has been included as income in the determination of the Group's share of TA Holdings Limited's profit for the period.
4.4 Subscription for preference shares in Telerix Communications (Private) Limited
On 4 April 2011, Masawara Plc subscribed for 2,000 preference shares in Telerix Communications (Private) Limited, ("Telerix"), at US$ 1,000 per share. The preference shares are redeemable at a price of US$ 1,100 per share, twenty-four months from the subscription date or on the date that Telerix lists on the Zimbabwe Stock Exchange (whichever date is sooner), bearing a coupon rate of 8% per annum, payable quarterly.
The investment in preference shares has been classified under the financial assets category as permitted by IAS 39 and is carried at amortised cost. Below is a reconciliation of the carrying amount of the investment at 30 June 2011.
Reconciliation of the investment in preference shares
US$ | |
Cost | 2,000,000 |
Accrued dividend income | 62,396 |
Balance at 30 June 2011 | 2,062,396 |
4.5 Secondary capital raise
On 9 May 2011, Masawara Plc successfully raised US$ 23,5 million from the issue of 24,102,564 shares at 97.5 US cents per share. Share issue costs of US$ 1,020,681 were debited to the share premium account. The new shares issued rank pari passu in all respects with the existing ordinary shares including the right to receive dividends or other distributions declared.
4.6 Acquisition of a loan
In March 2011 the Group entered into a loan agreement of US$ 7,5 million to assist in the funding of the acquisition of Zuva Petroleum (Private) Limited (formerly known as BP and Shell Marketing Services (Private) Limited). For more details refer to Note 13.2.
5. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit or loss for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
June 2011 | June 2010 | |
US$ | US$ | |
Net profit/(loss) attributable to ordinary equity holders of parent for basic earnings and diluted earnings | 1,694,052 | (1,160,376) |
Weighted average number of ordinary shares for basic earnings per share | 106,420,502 | 99,362,845 |
Effect of dilution: shares allocated | 153,066 | - |
Weighted average number of ordinary shares for diluted earnings per share | 106,573,568 | 99,362,845 |
Basic and diluted earnings per share | US$ 0.02 | US$ (0.01) |
The number of shares used to calculate the earnings per share for the comparative six month period ended 30 June 2011 is that of Masawara Plc after listing.
| ||
There were no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.
6. Property, plant and equipment
Acquisitions and disposals
During the six months ended 30 June 2011, Masawara Plc acquired assets with a cost of US$ 269,964 (2010: Nil). The assets acquired relate to the ongoing work to equip and furnish new corporate offices. The Group did not dispose of any assets during the period under review.
7. Financial assets
June 2011 | December 2010 | June 2010 | |
Unaudited | Audited | Unaudited | |
US$ | US$ | US$ | |
Debenture investment | 1,507,762 | 1,550,377 | 2,097,835 |
Preference shares - Note 4.4 | 2,062,396 | - | - |
Loans and receivables | 213,089 | 191,968 | - |
Short-term bank deposits | 2,082,132 | 2,021,388 | - |
Total | 5,865,379 | 3,763,733 | 2,097,835 |
The debenture investment is measured at amortised cost. The debentures were previously being amortized to 31 December 2011, this was changed and they are now being amortized to 31 December 2012. As a result of the re-evaluation of when the debenture interest will start being received, there is a debit to finance income amounting to US$ 42,615 due to the extension of the amortization period by twelve months.
8. Investment property
June 2011 | December 2010 | June 2010 | |
Unaudited | Audited | Unaudited | |
US$ | US$ | US$ | |
Opening balance | 31,423,073 | 26,393,547 | 26,393,547 |
Capitalised costs | 389,071 | 1,648,784 | 1,255,588 |
Capitalised costs (non cash) | - | 418,440 | - |
Fair value adjustment | - | 2,962,302 | 639,081 |
Closing balance | 31,812,144 | 31,423,073 | 28,288,216 |
As at the interim reporting date, the investment property was 100% complete (31 December 2010: 99.39%).
Based on the most recent independent valuation as at 31 December 2010 the directors have assessed the potential changes to the inputs to the valuation and are of the opinion that there has not been a material change to the fair value of the building from the previous reporting date. There is a risk that the illiquidity of the Zimbabwean capital market may affect the valuation of the Group's investment property in the short to medium term. As detailed in the financial statements for the year ended 31 December 2010, there are no buildings that are comparable to the Group's investment property in Zimbabwe, which poses a greater degree of uncertainty than which exists in a more active market in estimating market values of investment property.
9. Investment in associates
Investment in associates includes investment in TA Holdings Limited ("TA Holdings") and Telerix Communications (Private) Limited ("Telerix"). The share of profit of associates disclosed in the statement of comprehensive income was attributable to the share of profits in TA Holdings and share of losses in Telerix. The following shows a breakdown of the share of profit in associates.
June 2011 | December 2010 | June 2010 | |||
Unaudited | Audited | Unaudited | |||
| US$ | US$ | US$ | ||
| |||||
| Share of profit/(loss) of TA Holdings | 425,406 | (1,886,252) | (308,542) | |
| Share of loss of Telerix | (763,312) | - | - | |
| Share of loss of FMI Securities (Private) Limited | - | (43,124) | (30,400) | |
| Total share of loss of associates | (337,906) | (1,929,376) | (338,942) | |
9.1 Aggregate Group Investments in associates
| June 2011 | December 2010 | June 2010 | ||
| Unaudited | Audited | Audited | ||
US$ | US$ | US$ | |||
Opening balance |
| 14,417,450 | 16,876,718 | 16,876,718 | |
Share of loss of associates | (337,906) | (1,929,376) | (338,942) | ||
Share of other comprehensive loss of associates | (175,408) | (2,344,276) | (441,732) | ||
Purchase of additional shares of TA Holdings - Note 4.3 | 1,019,959 | 1,054,191 | - | ||
Gain on bargain purchase - Note 4.3 | 588,819 | 222,270 | - | ||
Share of other movements in reserves | - | (72,461) | - | ||
Share of prior year adjustment in associate | - | 651,972 | 651,972 | ||
Dilution of FMI Securities (Private) Limited (FMI Securities) | - | (28,221) | (28,221) | ||
Loss on disposal of FMI Securities | - | (13,367) | - | ||
Purchase of an associate, Telerix - Note 9.3 | 5,000,000 | - | - | ||
Carrying amount of investments in associate | 20,512,914 | 14,417,450 | 16,719,795 | ||
9.2 Summarised financial information in respect of TA Holdings Limited
Reconciliation of the investment in associate - TA Holdings Limited
June 2011 | December 2010 | June 2010 | |
Unaudited | Audited | Unaudited | |
US$ | US$ | US$ | |
Opening balance | 14,417,450 | 16,792,006 | 16,792,006 |
Share of profit/(loss) - Note 9 | 425,406 | (1,886,252) | (308,542) |
Gain on bargain purchase - Note 4.3 | 588,819 | 222,270 | - |
Share of other comprehensive loss | (175,408) | (2,344,276) | (433,564) |
Purchase of additional shares - Note 4.3 | 1,019,959 | 1,054,191 | - |
Share of prior year adjustments in associate | - | 651,972 | 651,972 |
Share of other movements in reserves | - | (72,461) | - |
Closing balance | 16,276,226 | 14,417,450 | 16,701,872 |
The improved performance of TA Holdings Limited during the six months ended 30 June 2011, was mainly as a result of a viable electricity tariff being awarded to Sable Chemical Industries by the Government, and the Zimbabwean insurance companies returning to underwriting profitability.
9.2 Summarised financial information in respect of TA Holdings Limited (continued)
| June 2011 | December 2010 | June 2010 | |
| Unaudited | Audited | Unaudited | |
| US$ | US$ | US$ | |
Share of other associate's statement of financial position: | ||||
Current assets | 20,945,854 | 18,868,752 | 19,537,314 | |
Non-current assets | 28,314,114 | 18,903,059 | 24,600,578 | |
Current liabilities | (21,801,312) | (13,759,069) | (18,609,237) | |
Non-current liabilities | (7,944,213) | (6,555,191) | (6,037,077) | |
Less: Non controlling interest | (3,238,217) | (3,040,101) | (2,789,706) | |
Equity | 16,276,226 | 14,417,450 | 16,701,872 | |
Share of the associate's revenue and profit/(loss): | ||||
Revenue | 10,235,501 | 15,645,022 | 6,583,509 | |
Profit/(loss) for the period | 425,406 | (1,886,252) | (308,542) | |
Gain on bargain purchase - Note 4.3 | 588,819 | 222,270 | - | |
Other comprehensive loss for the period | (175,408) | (2,344,276) | (433,564) | |
Share of other movements in reserves | - | (72,461) | - | |
Share of prior year adjustments in associate | - | 651,972 | 651,972 | |
| ||||
9.3 Summarised financial information in respect of Telerix Communications (Private) Limited
June 2011 | ||||
Reconciliation of the investment in associate - Telerix | Unaudited | |||
US$ | ||||
Opening balance | - | |||
Fair value of share of net assets acquired on 3 January 2011 - Note 4.2 |
| 4,621,215 | ||
Goodwill arising on acquisition - Note 4.2 | 378,785 | |||
Share of loss of associate |
|
| (763,312) | |
Carrying amount of investment at 30 June 2011 |
|
| 4,236,688 | |
| ||||
Share of associate's statement of financial position: | ||||
Current assets | 1,422,229 | |||
Non-current assets | 11,466,798 | |||
Current liabilities | (2,670,757) | |||
Non-current liabilities | (6,360,367) | |||
Equity | 3,857,903 | |||
Goodwill on acquisition | 378,785 | |||
Carrying amount of the investment in associate | 4,236,688 | |||
Share of the associate's revenue and loss: |
| |||
Revenue | 150,023 | |||
Loss for the period | (763,312) | |||
10. Investment in joint venture, Masawara Energy (Mauritius) Limited ("MEM")
June 2011 | |||
Unaudited | |||
US$ | |||
Opening balance | - | ||
Deposit paid in prior year | 8,000,000 | ||
Balance paid in current year | 7,759,300 | ||
Total purchase of MEM investment | 15,759,300 | ||
Share of loss of joint venture | (232,885) | ||
Share of gain on bargain purchase - Note 4.1 | 3,226,258 | ||
Carrying amount of investment at 30 June 2011 | 18,752,673 |
Summarised financial information in respect of Masawara Energy (Mauritius) Limited:
| |||
Share of joint venture's statement of financial position: | |||
Current assets | 13,631,021 | ||
Non-current assets | 27,609,168 | ||
Current liabilities | (14,090,619) | ||
Non-current liabilities | (11,623,155) | ||
Equity | 15,526,415 | ||
Negative goodwill | 3,226,258 | ||
Carrying amount of investment at 30 June 2011 | 18,752,673 | ||
Share of joint venture's revenue and profit/(loss): | |||
Revenue | 22,134,422 | ||
Share of loss of joint venture | (232,885) | ||
Share of negative goodwill - Note 4.1 | 3,226,258 |
11. Other receivables
June 2011 | December 2010 | June 2010 | |
Unaudited | Audited | Unaudited | |
US$ | US$ | US$ | |
Receivables from related parties | 2,309,347 | 196,811 | 284,424 |
Other receivables | 227,833 | 110,240 | - |
Total | 2,537,180 | 307,051 | 284,424 |
Refer to Note 15 for further details of the amounts due from related parties.
12. Share capital and share premium movement
Number of shares | Share capital | Share premium | Total | |
US$ | US$ | US$ | ||
Balance at 31 December 2010 | 99,362,845 | 993,629 | 61,869,043 | 62,862,672 |
Issue of share capital | 24,102,564 | 241,026 | 23,258,974 | 23,500,000 |
Share issue costs | - | - | (1,020,681) | (1,020,681) |
Balance at 30 June 2011 | 123,465,409 | 1,234,655 | 84,107,336 | 85,341,991 |
13. Financial liabilities
13.1 Financial liabilities - non current
Non-current financial liabilities, as at 30 June 2011, comprise of loans from non-controlling shareholders. The loans are unsecured, do not have fixed repayment terms and are interest free unless the shareholders agree otherwise. In line with International Financial Reporting Standards, interest has been imputed at the open market rate of 10%. The loans were previously being amortised to 31 December 2011, this has changed and they are now being amortised to 31 December 2012. As a result of the re-evaluation of when the loans will become interest bearing, there is a credit to finance cost amounting to US$ 252,872 due to the extension of the period by one year. Included in non-current financial liabilities as at 31 December 2010 is a loan from Stanbic Bank with a carrying amount of US$ 354,986 that has been reclassified to current financial liabilities as it falls due on 28 April 2012, refer to Note 13.2.
13.2 Financial liabilities - current
Included in non current financial liabilities is a sum of US$ 7,5 million borrowed from Alveir Management Limited during six month period ended 30 June 2011. The loan bears interest at a rate of 8% per annum and is repayable on 18 March 2012.
US$ | |
Balance at 1 January 2011 | - |
Bank loan reclassified from non-current liabilities - Note 13.1 | 354,986 |
Loans drawdown | 7,940,000 |
Accrued finance cost | 201,860 |
Finance cost paid | (151,667) |
Balance at 30 June 2011 | 8,345,179 |
14. Segment information
For management purposes, the Group is organised into business units based on their products and services. Two business units (Communications and Energy) were acquired during the six month period ended 30 June 2011. For more details refer to Note 4. The Group has four reportable segments as follows:
·; The Investment Property segment leases retail and office space at the Joina City building partly owned by the Group.
·; TA Holdings Limited, an associate, is a diversified investment company that holds stakes in insurance, agro-chemical and hospitality businesses across sub-Saharan Africa and is listed on the Zimbabwe Stock Exchange.
·; Communications segment, which includes Telerix Communications (Private) Limited an internet service company that is an associate of the Group.
·; Energy segment, which incorporates Masawara Energy (Mauritius) Limited with a wholly owned subsidiary, Zuva Petroleum (Private) Limited, a long established importer and distributor of petroleum products in Zimbabwe.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss, and is measured consistently with operating profit or loss in the consolidated financial statements.
Segment assets for the Investment Property segment represent the Group's share of the Joina City building, and receivables from tenants.
Six months ended 30 June 2011 | |||||
Investment property | TA Holdings | Communications | Energy | Total Group | |
US$ | US$ | US$ | US$ | US$ | |
Rent and service charge income | 556,211 | - | - | - | 556,211 |
Property operating expenses | (573,273) | - | - | - | (573,273) |
Equity accounted earnings | - | 425,406 | (763,312) | (232,885) | (570,791) |
Gain on bargain purchase | - | 588,819 | - | 3,226,258 | 3,815,077 |
Segment profit/(loss) | (17,062) | 1,014,225 | (763,312) | 2,993,373 | 3,227,224 |
Other operating expenses | (975,741) | ||||
Administrative expenses | (712,835) | ||||
Finance costs | (246,396) | ||||
Finance income | 385,780 | ||||
Profit before tax | 1,678,032 | ||||
As at 30 June 2011
| |||||
Segment assets | 31,812,144 | 16,276,226 | 4,236,688 | 18,752,673 | 71,077,731 |
Non-current assets | 6,138,992 | ||||
Current assets | 24,191,307 | ||||
Total assets | 101,408,030 | ||||
Segment liabilities | (2,277,384) | - | - | - | (2,277,384) |
Non-current liabilities | (5,180,875) | ||||
Current liabilities | (8,847,523) | ||||
Total liabilities | (16,305,782) | ||||
Six months ended 30 June 2010 | ||||||
Investment Property | TA Holdings | Communications | Energy | Total Group | ||
US$ | US$ | US$ | US$ | US$ | ||
Rent and service charge income | 42,008 | - | - | - | 42,008 | |
Fair value gain on investment property | 639,081 | - | - | - | 639,081 | |
Other property expenses | (30,378) | - | - | - | (30,378) | |
Equity accounted earnings | - | (308,542) | - | - | (308,542) | |
Segment profit/(loss) | 681,089 | (308,542) | - | - | 342,169 | |
Other operating expenses | (108,068) | |||||
Equity accounted earnings | (30,400) | |||||
Finance costs | (1,676,033) | |||||
Finance income | 129,000 | |||||
Loss before tax | 1,343,332 | |||||
As at 31 December 2010
| ||||||
Segment assets | 31,619,884 | 14,417,450 | - | - | 46,037,334 | |
Non-current assets | 3,770,483 | |||||
Current assets | 19,578,750 | |||||
Total assets | 69,386,567 | |||||
Segment liabilities | (7,203,550) | - | - | - | (7,203,550) | |
Current liabilities | (1,197,237) | |||||
Total liabilities | (8,400,787) | |||||
Geographical information
Investment Property
The Joina City building is situated in Harare and therefore all revenues and assets are from Zimbabwe.
Communications
Telerix Communications (Private) Limited is situated in Harare and only offers services in Zimbabwe, therefore all revenues and assets are from Zimbabwe.
Energy
Masawara Energy (Mauritius) Limited's significant assets that generate revenue are located in Zimbabwe through its wholly owned subsidiary, Zuva Petroleum (Private) Limited. Zuva Petroleum (Private) Limited imports and distributes petroleum products across Zimbabwe hence all revenues and assets of the energy segment have been deemed to be from Zimbabwe.
TA Holdings Limited
TA Holdings Limited has operations in Zimbabwe, Botswana, South Africa and Uganda. The Group's share of TA Holdings' revenues and non-current assets is split as follows:
| June 2011 | June 2010 | |
| Unaudited | ||
| US$ | US$ | |
Revenues | |||
From Zimbabwe | 13,960,245 | 9,272,425 | |
Outside Zimbabwe | 16,817,956 | 16,963,805 | |
Total | 30,778,201 | 26,236,230 | |
| June 2011 | December 2010 | |
| Unaudited | Audited | |
US$ | US$ | ||
Non-current assets From Zimbabwe | 18,910,892 | 17,037,195 | |
Outside Zimbabwe | 4,341,166 | 4,422,383 | |
Total | 23,252,058 | 21,459,578 | |
15. Related party disclosures
The financial statements include the financial statements of Masawara Plc, the subsidiaries, joint venture and associates. The related party relations have not changed from the previous reporting date i.e. as at 31 December 2010 with the exception of additional interests acquired in Zuva Petroleum (Private) Limited, through FMI Energy Zimbabwe (Private) Limited, and Telerix Communications (Private) Limited. Refer to Note 4.1 and Note 4.2 for more information on the acquisition of Zuva Petroleum (Private) Limited and Telerix Communications (Private) Limited respectively.
The following table provides the total amount of transactions that have been entered into with related parties during the six months ended 30 June 2011 and 30 June 2010.
| Sales to | Purchases | Balance owed | Balance owed | |
| related | from related | to related | by related | |
| parties | Parties | parties | parties | |
| US$ | US$ | US$ | US$ | |
| |||||
AON Zimbabwe (Private) Limited | |||||
2011 | - | 10,000 | - | - | |
2010 | - | - | - | - | |
New World Property Managers (Private) Limited | |||||
2011 | - | 143,554 | - | 98,432 | |
2010 | - | 7,107 | - | 67,248 | |
Joina Development Company (Private) Limited | |||||
2011 | - | 34,500 | - | - | |
2010 | - | 34,500 | - | - | |
TA Holdings Limited | |||||
2011 | - | 10,700 | - | - | |
2010 | - | - | - | - | |
Cherryfield Investments (Private) Limited | |||||
2011 | - | - | - | 1,716 | |
2010 | - | - | - | - | |
Head Biz (Private) Limited | |||||
2011 | 17,724 | - | - | 3,470 | |
2010 | - | - | - | - | |
BLC Chambers Limited | |||||
2011 | - | 2,421 | - | - | |
2010 | - | - | - | - | |
FMI Holdings (Private) Limited | |||||
2011 | - | 5,807 | - | - | |
2010 | - | - | - | - | |
FMI Energy Zimbabwe (Private) Limited | |||||
2011 | - | - | - | 2,205,729 | |
2010 | - | - | - | - | |
Total 2011 | 17,724 | 206,982 | - | 2,309,347 | |
Total 2010 | - | 41,607 | - | 67,248 | |
Terms and conditions of transactions with related parties
The sales and purchases from related parties are made at terms equivalent to those that prevail in arm's length transactions. Outstanding balances as at 30 June 2011 are unsecured, interest free and settlement occurs in cash. There are no guarantees received or provided for any related party receivables or payables.
Included in the US$ 2,205,729 owed by FMI Energy Zimbabwe (Private) Limited, in the table above, is a loan of US$ 1,800,000 that was advanced by Masawara Plc. The loan does not bear interest and has no fixed repayment date.
Directors' loans
There were no additional loans to directors' during the six month period ended 30 June 2011. There were no changes to the terms and conditions on directors' loans that existed as at the last reporting date.
Loans to related parties other than directors
| Interest income US$ | Amounts owed by related parties US$ | |
Associate - Telerix Communications (Private) Limited: | |||
June 2011 - Note 4.4 | 62,396 | 2,062,396 | |
June 2010 | - | - | |
Directors' remuneration
| June 2011 | June 2010 | ||
| Unaudited | |||
| US$ | US$
| ||
Short-term employee benefits | 323,500 | - | ||
Share based payments | 76,824 | - | ||
Directors' fees | 85,797 | - | ||
Medical benefits | 14,251 | - | ||
Total | 500,372 | - | ||
The amounts disclosed in the table are the amounts recognized as an expense during the reporting period.
16. Income tax expense
There was no income tax expense during the six month period ended 30 June 2011 because the Group did not have any taxable income during the period under review. Income tax expense for the associates and joint venture has been taken into account in the Group's share of post tax profit or loss from associates and joint venture.
17. Capital commitments
The Company did not have any capital commitments as at the interim reporting date.
18. Events after the reporting period
Subsequent to the six month period ended 30 June 2011, the Group increased its shareholding in TA Holdings Limited from 33.38% to 35.09% when Masawara (Mauritius) Limited purchased 2,821,489 shares on the Zimbabwe Stock Exchange for US$ 444,384, including brokers fees.
Enquiries
Masawara plc
Oliver Lutz/Rutendo Maziva +263 4 791676
Cenkos Securities plc (Nominated adviser and broker)
Nicholas Wells/Max Hartley +44 20 7397 8900
Related Shares:
Masawara