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Masawara Plc (MASA)

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Thursday 30 April, 2015

Masawara Plc

Final Results

RNS Number : 7700L
Masawara Plc
30 April 2015
 

30 April 2015

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

 

Final Results for the year ended 31 December 2014

 

Masawara, an investment company focused on acquiring interests in companies based in Zimbabwe and the southern African region, is pleased to announce its audited results for the year ended 31 December 2014.

 

The Company's Annual Report and Accounts for the year ended 31 December 2014 will be posted to shareholders shortly and may also 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 751805/6

 

Cenkos Securities plc (Nominated adviser and broker)

Nicholas Wells/Ian Soanes

 +44 20 7397 8900

 

CHAIRMAN'S STATEMENT

 

Following a period of consolidation and the implementation of planned key strategic objectives, I am pleased to report that Masawara Plc has commenced a process of transformation that will have a long term positive effect on the Group's financial position and performance. Key to this were completion of the disposal of Masawara Energy Mauritius Limited at the outset of the year, and the acquisition of an additional 34.7% shareholding in TA Holdings Limited toward year end.

 

As a result of the above initiatives, Masawara reported a significantly improved and satisfactory financial performance for 2014. Profit before taxation for the year totalled $16.1 million (2013: loss of $10.8 million), and the net asset value increased by 16% to $84.6 million (2013: $72.6 million). While full details of the Group's financial performance has been presented in this report, the following key features merit noting:

·      In addition to initial financial gains reported at acquisition, the Group recorded a $6.2 million profit on disposal of its share in Masawara Energy Mauritius; and

·      The increase in the Group's shareholding in TA Holdings Limited to 75.74% with effect from 1 December 2014 delivered a gain on bargain purchase of $10.0 million and resulted in the consolidation of financial statements for the month of December 2014.

 

From an operational perspective, the business environment in Zimbabwe has remained difficult. The trend of tightening liquidity witnessed over the past two years has continued and the formal economy has slowed. Based on reports issued by the Reserve Bank of Zimbabwe, it is estimated that the economy grew by only 3.1% in 2014. A number of businesses in Zimbabwe continue to face viability challenges and the frequency of business down-sizing and closure has increased. Despite this difficult operating environment, the majority of the Group's investments in Zimbabwe are performing well and are maintaining and, in some cases, improving their market positions.

 

The Group's regional investments have continued to be profitable and accounted for 34% of TA Holdings Limited's profit before tax for the year ended 31 December 2014. The Botswana hospitality business achieved a profit in line with prior year and management are pursuing opportunities for portfolio growth. The insurance investment in Botswana had a difficult year, with profit before tax declining by 64% compared to the prior year, primarily as a result of increasing claims and declining investment income. Various counteractive measures were adopted in this business towards the year end which are expected to enable the business to yield higher returns. The Uganda insurance business continues to perform above expectation, with profit before tax increasing by 40% compared to the prior year, with further growth expected during the 2015 financial year.

 

As shareholders will be aware subsequent to year end the Group acquired the remaining 24.26% shares held by TA Holdings Limited minorities and now controls 100% of the company. Following completion of a detailed strategic review of the Group and the individual underlying businesses, a focused restructuring process has begun that will create the platform for further value creation.

 

I would like to thank my fellow Board members, Shingai Mutasa and the Group's staff for their efforts and contribution toward Masawara's positive development. Despite the current macro economic challenges, the prospects for Group companies in 2015 and beyond are encouraging, and we continue to believe in Zimbabwe's growth potential.

 

 

 

David Suratgar

Chairman

29 April 2015

 

DIRECTORS' REPORT

 

The Directors are pleased to present the audited financial statements of the Group for the year ended 31 December 2014.

 

Principal activities

 

Masawara Plc is an investment company focused on acquiring interests in companies based in Zimbabwe and the Southern African region. The portfolio comprises of:

·      an interest in TA Holdings Limited ("TA Holdings"), a diversified investment company that holds stakes in insurance, agro-chemical and hospitality businesses across sub-Saharan Africa;

·      an interest in Joina City, a premium, multi-purpose property, located in Harare's Central Business District, providing rental property for retail, entertainment and office space;

·      an interest in Telerix Communications (Private) Limited ("Telerix"), a Zimbabwean broadband internet service provider which rolled-out a WiMAX network in Harare during the previous year;

·      an interest in iWayAfrica Zimbabwe (Private) Limited ("iWayAfrica"), a broadband internet service provider; and

·      an interest in Minerva Risk Advisors (Private) Limited (a company previously known as AON Zimbabwe (Private) Limited) that has operations in pensions consulting and administration, insurance risk advisory and reinsurance broking. Following the acquisition of additional shares in TA Holdings Limited during the year, the investment in Minerva Risk Advisors (Private) Limited ("Minerva") was accounted for as part of TA Holdings Limited, which holds a controlling interest in the business.

 

Investment strategy

 

Masawara Plc invests in businesses and assets primarily located in Zimbabwe. To the extent that value opportunities exist and attractive returns can be achieved, investments will also be considered elsewhere on the African continent.

 

In the identification of investment opportunities, emphasis is placed by Masawara Plc on identifying value propositions, with a view to finding, unlocking and extracting embedded real value. The Investment Advisor, Masawara Zimbabwe (Private) Limited (a subsidiary of the company), advises the Board on opportunities, acquisitions and sales, exit strategies and manages the Group's portfolio of investments in Zimbabwe on a day-to-day basis, with a view to achieving the Group's investment objective and strategy.

 

Business preference

The investment criteria adopted are:

·      ability to influence the business at a board level, with the Group's executives adding structuring and financing expertise to the management of the business, as well as significant industry relationships and access to finance;

·      ability to work alongside a strong management team to maximize returns through revenue growth, accretive acquisitions, and the optimization of cost control;

·      investing in businesses with a clear growth potential;

·      focusing  on the creation of intrinsic value through the restructuring of the investment or a merger with complementary businesses; and

·      emphasis on investment in cash generative businesses.

 

The Group will continuously assess its portfolio of investments in the light of further opportunities and the mix of investments.

 

Business review

 

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. Note 46 to the financial statements includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; its exposures to credit risk and liquidity risk; and other risks.

 

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. The senior management of the Investment Advisor collectively has over 70 years of experience in identifying and concluding value accretive transactions and also 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 property in the short to medium term. Significant judgments, estimates and assumptions made when valuing the investment property are detailed in Note 6.1 and Note 27.

 

Due to losses incurred by Telerix and its cash flow constraints, there is a risk that the loan notes granted to Telerix may be further impaired in future. Refer to Note 29.1 regarding the impairment of the loan notes.

 

Going concern

Management prepared cash flow forecasts indicating there is adequate operating cash for the period to 30 June 2016. In assessing the ability 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 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 these financial statements and accordingly, the financial statements have been prepared on the going concern basis.

 

Results for the year

The results for the year are set out in the financial statements below:

 

Overview

 

The following were the key highlights for the year ended 31 December 2014:

·      On 31 January 2014, the sale of Masawara Energy (Mauritius) Limited was concluded for a total consideration of $29.3 million (Note 34), resulting in $6.2 million profit on disposal being recorded in the current year results. A $9.2 million gain on bargain purchase of the Group's interest in MEM was recognized in the 2011 financial year. The total cash uplift realised on the disposal of this investment was $13.6 million. 

·      On 18 February 2014 the Directors of the Company declared a special cash dividend of 3.25 US cents per ordinary share. The total dividend amounted to approximately $4.0 million, and was paid on 5 March 2014 out of the Company's cash resources.

·      During the year under review, the Group increased its shareholding in TA Holdings Limited ("TA Holdings") from 41.04% as at 31 December 2013 to 75.74% as at 31 December 2014. This increase was achieved following a general offer to the shareholders of TA Holdings, and the cash consideration paid for the additional shares acquired was $11.8 million (Note 8).

·      Joina City, Telerix, Minerva and TA Holdings all recorded improved performance at an operating level, compared to the previous year.

 

Performance

 

The Group achieved a profit after tax of $16.1 million for year ended 31 December 2014 compared to a loss after tax of $10.8 million incurred during the previous year. The improved performance from the previous year was mainly attributable to:

 

·      bargain purchase on the acquisition of TA Holdings of $10.0 million;

·      increase in the share of profit from associate TA Holdings to $2.5 million in comparison to the previous reporting period, when the Group recorded a share of loss from associate of $3.2 million;

·      the inclusion of the post acquisition results of TA Holdings as a subsidiary, which were for one month, accounted for $1.5 million of the profit after tax achieved;

·      the profit on disposal of the Group's interest in Masawara Energy (Mauritius) Limited of $6.2 million; and

·      a $528,000 gain that was recognised on disposal of 20.75% shareholding in Minerva Risk Advisors (Private) Limited.

·      The Group's performance was however weighed down by a $2.5 million impairment loss (2013: $261,000) that was recorded on Telerix Communications (Private) Limited loan notes.

 

The performance of the individual investee companies is summarised below.

 

TA Holdings Limited

Following a general offer made to the shareholders of TA Holdings, Masawara acquired an additional 34.7% of TA Holdings. The effective date for this acquisition for accounting purposes was 1 December 2014. Consequently, the results for the Group include the TA Holdings results as an associate from 1 January 2014 to 30 November 2014, and as a subsidiary for the month of December 2014. If the acquisition had taken place on 1 January 2014, then Group's gross revenue and profit after tax would have been $96.6 million and $23.8 million respectively.

 

TA Holdings Limited ("TA") achieved a profit after tax of $9.2 million for the year (Group's share $4.0 million), an increase from the loss incurred in the prior year of $5.7 million (Group's share of loss $3.2 million). The prior year results included $13.7 million impairment loss against the investment in Sable Chemical Industries Limited ("Sable"). The investment in Sable remained impaired in the current year, and therefore TA Holdings did not recognise any share of profit or loss from Sable in the current year.

 

All the insurance companies registered growth in gross written premium compared to the prior year, and all companies achieved underwriting profits for the year. Despite increased levels of competition in the Zimbabwe and outside Zimbabwe hotel markets, the hotels recorded an increase in profitability compared to prior year.

 

The key performance ratios of the insurance businesses in the current year were as follows:

 


Claims ratio 2014

Claims ratio 2013

Combined ratio 2014

Combined ratio 2013

Botswana Insurance Company Limited

59%

47%

96%

86%

Lion Assurance Company (Uganda)

32%

33%

87%

85%

Zimnat Lion Insurance Company Limited (Zimbabwe)

34%

39%

81%

85%

Zimnat Life Assurance Company (Zimbabwe)

32%

38%

79%

84%

Grande Reinsurance Company (Zimbabwe)

38%

41%

94%

107%

 

Subsequent to year end, TA Holdings was delisted from the Zimbabwe Stock exchange, and Masawara entered into a scheme of arrangement with the other shareholders in March 2015. Following this, Masawara now holds 100% of the ordinary share capital of TA Holdings (Note 34).

 

Joina City

Overall occupancy in Joina City increased marginally from 71% in December 2013 to 72% in December 2014. The Group's share of profit for the year, excluding fair value gain on investment property, was $239,000, a 137% increase from the profit of $101,000 achieved in the prior year. The improvement from the previous year was driven by the 11% increase in revenue from $1.8 million last year to $2.0 million in the current year, while other property expenses remained at prior year levels. The Group's share of the fair value gain on the investment property was $860,000 (2013: $2.0 million loss). The significant judgments and valuation inputs are included in Note 6.1 and Note 27. The total cash paid out to the Co-owners of Joina City during the year was $970,000 (Group's share  $556,000), a 113% increase from the $455,000 cash paid in the prior year (Group's share $261,000). The increase in cash generated was as a result of improved debtors' management, termination of leases for non-performing tenants and replacement with new tenants, and this was a significant achievement in the operating environment characterised by poor liquidity and high tenant defaults.

 

Telerix Communications (Private) Limited ("Telerix")

Telerix registered 16% growth in revenues compared to the prior year. Gross margins increased from 22% to 31% during the year and operating costs decreased by 16%, resulting in a reduction in the earnings before interest, tax, depreciation and amortization (EBITDA) loss for the year from $2.0 million in the prior year to an EBITDA loss of $1.2 million in the current year. The Group did not recognize its share of losses of Telerix for the year, after the Group's investment in Telerix was reduced to $nil during the year ended 31 December 2012.

 

During the prior year, the Group provided a limited guarantee of $1.5 million to Telerix, for a $2.5 million loan obtained by Telerix's wholly owned subsidiary, Dandemutande Investments (Private) Limited ("Dandemutande") from Central African Building Society ("CABS").

 

The amount owed to CABS as at 31 December 2013 was $2.0 million and this resulted in the Group recognising a liability amounting to $1.19 million and an expense of the same amount, which was disclosed as share of loss of associate in the statement of comprehensive income during the year ended 31 December 2013. As at 31 December 2014, the loan payable to CABS by Dandemutande had reduced to $1.1 million. Consequently, the Group reduced the liability relating to the guarantee by $534,000 and this adjustment was disclosed as part of share of profit of associates in the statement of comprehensive income. 

 

During the year, the Group converted the Telerix debentures and loans receivable into a loan note, which has variable interest rates and a longer repayment period. As a result of the extension of the repayment period, the Group recognised an impairment loss of $2.9 million in the statement of comprehensive income (Note 29.1). The impairment loss recognised in the prior year on the debentures and loans receivable amounted to $261,000.

 

Cash flow for the year

 

The Group recorded an overall increase in cash and cash equivalents of $18.1 million from 31 December 2013. The increase in cash and cash equivalents from prior year was a result of a $26.3 million cash inflow from investing activities that was partially offset by a $3.4 million cash outflow relating to cash utilised in operating activities and a $4.8 million cash outflow that was used in financing activities.

 

The $26.3 million cash inflow from investment activities reflects the Group's investment decisions during the year.  The cash inflow from investing activities was mainly attributable to the following investing activities:

·      Net cash inflow of $4.9 million which was acquired when Masawara gained control of TA Holdings (net of the purchase price of $11.8 million);

·      $26.7 million cash inflow relating to disposal of investment in Masawara Energy (Mauritius) Limited;

·      $3.3 million outflow for loans granted to related parties; and

 

$1.5 million outflow for cash that was placed on fixed deposit longer than 3 months. Cash utilised in financing activities includes $4.0 million dividend paid and $800,000 net repayment of borrowings.

 

Financial position

 

Following the acquisition of TA Holdings, non-current assets increased from $62.9 million as at 31 December 2013 to $154.9 million as at 31 December 2014, while current assets increased by $73.4 million. The Group had cash and cash equivalents of $18.3 million as at 31 December 2014 (31 December 2013: $50,000). Current and non-current liabilities increased by $71.0 million and $40.1 million respectively, primarily as a result of the TA insurance company liabilities acquired and the deferred tax liabilities that were recognised as a result of the acquisition of TA Holdings.

 

The net asset value per share attributable to equity holders of the parent as at 31 December 2014 was $0.69 (31 December 2013: $0.59).

 

Outlook

 

In spite of the difficult operating environment (particularly in Zimbabwe), the Group businesses are all expected to achieve strong growth during the year ending December 2015. Following the acquisition of 100% of TA, the Group has embarked on an in-depth strategic review and restructure of the entire Group portfolio. This review will result in the streamlining of activities, consolidation of duplicated functions and, where appropriate, the engagement of strategic technical partners to improve revenues and optimise the operations.

 

Joina City occupancies are not expected to increase significantly in 2015, as the difficult trading environment and the increased congestion and informal trading in the Harare CBD will affect the ability of the property manager to find suitable tenants. Attention will continue to be placed on retaining good tenants, finding suitable tenants for the vacant office space and on debtors' collections, in order to increase occupancy levels and the cash available for distribution to the Joina City Co-owners. 

 

Although Telerix has continued to register growth in revenues, these have not reached a sufficient scale for the business to be profitable and cash positive. Initiatives are currently underway both to rationalise the cost structure and achieve scale. Masawara Plc will provide an update on these initiatives in due course.

 

Auditors

PricewaterhouseCoopers LLP has expressed its willingness to continue in office and a resolution re-appointing PricewaterhouseCoopers LLP as auditor of the Company and authorising the Directors to determine their remuneration will be proposed at the forthcoming Annual General Meeting.

 

By Order of the Board

Masawara Plc

 

 

 

 

Mr Julian Vezey

29 April 2015

 

STATEMENT OF CORPORATE GOVERNANCE

The Board has largely complied with the guidelines of the Corporate Governance Guidelines for Smaller Quoted Companies, as issued by The Quoted Companies Alliance. We are currently in the process of formulating a Corporate Social Responsibility (CSR) policy.

Values

 

The Board is always guided by the following core values:

·      integrity;

·      transparency;

·      promoting the best interests of the shareholders, employees and other stakeholders of the Company; and

·      compliance with the requirements of the legal and regulatory environment in which the Company operates.

 

Governance Structures

 

Board of Directors

 

Directorate

 

David Suratgar (Chairman)

Francis Daniels

Yvonne Deeney

Maureen Erasmus

Iqbal Rajahbalee

Shingai Mutasa

Julian Vezey

Stephen Folland (Appointed on 3 March 2014)

Jason Harel (Resigned on 13 March 2014) *

 

*   Jason Harel continues to serve the Company as an alternate director to Iqbal Rajahbalee.

 

The Board is the primary governance organ. One of its key functions is to develop, review and monitor the overall strategy and policies of the Group. It, therefore, considers and approves, among other things, all major investment decisions, the key risks to which the business is exposed, and measures to eliminate or minimize the impact of such risks, capital expenditure and the appointment of certain key executives.

 

The Board currently comprises eight non-executive Directors, five of whom are independent. Day to day management is devolved to the Investment Advisor who is charged with consulting the Board on all significant financial and operational matters. The independence of non-executive Directors is assessed and confirmed annually.

 

The Investment Advisor

 

The Investment Advisor, Masawara Zimbabwe (Private) Limited, a subsidiary of the company, advises the Board on investment opportunities, acquisitions and sales, exit strategies and manages the Group's portfolio of investments in Zimbabwe on a day-to-day basis, with a view to achieving the Group's investment objective and strategy.

 

Management Engagement Committee

 

Ms Yvonne Deeney, an independent director, chairs the Management Engagement Committee. The other Committee member is Mr David Suratgar. The Committee monitors, reviews and evaluates the performance of the Investment Advisor. The Committee also determines and agrees with the Board the framework for the remuneration of the employees of the Investment Advisor (including pension rights and compensation payments).

 

Audit Committee

 

The Audit Committee comprises of three non-executive Directors, two of whom are independent.  The Committee members are Mr David Suratgar, Mr Francis Daniels and Mrs Maureen Erasmus. Mrs Maureen Erasmus (an independent director) chairs the Committee. The Committee, amongst other duties, monitors the integrity of the financial statements of the company, and any formal announcements relating to the company's financial performance, reviews significant financial reporting judgements contained in them and reviews the company's internal control and risk management systems. The Committee meets with the external auditor at least twice a year.

 

Co-ownership Committee

 

Dubury Investments (Private) Limited (a sub-subsidiary of Masawara Zimbabwe (Private) Limited) and Cherryfield Investments (Private) Limited (a consortium of pension funds and an insurance company) are Co-owners (joint venturers) in the Joina City building, which is governed by a Co-ownership Agreement. The Co-owners of Joina City formed a Co-ownership Committee, which comprises all their shareholders. The Co-ownership Committee was delegated all the powers to make resolutions for and on behalf of the Co-owners.

 

Mr Shingai Mutasa sits on the Co-ownership Committee as the chairman. The Group relies on the Joina City Co-ownership Committee to deal with all matters of their investment. The powers of the Committee include the power to decide and pass resolutions on all matters which the Co-owners would themselves have power to jointly decide in respect of Joina City. The Co-ownership Committee's primary functions include:

 

·      to consider, review, and where necessary, approve capital expenditure; and

·      to review and monitor property management of Joina City.

 

The Committee meets quarterly and consists of six members, five of whom are representatives of the Co-owners, and the chairman of the Committee, Mr Shingai Mutasa.

 

Governance Processes

 

The Board of Directors meets at least four times a year or as often as the circumstances may determine. In addition to the Board members, professional advisors on corporate transactions and senior employees of the Investment Advisor are requested to attend as required. The Group's shareholders meet at least once every year, at the Annual General Meeting. The external auditor of the Group has unlimited access to the Board.

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RELATION TO THE FINANCIAL STATEMENTS

 

The directors are responsible for preparing the financial statements in accordance with applicable laws and International Financial Reporting Standards ("IFRS") as adopted by the European Union.

 

Companies (Jersey) Law 1991 requires the directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Group and the profit and loss for that year.

  
In preparing those financial statements the directors should:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and estimates that are reasonable and prudent;

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue the business; and

·      state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements.

  
The directors confirm they have complied with all the above requirements in preparing the financial statements.
 
The directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

 
So far as the Directors are aware, there is no relevant audit information of which the Group's auditors are unaware, and each Director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the Group's auditors are aware of that information.
 

 

 

Consolidated statement of comprehensive income for the year ended 31 December 2014

 



2014

2013


Notes

 US$ '000

 US$ '000

Continuing operations




INCOME




Gross insurance premium revenue

11.1

6,253

-

Insurance premium ceded to reinsurers on insurance contracts

11.2

(1,927)

-

Net insurance premium revenue


4,326

-

Fees and commission income

12

2,073

-

Hotel revenue

13

1,147

-

Rental income from investment properties

27

2,029

1,821

Net total revenue


9,575

1,821

Gain on bargain purchase of TA Holdings Limited

8

9,973

-

Investment income

14

1,905

1,100

Net realised and unrealised gains/(losses)

15

4,933

(1,228)

Other operating income

16

515

-

Total income


26,901

1,693





EXPENSES




Insurance claims and loss adjustment expense


(3,455)

-

Insurance claims and loss adjustment recovered from insurers


2,603

-

Net insurance claims

17

(852)

-

Expenses for the acquisition of insurance contracts

18

(656)

-

Hotel cost of sales

19

(183)

-

Property expenses

27

(1,655)

(1,663)

Operating and administrative expenses

20

(10,259)

(5,208)

Share of profit/(loss) of joint venture - Telerix Communications (Private) Limited

28.3

534

(1,194)

Total net insurance claims and operating expenses


(13,071)

(8,065)





Finance costs

21

(758)

(156)





Profit before share of profit of associates and tax


13,072

(6,528)

Share of profit of other associates

28

780

75

Share of profit/(loss) of associate - TA Holdings Limited

28.1.1

2,542

(3,230)

Profit/(loss) before tax from continuing operations


16,394

(9,683)

Income tax (expense)/credit

22

(325)

91

Profit/(loss) for the year from continuing operations


16,069

(9,592)





Discontinued operations




Share of loss of discontinued operations


-

(1,181)

Profit/(loss) for the year


16,069

(10,773)





Profit/(loss) for the year attributable to:




Equity holders of parent


15,432

(9,686)

Non-controlling interests


637

(1,087)

Profit/(loss) for the year


16,069

(10,773)





 

 



2014

2013



 US$

 US$





Earnings per share:

23



Basic and diluted, on profit/(loss) for the year attributable to ordinary

equity holders of parent

0.13

(0.08)

Basic and diluted, on profit/(loss) from continuing operations for the year

attributable to ordinary equity holders of the parent

0. 13

(0.07)

 



2014

2013


Notes

 US$ '000

 US$ '000





Profit/(loss) for the year


16,069

(10,773)





Other comprehensive income/(loss), net tax:                           








Items that will not be reclassified to profit or loss




Share of other comprehensive income of associate

28.1.1

350

75



350

75





Items that may be subsequently reclassified to profit or loss




Share of other comprehensive income of associate

28.1.1

(993)

(1,040)

Exchange differences on translation of foreign operations

37

424

-

Change in value of available-for-sale financial assets

37

449

-



(120)

(1,040)





Total comprehensive income/(loss)


16,299

(11,738)





Total comprehensive income/(loss) attributable to:




Equity holders of parent

     

15,662

(10,651)

Non-controlling interests


637

(1,087)

Total comprehensive income/(loss) for the year


16,299

(11,738)

 

All components of other comprehensive income disclosed in the statement of comprehensive income did not have any tax implications.

 

 

Consolidated statement of financial position as at 31 December 2014                                                     



Notes

2014

2013




US$ '000 

US$ '000 

ASSETS





Property, plant and equipment


25

29,976

524

Intangible assets


26

4,675

-

Investment properties


27

46,685

30,947

Investment in associates and joint venture


28

13,261

19,880

Financial assets


29

59,255

11,571

Deferred tax asset


22.2

1,080

-

Total non-current assets



154,932

62,922

Inventory


30

308

-

Reinsurance assets


41.2

23,807

-

Insurance receivables


31

9,250

-

Trade and other receivables


32

22,646

892

Cash and cash equivalents


33

18,300

50

Total current assets



74,311

942

Non-current assets classified as held for sale


34

575

34,791

Total assets



229,818

98,655

EQUITY





Share capital


35

1,235

1,235

Share premium


35

80,110

84,110

Treasury shares


35

(333)

(333)

Group restructuring reserve


36

(9,283)

(9,283)

Other capital reserves


37

35

(156)

Non-distributable reserve



(695)

(695)

Revaluation reserve


38

-

10,045

Retained earnings/(accumulated loss)



13,547

(12,280)

Equity attributable to equity holders of  the parent


84,616

72,643

Non-controlling interest


48

18,897

1,287

Total equity



103,513

73,930

LIABILITIES





Financial liabilities


39

5,444

1,882

Deferred tax liabilities


22.3

7,506

1,365

Investment contracts


41.4

30,372

-

Total non-current liabilities



43,322

3,247

Financial liabilities


39

9,427

6,675

Insurance contract liabilities


41.5

48,441

-

Deferred income


40

1,912

2,600

Income tax liability



114

8

Insurance payables


42

2,688

-

Provisions


43

1,824

-

Trade and other payables


44

18,577

2,664

Total current liabilities



82,983

11,947

Non-current liabilities classified as held for sale


7

-

9,531

Total liabilities



126,305

24,725

Total equity and liabilities



229,818

98,655


Consolidated statement of changes in equity for the year ended 31 December 2014

 



Attributable to the equity holders of the parent







US$ '000



US$'000


Share

Share

Treasury

Group

Other

Non

Revaluation

(Accumulated

Total

Non-controlling

Total

Capital

Premium

Shares

Restructuring

Capital

Distributable

Reserve

Loss)/Retained


Interest

Equity




Reserve

Reserves

Reserves


Earnings





Note 35

Note 35

Note 35

Note 36

Note 37

Note 3.17.4

Note 38

















At 1 January 2013

1,235

84,110

(333)

(9,283)

(103)

(695)

9,863

(2,594)

82,200

1,154

83,354

Loss for the year

-

-

-

-

-

-

-

(9,686)

(9,686)

(1,087)

(10,773)

Other comprehensive loss

-

-

-

-

(1,147)

-

182

-

(965)

-

(965)

Total comprehensive loss

-

-

-

-

(1,147)

-

182

(9,686)

(10,651)

(1,087)

(11,738)

Share based payment transactions

-

-

-

-

734

-

-

-

734

-

734

Movements in other reserves of associate

-

-

-

-

360

-

-

-

360

-

360

Acquisition of subsidiary

-

-

-

-

-

-

-

-

-

1,220

1,220

At 31 December 2013

1,235

84,110

(333)

(9,283)

(156)

(695)

10,045

(12,280)

72,643

1,287

73,930

Profit for the year

-

-

-

-

-

-

-

15,432

15,432

637

16,069

Other comprehensive loss

-

-

-

-

(993)

-

350

-

(643)

-

(643)

Exchange differences on translation of foreign operations

-

-

-

-

424

-

-

-

424

-

424

Net gain on available for sale investments

-

-

-

-

449

-

-

-

449

-

449

Total comprehensive loss

-

-

-

-

(120)

-

350

15,432

15,662

637

16,299

Dividend paid

-

(4,000)

-

-


-

-

-

(4,000)

-

(4,000)

Share based payment transactions

-

-

-

-

311

-

-

-

311

-

311

Loss of control of subsidiary

-

-

-

-

-

-

-

-

-

(909)

(909)

Acquisition of subsidiary  (Note 8)

-

-

-

-

-

-

-

-

-

17,882

17,882

Transfer to retained earnings

-

-

-

-

-

-

(10,395)

10,395

-

-

-

At 31 December 2014

1,235

80,110

(333)

(9,283)

35

(695)

-

13,547

84,616

18,897

103,513

 


                                                                                                                                                                                                                                                 

Consolidated statement of cash flows for the year ended 31 December 2014








 2014


2013


Notes

US$ '000


US$ '000






CASH FLOWS FROM OPERATING ACTIVITIES





Cash generated from/(utilised in) operations

45

(3,607)


(4,063)

Finance income received


572


288

Finance costs paid


(479)


(46)

Dividend received


440


-

Income tax paid


(298)


(7)

Net cash flows used in operating activities


(3,372)


(3,828)

 

CASH FLOWS FROM INVESTING ACTIVITIES





Proceeds on sale of interest in subsidiary

7

400


-

Acquisition of subsidiary, net of cash acquired

8

4,686


-

Purchase of property, plant and equipment

24

(319)


(14)

Proceeds on disposal of purchase of property, plant and equipment


55


-

Acquisition of additional shares in an associate

28.1

-


(320)

Proceeds on disposal of joint venture

34

26,725


2,600

Fixed deposit

29.1

(1,500)


-

Loans granted to related parties *


(3,314)


(1,725)

Proceeds from repayment of loans granted to related parties


46


491

Deferred consideration payment to Minet Group

39

(354)


-

Purchase of financial instruments


(5,585)


-

Proceeds from disposal of financial instruments

29.6

5,438


-

Net cash flows from investing activities


26,278


1,032

 

CASH FLOWS FROM FINANCING ACTIVITIES





Proceeds from borrowings


500


759

Repayment of borrowings


(1,259)


-

Dividend paid


(4,000)


-

Net cash flows (used in)/from financing activities


(4,759)


759






Net decrease in cash and cash equivalents


18,147


(2,037)

Net effect of exchange rate movements on cash and cash equivalents


103


-

Cash and cash equivalents at 1 January


50


2,087

Cash and cash equivalents at 31 December


18,300


50

 

* Loans granted to related parties is predominantly made up of loan notes amounting to $3,301,000 that were granted to Telerix Communications (Private) Limited during the year ended 31 December 2014, refer to Note 29.1.

 

The following notes are an integral part of these consolidated financial statements.

 

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

 

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), TA Holdings 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). During the year, the Company disposed of its investment in Zuva Petroleum (Private) Limited (an importer and distributor of petroleum products in Zimbabwe), refer to Note 34 for further information.

 

The Group financial statements consolidate those of the Company, its subsidiaries and the Group's interest in associates (together referred to as "the Group"). The financial statements of the Group for the year ended 31 December 2014 were authorized for issue in accordance with a resolution of the Directors on 29 April 2015.

 

2.            Significant accounting policies

 

                Basis of preparation

The consolidated financial information for Masawara plc and its subsidiaries (together 'the Group') have been derived from the audited consolidated financial statements of the Group for the year ended 31 December 2014 (the 'financial statements'). The auditors have reported on the 2014 financial statements and their reports were unqualified.

 

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

 

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

 

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 dollar ($ '000), except when otherwise indicated.

 

Going concern

Management prepared cash flow forecasts indicating there is adequate operating cash for the period to 30 June 2016. In assessing the ability 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 to continue as a going concern. The Directors reviewed the cash flow forecasts prepared by management when assessing the ability of the Group to continue operating 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 these financial statements and accordingly, the financial statements have been prepared on the going concern basis.

 

3             Summary of significant accounting policies

 

3.1          Consolidation

 

3.1.1       Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

 

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquire and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.

 

Acquisition-related costs are expensed as incurred.

 

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.

 

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

 

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Where necessary, amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies.

 

3.1.2       Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

 

3.1.3       Disposal of subsidiaries

When the group ceases to have control any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

 

3.1.4       Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition. The Group's investment in associates includes goodwill identified on acquisition. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.

 

The Group's share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

 

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to 'share of profit/(loss) of associates in the income statement. Gains and losses resulting from upstream and downstream transactions between the group and its associate are recognised in the group's financial statements only to the extent of unrelated investor's interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

Dilution gains and losses arising in investments in associates are recognised in the income statement.

 

3.1.5       Joint arrangements

The Group applies IFRS 11 to all joint arrangements. Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. Joint ventures are accounted for using the equity method. Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group's share of the post-acquisition profits or losses and movements in other comprehensive income.

 

When the Group's share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the group's net investment in the joint ventures), the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

 

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group's interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

3.2          Segment reporting

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Investment Advisor's executive committee that makes strategic decisions.

 

3.3          Foreign currency translation

 

3.3.1       Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The consolidated financial statements are presented in United States of America dollars, which is the functional and presentation currency of the Group.

 

3.3.2       Transactions and balances

Foreign currency transactions are translated into the Group's functional currency at exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates are recognised in the income statement (except when recognised in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges).

 

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within 'other operating income'. All other foreign exchange gains and losses are presented in the income statement within 'other operating revenue' or 'other operating expenses'.

 

Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security, and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in the income statement; other changes in carrying amount are recognised in 'other comprehensive income'.

 

Translation differences on financial assets and liabilities held at fair value through profit or loss are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available-for-sale financial assets are included in 'other comprehensive income'

 

3.3.3       Group companies

The results and financial position of all the group entities (none of which have the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

 

Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

·      Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case, income and expenses are translated at the dates of the transactions); and

·      All resulting exchange differences are recognised in 'Other comprehensive income'.

 

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders' equity.

 

On a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of cumulative amount of exchange differences are re-attributed to non-controlling interests in that foreign operation and are not recognised in the income statement. In any other partial disposals, the proportionate share of the cumulative amount of the exchange differences is reclassified to the consolidated income statement.

 

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as the foreign entity's assets and liabilities and are translated at the closing rate.

 

3.4          Property, plant and equipment

 

Property, plant and equipment, including owner-occupied property, is initially stated at cost. Costs include all expenditure that is directly attributable to the acquisition of an asset and bringing it to a working condition for its intended use, including import duties and non-refundable purchases taxes, but excluding trade discounts and rebates. Maintenance and repairs expenditure, which neither adds to the value of property and equipment nor significantly prolongs its expected useful life, is recognised directly in the income statement.

 

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

 

For subsequent measurement the Group uses the revaluation model i.e. fair value at the date of revaluation less subsequent accumulated depreciation and subsequent accumulated impairment losses in the valuation of freehold land and buildings. All other classes of property, plant and equipment are measured using the cost model. Valuations of freehold land and buildings are performed annually by external independent appraisers to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.

 

Any revaluation surplus is recognised in other comprehensive income and accumulated in the asset revaluation reserve in equity, except to the extent that it reverses a revaluation decrease on the same asset previously recognised in the income statement, in which case the increase is recognised in the income statement. A revaluation deficit is recognised in the income statement, except to the extent that it offsets an existing surplus on the same asset recognised in the revaluation reserve.

 

Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.

 

Land is not depreciated. Depreciation is provided for on a straight-line basis over the useful lives of the following classes of assets:

·      Buildings: over 40 - 50 years

·      Machinery and vehicles: 3 - 10 years

·      Furniture, fittings and other: 3 - 10 years

 

The assets' residual values, and useful lives and method of depreciation are reviewed and adjusted if appropriate at each financial year end and adjusted prospectively, if appropriate. Impairment reviews are performed where there are indicators that the carrying value may not be recoverable. Impairment losses are recognised in the income statement as an expense.

 

An item of property and equipment is derecognised upon disposal or where no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognised.

 

3.5          Investment properties

 

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the statement of comprehensive income in the period in which they arise. Fair values are evaluated annually by an accredited external, independent valuer, applying a valuation model recommended by the International Valuation Standards Committee.

 

Investment properties are derecognised where either they have been disposed of, or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal.

 

Any gains or losses on the retirement or disposal of an investment property are recognised in the statement of comprehensive income in the year of retirement or disposal. Gains or losses on the disposal of investment property are determined as the difference between net disposal proceeds and the carrying value of the asset in the previous full period financial statements.

 

Transfers are made to investment property only when there is a change in use evidenced by the end of owner-occupation or commencement of development with a view to sell. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use.

 

If owner occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of the change in use.

 

3.6          Revaluation of property, plant and equipment and fair value of investment properties

 

In assessing the carrying amounts of property, plant and equipment and investment properties, management considers the condition of the assets and their life span on an item by item basis and by placing fair market values that are obtainable from the sale of assets in a similar condition. Valuations are performed with sufficient regularity to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.

 

Increases in the carrying amount arising on revaluation of land and buildings are credited to other comprehensive income and shown as other reserves in shareholders' equity. Decreases that offset previous increases of the same asset are charged in other comprehensive income and debited against revaluation surplus directly in equity; all other decreases are charged to the income statement. When revalued assets are sold, the amounts included in revaluation surplus are transferred to retained earnings.

 

Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the year in which they arise.

 

3.7          Intangible assets

 

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the income statement in the year in which the expenditure is incurred.

 

The useful lives of intangible assets are assessed to be either finite or indefinite.

 

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in operating expenses.

 

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

 

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

 

Subsequent to initial recognition, the intangible asset is carried at cost less accumulated amortisation and accumulated impairment losses.

 

An impairment review is performed whenever there is an indication of impairment. When the recoverable amount is less than the carrying value, an impairment loss is recognised in the income statement.

 

3.7.1       Goodwill

Goodwill arises on the acquisition of subsidiaries, associates and joint arrangements; it represents the excess of the consideration transferred over Group's interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.

 

If the total of consideration transferred, non-controlling interest recognised and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognised directly in the income statement.

 

3.7.2       Computer software

Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:

·      It is technically feasible to complete the software product so that it will be available for use;

·      Management intends to complete the software product and use or sell it;

·      There is an ability to use or sell the software product;

·      It can be demonstrated how the software product will generate probable future economic benefits;

·      Adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and

·      The expenditure attributable to the software product during its development can be reliably measured.

 

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of directly attributable overheads.

 

Computer software costs recognised as assets are amortised over their useful lives, which does not exceed five years.

 

3.7.3       Deferred acquisition costs ("DAC")

Those direct and indirect costs incurred during the financial period arising from the writing or renewing of short-term insurance contracts, are deferred to the extent that these costs are recoverable out of unearned premiums. All other acquisition costs are recognised as an expense when incurred.

 

Subsequent to initial recognition, DAC for short-term insurance contracts are amortised over the terms of the insurance policies as premiums are earned. The reinsurers' share of deferred acquisition costs is amortised in the same manner as the underlying asset amortisation is recorded in the income statement.

 

Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period and are treated as a change in an accounting estimate.

 

An impairment review is performed at each reporting date or more frequently when an indication of impairment arises. When the recoverable amount is less than the carrying value, an impairment loss is recognised in the income statement. DAC are also considered in the liability adequacy test for each reporting period. DAC are derecognised when the related contracts are either settled or disposed of.

 

3.7.4       Reinsurance commissions

Commissions receivable on outwards reinsurance contracts are deferred and amortised on a straight line basis over the term of the reinsurance contract.

 

3.7.5       Brands

The cost of brands acquired in a business combination is their fair value at the date of acquisition. Brands are recognised as an intangible asset where the brand has a long-term value. Acquired brands are only recognised where title is clear or the brand could be sold separately from the rest of the business and the earnings attributable to it are separately identifiable.

 

An impairment review is performed at each reporting date or more frequently when an indication of impairment arises. When the recoverable amount is less than the carrying value, an impairment loss is recognised in the income statement.

 

3.8          Impairment of non-financial assets

 

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to dispose and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

 

Impairment losses of continuing operations are recognised in the statement of comprehensive income in those expense categories consistent with the function of the impaired asset.

 

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of recoverable amount. A previous impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of comprehensive income unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.

 

3.9          Non-current assets held for sale and discontinued operations

 

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to dispose. The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

 

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the income statement. Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.

 

3.10       Financial assets

 

The Group classifies its financial assets into the following categories: at fair value through profit or loss, loans and receivables, held to maturity and available for sale. The classification is determined by management at initial recognition and depends on the purpose for which the investments were acquired or originated.

 

3.10.1     Initial recognition

Financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the income statement.

 

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

 

3.10.2     Classification and measurement

 

3.10.2.1 Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets held for trading and those designated at fair value through profit or loss at inception.

 

A financial asset is classified into the 'financial assets at fair value through profit or loss' category at inception if acquired principally for the purpose of selling in the short term, if it forms part of a portfolio of financial assets in which there is evidence of short-term profit-taking, or if so designated by management.

 

This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. For investments designated as at fair value through profit or loss, either of the two following criteria must be met:

·      the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on a different basis

·      the assets and liabilities are part of a group of financial assets, financial liabilities, or both, which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.


These investments are initially recorded at fair value. Subsequent to initial recognition, they are remeasured at fair value. Changes in fair value are recorded in 'net fair value gains and losses', determined based on the change in quoted market prices in active markets for identical financial assets.

 

Interest is accrued and presented in 'Investment income' or 'Finance cost', respectively, using the effective interest rate ("EIR"). Dividend income is recorded in 'Investment income' when the right to the payment has been established.

 

The Group evaluates its financial assets at fair value through profit and loss (held for trading) whether the intent to sell them in the near term is still appropriate. When the Group is unable to trade these financial assets due to inactive markets and management's intent to sell them in the foreseeable future significantly changes, the Group may elect to reclassify these financial assets in rare circumstances. The reclassification to loans and receivables, available-for-sale or held to maturity depends on the nature of the asset. This evaluation does not affect any financial assets designated at fair value through profit or loss using the fair value option at designation.


Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those that the Group intends to sell in the short term or that it has designated as at fair value through profit or loss or available for sale. Receivables arising from insurance contracts are classified in this category and are reviewed for impairment as part of the impairment review of loans and receivables.

 

After initial measurement, loans and receivables are measured at amortised cost, using the EIR, less allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. The EIR amortisation is included in 'finance income' in the income statement. Gains and losses are recognised in the income statement when the investments are derecognised or impaired, as well as through the amortisation process.

 

3.10.2.3 Held-to-maturity financial assets

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group's management has the positive intention and ability to hold to maturity, other than:

·      those that the Group upon initial recognition designates as at fair value through profit or loss;

·      those that the Group designates as available for sale; and

·      those that meet the definition of loans and receivables.

 

After initial measurement, held to maturity financial assets are measured at amortised cost, using the EIR, less impairment. The EIR amortisation is included in 'investment income' in the consolidated income statement. Gains and losses are recognised in the income statement when the investments are derecognised or impaired, as well as through the amortisation process.

 

3.10.2.4 Available-for-sale financial assets

Available-for-sale financial assets are financial assets that are either designated in this category because they are intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices; or that are not classified as loans and receivables, held to maturity investments or financial assets at fair value through profit or loss.

 

After initial measurement, available-for-sale financial assets are subsequently measured at fair value, with unrealised gains or losses recognised in other comprehensive income in the available-for-sale reserve (equity). The unrealised gains or losses are determined based on the change in inputs other than quoted prices that are observable for the financial assets either directly or indirectly.

 

Where the insurer holds more than one investment in the same security, they are deemed to be disposed of on a first-in first-out basis. Interest earned whilst holding available-for-sale investments is reported as interest income using the EIR.

 

Dividends earned whilst holding available-for-sale investments are recognised in the income statement as 'Investment income' when the right of the payment has been established.

 

When the asset is derecognised the cumulative gain or loss is recognised in other operating income, or determined to be impaired, or the cumulative loss is recognised in the income statement in finance costs and removed from the available-for-sale reserve.

 

The Group evaluates its available-for-sale financial assets to determine whether the ability and intention to sell them in the near term would still be appropriate. In the case where the Group is unable to trade these financial assets due to inactive markets and management's intention significantly changes to do so in the foreseeable future, the Group may elect to reclassify these financial assets in rare circumstances.

 

Reclassification to loans and receivables is permitted when the financial asset meets the definition of loans and receivables and management has the intention and ability to hold these assets for the foreseeable future or until maturity. The reclassification to held-to-maturity is permitted only when the entity has the ability and intention to hold the financial asset until maturity.

 

For a financial asset reclassified out of the available-for-sale category, any previous gain or loss on that asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortised cost and the expected cash flows is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired then the amount recorded in equity is reclassified to the consolidated income statement.

 

3.10.3     De-recognition of financial assets

A financial asset (or, when applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

·      the rights to receive cash flows from the asset have expired, or;

·      the Group retains the right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either:

·      the Group has transferred substantially all the risks and rewards of the asset, or;

·      the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

 

When the Group has transferred its right to receive cash flows from an asset or has entered into a pass through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group's continuing involvement in the asset.

 

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

 

3.10.4     Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred 'loss event') and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

 

Objective evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

 

3.10.4.1 Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

 

If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the carrying amount of the asset and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

 

The carrying amount of the asset is reduced directly and the amount of the loss is recognised in the net realized and unrealized gains line item on the consolidated income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of investment income in the consolidated income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group.

 

If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the 'other operating revenue' in the income statement.

 

Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

 

3.10.4.2 Available-for-sale financial investments

For available-for-sale financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.

 

In the case of equity investments classified as available-for-sale, objective evidence would include a 'significant or prolonged' decline in the fair value of the investment below its cost. 'Significant' is to be evaluated against the original cost of the investment and 'prolonged' against the period in which the fair value has been below its original cost.

 

Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement - is removed from other comprehensive income and recognised in the income statement. Impairment losses on equity investments are not reversed through the income statement; increases in their fair value after impairment are recognised directly in other comprehensive income.

 

In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the consolidated income statement.

 

Future interest income continues to be accrued based on the reduced carrying amount of the asset and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of investment income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the consolidated income statement, the impairment loss is reversed through the consolidated income statement.

 

3.10.5   Offsetting of financial instruments

 

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Income and expense will not be offset in the consolidated income statement unless required or permitted by any accounting standard or interpretation, as specifically disclosed in the accounting policies of the Group.

 

3.10.6   Fair value of financial instruments

 

The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market bid prices for assets and offer prices for liabilities, at the close of business on the reporting date, without any deduction for transaction costs.

 

For units in unit trusts and shares in open ended investment companies, fair value is determined by reference to published bid values in an active market.

 

For all other financial instruments not traded in an active market, the fair value is determined by using appropriate valuation techniques. Valuation techniques include the discounted cash flow method, comparison to similar instruments for which market observable prices exist, options pricing models, credit models and other relevant valuation models.

 

Certain financial instruments are recorded at fair value using valuation techniques because current market transactions or observable market data are not available. Their fair value is determined using a valuation model that has been tested against prices or inputs to actual market transactions and using the Group's best estimate of the most appropriate model assumptions. Models are adjusted to reflect the spread for bid and ask prices to reflect costs to close out positions, counterparty credit and liquidity spread and limitations in the models. Also, profit or loss calculated when such financial instruments are first recorded ('Day 1' profit or loss) is deferred and recognised only when the inputs become observable or on derecognition of the instrument.

 

For discounted cash flow techniques, estimated future cash flows are based on management's best estimates and the discount rate used is a market-related rate for a similar instrument. The use of different pricing models and assumptions could produce materially different estimates of fair values.

 

The fair value of floating rate and overnight deposits with credit institutions is their carrying value. The carrying value is the cost of the deposit and accrued interest. The fair value of fixed interest bearing deposits is estimated using discounted cash flow techniques. Expected cash flows are discounted at current market rates for similar instruments at the reporting date.

 

If the fair value cannot be measured reliably, these financial instruments are measured at cost, being the fair value of the consideration paid for the acquisition of the investment or the amount received on issuing the financial liability. All transaction costs directly attributable to the acquisition are also included in the cost of the investment.

 

3.11       Financial liabilities

 

The Group classifies its financial liabilities into the following categories: at fair value through profit or loss and financial liabilities at amortised cost. The classification is determined by management at initial recognition and depends on the purpose for which the liabilities were acquired or originated.

 

A financial instrument is classified as debt if it has a contractual obligation to:

·      deliver cash or another financial asset to another entity, or;

·      exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the Group.

 

If the Group does not have an unconditional right to avoid delivering cash or another financial asset to settle its contractual obligation, the obligation meets the definition of a financial liability.

 

3.11.1     Initial recognition

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, less directly attributable transaction costs.

 

The Group's financial liabilities include investment contracts, trade and other payables, borrowings and insurance payables.

 

3.11.2     Classification and subsequent measurement

The subsequent measurement of financial liabilities depends on their classification, as follows:

 

3.11.2.1 Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss includes financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

 

Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

 

Gains or losses on designated or held for trading liabilities are recognised in fair value gains and losses in the consolidated income statement.

 

3.11.2.2 Financial liabilities at amortised cost

After initial recognition, insurance payables, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective interest rate method (EIR) amortisation process.

 

Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. The EIR amortisation is included in finance cost in the consolidated income statement.

Fees paid on the establishment of loan facilities are recognised as transaction cost of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

 

Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. The dividends on these preference shares are recognised in the consolidated income statement as finance costs.

 

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.

 

3.11.3   Derecognition of financial liabilities

 

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

 

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

 

3.12       Insurance contracts and investment contracts

 

3.12.1     Classification

   Insurance and investment contracts are classified into four categories, depending on the duration of or type of       insurance risks or investment benefits and whether or not the terms and conditions are fixed, namely, short-term    insurance contracts, long- term insurance contracts, investment contracts with discretionary participation features (DPF) and investment contracts without DPF.

A discretionary participation feature is a contractual right to receive additional benefits, as a  supplement to the guaranteed benefits of the insurance or investment contract. The amount and timing of these benefits are contractually at the discretion of the issuer. The benefits are contractually dependent on the performance of a specified pool of contracts or investment  returns on a specified pool of assets or the profit or loss of the company.

The Group issues contracts that transfer insurance risk or financial risk or both. Insurance contracts are when the Group (the insurer) has accepted significant insurance risk from another party (the policyholder) by agreeing to   compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. As a general guideline, the Group determines whether it has significant insurance risk, by comparing benefits paid with benefits payable if the insured event did not occur.

Investment contracts are those contracts that transfer financial risk and no significant insurance risk.  Financial risk is the risk of a possible future change in one or more of a specified interest rate, financial instrument   price, commodity price, foreign exchange rate, index of price or rates, credit rating or credit index or other variable,  provided in the case of a non-financial variable that the variable is not specific to a party to the contract.

Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder of its  lifetime, even if the insurance risk reduces significantly during this period, unless all rights and obligations are extinguished or expire. Investment contracts can, however, be reclassified as insurance contracts after inception if the terms are amended to include significant insurance risk.

 

3.12.2     Short-term insurance contracts

                The insurance products offered by the Group include motor, household, commercial and business interruption     insurance.

    For all these contracts, premiums are recognised as revenue (earned premiums) proportionally over the period of  coverage. The portion of premium received on in-force contracts that relates to unexpired risks at the statement of  financial position date is reported as the unearned premium liability. Premiums are shown before deduction of  commission and are gross of any taxes or duties levied on premiums.

Claims and loss adjustment expenses are charged to income as incurred based on the estimated liability for compensation owed to contract holders or third parties' damages by the contract holders. They include direct and indirect claims settlement costs and arise from events that have occurred up to the end of the reporting period even if they have not yet been reported to the Group.

The Group does not discount its liabilities for unpaid claims other than for disability claims. Liabilities for unpaid claims are estimated using the input of assessments for individual cases reported to the Group and statistical analyses for the claims incurred but not reported, and to estimate the expected ultimate cost of more complex claims that may be affected by external factors (such as court decisions).

 

3.12.3     Long-term insurance contracts with fixed and guaranteed terms

  These contracts insure events associated with human life (for example, death or survival) over a long duration.     Premiums are recognised as revenue when they become payable by the contract holder. Premiums are shown before deduction of commission.

 

                Benefits are recorded as an expense when they are incurred.

            

  Life insurance liabilities are recognised when contracts are entered into and premiums are charged. These liabilities are measured by using the net premium method. The liability is determined as the sum of the discounted value of  the expected future benefits, claims handling and policy administration expenses, policyholder options and guarantees and investment income from assets backing such liabilities, which are directly related to the contract, less the discounted value of the expected theoretical premiums that would be required to meet the future cash outflows based on the valuation assumptions used (valuation premiums). The liability is based on current assumptions that may include a margin for risk and adverse deviation. A separate reserve for longevity may be established and included in the measurement of the liability.

Furthermore, the liability for life insurance contracts comprises the provision for unearned premiums and premium deficiency, as well as for claims outstanding, which includes an estimate of the incurred claims that have not yet been reported to the Group. Adjustments to the liabilities at each reporting date are recorded in the income statement. Profits originated from margins of adverse deviations on run-off contracts are recognised in the income statement over the life of the contract, whereas losses are fully recognised in the consolidated income statement during the first year of run-off.

Where insurance contracts have a single premium or a limited number of premium payments due over a  significantly shorter period than the period during which benefits are provided, the excess of the premiums payable over the valuation premiums is deferred and recognised as income in line with the decrease of unexpired insurance   risk of the contracts in force or, for annuities in force, in line with the decrease of the amount of future benefits expected to be paid.

 

                The liabilities are recalculated at each end of the reporting period using the assumptions established at inception of  the contracts.

The liability is derecognised when the contract expires, is discharged or is cancelled. At each reporting date, an     assessment is made of whether the recognised life insurance liabilities are adequate, net of related PVIF (Present value of in-force business) by using an existing liability adequacy test. The liability value is adjusted to the extent that it is insufficient to meet future benefits and expenses (refer to note 3.12.6 for liability adequacy tests).

In performing the adequacy test, current best estimates of future contractual cash flows, including related cash flows such as claims handling and policy administration expenses, policyholder options and guarantees, as well as investment income from assets backing such liabilities, are used. A number of valuation methods are applied,  including discounted cash flows, option pricing models and stochastic modelling.

 

3.12.4     Investment contracts with DPF

The liability for these contracts is established in the same way as for the long-term insurance contracts with fixed and guaranteed terms (see above). Revenue is also recognised in the same way. Where the resulting liability is lower than the sum of the amortised cost of the guaranteed element of the contract and the intrinsic value of the surrender  option embedded in the contract, it is adjusted and any shortfall is recognised immediately in the income statement.       

 

The group does not recognise the guaranteed element of the investment contract separately from the discretionary                 participation feature (DPF) and therefore classifies an entire investment contract as a liability.

 

3.12.5     Investment contracts without DPF

  The Group issues investment contracts without fixed terms (unit-linked) and investment contracts with fixed and guaranteed terms (fixed interest rate).

Investment contracts without fixed terms are financial liabilities whose fair value is dependent on the fair value of  underlying financial assets, derivatives and/or investment property (these contracts are also known as unit-linked investment contracts) and are designated at inception as at fair value through profit or loss. The Group designates these investment contracts to be measured at fair value through profit or loss because it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as 'an accounting mismatch') that     would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.

 

 The best evidence of the fair value of these financial liabilities at initial recognition is the transaction price (that is, the fair value received) unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets. When such evidence exists, the Group recognises profit on day 1. The Group has not  recognised any profit on initial measurement of these investment contracts because the difference is attributed to the pre-payment liability recognised for the future investment management services that the Group will render to each contract holder. 

The Group's main valuation techniques incorporate all factors that market participants would consider and make maximum use of observable market data. The fair value of financial liabilities for investment contracts without fixed terms is determined using the current unit values in which the contractual benefits are denominated. These unit values reflect the fair values of the financial assets contained within the Group's unitised investment funds linked to the financial liability. The fair value of the financial liabilities is obtained by multiplying the number of units attributed to each contract holder at the end of the reporting period by the unit value for the same date.

For investment contracts with fixed and guaranteed terms, the amortised cost basis is used. In this case, the liability  is initially measured at its fair value less transaction costs that are incremental and directly attributable to the acquisition or issue of the contract. Subsequent measurement of investment contracts at amortised cost uses the effective interest method.

The Group re-estimates at each reporting date the expected future cash flows and recalculates the carrying amount of the financial liability by calculating the present value of estimated future cash flows using the financial liability's original effective interest rate. Any adjustment is immediately recognised as income or expense in the consolidated  income statement.

 

3.12.6     Liability adequacy test

At the end of the reporting period, liability adequacy tests are performed to ensure the adequacy of the contract     liabilities net of related DAC assets. In performing these tests, current best estimates of future contractual cash flows    and claims handling and administration expenses, as well as investment income from the assets backing such     liabilities, are used. Any deficiency is immediately charged to profit or loss initially by writing off DAC and by  subsequently establishing a provision for losses arising from liability adequacy tests (the unexpired risk provision).

As set out in Note 3.12.3 long-term insurance contracts with fixed terms are measured based on assumptions set out at the inception of the contract. When the liability adequacy test requires the adoption of new best estimate assumptions, such assumptions (without margins for adverse deviation) are used for the subsequent measurement  of these liabilities.

 

3.12.7     Reinsurance contracts held

Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group and that meet the classification requirements for insurance contracts in Note 3.12.1 are classified as reinsurance contracts held. Contracts that do not meet these classification requirements are classified as financial assets. Reinsurance assets represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurer's policies and are in accordance with the related reinsurance contract.

 

Reinsurance assets are reviewed for impairment at each reporting date, or more frequently, when an indication of impairment arises during the reporting year. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the reinsurance asset that the Group may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurer. The impairment loss is recorded in the consolidated income statement.

 Gains or losses on buying reinsurance are recognised in the consolidated income statement immediately at the date of purchase and are not amortised.

                Ceded reinsurance arrangements do not relieve the Group from its obligations to policyholders.

          

 The Group also assumes reinsurance risk in the normal course of business for life insurance and non-life insurance  contracts where applicable. Premiums and claims on assumed reinsurance are recognised as revenue or expenses in  the same manner as they would be if the reinsurance were considered direct business, taking into account the product classification of the reinsured business.

       

Reinsurance liabilities represent balances due to reinsurance companies. Amounts payable are estimated in a manner consistent with the related reinsurance contract. 

Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance.

               

Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expire or when the contract is transferred to another party.

Reinsurance contracts that do not transfer significant insurance risk are accounted for directly through the statement of financial position. These are deposit assets or financial liabilities that are recognised based on the consideration paid or received less any explicit identified premiums or fees to be retained by the reinsured.

               

                Investment income on these contracts is accounted for using the effective interest rate method when accrued.

 

3.12.8     Receivables and payables related to insurance contracts

Receivables and payables are recognised when due. These include amounts due to and from agents, brokers and insurance contract holders. If there is objective evidence that the insurance receivable is impaired, the Group reduces the carrying amount of the insurance receivable accordingly and recognises that impairment loss in the consolidated income statement. The Group gathers the objective evidence that an insurance receivable is impaired using the same process adopted for loans and receivables. The impairment loss is calculated under the same method used for these financial assets.

 

3.12.9     Salvage and subrogation reimbursements

 Some insurance contracts permit the Group to sell (usually damaged) property acquired in settling a claim (for example, salvage). The Group may also have the right to pursue third parties for payment of some or all costs (for  example, subrogation). Estimates of salvage recoveries are included as an allowance in the measurement of the      insurance liability for claims, and salvage property is recognised in other assets when the liability is settled. The allowance is the amount that can reasonably be recovered from the disposal of the property. Subrogation reimbursements are also considered as an allowance in the measurement of the insurance liability for claims and are recognised in other assets when the liability is settled. The allowance is the assessment of the amount that can be recovered from the action against the liable third party.

 

3.12.10  Non-life insurance (general insurance) contract liabilities

Non-life insurance contract liabilities include the outstanding claims provision, the provision for unearned premium and the provision for premium deficiency incurred but not reported (IBNR). The outstanding claims provision is  based on the estimated ultimate cost of all claims incurred but not settled at the reporting date, whether reported or     not, together with related claims handling costs and reduction for the expected value of salvage and other recoveries. Delays can be experienced in the notification and settlement of certain types of claims, therefore the ultimate cost of these cannot be known with certainty at the reporting date. The liability is calculated at the   reporting date using a range of standard actuarial claim projection techniques, based on empirical data and current assumptions that may include a margin for adverse deviation. The liability is not discounted for the time value of money. No provision for equalisation or catastrophe reserves is recognised. The liabilities are derecognised when the obligation to pay a claim expires, is discharged or is cancelled.

The provision for unearned premiums represents that portion of premiums received or receivable that relates to risks that have not yet expired at the reporting date. The provision is recognised when contracts are entered into     and premiums are charged, and is brought to account as premium income over the term of the contract in accordance with the pattern of insurance service provided under the contract.

 

 At each reporting date the Group reviews its unexpired risk and a liability adequacy test is performed to determine whether there is any overall excess of expected claims and deferred acquisition costs over unearned premiums. This calculation uses current estimates of future contractual cash flows after taking account of the investment return    expected to arise on assets relating to the relevant nonlife insurance technical provisions. If these estimates show that the carrying amount of the unearned premiums (less related deferred acquisition costs) is inadequate, the deficiency is recognised in the income statement by setting up a provision for premium deficiency.

                                  

3.12.11  Shadow accounting

The Group applies shadow accounting in order to ensure that unrealised gains or losses on policyholder insurance  assets affect the measurement of policyholder insurance liabilities in the same way that realised gains or losses do (i.e. elimination of the accounting mismatch). Changes to policyholder liabilities arising from revaluation gains or losses on owner-occupied properties held are reclassified from equity to profit or loss in-order to match the corresponding gross increase or decrease in policyholder insurance liabilities. Note that the gross change in policyholder insurance liabilities is recorded in profit or loss.

 

3.13       Financial guarantee contracts

 

Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. 

 Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the   present obligation at the reporting date and the amount recognised less cumulative amortisation.

 

3.14       Inventories

 

Inventories which consist of foodstuffs, beverages and consumable stores are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out ("FIFO") method. The cost of finished goods and work in progress comprises direct raw materials, direct labour, other directs costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs to completion and applicable variable selling expenses necessary to make the sale.

 

3.15       Trade receivables

 

Trade receivables are amounts due from customers for food, beverages and rooms sold in the ordinary course of business and other unsettled amounts not classified as insurance receivables. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets, if not they are presented as non-current assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment.

 

3.16       Cash and cash equivalents

 

Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less in the statement of financial position.

 

3.17       Equity movements

 

3.17.1     Ordinary share capital

The Group has issued ordinary shares that are classified as equity.

 

3.17.2     Share premium

The difference between the issue price and the par value of ordinary share capital, is allocated to share premium. The transaction costs incurred for the share issue are accounted for as a deduction from share premium, net of any related income tax benefit, to the extent they are incremental costs directly attributable to the share issue that otherwise would have been avoided.

 

3.17.3     Treasury shares

Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group's own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognized directly in equity. Voting rights related to treasury shares are nullified for the Group and no dividends are allocated to them. Share options exercised during the reporting period are satisfied with treasury shares.

 

3.17.4     Non-distributable reserves

Non-distributable reserves of $695,244 represent the equity of the Masawara Zimbabwe (Private) Limited sub-group that arose on the change of the functional currency to United States Dollars effective from 1 January 2009.

 

3.17.5     Revaluation reserve

The revaluation reserve records revaluation gains and losses (to the extent that revaluation losses are not more than revaluation gains) on the Group's property that is carried at fair value and Group's share of the associate's revaluation reserve. The Group accounts for all impairments and revaluation surpluses in this reserve.

 

3.17.6     Group restructuring reserve

The group restructuring reserve arose on consolidation, under the pooling of interests method.

 

3.17.7     Other capital reserve

Other capital reserve is the reserve that the Group uses to record share based payment expenses, fair value gains or losses on available for sale investments, exchange rate movements on translation of foreign operations, share of movements in other reserves of the Group's associates and the Group's share of other comprehensive income of associates, with the exception of the Group's share of revaluation reserves of associates which is recorded under the revaluation reserve.

 

3.17.8     Distributions

Under Jersey Law, distributions can be made against any equity account with the exception of the share capital account or any capital redemption account.

 

3.18       Trade payables

 

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers and service providers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

 

3.19       Borrowing costs

 

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

 

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

 

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

 

3.20       Taxation

 

3.20.1     Current tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income.                            

 

Current income tax relating to items recognised directly in other comprehensive income or equity is recognised in other comprehensive income or equity and not in the income statement.      

 

3.20.2     Deferred tax

Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

 

Deferred income tax liabilities are recognised for all taxable temporary differences, except:          

·      Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

·      In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

 

Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

·      Where the deferred income tax assets relating to the deductible temporary difference arise from the  initial recognition of an asset or liability in a transaction that is not a business combination and, at time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

·      In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

               

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.        

 

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.    

 

Deferred income tax relating to items recognised directly in other comprehensive income or equity is recognised in other comprehensive income or equity and not in the income statement. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

 

3.20.3     Value Added Tax (VAT)

Revenue and expenses are recognised net of the amount of VAT except:

 

·      When the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the VAT is recognised as part of the cost of acquisition of the assets or as part of the expense item as applicable; and

·      For receivables and payables that are stated with the amount of VAT included.

 

The net amount of VAT recoverable from, or payable, to the taxation authorities is included as part of receivables or payables in the statement of financial position.

 

3.21       Leasing

 

The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement at the inception date.

 

3.21.1     Group as a lessee

Leases that transfer to the Group substantially all of the risks and benefits incidental to ownership of the leased item, are classified as finance leases and capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments.

 

Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance cost in the income statement.

 

                Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the

                Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the  asset and the lease term.

Leases that do not transfer to the Group substantially all the risks and benefits incidental to ownership of the leased items are operating leases. Operating lease payments are recognised as an expense in the income statement on a    straight-line basis over the lease term. Contingent rentals are recognised as an expense in the period in which they are incurred.

 

3.21.2   Group as a lessor

Leases in which the Group does not transfer substantially all of the risks and benefits of ownership of the asset are                  classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying  amount of the leased asset and recognised over the lease term on the same bases as rental income. Contingent rents  are recognised as revenue in the period in which they are earned.

 

3.22       Employee benefits

 

3.22.1     Pension obligations

The Group has a defined contribution plan. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current period and prior periods.

 

The Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due. Pre-paid contributions are recognised as an asset to the extent that a cash refund or reduction in the future payment is available.

 

3.22.2     Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to a termination when the entity has a detailed formal plan to terminate the employment of current employees without possibility of withdrawal. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.

 

3.22.3     Bonus plans

The Group recognises a liability and an expense for bonuses based on a formula that takes into consideration operational performance. Executive employees of TA Holdings, a subsidiary of Masawara Plc, can purchase TA Holdings Limited shares from the pool of shares held for treasury (treasury pool). The shares are sold at the ruling market share price as quoted on the Zimbabwe Stock Exchange on the date of purchase, utilising up to a maximum of 50% of the after tax net bonus. There were no shares sold by the Group during the years ended 31 December 2014 and 2013. Subsequent to year end, TA Holdings Limited was delisted from the Zimbabwe Stock Exchange, and the bonus scheme will be re-assessed.

 

3.23       Share-based payment transactions

 

Employees (including senior executives) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments.

 

In situations where equity instruments are issued and some or all of the goods or services received by the entity as consideration cannot be specifically identified, the unidentified goods or services received (or to be received) are measured as the difference between the fair value of the share-based payment transaction and the fair value of any identifiable goods or services received at the grant date. This is then capitalised or expensed as appropriate.

 

The cost of equity-settled transactions is recognised, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled.

 

The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in staff costs.

 

No expense is recognised for awards that do not ultimately vest except for awards where the vesting is conditional upon a market condition where they are treated as vesting irrespective of whether the market condition is met. Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met.

 

An additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

 

Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. All cancellations of equity-settled transaction awards are treated equally.

 

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (Note 23).

 

3.24       Provisions

 

3.24.1     General

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

 

3.24.2     Onerous contracts

A provision is recognised for onerous contracts in which the unavoidable costs of meeting the obligations under the contract exceed the expected economic benefits expected to be received under it. The unavoidable costs reflect the least net cost of exiting the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it.

 

3.25       Revenue recognition

 

Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty for sale of goods and services in the ordinary course of the Group's activities.

The Group recognises revenue when the amount of revenue can be reliably measured; it is probable that future      economic benefits will flow to the Group and when specific criteria have been met for each of the Group's revenue streams described below. The Group assesses its revenue arrangements against specific criteria in order to    determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements.

 

3.25.1     Gross premiums

                Gross recurring premiums are recognised as revenue when payable by the policyholder. For single premium         business, revenue is recognised on the date on which the policy is effective. Gross general insurance written            premiums comprise the total premiums receivable for the whole period of cover provided by contracts entered into during the accounting period and are recognised on the date on which the policy commences. Premiums include any    adjustments arising in the accounting period for premiums receivable in respect of business written in prior       accounting periods. Premiums collected by intermediaries, but not yet received, are assessed based on estimates            from underwriting or past experience and are included in premiums written.

 

                Unearned premiums are those proportions of premiums written in a year that relate to periods of risk after the      reporting date. Unearned premiums are calculated on a daily pro rata basis. The proportion attributable to                 subsequent periods is deferred as a provision for unearned premiums.

 

3.25.2     Reinsurance premiums

                Gross reinsurance premiums on life are recognised as an expense when payable or on the date on which the policy is                 effective. Gross general reinsurance premiums written comprise the total premiums payable for the whole cover provided by contracts entered into the period and are recognised on the date on which the policy incepts. Premiums   include any adjustments arising in the accounting period in respect of reinsurance contracts incepting in prior     accounting periods.

 

                Unearned reinsurance premiums are those proportions of premiums written in a year that relate to periods of risk                after the reporting date. Unearned reinsurance premiums are deferred over the term of the underlying direct     insurance policies for risks-attaching contracts and over the term of the reinsurance contract for losses occurring    contracts.

 

3.25.3     Fees and commission income

                The Group earns fees and commission income from its provision of insurance, asset management and hoteling     services. These fees are recognised as revenue over the period in which the related services are performed or          rendered. If the fees are for services provided in future periods then they are deferred and recognised over those     future periods.

 

3.25.4     Sale of goods

                The Group operates hotels and earns revenue through the sale of food and beverages. Revenue from the sale of       goods is recognised when all the following conditions are satisfied:

·      the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

·      the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

·      the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the entity; and

·      the costs incurred or to be incurred in respect of the transaction can be measured reliably.

 

3.25.5     Investment income

                Interest income earned from the Group's interest bearing financial assets is recognised within investment income.                 Interest income is recognised in the consolidated income statement as it accrues and is calculated by using the      effective interest rate method. Fees and commissions that are an integral part of the effective yield of the financial                 asset or liability are recognised as an adjustment to the effective interest rate of the instrument. When a receivable is                 impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow       discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest    income.

 

                Investment income also includes dividend income earned from the Group's equity investments. Dividend income is                 recognised when the right to receive payment is established. For listed securities, this is the date the security is    listed as ex dividend.

 

3.25.6     Rendering of services

                The Group earns revenue from the provision of accommodation at its hotels. Revenue arising from the rendering of                 services is recognised by reference to the stage of completion of the transaction at the statement of financial position          date (the percentage-of-completion method), provided that all of the following criteria are met:

·      the amount of revenue can be measured reliably;

·      it is probable that the economic benefits will flow to the seller;

·      the stage of completion at the statement of financial position date can be measured reliably; and

·      the costs incurred, or to be incurred, in respect of the transaction can be measured reliably.

 

                When the above criteria are not met, revenue arising from the rendering of services is recognised only to the extent              of the expenses recognised that are recoverable (a "cost-recovery approach").

 

3.25.7     Rental income

                Rental income receivable under operating leases is recognised on a straight-line basis over the term of the lease,   except for contingent rental income which is recognised when it arises.

 

                Incentives for lessees to enter into lease agreements are spread evenly over the lease term, even if the payments are             not made on such a basis. The lease term is the non-cancellable period of the lease together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease, the directors are     reasonably certain that the tenant will exercise that option.

 

                Premiums received to terminate leases are recognised in the consolidated income statement when they arise.

 

3.25.8     Service charges and expenses recoverable from tenants

                Income arising from expenses recharged to tenants is recognised in the period in which the expense can be             contractually recovered. Service charges and other such receipts are included gross of the related costs in revenue,        as the Directors consider that the Group acts as principal in this respect.

 

3.25.9     Net realised gains and losses

                Net realised gains and losses recorded in the consolidated income statement on investments include gains and      losses on financial assets and investment properties. Gains and losses also include the ineffective portion of hedge                transactions. Gains and losses on the sale of investments are calculated as the difference between net sales proceeds               and the original or amortised cost and are recorded on occurrence of the sale transaction.

 

3.26       Benefits, claims and expenses recognition

 

3.26.1     Gross benefits and claims

                Gross benefits and claims for life insurance contracts include the cost of all claims arising during the year including                 internal and external claims handling costs that are directly related to the processing and settlement of claims, as                 well as changes in the gross valuation of insurance contract liabilities. Death claims and surrenders are recorded on     the basis of notifications received. Maturities and annuity payments are recorded when due.

 

                General insurance claims include all claims occurring during the year, whether reported or not, related internal and                 external claims handling costs that are directly related to the processing and settlement of claims, a reduction for the                 value of salvage and other recoveries, and any adjustments to claims outstanding from previous years.

 

3.26.2     Reinsurance claims

                Reinsurance claims are recognised when the related gross insurance claim is recognised according to the terms of                the relevant contract.

 

3.26.3     Outstanding claims

                Provision is made for the estimated cost of claims net of anticipated recoveries under reinsurance arrangements   notified but not settled at period end using the best information available at the time. Provision is also made for the   cost of claims Incurred But Not Reported ("IBNR") until after the statement of financial position date and for the              estimated administrative expenses that will be incurred after the statement of financial position date in settling           claims outstanding at that date.

 

                Outstanding claims do not include any provision for possible future claims where claims arise under contracts not in                 existence at statement of financial position date.

 

3.27       Events after the reporting date

 

The financial statements are adjusted to reflect events that occurred between the reporting date and the date when the financial statements are authorised for issue, provided they give evidence of conditions that existed at the reporting date. Events that are indicative of conditions that arose after the reporting date are disclosed, but do not result in an adjustment of the financial statements themselves.

 

3.28       Profit allocation in the Life Assurance subsidiary company

 

The Board of Zimnat Life Assurance Company Limited (Life Assurance Company), the Group's life assurance subsidiary, in consultation with an independent actuary, have set the profit participation rules between shareholders and policyholders in that company. In terms of these rules shareholder assets and life assurance noncurrent assets (policyholder assets) in the Life Assurance Company are managed separately, and net investment returns from such assets are credited to shareholder funds and policyholder funds respectively.

 

Shareholder funds are also credited with administration, investment and service charges for managing policyholder funds at rates set out in the Profit Participation Rules. These rates are reviewed annually by the Life Assurance Company Board, in consultation with the independent actuary.

 

At statement of financial position date, an independent valuation of policy holder liabilities is carried out. The value of policy holder liabilities is then deducted from the total value of policy holder assets. Any actuarial surplus (i.e. excess of assets over liabilities) is split between policy holders and shareholders as per recommendations from the independent actuary. The surplus allocated to shareholders is debited from the life assurance fund and credited to the shareholders' funds. If there is a deficit (policyholder liabilities in excess of policyholder assets) the total amount is debited against the shareholders' funds.

 

4.            Changes in accounting policies and disclosures

 

4.1          New and amended standards and interpretations

 

The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2013, except for the following new and amended IFRS effective as of 1 January 2014:

 

IFRS 10 Consolidated financial statements builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The Directors are working towards complying with the requirements of IFRS 10 investment entity exception. The adoption of this standard did not have an impact on the Group.

 

IFRS 11 Joint arrangements focuses on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. Joint operations arise where the investors have rights to the assets and obligations for the liabilities of an arrangement. A joint operator accounts for its share of the assets, liabilities, revenue and expenses. Joint ventures arise where the investors have rights to the net assets of the arrangement; joint ventures are accounted for under the equity method. Proportional consolidation of joint arrangements is no longer permitted. The adoption of this standard did not have an impact on the Group.

 

IFRS 12 Disclosures of interests in other entities includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other off balance sheet vehicles. Additional disclosures required by IFRS 12 have been included in Note 6.3 and Note 28.

 

Amendment to IAS 32 Financial instruments: Presentation on offsetting financial assets and financial liabilities. This amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms. The adoption of this standard did not have an impact on the Group.

 

Amendments to IAS 36 Impairment of assets on the recoverable amount disclosures for non-financial assets. This amendment removed certain disclosures of the recoverable amount of cash generating units which had been included in IAS 36 by the issue of IFRS 13. The adoption of this standard did not have an impact on the Group.

 

Amendment to IAS 39 Financial instruments: Recognition and measurement on the novation of derivatives and the continuation of hedge accounting. This amendment considers legislative changes to 'over-the-counter' derivatives and the establishment of central counterparties. Under IAS 39 novation of derivatives to central counterparties would result in discontinuance of hedge accounting. The amendment provides relief from discontinuing hedge accounting when novation of a hedging instrument meets specified criteria. The adoption of this standard did not have an impact on the Group.

 

IFRIC 21 Levies sets out the accounting for an obligation to pay a levy if that liability is within the scope of IAS 37 Provisions. The interpretation addresses what the obligating event is that gives rise to pay a levy and when a liability should be recognised. The Group is not currently subjected to significant levies so the impact on the Group is not material. The interpretation is not mandatory for the Group in the currect period, however the Group has early adopted the interpretation. The adoption of this standard did not have an impact on the Group.

 

Other standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2014 are not material to the Group.

 

5.            Standards issued but not yet effective

 

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2014, and have not been applied in preparing these consolidated financial statement. None of these is expected to have a significant effect on the consolidated financial statements of the Group, except the following set out below:

 

IFRS 9 Financial instruments addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the 'hedged ratio' to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted subject to EU endorsement. The Group is yet to assess IFRS 9's full impact.

 

IFRS 15 Revenue from contracts with customers deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 Revenue and IAS 11 Construction contracts and related interpretations. The Group is yet to assess IFRS 15's full impact.

 

The standard is effective for annual periods beginning on or after 1 January 2017 and earlier application is permitted subject to EU endorsement.

 

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

 

6.            Significant accounting judgments, estimates and assumptions

 

The preparation of financial statements in conformity with IFRS requires the use of certain accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions are changed. Management believes that the underlying assumptions are appropriate and that the Group's financial statements therefore fairly present the financial position and results.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The areas involving a higher degree of judgments or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in the relevant notes to the financial statements.

 

The following are the critical judgments, estimates and assumptions that management has made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

 

6.1          Valuations of properties

 

The Group's property comprise of freehold land and buildings that are classified under the property, plant and equipment category and investment properties. The Group has three distinct investment properties categories i.e. commercial buildings, that offer retail and office space, residential buildings and industrial buildings. The distinct categories were valued by independent professional valuers (Dawn Property Consultancy and Bard Real Estate) differently as highlighted below:

 

6.1.1       Property classified under the property, plant and equipment category

The freehold land and buildings valuations were based on market values which are defined as the estimated amount for which, a property would be exchanged between knowledgeable, willing parties in an arms length transaction. In determining the open market value estimates, comparable market evidence was considered.

 

6.1.2       Commercial buildings

The determination of the fair value of investment properties requires the use of estimates such as future cash flows from assets (such as lettings, tenants' profiles, future revenue streams, capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property) and discount rates applicable to those assets. These estimates are based on local market conditions existing at the reporting date.

 

The continuing volatility in the global financial system is reflected in the turbulence in commercial real estate markets across the world. The lack of liquidity in the Zimbabwean market also means that, if it was intended to dispose of the investment properties, may be difficult to achieve a successful sale of the investment properties in the short term.  Therefore, in arriving at their estimates of market values as at 31 December 2013 and 31 December 2014, the valuers have used their market knowledge and professional judgment and have not only relied solely on historic transactional comparables.

 

In arriving at the market value of the properties, the valuers used the explicit discounted cash flow method. This approach is based on the principle that the value of a property reflects the quality and quantity of the income it is expected to generate over time. Income-producing properties are typically purchased for investment purposes, and thus a property's ability to earn income is the critical element affecting its value from a market point of view. Hence given the estimate of income produced by a property, its value can be estimated.

 

This approach requires careful estimation of future benefits and the application of investor yield or return requirements. The rental estimates were based on comparable rentals, inferred from retail and office spaces within the locality of the different properties in Zimbabwe. The estimated future rental income streams were discounted in order to determine the fair value of the investment properties, refer to Note 27 for more details on inputs used in the valuation.

 

6.1.3      Industrial and residential buildings

The Industrial and residential buildings valuations were based on market values which are defined as the estimated amount for which, a property would be exchanged between knowledgeable, willing parties in an arms length transaction. In determining the open market value estimates, comparable market evidence was considered. This comprised of transactions where offers had been made but the transaction had not been finalized. Professional judgement was used to adjust the market evidence.

 

6.2          Financial instruments at amortised cost

 

The value of financial assets and financial liabilities held at amortised cost are based on the expected cash flows under consideration of a market interest rate. The judgments include considerations of inputs such as expected cash flows, amortisation period, market interest rate applied and also whether or not the financial assets are recoverable.

 

6.3          Assessment of control over investees

 

The Group follows the guidance of IFRS 10 Consolidated Financial Statements to determine when control exists over an investee. This determination requires significant judgement. In making this judgement, the Group evaluates, whether it has power over the investee, exposure or rights to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of the Group's returns.

 

iWayAfrica Zimbabwe (Private) Limited

Masawara Plc accounts for iWayAfrica Zimbabwe (Private) Limited ("iWayAfrica") as an associate even though it owns less than 20% of the issued share capital because it has significant influence in iWayAfrica arising from the fact that it has one representative on the iWayAfrica Board of Directors which is made up of five members.

 

Telerix Communications (Private) Limited

Masawara owns 50% of Telerix Communications (Private) Limited "Telerix" issued share capital. Telerix's relevant activities are controlled by the Telerix board, which Masawara has the right to appoint two out of four directors. A consortium of other Telerix shareholders has the right to appoint the other two board members. Masawara and the consortium of the other shareholders collectively control Telerix as they must act together to direct the relevant activities. No investor can direct the activities without the co-operation of the others i.e. neither Masawara nor the consortium of the other Telerix shareholders individually controls the Telerix. Consequently, the Group accounts for its investment in Telerix as a joint venture.

 

Sable Chemicals Industries Limited

Although the Group holds 51% of the equity shares of Sable Chemicals Industries Limited (Sable Chemicals), it has no control over the relevant activities of the entity. The Group exercises significant influence by virtue of its contractual right to appoint two directors on the board of Directors of that company. The Sable Chemicals board of directors has nine directors. The Group does not have rights or power to exercise control and therefore does not consolidate Sable Chemicals.

 

Cresta Marakanelo Limited

The Group holds 35% of the equity shares of Cresta Marakanelo Limited (Marakanelo). The Group entered into a management agreement with Marakanelo that stipulates that the Managing Director and the Finance Director of Marakanelo are appointed by the Group. The Group has assessed that it has no control over the relevant activities of Marakanelo due to the following:

·      The Group has two (2) representatives on the Marakanelo board which comprises eight (8) members. The Group therefore does not control the Board.

·      The management agreement indicates that the Group is accountable to the Marakanelo Board.

·      The agreement has a limited term and expires on 31 December 2019.

 

6.4          Functional currency

Management used its judgment to determine the functional currency that most accurately represented the economic effects of the underlying Group transactions, events and conditions. As part of this approach, management considered the following information relating to the Group:

 

·      The currency that mainly influences sales prices for goods and services;

·      The currency that mainly influences labour, material and other costs of providing goods or services; and

·      The currency in which receipts from operating activities were normally retained.

 

The United States Dollar was determined to be the functional currency of the Company.

 

6.5          Impairment assessment of investments in associates

The Group determines at each reporting date, whether there is any objective evidence that the investment in the associates and joint venture is impaired. This requires an estimation of recoverable amount of the investment in associate or joint venture by reference to the value in use. A value in use calculation requires the Group to make an estimate of the expected future cash flows from the associate or joint venture and also to choose a suitable discount rate in order to calculate the present values of those cash flows.

 

6.6          Recoverability of loans granted to investee companies

The Group assesses the recoverability of loans granted to investee companies at each reporting date and where appropriate an impairment loss is recognized against loans that are deemed to be irrecoverable or those that will be recoverable over extended periods i.e. periods that are longer than the periods as per the original agreements.

 

The Group reviews the investee company's financial performance and also reviews the capital as well as interest payment pattern by the investee company in order to come up with estimations of how much of the loans granted will be recoverable and also over what time frame. There were significant judgments involved in determining the Telerix cash flow forecasts due to the fact that the forecasts were based on a Telerix restructured Group. Refer to Note 28.1 for the detailed impairment tests on investment in Telerix loan notes.

 

6.7          Valuation of insurance contract liabilities

 

6.7.1       Non-life insurance (which comprises general insurance) contract liabilities

For non-life insurance contracts, estimates have to be made both for the expected ultimate cost of claims reported at the reporting date and for the expected ultimate cost of claims incurred but not yet reported at the reporting date ("IBNR").

 

Insurance risks are unpredictable and the Group recognises that it is not always possible to forecast with absolute precision, future claims payable under existing insurance contracts. The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims projection techniques. Overtime, the group has developed a methodology that is aimed at establishing insurance provisions that have an above-average likelihood of being adequate to settle its insurance obligations.

 

The main assumption underlying these techniques is that a company's past claims development experience can be used to project future claims development and hence ultimate claims costs. As such, these methods extrapolate the development of paid and incurred losses, average costs per claim and claim numbers based on the observed development of earlier years and expected loss ratios.

 

Historical claims development is mainly analysed by accident years, but can also be further analysed by geographical area, as well as by significant business lines and claim types. Large claims are usually separately addressed, either by being reserved at the face value of loss adjuster estimates or separately projected in order to reflect their future development. In most cases, no explicit assumptions are made regarding future rates of claims inflation or loss ratios. Instead, the assumptions used are those implicit in the historical claims development data on which the projections are based.

 

Additional qualitative judgement is used to assess the extent to which past trends may not apply in future, (for example to reflect one-off occurrences, changes in external or market factors such as public attitudes to claiming, economic conditions, levels of claims inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy features and claims handling procedures) in order to arrive at the estimated ultimate cost of claims that present the likely outcome from the range of possible outcomes, taking account of all the uncertainties involved.

 

Similar judgements, estimates and assumptions are employed in the assessment of adequacy of provisions for unearned premium. Judgement is also required in determining whether the pattern of insurance service provided by a contract requires amortisation of unearned premium on a basis other than time apportionment.

 

6.7.2       Life insurance contract liabilities

The liability for life insurance contracts is either based on current assumptions or on assumptions established at inception of the contract, reflecting the best estimate at the time increased with a margin for risk and adverse deviation. All contracts are subject to a liability adequacy test, which reflect management's best current estimate of future cash flows.

 

The main assumptions used relate to mortality, morbidity, longevity, investment returns, expenses, lapse and surrender rates and discount rates. The Group bases mortality and morbidity on standard industry mortality tables which reflect historical experiences, adjusted when appropriate to reflect the Group's unique risk exposure, product characteristics, target markets and own claims severity and frequency experiences. For those contracts that insure risk related to longevity, prudent allowance is made for expected future mortality improvements as well as wide ranging changes to life style, could result in significant changes to the expected future mortality exposure.

 

Estimates are also made as to future investment income arising from the assets backing life insurance contracts. These estimates are based on current market returns as well as expectations about future economic and financial developments.

 

Assumptions on future expense are based on current expense levels, adjusted for expected expense inflation if appropriate.

 

Lapse and surrender rates are based on the Group's historical experience of lapses and surrenders.

 

Discount rates are based on current industry risk rates, adjusted for the Group's own risk exposure.

 

The assumptions used for the actuarial valuation of the insurance contracts disclosed in this note are as follows:

 

Economic rates - The economic rates were set as follows:

 

Variable

Rate

Rate


2014

2013




Inflation

6%

5%

Expense

8%

8%

Valuation interest rate

10%

10%

Discount rate

8%

12%

Discount rate annuitants

6%

5%

 

Mortality - The tables used for mortality were:

·      A24/29 table of Assured Lives experience in the UK in the years 1924 to 1929.

·      HIV/AIDS - as the HIV/AIDS pandemic develops in Zimbabwe, the assumption concerning deaths from the pandemic is of increasing importance. As such, a standard AIDS loading was allowed on the mortality rates. However the HIV/AIDS transmission rate has been decreasing due to the increased awareness, use of protection methods and the use of Anti-retroviral drugs, ARVs. This means that the mortality may reach a stable state system.

·      A(55), a table of annuitant experience in the UK thought to be appropriate for annuities purchased in 1955. For female policyholders, spouses were assumed to be 3 years older, whilst for male policyholders, spouses were assumed to be 3 years younger.

 

Expenses - The allowance for expenses in the valuation should be sufficient to ensure that expenses can be covered not only in the next year but also in all future years. The following were the assumptions used to project the present value of future expenses and these were based on expense analysis figures for the year 2014.

·      For new Cashpal policies, the base year (2014) expense per policy was set at US$ 36 per annum.

·      For Whole Life policies, the base year (2014) expense per policy was set at US$ 36 per annum.

·      For Pension Plan policies, the base year (2014) expense per policy was set at US$ 36 per annum.

·      For Individual Life Funeral policies, the base year (2014) expense per member was set at US$ 12 per annum for all of the future years.

·      For new Individual Life Funeral policies, expense per main member was set at US$ 45 per annum for all of the future years.

·      For Whole Life policies without-profits where there is a will-writing benefit to be exercised after one year. A take up rate of 10% was assumed. The will-writing expense was set as US$ 185 per policy.

 

Expense per policy assumption needs to be reviewed continuously in line with expense inflation.

 

Commission was allowed for as per pricing basis.

 

Unit growth rate - This was assumed to be 10% p.a. after the valuation date.

 

Bonuses - Bonuses were awarded to Investment Contracts with DPF, Conventional Annuities, Individual Life Old Conventional Fund and Whole Life as at 31 December 2014 as follows:

 

·      1% Bonus, split as 35% vested and 65% non-vested was awarded to Investment Contracts with DPF (Deposit Administration Contracts) and Individual Life Old Conventional Policies as at 31 December 2014.

·      2% Bonus, split as 100% vested and 0% non-vested was awarded to Individual Life Whole Life with profits Product as at 31 December 2014

 

Transfer to shareholders - There was no transfer of profits from the Policyholder Fund to Shareholders as at 31 December 2014.

 

Planned margins - The intention of the compulsory margins (to be added to the best estimate assumptions) is to introduce a degree of prudence to allow for possible adverse deviations in experience during the expected future lifetime of the business. These compulsory margins will at the same time serve to an extent to defer profits and thus reduce the risk that profits are recognised prematurely. The margins added to the best estimate assumptions were as follows:

 

Assumption


Margin

Margin



2014

2013





Mortality


7.5%

7.5%

Lapse


25%

25%

Surrender


10%

10%

Expense inflation


10%

10%

Renewal expense


10%

10%

 

Lapse Rates -We have set expected future lapse rates and these are given below:

 

Duration

Funeral

Whole Life

Cashpal

Pension Plan






Within Year 1

30%

25%

20%

25%

Year 1 to 2

25%

20%

12%

20%

Year 2 to 3

15%

5%

5%

5%

Year 3+

5%

5%

5%

5%

 

The expected funeral lapse rates have been based on the lapse experience investigation done as at 30 November 2014.

 

7             Disposal of 20.75% of Minerva Risk Advisors (Private) Limited to TA Holdings Limited

 

On 18 February 2014, Masawara Plc concluded the sale of 20.75% shareholding in Minerva Risk Advisors (Private) Limited ("Minerva Risk Advisors") to TA Holdings Limited ("TA Holdings"). Assets amounting to $11.7 million, liabilities ($9.5 million)and non controlling interest ($909,000) relating to Minerva Risk Advisors that were classified as held for sale were derecognised when Masawara lost control over Minerva Risk Advisors.  For accounting purposes, 1 January 2014 has been used as the effective date. The exclusion of transactions that took place between 1 January 2014 and 18 February 2014 does not have a material effect on the consolidated financial statements.

 

The total gain on loss of control amounted to $528,000. Of the total gain on loss of control of Minerva Risk Advisors of $528,000, $57,000 related to a gain on re-measurement of the investment retained in Minerva Risk Advisors on the date when control was lost and $472,000 was the actual gain on disposal of the 20.75% interest in Minerva Risk Advisors to TA Holdings.

 

The consideration receivable from TA Holdings, which ranges from a minimum of $400,000 up to maximum of $1.5 million, will be the sum total of 30% of earnings before interest, tax, depreciation and amortization ("EBITDA") of Minerva Risk Advisors for the years ending 31 December 2013, 31 December 2014 and 31 December 2015 and will be payable over the 3 years on 30 April 2014, 30 April 2015 and 30 April 2016. TA Holdings Limited made the first installment payment of $400,000, on 25 April 2014.

 

Subsequent to the sale of Masawara Plc's 20.75% shareholding in Minerva Risk Advisors to TA Holdings, Masawara has a direct shareholding of 44% in Minerva Risk Advisors. Masawara accounted for its investment in Minerva Risk Advisors as an associate in accordance with IAS 28 Investment in Associates and Joint Ventures for the period 1 January 2014 to 1 December 2014, which is the date when Masawara gained control over TA Holdings. Refer to Note 8 for more details on the acquisition of TA Holdings by Masawara.

 

8             Business combination

 

On 24 November 2014, Masawara Plc obtained control of TA Holdings Limited "TA Holdings" after it increased its shareholding in TA Holdings from 41.04% to 75.74%. This took place when Masawara Plc, through its wholly owned subsidiary, Masawara Holdings (Mauritius) Limited ("MHML"), purchased 57,201,530 TA Holdings shares, representing 34.7% of TA Holdings' issued share capital, for $11.8 million.

 

The acquisition of TA Holdings resulted in a provisional gain on bargain purchase amounting to $10.0 million and this has been recognised in the consolidated financial statements. The transaction resulted in a gain on bargain purchase because the provisional value of the net assets acquired was higher than sum of the fair value of consideration transferred and the fair value of the previously held interest in TA Holdings.

 

Provisional fair value of net assets was higher than fair value of consideration transferred mainly because the offer price of 20.6 US cents, though it represented a 106% premium on the TA Holdings trading share price on date of offer, was lower than net asset value per share.

 

Notwithstanding the fact that the effective acquisition date of TA Holdings was 24 November 2014, 1 December 2014 has been adopted as the acquisition date for accounting purposes. The exclusion of transactions that took place between 24 November 2014 and 30 November 2014 does not have a material effect on the consolidated financial statements.

 

The Group's consolidated financial statements include TA Holdings' revenue amounting to $5.5 million and profit after tax amounting to $1.5 million for the period 1 December 2014 to 31 December 2014. If the business combination had taken place on 1 January 2014, then Group's gross revenue would have been $96.6 million and the Group's profit after tax would have been $23.8 million. 

 

The following table summarises the consideration paid for TA Holdings Group, the provisional fair value of assets acquired, liabilities assumed and the non-controlling interest at the acquisition date.

 


Footnotes

Provisional fair value



US$ '000




Consideration transferred



Cash

a

11,784

Fair value previously held equity

b

15,004

Fair value of existing loan relationship

c

853

Total consideration transferred


27,641




Add fair value of non-controlling interest

d

17,882




Less fair value of identifiable assets acquired and liabilities assumed

Property, plant and equipment

e

29,439

Investment properties

f

15,453

Intangible assets

g

4,414

Investment in associates

h

12,638

Financial assets

i

43,794

Deferred tax asset

j

1,080

Inventory

k

295

Reinsurance assets

l

22,496

Deferred acquisition costs

m

-

Insurance receivables

n

11,646

Trade and other receivables

o

21,480

Cash resources

p

16,469

Financial liabilities

q

(6,771)

Deferred tax liabilities

r

(5,873)

Deferred income

s

(1,984)

Investment contracts with and without Discretionary Participation Features

t

(30,372)

Insurance contract liabilities

u

(47,369)

Income tax liability

v

(329)

Insurance payables

w

(5,893)

Provisions

x

(1,813)

Trade and other payables

x

(15,739)

Total identifiable net assets


63,061




Gain on bargain purchase


17,538

Less fair value loss on fair valuation of previously held equity

y

(7,565)

Net gain on bargain purchase


9,973

 

                Footnotes

               

a.     The business combination was effected using the Group's cash resources and the fair value of consideration transferred equaled the cash utilized to effect the transaction. The business combination resulted in a net cash acquired position of $4.9 million.

b.     The fair value of previously held equity was calculated as the number of TA Holdings shares held by Masawara prior to the business combination multiplied by the fair value of the TA Holdings shares, which was based on the transaction price i.e. 20.6 US cents per share ($13.9 million) plus the fair value of Masawara's interest in Minerva Risk Advisors (Private) Limited ($1.1 million) at the business combination date. Masawara owned 44% of issued share capital of Minerva Risk Advisors (Private) Limited, which was a subsidiary of TA Holdings Limited, prior to the business combination.

c.     This relates to a loan payable by TA Holdings Limited to Masawara which existed at the date of the business combination date.

d.     The fair value of non-controlling interest was determined as the non controlling interest relating to subsidiaries that are partially owned by TA Holdings Limited i.e. Botswana Insurance Company Limited, Lion Assurance Company Limited and Minerva Risk Advisors (Private) Limited plus the number of shares belonging to non-controlling shareholders multiplied by the fair value of the TA Holdings shares on date of acquisition, which was based on the transaction price i.e. 20.6 US cents per share.

e.     The significant portion of the property, plant and equipment balance is made up of property. The fair value of property at 1 December 2014 was determined by Bard Real Estate (Private) Limited and Dawn Properties (Private) Limited, professional valuers with recognized and relevant professional qualifications and with recent experience in the location and category of the property being valued. The carrying amount of the plant and equipment approximated fair value.

f.      The fair value of investment properties at 1 December 2014 was determined by Bard Real Estate (Private) Limited and Dawn Properties (Private) Limited, professional valuers with recognized and relevant professional qualifications and with recent experience in the location and category of the property being valued.

g.     Intangible assets recognized at the acquisition date consisted of computer software, customer list and brands.

 

The following brands were recognized at the business combination date; Cresta South Africa Limited brand, Botswana Insurance Company Limited brand and the Lion Assurance Company Limited brands. The fair value of the brands was determined by Brand Finance Africa (Proprietary) Limited, professional valuer with recognized and relevant professional qualifications and with recent experience in the location and category of the property being valued.

h.     The fair value of investment in associates that are unlisted was determined based on the net asset based valuation method, after it was concluded that fair value of the assets and liabilities of the associates approximated fair value. The fair value of the investment in Cresta Marakanelo Limited, an associate that is listed, was determined based on the listed share price at 1 December 2014 i.e. number of shares held in Cresta Marakanelo Limited multiplied by listed share price at 1 December 2014.

 

Investment in one of the Group's significant associate, Sable Chemicals Industries Limited, was $nil because the discounted cash flows computation resulted in a negative net present value.

i.      Financial assets are made up of listed and unlisted securities. The fair value of financial assets held at amortized cost approximated fair value at the date of the business combination due to the fact that effective interest rate used to calculate the amortised cost approximated fair value. The fair value of financial assets that are listed was based market price of the shares at 1 December 2014.

j.      The deferred tax asset is on fair value adjustments on investment in associates and deferred acquisition costs.

k.     The inventory balance is made up of consumables. The carrying amount of the inventory items at 1 December 2014 approximated fair value.

l.      The carrying amount of reinsurance assets approximated fair value.

m.   Deferred acquisition costs do not represent future cash flows to Masawara Plc. Consequently, the deferred acquisition costs were written off and have not been carried forward by Masawara Plc in acquisition accounting.

n.     Insurance receivables carrying amount approximated fair value at 1 December 2014. Effect of discounting is immaterial due to the fact that insurance receivables are short term in nature.

o.     Trade and other receivables carrying amount approximated fair value at 1 December 2014. Effect of discounting is immaterial due to the fact that trade and other receivables are expected to be recovered within one year.

p.     Cash resources represent cash at bank and cash on hand at 1 December 2014.

q.     Carrying amount of financial liabilities approximates fair value due to the fact that effective interest rate used for calculating the amortised cost were market related interest rates. There were no financial liabilities with related parties.

r.     Deferred tax liabilities were determined by applying appropriate tax rates (depending on the jurisdiction in which the assets and liabilities located) on the temporary difference on assets and liabilities. This includes deferred tax on fair value adjustments on acquired assets and assumed liabilities at 1 December 2014.

s.     Deferred income relates to income that will be realized within one year. Carrying amount of deferred income approximates fair value because the effect of discounting is immaterial.

t.      Fair value of investment contracts with and without discretionary participation features was determined by actuarial valuers.

u.     The carrying amount of the insurance contract liabilities approximated fair value because insurance contract liabilities are short term in nature and the effect of discounting would be immaterial.

v.     Income tax liability represents a short term obligation to the Zimbabwean Tax Authorities, expected to be repaid during the year 2015. The carrying amount of the income tax liability at 1 December 2014 approximated fair value because the effect of discounting would be immaterial.

w.    The carrying amount of the insurance payables approximated fair value because insurance contract liabilities are short term in nature i.e. they are expected to be settled within one year.

x.     The carrying amount of provisions, trade and other payables approximated fair value because trade and other payables are short term in nature i.e. they are expected to be settled within one year.

y.     The fair value loss on fair valuation of equity interest that was held in TA Holdings prior to business combination.

 

9                 Segment information

 

For management purposes, the Group is organised into business units based on their products and services and has four reportable segments as follows:

·      The Joina City, referred to as "Investment Property" in the prior years financial statements, segment leases retail and office space at the Joina City building partly owned by the Group.

·      TA Holdings Limited "TA Holdings", a subsidiary, is a diversified investment company that holds stakes in insurance, agro-chemical and hospitality businesses across sub-Saharan Africa. TA Holdings has treated as one operating segment because the chief operating decision maker, Masawara, views TA Holdings as one segment when deciding how to allocate resources and in assessing performance. TA Holdings was accounted as an associate prior to the Group obtaining control on 1 December 2014.

 

The Group's interest in Minerva Risk Advisors (Private) Limited ("Minerva Risk Advisors") has been accounted for as part of TA Holdings Limited for segment reporting purposes. This is because the financial performance of Minerva Risk Advisors is reported to Masawara Plc on a monthly basis as part of TA Holdings Limited.

·      Telerix Communications (Private) Limited, an associate, is a company that is licensed to construct, operate and maintain public data internet access and Voice Over network in  Zimbabwe.

·      iWayAfrica Zimbabwe (Private) Limited, an associate, is a broadband internet service company in Zimbabwe.

·      Comparative figures include Energy segment which represents the Group's interest in the Energy segment that was disposed on 31 January 2014, refer to Note 34.

 

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 segment profit or loss, and is measured consistently with operating profit or loss in the consolidated financial statements.

 



Joina City

TA Holdings

Telerix

iWayAfrica

Energy

Central

Total Group

Year ended 31 December 2014

US$ '000

US$ '000

US$ '000

US$ '000

US$ '000

US$ '000

US$ '000









Net insurance premium revenue

-

4,326

-

-

-

-

4,326

Fees, commission income and hotel revenue

-

3,220

-

-

-

-

3,220

Rental income from investment property

2,029

-

-

-

-

-

2,029

Net realised and unrealised gains and other income

860

719

-

-

6,195

529

8,303

Net insurance claims

-

(852)

-

-

-

-

(852)

Expenses for acquisition of insurance contracts

-

(656)

-

-

-

-

(656)

Hotel cost of sales, administrative and operating expenses

-

(4,758)

-

-

-

(5,279)

(10,037)

Property expenses

(1,655)

-

-

-

-

-

(1,655)

Equity accounted earnings

-

3,281

534

3

-

-

3,818

Depreciation

-

(314)

-

-

-

(55)

(369)

Investment income

-

25

-

-

-

1,880

1,905

Finance costs

(120)

(289)

-

-

-

(349)

(758)

Gain on bargain purchase of TA Holdings

-

-

-

-

-

9,973

9,973

Impairment loss on financial assets

-

-

-

-

-

(2,853)

(2,853)

Income tax expense

-

(207)

-

-

-

(118)

(325)

Profit for the year

1114

4,495

534

3

6,195

3,728

16,069

 

As at 31 December 2014








Segment assets

33,209

144,545

-

282

-

-

178,036

Central non-current assets







49,156

Central current assets







2,626

Total assets







229,818









Segment liabilities

(7,703)

(114,847)

-

-

-

-

(122,550)

Central non-current liabilities







(1,738)

Central current liabilities







(2,017)

Total liabilities







(126,305)

 


Joina City

TA Holdings

Telerix

iWayAfrica

Energy

Central

Total Group

Year ended 31 December 2013

US$ '000

US$ '000

US$ '000

US$ '000

US$ '000

US$ '000

US$ '000









Rental income from investment property

1,821

-

-

-

-

-

1,821

Investment income






1,100

1,100

Net realised gains/(losses) and other income

(1,968)

1,001

-

-

-

-

(967)

Operating and administrative expenses






(4,960)

(4,960)

Property expenses

(1,663)

-

-

-

-

-

(1,663)

Equity accounted earnings

-

(3,230)

(1,194)

75

-

-

(4,349)

Depreciation

-

-

-

-

-

(57)

(57)

Impairment loss on financial assets

-

-

-

-

-

(261)

(261)

Loan forgiveness

-

-

-

-

-

(191)

(191)

Finance costs

-

-

-

-

-

(156)

(156)

Loss from discontinued operations

-

(883)

-

-

(298)

-

(1,181)

Income tax credit

-

-

-

-

-

91

91

Loss for the year

(1,810)

(3,112)

(1,194)

75

(298)

(4,434)

(10,773)

















 

As at 31 December 2013

 








Segment assets

32,945

31,262

-

279

23,130

-

87,616

Central non-current assets







10,334

Central  current assets







705

Total assets







98,655









Segment liabilities

(7,722)

(9,531)

-

-

-

-

(17,253)

Central non-current liabilities







(1,432)

Central current liabilities







(6,040)

Total liabilities







(24,725)

 

 

 


Geographical information

 

Investment property

The Joina City building is situated in Harare and therefore all revenues and assets are from Zimbabwe.

 

Telerix

Telerix Communications (Private) Limited is situated in Harare and only offers services in Zimbabwe, therefore all revenues and assets are from Zimbabwe.

 

iWayAfrica 

iWayAfrica Zimbabwe (Private) Limited is situated in Harare and only offers services in Zimbabwe, therefore all revenues and assets are from Zimbabwe.

 

                TA Holdings Limited

TA Holdings Limited has operations in Zimbabwe, Botswana, South Africa, Zambia and Uganda. The results and assets of the operations in South Africa, Zambia and Uganda are not individually material in comparison with the total TA Holdings results. Consequently, revenue and non-current assets relating to operations in South African, Zambia and Uganda have been combined and reported as "outside Zimbabwe (excluding Botswana)".

 

The Group's share of TA Holdings Limited's revenues and non-current assets is split as follows:                                                





2014

2013


US$ '000

  US$ '000

Revenues



From Zimbabwe

59,155

20,126

Outside Zimbabwe (Botswana)

19,679

9,013

Outside Zimbabwe (excluding Botswana)

8,606

2,565

Total

87,440

31,704

 

Non-current assets



From Zimbabwe

80,014

28,013

Outside Zimbabwe (Botswana)

23,080

9,422

Outside Zimbabwe (excluding Botswana)

5,691

2,118

Total

108,785

39,553

 

10           Operating leases

 

                Group as lessor

The Group has entered into leases on its property portfolio. The commercial property leases typically have lease terms of one to six years and include clauses to enable bi-annual upward revision of the rental charge. Future minimum rentals receivable under non-cancellable operating leases were as follows:         

 


2014

2013


US$ '000

US$ '000




Within 1 year

2,455

1,668

After 1 year, but not more than 5 years

2,867

1,991

More than 5 years

178

150


5,500

3,809

 

Operating lease commitments - Group as lessee

The Group entered into commercial leases on three hotel properties and offices. These leases have an average life of between one and four years with a renewal option included in the contracts. There are no restrictions placed upon the Group by entering into these leases. Future minimum rentals payable under the non-cancellable operating lease as at 31 December are as follows:


2014

2013


US$ '000

US$ '000




Within 1 year

1,020

53

After 1 year, but not more than 5 years

2,257

79


3,277

132

 

11           Net insurance premium revenue

 

11.1        Gross insurance premium revenue 

Life insurance

4,454

-

Non-life insurance

1,614

-

Change in unearned premium reserve

185

-

Total gross premiums

6,253

-

 

11.2        Insurance premium ceded to reinsurers on insurance contracts

Life insurance

(31)

-

Non-life insurance

(1,896)

-

Total premiums ceded to reinsurers

(1,927)

-




Total net premiums

4,326

-

 

12           Fees and commission income

 

Policyholder administration and investment management services

1,057

-

Re-insurance commission received

466

-

Brokerage fees

550

-

Total fees and commission income

2,073

-

 

13           Hotel revenues

 

Accommodation

618

-

Food and beverages

529

-

Total hotel revenue

1,147

-

 

14           Investment income

 

Interest on Cherryfield debentures

35

35

Interest on Telerix debentures

62

793

Interest on Telerix loan notes

1,487

-

Preference dividend income

-

42

Interest on bank deposits and loans

156

230

Loss on disposal of investments

(4)

-

Held to maturity financial instruments interest income

29

-

Interest of deferred consideration receivable

140

-

Total investment income

1,905

1,100

 

15           Net realised and unrealised gains/(losses)

 


2014

2013


US$ '000

US$ '000




Profit on disposal of Masawara Energy (Mauritius) Limited - Note 34

6,195

-

Loss on disposal of property, plant and equipment

(1)

-

Fair value adjustment of investment property - Note 27

860

(1,968)

Fair value gains on financial assets

204

-

Gain on loss of control of Minerva Risk Advisors (Private) Limited - Note 7

528

-

Impairment loss on financial assets- Note 29.1

(2,853)

(261)

Gain on bargain purchase of Minerva Holdings (Private) Limited

-

240

Gain on bargain purchase of additional shares in associate - Note 28.1.1

-

761

Total realised and unrealised gains/(losses)

4,933

(1,228)

 

16           Other operating income                               

                                                                 

Ancillary hotel services

14

-

Sundry income

501

-

Other operating income

515

-

               

17           Net insurance claims

 

17.1        Gross benefits and claims paid                                         

Life insurance contracts

(577)

-

Non-life insurance contracts

(1,734)

-

Total gross benefits and claims paid

(2,311)

-

 

17.2        Gross change in insurance contract liabilities                                                               

Change in life insurance contract liabilities

719

-

Change in non-life insurance contract liabilities

(1,863)

-

Total gross change in contract liabilities

(1,144)

-




Insurance claims and loss adjustment expense

(3,455)

-

 

17.3        Claims recovered from reinsurers                                                    

Life insurance contracts

12

-

Non-life insurance contracts

728

-

Total claims ceded to reinsurers

740

-

 

17.4        Change in insurance contract liabilities ceded to reinsurers                                                                     




Change in non-life insurance contract liabilities

1,863

-

Total change in contract liabilities ceded to reinsurers

1,863

-

 

Insurance claims and loss adjustment expenses recovered from reinsures

2,603

-

 

Net insurance claims

(852)

-

 

18           Expenses for the acquisition of insurance contracts

 

Commission paid

(619)

-

Change in deferred expenses

(37)

-

Total expenses for the acquisition of insurance contracts

(656)

-

 

19           Hotel cost of sales

 

Hotel cost of sales



Employee benefits expense

(79)

-

Consumption of inventories

(104)

-

Total hotel cost of sales

(183)

-

 

20           Operating and administrative expenses




Audit fees

(586)

                (469)

Staff costs

(2,657)

(1,562)

Directors' remuneration - Note 48

(1,513)

(1,341)

Consultancy and due diligence costs

(1,103)

(1,043)

Exchange losses

(1)

(7)

Loss on disposal of property, plant and equipment

(1)

-

Depreciation on property, plant and equipment - Note 25

(369)

(57)

Amortisation of intangible assets - Note 26

(14)

-

Other administration expenses

(4,015)

(537)

Other operating expenses - loan forgiveness

-

(192)

Total operating expenses

(10,259)

(5,208)

 

Staff costs and directors remuneration include share option expense amounting to $311,000 (2013: $734,000) (Note 37).

 

                During the year the Group obtained the following services from the company auditors and its investee companies.

 

Fees payable to company's auditor and its associates for the audit of parent company and consolidated financial statements

300

433

Fees payable to company's auditor and its associates for other services:



The audit of company's subsidiaries

585

612

Audit-related assurance services

263

50

Total

1,148

1,095

 

21           Finance costs


2014

2013


US$ '000

US$ '000




Current borrowings:



Interest expense on bank loans

(299)

-

Interest expense on non bank loans

(131)

(120)

Interest expense on deferred consideration payable to Minet Group

(328)

-




Non-current borrowings:



Interest expense on non bank loans

-

(36)

Total finance costs

(758)

(156)

 

22           Income taxes

 

The major components of income tax expense/(credit) for the years ended 31 December 2014 and 31 December 2013 are shown below. There were no tax amounts that were recognized in other comprehensive income.               

                                                                                                                                                                               

22.1      Statement of comprehensive income




Current tax expense           

(282)

(7)

Deferred income tax:



Relating to origination and reversal of temporary differences

(43)

98

Income tax (expense)/credit reported in statement of comprehensive income

(325)

91

 

A reconciliation between tax expense and the product of accounting profit or loss multiplied by the Jersey's tax rate of 0% for the year ended 31 December 2014 (2013: 0%) is as follows:

 

Accounting profit/(loss) before tax

16,394

(9,683)

Tax at a standard rate of 0% (2013: 0%)

-

-

Effect of higher tax rates in other countries

(282)

(7)

Fair value adjustment gain taxable under capital gains tax

(43)

98

Income tax (expense)/credit

(325)

91

 

22.2       Deferred tax asset

 

Deferred tax asset resulted from the following:



Fair value loss relating to TA Holdings deferred acquisition costs  

640

1,365

Fair value adjustments on investment in associates

440


Total

1,080

1,365

 

Reconciliation of deferred tax asset



At 1 January

-

-

Acquisition of subsidiary - Note 8

1,080

-

At 31 December

1,080

-

 

22.3       Deferred tax liability

 

Deferred tax liability resulted from the following:



Revaluations of investment properties to fair value

1,408

1,365

Provisions and other temporary differences

5,564

-

Intangible assets

534

-

Total

7,506

1,365

 

Reconciliation of deferred tax liability



At 1 January

1,365

1,463

Acquisition of subsidiary - Note 8

5,873

-

Recognised in statement of comprehensive income

249

(98)

Effects of exchange rates

19

-

At 31 December

7,506

1,365

 

23           Earnings per share

 

Basic earnings per share amounts are calculated by dividing net profit or loss for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

 

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 year 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:

                                                                                                                                   




2014

2013


                   US$ '000

US$ '000

Profit/(loss) attributable to ordinary equity holders of parent for basic earnings and diluted earnings

15,432

(9,686)




Profit/loss from continuing operations attributable to ordinary equity holders of parent for basic earnings and diluted earnings

15,432

(8,505)





2014

2013


'000

'000




Weighted average number of ordinary shares for basic earnings per share

123,065

123,065

Effect of dilution: share options/shares allocated

-

-

Weighted average number of ordinary shares for diluted earnings per share

123,065

123,065





2014

2013


                US$

US$

Basic and diluted, on loss for the year attributable to ordinary equity holders of the parent         

0.13

(0.08) 

Basic and diluted, on loss from continuing operations for the year       attributable to ordinary equity holders of the parent

0.13

(0.07)

Basic and diluted, on loss from discontinued operations for the year       attributable to ordinary equity holders of the parent

0.13

(0.01)

 

The performance conditions for the 8.3 million share option scheme disclosed in Note 37 had not been met as at 31 December 2014. Consequently, 8.3 million share options will only have a dilutive effect in future when the performance conditions are met.

 

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.

 

24           Dividend paid

 

On 18 February 2014 the Directors of the Company declared a special cash dividend of 3.25 US cents per ordinary share. The dividend, amounting to approximately $4.0 million, was paid on 5 March 2014 out of the Company's available cash resources.

 

25           Property, plant and equipment

 


Freehold land and buildings

Machinery and vehicles

Furniture, fittings and other

Capital work in progress

Total







At 31 December 2014






Opening net book value

205

-

319

-

524

Acquisition of subsidiary - Note 8

23,672

2,487

2,706

574

29,439

Additions

-

102

12

205

319

Disposals

-

-

(55)

-

(55)

Depreciation

(273)

(31)

(65)

-

(369)

Exchange rate movements

185

(166)

99

-

118

Closing net book value

23,789

2,392

3,016

779

29,976

 

At 31 December 2014






Cost/valuation

24,062

2,423

3,192

779

30,456

Accumulated depreciation and impairment

(273)

(31)

(176)

-

(480)

Closing net book value

23,789

2,392

3,016

779

29,976

 

At 31 December 2013






Opening net book value

-

-

362

-

362

Additions

-

-

14

-

14

Acquisition of subsidiary

205

-

-

-

205

Depreciation

-

-

(57)

-

(57)

Closing net book value

205

-

319

-

524

 

At 31 December 2013






Opening cost/valuation

205

-

444

-

649

Accumulated depreciation and impairment

-

-

(125)

-

(125)

Closing net book value

205

-

319

-

524

 

Fair values of freehold land and buildings

 

The revaluation of freehold land and buildings for the year ended 31 December 2014 was carried out by independent professional valuers (Bard Real Estate (Private) Limited and Dawn Property Consultancy (Private) Limited. The gain on revaluation net of applicable deferred income taxes was credited to other comprehensive income and is shown in the revaluation reserve in shareholders' equity.

 

The freehold land and buildings valuations were based on market values which are defined as the estimated amount for which, a property would be exchanged between knowledgeable, willing parties in an arms length transaction. In determining the open market value estimates, comparable market evidence was considered. Refer to Note 6.1 for more details on the valuation of property.

 

No borrowing costs were capitalised to property, plant and equipment for the years ended 31 December 2013 and 31 December 2014.

 

 If land and buildings were stated on a historical cost basis, the amounts would be as follows:

 


2014

2013


US$ '000

US$ '000




At 1 January



Cost

6,579

250

Accumulated depreciation

(77)

-

At 31 December

6,502

250

 

Breakdown freehold land and buildings

 


2014

2013


US$ '000

US$ '000




Hotel properties:



Cresta Lodge - Mutare Road, Harare, Zimbabwe *

10,587

-

Cresta Oasis - Nelson Mandela Avenue (CBD), Harare, Zimbabwe

5,740

-

Residential properties:



Burnside suburb, Bulawayo, Zimbabwe

120

-

Belmont flat, Harare, Zimbabwe

29

-

Commercial properties - Offices:



Gaborone Business Park, Botswana

2,992

-

Zimnat House - Nelson Mandela Avenue (CBD), Harare, Zimbabwe

4,116

-

Number 134 George Silundika Street, Bulawayo, Zimbabwe

205

205

Total

23,789

205

 

* Includes work in progress amounting to $357,000 (2013: $nil) on the Cresta Lodge refurbishment project.

 

The Cresta Lodge, Mutare Road, was used a security for bank loan amounting to $4.2 million (2013: $nil) (Note 39).

 

For fair value hierarchy disclosures refer to Note 49.2.

 

26           Intangible assets

               


Software

Customer list

Brands

Total


US$ '000

US$ '000

US$ '000

US$ '000






At 31 December 2014





Opening net book value

-

-

-

-

Acquisition of subsidiary - Note 8

935

190

3,289

4,414

Additions

275

-

-

275

Amortisation

(6)

(8)

-

(14)

At 31 December 2014

1,204

182

3,289

4,675

 


Software

Customer List

Brands

Total


US$ '000

US$ '000

US$ '000

US$ '000






At 31 December 2014

-

-

-

-

Cost/valuation

1,210

190

3,289

4,689

Exchange rate movement

(6)

(8)

-

(14)

Closing net book value

1,204

182

3,289

4,675

 

At 31 December 2013

 

Net book value

-

-

-

-

 

For more information on the brands recognised, refer to Note 8.

 

27                Investment properties

                                                                                                                                                                 


2014


US$ '000



At 1 January

30,947

Acquisition of subsidiary - Note 8

15,453

Fair value adjustment

860

Transfer to non-current assets held for sale

(575)

At 31 December

46,685

30,947



The total property expenses, $1.7 million (2013: $1.7 million), disclosed on the face of the statement of comprehensive income are made up of direct operating expenses that generated rental income, $779,000 (2014: $762,000) and direct operating expenses that did not generate rental income, $915,000, (2013: $912,000) as detailed below:

 

Group's share of: -


Rental income derived from investment properties

2,029

Direct operating expenses (including repair and maintenance) generating rental income during the year

(779)

Direct operating expenses (including repair and maintenance) that did not generate rental income during the year

(876)

Profit from investment property carried at fair value attributable to non controlling interest

(135)

(57)

Profit arising from investment properties at fair value (excluding fair value adjustments, finance costs and finance income)

239

101

 

The following table shows the Group's largest investment property Joina City, fair value, insurance value and the gross replacement cost at 31 December 2014.

 


Fair value

Gross replacement cost

Insured value


US$ '000

US$ '000

US$ '000





Value of the whole property

55,500

87,672

87,672

Masawara's share of the value

31,807

50,245

50,245

 

Breakdown of investment properties                     

                                                                                                               


2014


US$ '000



Commercial - Offices:


Commercial building - Joina City, Jason Moyo, Julius Nyerere, Harare, Zimbabwe

31,807

Commercial building - Zimnat Plaza, Kwame Nkrumah, Harare, Zimbabwe

8,200

Commercial building - Gweru, Zimbabwe

410

Commercial building - Elsworth, Zimbabwe

430

Commercial property - 72 Birmingham Road, Harare, Zimbabwe

2,400

Supermarket - 99 Harare Street, Harare, Zimbabwe

810

Residential:


Makuti House, Nyanga, Zimbabwe

250

Northern suburbs, Harare, Zimbabwe

1,400

Phakalane, Gaborone, Botswana

448

Industrial:


Warehouses - Msasa, Harare

530

Total

46,685

30,947

 

The investment property, Commercial building - Joina City, Jason Moyo, Julius Nyerere, Harare, is the Group's share of 57.31% joint ownership in Joina City. This is held through Dubury Investments (Private) Limited (a subsidiary of Masawara Zimbabwe (Private) Limited) which owns 57.31% of Joina City.  

 

The Group has contractual obligations for on-going repairs, maintenance and enhancements, which are then recoverable from tenants as part of the service levy charge. As it is a recently constructed building, the Group is responsible for repairs arising out of any identified latent defects from the construction of the building.

 

Valuation of investment properties

Fair valuations of investment properties have been carried out by independent professional valuers, Dawn Property Consultancy (Private) Limited and Bard Real Estate (Private) Limited. The valuers are registered with the Real Estate Institute of Zimbabwe and have recent experience in the location and category of investment property held by the Group. The property valuations were carried out on the following basis:

 

The explicit investment approach was applied on the commercial properties, which is based on the principle that rentals and capital values are inter-related. Hence given income produced by a property, its capital value can be estimated. Comparable rentals inferred from other commercial properties within the locality of the properties based on use, location, size and quality of finishes were also used.

 

The residential property and industrial property valuations were based on market values, which were defined as the estimated amount for which a property could be exchanged between knowledgeable, willing parties in an arms length transaction. In determining the open market value estimates of the properties, comparable market evidence was considered. This comprised of transactions where offers had been made but the transaction had not been finalized. Professional judgement was used to adjust the market evidence.

 

The property market is highly segmented into different sectors i.e. industrial, residential and commercial property markets. There is further segregation on a geographical basis with some locations attracting a higher demand than others. Property may also be acquired for speculative, investment or owner occupation purposes. Although the different property markets may be difficult to distinguish, each market tends to have characteristics peculiar to it.

                               

This results in sharp differences in the values of the different properties based on type, location and demand for the particular property.

 

There are significant uncertainties in the market and the growth assumptions in the valuation model are made on the basis of a recovery in the market.     

 

The following is a disclosure of the significant assumptions made relating to the valuation of investment properties. This disclosure relates to only investment properties classified in level 3 fair value hierarchy i.e. the commercial properties. Due to the fact that Joina City makes up a significant portion of the total investment property balance and also due to its uniqueness in comparison to the other investment properties the significant assumptions used in determining its fair value have been shown separately. 

 


2014

2013

Joina City



Operating costs per sqm

$3-$4

$3-$4

Yield (market based adjusted for Joina City conditions)

7.5%-9%

6.8%

Assumptions related to rental rate



Occupancy

72%-90%

71%

Estimated average retail space value (market rent) per sqm in Year 1

$13-$15

$7.8 - $14.5

Estimated office space value (market rent) per sqm in Year 1

$10

$10

Estimated parking value (market rent) per bay per month in Year 1

$50

$50

Rental growth for Year 2 - Year 5

5%

5.5%

Rental growth for Year 5 - Year 10

10%

6.5%

 

Other investment properties



Estimated market rentals per sqm

$3 - $10

-

Yield (market based)

10%

-

Voids rate

0% - 10%

-

 

Sensitivity analysis

 

The valuation of investment properties give the highest and best value of the investment properties at 31 December 2014 as the current use of the properties represents the best use for the properties.

 

A sensitivity analysis has only been done for the three largest investment properties by value i.e. Joina City, Zimnat Mall and Birmingham commercial property.

 

The following table presents the sensitivity of the Group's share of the market based valuation of the Joina City to changes in the most significant assumptions underlying the valuation of the investment property. No comparative figures have been shown because the basis of valuation in 2014 was different from valuation in 2013.

 

Increase/(decrease) in valuation


2014

2013


US$ '000

US$ '000




Increase in discount rate by 100 basis points

(3,160)

-

Decrease in discount rate by 100 basis points

3,740

-

Impact of constant 5% growth rate for the whole 10 year period

(6,143)

-

Impact of no growth rate in rentals

(13,982)

-

Impact of maintaining occupancy at current 71% - no reduction in voids

(7,291)

-

Impact of 20% reduction in exit value

(3,643)

-

 

The following table presents the sensitivity of the Group's market-based valuation of the other investment properties to changes in the most significant assumptions underlying the valuation of the investment property.  

 

The sensitivity analysis for the other two significant properties is as below:

 


2014

2013


US$ '000

US$ '000




Other investment properties:






Zimnat Mall



Increase in capitalization rate by 1 basis point

(794)

-

Decrease in capitalization rate by 1 basis point

852

-

Void rate of 20%

(959)

-

Void rate at 0%

852

-

Increase in rent rates by 10%

761

-

Decrease in rent rates by 10%

(868)

-




Birmingham



Increase in capitalization rate by 1 basis point

(364)

-

Decrease in capitalization rate by 1 basis point

89

-

Void rate of 10%

(384)

-

Increase in rent rates by 10%

64

-

Decrease in rent rates by 10%

(384)

-

 

For fair value hierarchy disclosures, refer to Note 49.2.

 

28           Investment in associates and joint venture

               


2014

2013

             

US$ '000

US$ '000




Investment in associates - Note 28.1

13,261

19,880

Investment in joint venture - Note 28.3

-

-

Total

13,261

19,880

 

Share of profit of other associates amounting to $780,000 that is disclosed on the face of the statement of comprehensive income is made up of share of profit of iWayAfrica (Private) Limited amounting to $3,000 (Note Note 28.1.2), share of profit of Minerva Risk Advisors (Private) Limited amounting to $436,000 (Note 28.1.3) and share of profit of Cresta Marakanelo Limited amounting to $341,000 (Note 28.1.6).

 

28.1       Investment in associates

 

Investment in associates includes investments in iWayAfrica (Private) Limited ("iWayAfrica"), Sable Chemicals Industries Limited, Zimbabwe Fertiliser Company Limited, Cresta Marakanelo Limited and Continental Reinsurance Company Limited.

 

The reporting date of all associates is 31 December with the exception of iWayAfrica that has a reporting date of 31 March. For the purposes of preparing the Masawara Plc annual report, the financial statements of iWayAfrica have been prepared as of the same date as the financial statements of Masawara Plc. As at 31 December 2014, there were no contingent liabilities relating to the Group's interest in the associates.

 

The following shows a summary of the composition of the carrying amount of the Group's investment in associates.

 


2014

2013

             

US$ '000

US$ '000




TA Holdings Limited - Note 28.1.1

-

19,601

iWayAfrica Zimbabwe (Private) Limited - Note 28.1.2

282

279

Minerva Risk Advisors (Private) Limited - Note 28.1.3

-

-

Sable Chemicals Industries Limited - Note 28.1.4

-

-

Zimbabwe Fertiliser Company Limited - Note 28.1.5

3,629

-

Cresta Marakanelo Limited - Note 28.1.6

6,460

-

Continental Reinsurance Company Limited - Note 28.1.7

2,890

-

At 31 December

13,261

19,880

 

28.1.1     Investment in TA Holdings Limited ("TA Holdings")

 

TA Holdings is an investment holding company that was listed on the Zimbabwe Stock Exchange (TA Holdings was delisted on 12 February 2015) whose principal strategic investments are in insurance, agro-chemicals, and hospitality and leisure.

 

On 1 December 2014, the Group acquired TA Holdings through a business combination (Note 8) when it increased its shareholding in TA Holdings from 41.04% to 75.74%. The Group equity accounted for its investment in TA Holdings for the period 1 January 2014 to 30 November 2014 and consolidated the results of TA Holdings for period 1 December 2014 to 31 December 2014.

 

The following is a reconciliation of the Group's interest in TA Holdings Limited:

               


2014

2013


US$ '000

US$ '000




At 1 January

19,600

22,354

Share of profit/(loss)

2,542

(3,230)

Gain on bargain purchase

-

761

Share of other comprehensive loss

(641)

(965)

Purchase of additional shares

-

320

Share of movement in other reserves - Note 37

-

360

Fair value loss on fair valuation of previously held equity - Note 8

(7,565)

-

Transfer to investments in subsidiary

(13,936)

-

At 31 December

-

19,600

               

Other comprehensive income amounting to $641,000 that is disclosed in the reconciliation above, is split between other comprehensive loss to be reclassified to profit or loss in subsequent periods, net of tax amounting to $993,000 and other comprehensive income not to be reclassified to profit or loss in subsequent periods amounting to $350,000.

               

28.1.2     Investment in iWayAfrica Zimbabwe (Private) Limited ("iWayAfrica")

 

The Group has a 15.03% (2013: 15.03%) interest in iWayAfrica which is a broadband internet service company in Zimbabwe. The following is a reconciliation of the Group's interest in iWayAfrica:

 


2014

US$ '000

2013

US$ '000




At 1 January

279

204

Share of profit of associate

   

3

75  

At 31 December

   

282

279  

 

iWayAfrica summarised financial information for the year ended 31 December 2014 is disclosed in Note 28.2. iWayAfrica does not have other comprehensive income, hence iWayAfrica's total profit for the year ended 31 December 2014 disclosed in Note 28.2 is the same as the total comprehensive income for the same period.

 

28.1.3     Investment in Minerva Risk Advisors (Private) Limited ("Minerva Risk Advisors")

 

Minerva Risk Advisors is a provider of risk management services, insurance and reinsurance brokerage and human resource benefits consulting in Zimbabwe. As at 31 December 2013, the Group owned a 64.75% interest in Minerva Risk Advisors.

 

Effective 1 January 2014, the Group sold 20.75% shareholding in Minerva Risk Advisors (Private) Limited ("Minerva Risk Advisors") to TA Holdings Limited ("TA Holdings"). Subsequent to the sale of the Group's 20.75% shareholding in Minerva Risk Advisors to TA Holdings, it owned 44% of Minerva Risk Advisors' issued share capital whilst 5% of Minerva risk Advisors' issued share capital was owned by Minerva Risk Advisors Share Employee Trust and the 51% was owned by TA Holdings Limited.

 

The Group accounted for its investment in Minerva Risk Advisors as an associate in accordance with IAS 28 Investment in Associates and Joint Ventures from 1 January 2014 up to 1 December 2014, which is the date when the Group obtained control of TA Holdings Limited. Subsequent to the Group obtaining control of TA Holdings, the Group accounted for its interest in Minerva Risk Advisors as a subsidiary.

 

The following reconciliation shows how the Group accounted for Minerva Risk Advisors when it was at associate.

 


2014

US$ '000

2013

US$ '000




At 1 January

-

-

Fair value of investment in Minerva Risk Advisors

1,073

-

Share of profit of associate   

436

-

Dividend received

(440)

-

Transfer to investments in subsidiary - Note 7

(1,069)

-

At 31 December   

-

-

 

Minerva Risk Advisors total comprehensive income after tax for the year ended 31 December 2014 amounted to $1 million. Other Minerva Risk Advisors' financial information for the year ended 31 December 2014 has been summarised in Note 28.2.

 

28.1.4     Investment in Sable Chemicals Industries Limited ("Sable Chemicals")

 

The Group's interest in Sable Chemicals was acquired when the Group obtained control over TA Holdings Limited on 1 December 2014.

 

The Group has an effective 50.6% (2013: 0%) interest in Sable Chemicals though a direct shareholding of 41.18% and the remaining 9.42% held through other investments. Sable Chemicals, the sole producer of Ammonium Nitrate fertilizer in Zimbabwe.

 

The following is a reconciliation of the Group's interest in Sable Chemicals:

 


2014

US$ '000

2013

US$ '000




At 1 January

-

-

Acquisition of subsidiary

-

-

At 31 December   

-

-

 

Due to uncertainties of future returns from the investment in Sable Chemicals as a results non-viable electricity tariff and the fact that the company is not receiving sufficient power supply in order to operate at profitable levels, the Group's investment in Sable at acquisition was nil and remained impaired at year end.

 

Sable is still in negotiations with the Government of Zimbabwe with regard to the continuation of a viable electricity tariff for 2013 and beyond. At 31 December 2014 the results of these negotiations were still uncertain. In the absence of a viable electricity tariff, doubt is cast over the going concern status of Sable due the resultant uncertainity in Sable's future returns.

 

The Group is not obligated to settle any of Sable Chemicals obligations. Consequently, no provision or contingent liability has been recognised by the Group in respect to Sable Chemicals.

 

Sable Chemicals' total comprehensive income after tax for the year ended 31 December 2014 amounted to $2 million. Other Sable Chemicals' financial information for the year ended 31 December 2014 has been summarised in Note 28.2.

 

28.1.5     Investment in Zimbabwe Fertiliser Company Limited ("ZFC")

 

The Group has a 22.5% (2013: 0%) interest in ZFC, a distributer of agrochemicals in Zimbabwe. The Group's interest in ZFC was acquired when the Group obtained control over TA Holdings Limited on 1 December 2014.

 

The following is a reconciliation of the Group's interest in ZFC:

 


2014

US$ '000

2013

US$ '000




At 1 January

-

-

Acquisition of subsidiary - Note 8

3,629

-

At 31 December   

3,629

-

 

ZFC's total comprehensive loss after tax for the year ended 31 December 2014 amounted to $108,000. The Group is not obligated to fund any further losses incurred by ZFC.

 

OtherZFC's financial information for the year ended 31 December 2014 has been summarised in Note 28.2.

 

28.1.6     Investment in Cresta Marakanelo Limited ("Cresta Marakanelo")

 

The Group has a 35% (2013: 0%) interest in Cresta Marakanelo, a company which is incorporated in Botswana that provides hotel management services in Botswana and Zambia. The Group's interest in Cresta Marakanelo was acquired when the Group obtained control over TA Holdings Limited on 1 December 2014.

 

The following is a reconciliation of the Group's interest in Cresta Marakanelo:

 


2014

US$ '000

2013

US$ '000




At 1 January

-

-

Acquisition of subsidiary - Note 8

6,119

-

Share of profit of associate for the month of December 2014

341

-

At 31 December   

6,460

-

 

Cresta Marakanelo'stotal comprehensive income after tax for the year ended 31 December 2014 amounted to $14,000. Other Cresta Marakanelo's financial information for the year ended 31 December 2014 has been summarised in Note 28.2.

 

The Group has a 40% (2013: 0%) interest in Continental Re, a company which is incorporated in Botswana that provides treaty and facultative reinsurance for life assurance and short-term insurance companies in Southern Africa. The Group's interest in Continental Re was acquired when the Group obtained control over TA Holdings Limited on 1 December 2014. The following is a reconciliation of the Group's interest in Continental Re:

 


2014

US$ '000

2013

US$ '000




At 1 January

-

-

Acquisition of subsidiary - Note 8

2,890

-

At 31 December   

2,890

-

 

Continental Re'stotal comprehensive income after tax for the year ended 31 December 2014 was $161,000. However no profit is shown in reconciliation above because Continental Re did not make neither a profit nor a loss during the month of December 2014. Other Continental Re's financial information for the year ended 31 December 2014 has been summarised in Note 28.2.

 

28.2        Summarised financial information of associates

 


Revenue

 

US$ '000

Profit/(loss) after tax

US$ '000

Non-current assets

US$ '000

Current Assets

US$ '000

Non-current liabilities

US$ '000

Current Liabilities

US$ '000








TA Holdings Limited














2014

-

-

-

-

-

-

2013

76,829

(5,687)

96,376

59,838

82,879

12,432








iWayAfrica Zimbabwe (Private) Limited












2014

3,053

22

51

989

-

1,521

2013

-

-

-

-

-

-








Sable Chemicals Industries Limited










2014

30,876

3,707

28,259

37,506

4,304

32,545

2013

-

-

-

-

-

-








Zimbabwe Fertilizer Company Limited












2014

59,556

1,861

3,755

27,055

4,069

20,826

2013

-

-

-

-

-

-

 

Cresta Marakanelo Limited













2014

34,284

2,716

17,243

7,086

5,102

3,824

2013

-

-

-

-

-

-








Continental Reinsurance Company Limited












2014

4,678

161

385

12,818

2,529

3,574

2013

-

-

-

-

-

-

 

Reconciliation of summarised financial information to carrying value of associates

 



iWayAfrica

ZFC

Sable Chemicals

Cresta Marakanelo

Continental Reinsurance

2014







Net assets at 31 December 2014


(481)

16,130

28,916

15,403

7,100

Interest in associate


15.03%

22.5%

50.6%

35%

40%

Share of net assets


(72)

3,629

14,631

5,393

2,840

Goodwill


354

-

-

-

-

Impairment loss previously recognised

-

-

(13,709)

-

-

Fair value adjustment

-

-

-

1,067

50

Unrecognised share of profits of associate

-

-

(922)

-

-

Carrying amount at 31 December 2014

282

3,629

-

6,460

2,890

 

28.3       Investment in joint venture

 

The Group's investment in joint venture represents a 50% (2013: 50%) interest in Telerix, 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.

 

In accordance with IAS 28 Investment in Associates and Joint Ventures, Masawara Plc discontinued recognizing its share of further losses after the investment in Telerix was written off to $nil during the year ended 31 December 2012. Cumulative unrecognised share of losses at 31 December 2014 amounted to $4.3 million (2013: $2.2 million), which was determined as unrecognized share of losses at the beginning of the year plus current year unrecognised share of losses.

 

During the year ended 31 December 2013, the Group provided a guarantee to Telerix, limited to $1,465,250 relating to a $2.5 million loan obtained by Telerix's wholly owned subsidiary, Dandemutande Investments (Private) Limited ("Dandemutande") from Central African Building Society ("CABS"). The amount owed by Dandemutande to CABS as at 31 December 2014 was $1.1 million and this resulted in the Group reducing it liability relating to the financial guarantee from $1.2 million at 31 December 2013 to $666,000 at 31 December 2014.

 

The $534,000 that is disclosed as share of profit of Telerix in the statement of comprehensive income during the year ended 31 December 2014 relates to the unwinding of the financial guarantee liability.

                                                                                                                                                                                             

Telerix did not have other comprehensive income, hence Telerix's total loss after tax for the year ended 31 December 2014 is the same as the total comprehensive income for the same period. 

 

28.3.1     Summarised financial information for joint ventures

 

                Set out below are the summarised financial information for Telerix Communications (Private) Limited which is    accounted for using the equity method.

 

                Summarised statement of financial position

 


2014

2013

            

US$ '000

US$ '000

Current



Cash and cash equivalents

26

13

Other current assets (excluding cash)

680

532

Total current assets

706

545




Financial liabilities (excluding trade payables)

-

-

Other current liabilities (including trade payables)

(2,102)

(2,125)

Total current liabilities

(2,102)

(2,125)




Non-current



Assets

14,927

15,796

Financial liabilities

(26,040)

(22,726)

Other liabilities

-

-

Total non-current liabilities

(26,040)

(22,726)

Net assets

(12,509)

(8,510)

 

 

                Summarised statement of comprehensive income

 


2014

2013

            

US$ '000

US$ '000




Revenue

5,099

4,306

Cost of sales

(3,506)

(3,378)

Gross profit

1,593

928

Other income

73

104

Other expenses

(3,874)

(4,123)

Impairment reversal/(loss)

44

(1,918)

Loss before finance costs and tax

(2,164)

(5,009)

Finance costs

(2,663)

(1,777)

Loss before tax

(4,827)

(6,786)

Income tax credit

778

1,286

Loss for the period

(4,049)

(5,500)

 

The information above reflects the amounts presented in the financial statements of the joint venture adjusted for differences in accounting policies between the group and the joint venture.

 

29           Financial assets

 


2014

2013

            

US$ '000

US$ '000




Held-to-maturity financial assets- Note 29.1

24,239

9,021

Available-for-sale financial assets - Note 29.2

817

-

Financial assets at fair value through profit or loss - Note 29.3

34,199

-

Staff loans receivable

-

389

Loans receivable - Note 29.5

-

2,161

Total

59,255

11,571

 

29.1        Held-to-maturity financial assets

 

Debt securities - fixed interest rate



- Unlisted

24,239

9,021

Total held-to-maturity financial assets

24,239

9,021

 

Financial assets under the held to maturity category is made up of debentures in Cherryfield Investments (Private) Limited, a co-owner of the Joina City $1.8 million (2013: $1.8 million), Telerix Communications (Private) Limited ("Telerix") loan notes amounting to $11.4 million (2013: $nil), fixed deposit with Afrasia Bank amounting to $1.5 million and unlisted debt securities amounting to $9.6 million (2013: $nil).

 

The prior year debt securities balance included $7.2 million Telerix debentures that were converted into Telerix loan notes during 2014 financial year, refer to Note 29.5 for more details.

 

Cherryfield Investments (Private) Limited ("Cherryfield") debentures

Masawara Zimbabwe (Private) Limited, through its subsidiary Melville Investments (Private) Limited, holds debentures in Cherryfield Investments (Private) Limited, a co-owner of Joina City. These debentures represent a further interest in Joina City, in addition to the 57.31% share of Joina City which the Group holds through its subsidiary Dubury Investments (Private) Limited.

 

The debentures are unsecured and began to earn interest at a coupon rate of 2% on 1 January 2013. The debentures are repayable five years after the completion of the Joina City i.e. February 2016.




2014

2013


US$ '000

US$ '000




At 1 January

1,762

1,742

Finance income

35

35

Repayments

(33)

(15)

At 31 December

1,764

1,762

 

Telerix Communications (Private) Limited ("Telerix") loan notes

 

On 21 March 2014 Masawara converted all the Telerix debentures amounting to $7.2 million and loans receivable from Telerix amounting to $2.2 million into a loan note. The loan note has variable interest rates, over a period of 5 years as shown in the following table.

 

Period (months)

Interest rate (percentage)

0 - 24

10%

25 - 36

12%

37 - 48

14%

49 -60

16%

61 -65

18%

 

Below is a reconciliation of the investment in Telerix loan notes.


2014

2013


US$ '000

US$ '000




At 1 January

-

-

Transfer from loans and receivables and debentures

9,628

-

New loans granted during the year

3,303

-

Interest received

1,302

-

Impairment loss

(2,853)

-

At 31 December

11,380

-

The facts that the repayment dates for the amounts granted to Telerix have been extended, Telerix has recurring losses and the fact that Telerix may not have adequate resources to repay all its debts on the maturity date, 21 March 2019, an impairment test has been carried out. The present value of estimated future cash flows were discounted at the original effective interest rate in order to determine the recoverable amount of the loan notes and this resulted in the Group recognizing impairment losses amounting to $2.9 million relating to the loan notes.

 

In determining the recoverable amount, the Directors assumed that $4.4 million per year, beginning December 2018, will be repaid for four years and a final payment of $2.8 million will be made at the end of the year 2022. An effective interest rate of 16% has been used in determining the recoverable amount of the loan notes.

 

If it had been assumed that the Telerix will only begin making loan notes repayments at the end of 2019 financial year, then the impairment loss would increase by $1.2 million. If it had been assumed that the Telerix will begin making loan notes repayments at the end of 2017 financial year, then the impairment loss would decrease by $1.4 million.

 

Fixed deposit

The Group holds a $1.5 million fixed deposit with Afrasia Bank Limited beginning 7 November 2014. The fixed deposit matures on 7 November 2015, earns interest at a rate of 1.5% per annum which is payable quarterly.

 

29.2        Available for sale financial assets

 


2014

2013


US$ '000

US$ '000

Debt securities



- Unlisted (Uganda government bonds)

817

-

Total available for sale financial assets

817

-

 

29.3        Financial assets at fair value through profit or loss

 

Equity securities



- Listed

29,447

-

- Unlisted

4,752

-

Total financial assets at fair value through profit or loss

34,199

-

 

29.4        Staff loans receivable - non-current

               


2014

2013


US$ '000

US$ '000




Loans to Directors

-

336

Loans to employees

-

53

At 31 December

-

389

 

Further details of loans to Directors are included in Note 48. Loans to Directors and employees are charged interest of 6% per annum. Current portion of Directors and staff loans have been included in trade and other receivables (Note 32).

 

29.5        Loan receivable

 

Loan receivable balance in prior year related to a loan that was receivable from Telerix Communications (Private) Limited ("Telerix"). On 21 March 2014, the loan was converted into a loan note, refer to Note 29.1.

 

29.6        Financial assets movement

 

                The movement of the Group's financial assets (excluding loans and receivables) are summarised in the table          below by measurement category:

 

  

Held to Maturity

Available for sale

Fair value through profit or loss

Total


US$ '000

US$ '000

US$ '000

US$ '000






At 1 January 2013

6,277

-

-

6,277

Finance income

828

-

-

828

Debenture interest received (cash)

(15)

-

-

(15)

Impairment loss

(218)

-

-

(218)

Transfer from preference shares

2,149

-

-

2,149

At 31 December 2013

9,021

-

-

9,021

Acquisition of subsidiary - Note 8

8,727

817

34,250

43,794

Additions

8,411

904

3,441

12,756

Disposals (maturities and sales)

-

(1,536)

(3,902)

(5,438)

Repayments

(33)



(33)

Fair value gains

-

449

204

653

Finance income

1,337

-

-

1,337

Impairment loss

(2,853)

-

-

(2,853)

Effects of foreign currency translation

(371)

183

206

18

At 31 December 2014

24,239

817

34,199

59,255

 

                For fair value hierarchy disclosures, refer to Note 49.1.

 

30           Inventories

 



2014

2013



US$ '000

US$ '000





Consumables


308

-

 

31           Insurance receivables

 

Due from agents, brokers and intermediaries


9,250

-

Less: impairment allowance


-

-

Total insurance receivables


9,250

-

 

Insurance receivables amounting to $11.6 million were acquired when the Masawara Group obtained control over TA Holdings Limited, effective 1 December 2014. The Group does not hold any collateral as security against potential default by all counterparties. As at 31 December 2014 insurance receivables amounting to $7.7 million (2013: $nil) were fully performing.  

 

As of 31 December 2014, insurance receivables of $1.5 million (2013: $nil) were past due but not impaired. The ageing of these receivables is as follows:

               



2014

2013



US$ '000

US$ '000

3 - 6 months


1,458

-

Over 6 months


72

-



1,530

-

 

As at 31 December 2014, no insurance receivables were impaired.

               

There are no credit ratings for insurance receivables. All counter parties are assessed before transacting with them. There have been some defaults in the past. Most of the defaults were fully recovered and the Group has stopped transacting with counter parties with history of defaults.

 

32           Trade and other receivables      

                                                                             


2014

2013


US$ '000

US$ '000




Trade receivables

13,103

-

Prepayments

1,887

-

Receivables from related parties

2,642

440

Rent and service charge receivables

142

67

Loans to Directors and employees

2,642

329

VAT receivables

3

-

Bills receivable

303

-

Other receivables

1,924

56

At 31 December

22,646

892

 

Trade receivables are non-interest bearing and are generally on 30 - 90 day terms. The fair values of trade and other receivable approximate their carrying amounts. The carrying amounts of the financial assets best represent the maximum exposure to credit risk. The Group does not hold any collateral as security against potential default by all counterparties.

 

Loans receivable from related parties are considered to be fully recoverable although where appropriate, loans and receivables from related parties have been impaired in order to reflect the delay in the timing of repayments. For more details on what procedures the Group implements to cater for the risk of non recoverability of related party receivable balances, refer to Group's credit risk policy included in Note 46.

 

Rent and service charge receivables are non-interest bearing and are typically due within 30 days. Rent and service charge receivables that are in the 60 and over day period are provided for in the financial statements by way of an allowance for credit losses account.

 

Below is a reconciliation of the allowance for credit loss account against the rent and service charge receivables:

 


2014

2013


US$ '000

US$ '000




At 1 January

238

190

Current year provision

133

48

Bad debts written off

(64)

-

At 31 December

307

238

 

Loans to employees include loans granted to Directors amounting to $692,000 (2013: $570,000). Loans to employees are charged interest of 6% per annum.

          

33           Cash resources

                                                                                                                                             


2014

2013


US$ '000

US$ '000




Cash at banks and cash on hand

18,300

50

Total

18,300

50

 

Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for periods less than three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.

 

34           Non-current assets classified as held for sale

 


2014

2013


US$ '000

US$ '000




Masawara Energy (Mauritius) Limited

-

23,130

Minerva Risk Advisors -  Note 7

-

11,661

Investment property

575

-

Total

575

34,791

 

As highlighted in table above, the prior year non-current assets classified as held for sale balance was made up investment in Masawara Energy (Mauritius) Limited and Minerva Risk Advisors total assets classified as held for sale following qualification as such under IFRS 5 Non-current assets held for sale and discontinued operations requirements.

 

On 31 January 2014, Masawara Plc disposed of its entire interest in Masawara (Energy) Mauritius Limited for $29.3 million to Woble Investments (Private) Limited. The proceeds received on 31 January 2014 of $26.7 million were net of the $2.6 million deposit that was received in July 2013. Profit on the disposal of MEM amounted to $6.2 million.

 

Effective 1 January 2014, the Group reduced its shareholding in Minerva Risk Advisors from 64.75% to 44%. On that date, the Group derecognised assets and liabilities that were classified as held for sale, refer to Note 7 for more details.

 

The investment properties that are classified as held for sale at year ended 31 December 2014 are residential properties was owned by Zimnat Lion (Private) Limited, a wholly owned subsidiary of TA Holdings Limited. The investment properties were classified as held for sale following the approval of the sale by the Zimnat Lion (Private) Limited Board in December 2014.

 

The sale transactions were completed in January 2015 and March 2015, refer to Note 53 for more information.

 

35           Share capital

 

Authorised shares

                          2014

                   2013




Authorised ordinary shares of $0.01 each

       35,000,000,000

        35,000,000,000




Ordinary shares issued and fully paid

                         

              


     Number of shares   

                            US$




At 1 January 2013

          123,065,409

           1,230,655

At 31 December 2013

          123,065,409

           1,230,655

At 31 December 2014

          123,065,409

           1,230,655

 

Share capital and share premium movement

 


Number of shares

Share capital

Share premium

Treasury shares

Total



US$ '000

US$ '000

US$ '000

US$ '000







Balance at 1 January 2013

123,065,409

1,235

84,110

(333)

85,012

Balance at 31 December 2013

123,065,409

1,235

84,110

(333)

85,012

Dividend paid

-

-

(4,000)

-

(4,000)

Balance at 31 December 2014

123,065,409

1,235

80,110

(333)

81,012

 

36           Group restructuring reserve

 

This reserve arose in the 2010 financial year on consolidation under the pooling of interests method, where the Masawara Group was treated as a continuation of the Masawara Zimbabwe (Private) Limited Group. Share capital together with share premium in the new parent company, Masawara Plc, was $40,466,202, which reflected the cost of the investment in Masawara Zimbabwe (Private) Limited, which equated to the net assets of Masawara Zimbabwe (Private) Limited at the date of reorganization. The difference between the share capital and share premium of the new parent company, Masawara Plc, and the share capital and share premium of the old parent company, Masawara Zimbabwe (Private) Limited, was $9,283,142 which was recorded in the Group Restructuring Reserve.

 

37           Other capital reserves

                                               


2014

2013


US$ '000

US$ '000        




At 1 January

(156)

(103)

Share based payment transactions - non cash

311

734

Share of other reserve movements of associate - Note 28.1

-

360

Share of associates' other comprehensive income - Note 28.1

(993)

(965)

Share of associates' asset revaluation transferred to revaluation reserve - Note 38

-

(182)

Exchange differences on translation of foreign operations

424

-

Net gain on available for sale investments

449

-

 At 31 December

35

(156)

 

Within other capital reserve, is a reserve that records share based payment expenses, a reserve that records fair value gains or losses on available for sale investments, a reserve that records exchange rate movements on translation of foreign operations, a reserve that records share of the movements in other reserves of associates and another reserve that records the Group's share of other comprehensive income of associates, with the exception of the Group's share of revaluation reserves of associates which is recorded under the revaluation reserve.

 

Share based payment reserve

On 1 October 2012, Masawara Plc granted 8,333,916 share options to Masawara Zimbabwe (Private) Limited "Masawara Zimbabwe" senior management. The share options granted gave the Masawara Zimbabwe senior management the right to purchase Masawara Plc shares at an exercise price of 50 pence, being the price per share at which shares were placed on Admission of Masawara Plc on AIM. Vesting of the share options is dependent on Masawara Plc achieving a hurdle rate of 15% which is a weighted average of the cumulative increase in both Masawara Plc net asset value and Masawara Plc share price and the share options shall vest as follows:

·      40-60% of the Share Options shall vest at the later of 19 August 2013 or the attainment of the Hurdle Rate (Tranche 1);

·      20-30% of the Share Options shall vest at the later of 19 August 2014 or the attainment of the Hurdle Rate (Tranche 2);

·      the balance of the Share Options shall vest at the later of 19 August 2015 or the attainment of the Hurdle Rate (Tranche 3).

 

The vesting allocation highlighted above is at the discretion of Masawara Plc Directors. Of the $311,000 share option expense recognised in the current year, $184,000 relates to share options granted to J Vezey a Director of Masawara Plc.

The fair value of the options was determined using the Black Scholes pricing model taking into account the terms and conditions upon which the share options were granted. The inputs into the valuation were stated in pounds and the resultant valuation was translated using the prevailing exchange rate on the grant date i.e. 1 US$: 1.613 GBP. The key inputs into the valuation have been disclosed below.

 


Tranche 1

Tranche 2

Tranche 3

Strike price

50 pence

50 pence

50 pence

Expected option life in years

2

3

4

Volatility

27.62

27.62

27.62

Risk free rate

0.34%

0.54%

0.79%

Dividend yield

0.00%

0.00%

0.00%

 

The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.

 

Share options movement during the year

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year:

 


2014

2014

2013

2013


Number

WAEP

Number

WAEP

Outstanding at 1 January

8,333,916

50 pence

8,333,916

50 pence

Granted during the year

-

-

-

-

Outstanding at 31 December

8,333,916

50 pence

8,333,916

50 pence

 

There were no share options that expired, were forfeited or were exercised during the year. As at 31 December 2014, there were no share options that were exercisable because not all the vesting conditions had been met.

 

38           Revaluation reserve                 





2014

2013


US$ '000

US$ '000




At 1 January

10,045

9,863

Revaluation adjustment for the period

350

182

Transfer to retained earnings

(10,395)

-

At 31 December

-

10,045

 

Revaluation adjustment relates to Masawara Plc's share of a gain recognised on revaluation of property, plant and equipment by associate, TA Holdings Limited.

 

On acquisition of the controlling interest in TA Holdings Limited, revaluation reserve was recycled through retained earnings.

 

39           Financial liabilities         

 

                Non-current financial liabilities

               

2014

2013


       US$ '000 

                      US$ '000




 Long term bank loans -  Note 39.1

4,273

-

 Deferred consideration payable to Minet Group - Note 39.3

1,171

1,882

 Total

5,444

1,882

 

Current financial liabilities

 Current portion of long term bank loans - Note 39.1

1,027

-

 Loan payable to non-controlling interest shareholder - Note 39.2

5,975

6,005

 Deferred consideration payable to Minet Group - Note 39.3

1,009

325

Short term bank loans - Note 39.4

-

345

 Bank overdraft - Note 39.4

1,416

-

 Total

9,427

6,675

 

Movements in borrowings per category

 

39.1        Long term bank loans


2014

2013


 US$ '000

                     US$ '000




 At 1 January

-

-

 Acquisition of subsidiary -  Note 8

5,397

-

 Repayments

(97)

-

 Total bank loans

5,300

-

Less current portion of bank loans

(1,027)

-

Total long term bank loans

4,273

-

               

The Bank borrowings comprise the following:

·      Long term loan of $460,000 (2013: $nil) with an interest rate of 17%, maturing in 2015.

·      Long term loan of $4.2 million (2013: $nil) with an interest rate of 11%, maturing in 2019. The $4.2 million long term borrowing is secured by a hotel property (Cresta Lodge), refer to Note 25. All other borrowings are unsecured.

 

All borrowings are stated at amortised cost. The carrying amount of borrowings approximates approximates fair value.

 

39.2        Loan payable to non-controlling shareholder                                                                                                                                  


2014

2013


 US$ '000

                      US$ '000




 At 1 January

6,005

5,977

 Finance cost

120

120

 Repayment

(150)

(92)

 At 31 December

5,975

6,005

 

Loan payable to non-controlling shareholder is unsecured, does not have fixed repayment terms and the loan began bearing interest with effect from 1 January 2013 at a rate of 2% per annum.

 

39.3        Deferred consideration payable to Minet Group

This relates to the amount payable to Minet Group for the acquisition of Minerva Holdings (Private) Limited. Refer to the reconciliation below.

 


2014

2013


          US$ '000 

                    US$ '000




 At 1 January

2,207

2,207

 Finance cost

327

-

 Loan repayment

(354)

-

 Total deferred consideration payable to Minet Group

2,180

2,207

Less current portion of deferred consideration payable to Minet Group

(1,009)

-

Non-current portion of deferred consideration payable to Minet

1,171

-

 

39.4        Short term bank Loans


2014

2013


US$ '000 

US$ '000




At 1 January

331

-

New loans - cash

-

309

Accrued finance costs

6

36

Loan repayment

(309)

-

Finance costs paid

(28)

-

At 31 December

-

345

               

The short term loan was secured from African Banking Corporation of Zimbabwe. The loan bore interest at a rate of 13% and was repaid in full, including accrued interest, on 17 February 2014.

 

The Group had an overdraft facility of $1.4 million with an interest rate of 16% plus LIBOR rate. The Group had undrawn borrowing facilities of $440,000 million at the reporting date (2013: $2.0 million).

 

40           Deferred income

 


2014

2013


       US$ '000 

                       US$ '000




At 1 January

2,600

-

Acquisition of subsidiary - Note 8

1,984

-

Deposit received for sale of Masawara Energy (Mauritius) Limited

-

2,600

Disposal of Masawara Energy (Mauritius) Limited ("MEM")

(2,600)

-

Utilisation of deferred income

(72)

-

At 31 December

1,912

2,600

 

Deferred income in prior year relates to a non refundable deposit amounting to $2.6 million that was received from Woble Investments (Private) Limited "Woble" on 25 July 2013, as part of the purchase consideration for the sale of Masawara Energy (Mauritius) Limited "MEM". The sale transaction was only completed on 31 January 2014, also refer to Note 34.

 

41           Insurance and investment contract liabilities

 

41.1       Gross insurance contract liabilities

 


2014

2013


US$ '000

US$ '000

 Short-term insurance contracts



 - Claims reported and loss adjustment expenses

16,717

-

 - Claims incurred but not reported

3,794

-

 - Unearned premium

23,274

-

 Long-term insurance contracts



 - With fixed and guaranteed terms

4,656

-

 Total insurance liabilities, gross

48,441

-

 

41.2       Reinsurance assets

 

 Short-term insurance contracts



 - Claims reported and loss adjustment expenses

(10,925)

-

 - Claims incurred but not reported

(1,489)

-

 - Unearned premium

(11,393)

-

 Total reinsures' share of insurance liabilities

(23,807)

-

 

41.3       Net insurance liabilities

 

 Short-term insurance contracts



 - Claims reported and loss adjustment expenses

5,792

-

 - Claims incurred but not reported

2,305

-

 - Unearned premium

11,881

-

 Long-term insurance



 - With fixed and guaranteed terms

4,655

-

 Total insurance liabilities, net

24,633

-

 

41.4       Investment contracts with and without Discretionary Participation Features

 


2014

2013


US$ '000

US$ '000




 At 1 January

-

-

Acquisition of subsidiary - Note 8

30,372

-

 Movement for the month of December 2014

-

-

 At 31 December

30,372

-

 

$17.1 million related to investment contracts with discretionary participation features and $13.3 million related to investment contracts with discretionary participation.

 

41.5       Insurance contract liabilities

 

 At 1 January

-

-

Acquisition of subsidiary - Note 8

47,369

-

 Movement for the month of December 2014

1,072

-

 At 31 December

48,441

-

 

42           Insurance payables (amounts payable in direct insurance business)

 

 At 1 January

-

-

Acqusition of subsidiary - Note 8

5,893

-

 Net movement for the month of December 2014

(3,257)

-

 Foreign exchange adjustment

52

-

 At 31 December

2,688

-

 

43           Provisions

 

 At 1 January

-

-

Acquisition of subsidiary - Note 8

1,813

-

 Charge to income statement

-

-

 Utilised during the year

-

-

 Exchange difference

11

-

 At 31 December

1,824

-

 

                Provisions comprise:

·      Leave pay of $779,000 (2013: $43,000). This relates to an obligation of the Group to compensate employees for future absences attributable to employees' services already rendered.

·     Bonus provision of $1 million (2013: $nil). This is a performance bonus which is usually paid within 3 months of the finalisation of audited financial statements of TA Holdings Limited, subject to cash flow availability.

 

44           Trade and other payables                        


2014

2013


US$ '000

US$ '000




Trade payables

10,968

-

Amounts due to related parties

102

146

Accrued expenses

2,882

-

Value Added Tax             

996

-

Guest deposits

256

-

Financial guarantee contract

660

1,194

Other payables

2,713

1,324

At 31 December

18,577

2,664

 

45           Cash generated from operating activities



2014


2013



US$ '000


US$ '000






Profit/(loss) before tax from continuing operations


16,394


(9,683)

 Adjustments to reconcile loss before tax to net cash flows from operating activities:





       Share of profit/(loss) of associate - TA Holdings Limited

28.1

(2,542)


3,230

Gain on bargain purchase of additional shares in an associate

28.1

-


(761)

       Share of loss of associate - Telerix Communications

28.3

(534)


1,194

       Share of profit of other associates

28

(780)


(75)

Gain on bargain purchase of TA Holdings Limited

8

(9,973)


-

Net realized and unrealized gains/(losses)

15

(4,933)


2,229

Gain on bargain purchase of Minerva Holdings (Private) Ltd


-


(241)

Depreciation

20

369


57

Loss on disposal of investments

20

4


-

Amortisation of intangible assets

20

14



Insurance claims recovered from reinsurers

18.4

2,603



Loan forgiveness


-


192

Share-based payment transaction expense

37

311


734

Finance cost


758


156

Finance income


(1,909)


(1,100)

Unrealized exchange losses


1


7

Working capital adjustments:





Increase in inventory


(13)


-

Increase in reinsurance receivables


(1,744)


-

Decrease in insurance receivables


2,174


-

Decrease in trade and other receivables


291


36

Increase in insurance contract liabilities


1,165


-

Decrease in deferred income


(73)


-

Increase in insurance payables


(2,122)



Increase in loans to Directors and employees


(566)


(280)

(Decrease)/increase in other payables


(2,502)


242

Cash generated from operating activities


(3,607)


(4,063)

 

46           Financial risk management

 

The primary objective of the Group's risk management framework is to protect the Group's shareholders from events that hinder the sustainable achievement of financial performance objectives, including failing to exploit opportunities. Key management recognises the critical importance of having efficient and effective risk management systems in place.

 

The Group is exposed to financial risk through its financial assets and financial liabilities. The Group's principal financial liabilities comprise bank loans and overdrafts, trade payable, other loans and insurance contract liabilities. The main purpose of these financial liabilities is to raise finance for the Group's operations. The Group has various financial assets such as shares in listed and unlisted entities, trade receivables and cash and short-term deposits, which arise directly from its operations.

 

The Group's policy is to manage financial risk separately through its operations subject to monitoring by the Group Treasurer and the Investment Committee. The risks arising from policyholder and shareholder financial instruments are similar in nature, as such no distinction has been made in assessing the quantitative effects of the financial risks emanating from these financial instruments.

 

The policies for managing each of these risks are summarized below:

 

46.1       Credit risk

 

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to financial loss. The Group is exposed to credit risk from its leasing activities, loans and receivables, investments in debt securities, insurance policyholders, amounts due from underwriting agencies and brokers, reinsurance assets and from deposits with banks. Credit risk is minimized by requiring tenants to pay rentals in advance. The credit quality of customers is assessed based on a credit rating scorecard at the time of entering into a lease agreement. Outstanding receivables are regularly monitored and followed up.

 

The Group's share of outstanding tenants' receivables as at 31 December 2014 was $385,000 (2013: $305,000) of which 31% (2013: 78%) had been owed for 30 days and below. 7% of the outstanding tenants' receivables as at 31 December 2014 had been owed for between 30 days and 60 days, 7% had been owed for between 60 days and 90 days, and 55% had been owed for between 90 days and 120 days. There were no past due but not impaired tenant's receivables at 31 December 2014 (2013: $nil).

 

With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash equivalents, loans and receivables and debt securities, the Group's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments at the reporting date, of $64 million (2013: $nil).

 

As of 31 December 2014, trade receivables of $5.8 million (2013: $nil) were past due but not impaired. The ageing analysis of these trade receivables is as follows:

 


2014

2013


US$

US$




Up to 3 months

1,613

-

3 to 6 months

4,201

-

Total

5,814

-

 

The Group has no significant concentration of credit risk.

 

The credit quality of cash at banks can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates. The following

 


2014

2013


US$ '000

US$ '000




Cash at banks and short-term bank deposits



AA+                           

2,564

-

AA

1

-

AA-

7,749

27

A+

1,489

2

A-

146


BBB

4,237

17

BB+

57

4

LD

79

-

Unrated (rating not available)

1,901

-


18,223

50

Cash in hand

77

-

Total cash and cash equivalents

18,300

50

 

Investment grade

Description



AA

AA-



A+

High credit quality. Protection factors are good. However, risk factors are more variable and greater in periods of economic stress.

A-



BBB

Adequate protection factors and considered sufficient for prudent investment.  However, there is considerable variability in risk during economic cycles.




BB+

Below investment grade but capacity for timely repayment exists. Present or prospective financial protection factors fluctuate according industry conditions or company fortunes. Overall quality may move up or down frequently within this category



LD

Defaulted on one or more of its obligations, failing to meet the schedule principal and/or interest payments (LD). Defaulted on all obligations, or is likely to default on all or substantially all scheduled principal and/or interest payments (DD)

Unrated

The financial institutions in this category do not have ratings. Based on management's experience with these institutions their financial performance has been stable and their generally adopt a prudent approach to liquidity management.

 

46.2       Liquidity risk

 

Liquidity risk is the risk that the meet its financial obligations as they fall due. The Group's exposure to liquidity risk relates mainly to borrowings, investment contracts and their liabilities, insurance contracts and their liabilities and trade and other payables.

 

The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities as they fall due, without incurring unacceptable losses or risking damage to the Group's reputation. The Group manages liquidity risk by maintaining adequate cash resources and banking facilities and by continuously monitoring forecast and actual cash flows.

 

The table below summarises the maturity profile of the Group's financial liabilities at 31 December 2014:

 

Maturity profile for liabilities

 

The amounts disclosed in the table are the contractual undiscounted cash flows.

 

31 December 2014

Within 3 months

3 - 12 months

1- 5 years

More than 5 years


US$ '000

US$' 000

US$ '000

US$ '000

Liabilities





Borrowings

333

8,005

5,791

-

Investment contracts with DPF

235

431

10,227

6,148

Investment contracts without DPF

165

506

9,394

3,216

Insurance contract liabilities

-

48,441

-

-

Insurance payables

672

2,016

-

-

Trade and other payables

13,730

4,847

-

-


15,135

64,246

25,412

9,364

 

31 December 2013

Within 3 months

3 - 12 months

1- 5 years

More than 5 years


US$ '000

US$ '000


US$ '000

Liabilities





Borrowings

670

8,849

-

-

Trade and other payables

5,273

-

-

-


5,943

8,849

-

-

 

46.3       Fair values of financial assets and financial liabilities

 

The carrying amounts and fair value of the Group's financial instruments are reasonable approximations of fair values with because the interest rates charged are market related rates with the exception of debentures held with Cherryfield Investments (Private) Limited "Cherryfield Investment" (Note 29.1).

 

The following table shows a comparison of the carrying amounts of the fair value debentures held with Cherryfield Investments with the carrying amounts.

 

The fair value disclosed in the following table was determined by using the DCF method using a discount rate of 16% which reflects the fair market rates at the end of the reporting period.

 


                        Carrying amount


                Fair value


2014

2013


2014

2013


US$ '000

US$ '000


US$ '000

US$ '000







Cherryfield Investments debentures

1,764

1,762


1,382

1,222

 

46.4       Market risk

 

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises of foreign exchange rates (currency risk) and market interest rates (interest rate risk).

 

Interest rate risk

Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. This risk arises from the Group's investment in debt securities and its borrowings which comprise overdraft facilities and short-term and long-term bank loans.

 

Floating rate instruments expose the Group to cash flow interest risk, whereas fixed interest rate instruments expose the Group to fair value interest risk. The Group's interest risk policy requires it to manage interest rate risk by maintaining an appropriate mix of fixed and variable rate instruments. The policy also requires it to manage the maturities of interest bearing financial assets and interest bearing financial liabilities. Interest on floating rate instruments is re-priced at intervals of less than one year. Interest on fixed interest rate instruments is priced at inception of the financial instrument and is fixed until maturity.

 

The Group has no significant concentration of interest rate risk.

 

An increase or decrease by five percent (5%) in the respective interest rates would result in the following changes

 


2 014

2 014


Increase 5%

Decrease 5%


US$ '000

US$ '000




(Decrease)/increase in long-term bank loans

(320)

   707

 

As at 31 December 2014, an increase or decrease of 5% in the interest rates relating to interest bearing borrowings and debt securities, with all other variables held constant, would result in an increase/decrease in profit after tax by $82,350 (2013: $nil).

 

Foreign currency risk

As a result of significant investment operations in Botswana, Uganda and South Africa, the Group's statement of financial position can be affected significantly by movements in the US$ to the other currencies' exchange rate. The Group also has transactional currency exposures. Such exposure arises from normal trading activities as well as investments by an operational unit in currencies other than the unit's functional currency.

 

The Group mitigates foreign currency risk by ensuring financial assets are primarily denominated in the same currencies as its insurance contract liabilities. And ensuring that there is a balance between total assets attributable to Group companies whose functional currency is the same as the holding company's and group companies whose functional currency is different from the holding company's. Approximately 42% (2013: 47%) of the Group's total assets are denominated in currencies other than the functional currency of the holding company.

 

A strengthening or weakening in foreign exchange rates against the US$ of 10%, with all other variables held constant would result in the following changes in shareholders' equity at 31 December 2014 and profit after tax for the year then ended 31 December 2014.

 



2014

2014

2014



BWP

UGX

ZAR






Currency US$ equivalent

$ '000

$ '000

$ '000






10% strengthening









Increase in shareholders' equity


  3,620

   462

   70

Increase in profit after tax


   176

   105

   16





10% weakening









Decrease in shareholders' equity


(2 962)

(378)

(57)

Decrease in profit after tax

(144)

(86)

(13)

 

The table below summarises the group's monetary assets and liabilities, which are denominated in a currency other than the United States Dollar:












2014


2014


2014




BWP


UGX


ZAR









Currency US$ Equivalent


$'000


$'000


$'000









Monetary assets



  37 437


  10 457


   685









Monetary liabilities


  29 482


  6 100


   28

 

The maximum exposure to foreign currency risk at the reporting date is limited to the net asset value of Outside Zimbabwe Investments of $37.4 million (2013: $nil).

 

46.6       Operational risks

 

Operational risk is the risk of loss arising from system failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications or can lead to financial loss. The Group cannot expect to eliminate all operational risks, but by establishing a control framework and by monitoring and responding to potential risks, the Group will be able to manage the risks. Controls include effective segregation of duties, access controls, authorisation and reconciliation procedures, staff education and assessment processes.

 

Business risks such as changes in environment, technology and the industry are monitored through the Group's strategic planning and budgeting process. There has been negative publicity about Zimbabwe's prior socio-economic difficulties and political instability, which may result in negative perceptions of Zimbabwe among investors and financiers, and could lead to difficulties in raising more capital in the future.

 

46.7       Price risk

 

Equity price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.

 

The Group's equity price risk arises as a result of financial assets (i.e. listed, fair value through profit, equity securities) whose values will fluctuate as a result of changes in market prices, principally investment securities not held for the account of unit-linked business.

 

The Group's price risk policy requires it to manage such risks by setting and monitoring objectives and constraints on investments, diversification plans and limits on investments in each country, sector and market.

 

At 31 December 2014, the fair value of equities exposed to price risk was $35.0 million (2013: $nil). A 5% increase/decrease in each individual unit price would result in an increase or decrease in profit after tax by $1.8 million (2013: $nil).

 

The Group has no significant concentration of price risk.

 

46.8       Capital management

              

The primary objective of the company's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholders value.

 

The company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, or issue new shares.

 

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The

Group's current policy is to keep the gearing ratio below 40%. The Group includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents. Equity is equity attributable to ordinary equity holders of the parent.





2014

2013


US$ '000

US$ '000

Borrowings

14,871

8,557

Trade and other payables

18,577

2,664

Less cash and short-term deposits

(18,300)

(50)

Net debt

15,148

11,171




Equity

84,616

72,643

Capital and net debt

99,764

83,814

Gearing ratio

15%

13%

 

The Group policy is to keep the capital requirements above the statutory limit. The comparison of actual capital levels against the statutory limit is shown below:

 

Company

Statutory limit

  2 014




Zimnat Lion

25%

43%

Grand Reinsurance

25%

225%

Lion Assurance, Uganda

25%

85%

Botswana Insurance

20%

176%

Zimnat Life Assurance ($'000)

500

14,483

Zimnat Financial Services ($'000)

25

606

Zimnat Asset management ($'000)

500

551

Minerva Risk Advisors ($'000)

450

2,512

 

46.9       Laws and regulations

 

There is a risk that a change in laws and regulations in Zimbabwe where the investments are predominantly held, will materially impact a business, sector or market. A change in laws or regulations made by the government or a regulatory body can increase the costs of operating a business, reduce the attractiveness of investment and/or change the competitive landscape.

 

46.10    Start up risks

 

This relates to the investment in Telerix Communications (Private) Limited ("Telerix"), which publicly launched its WiMAX network during the previous year. There is a risk that changes to the initial forecasts, competitive and economic environment could lead to higher capital expenditure, lower revenues and lower investment returns for the Group.

 

47           US$ Translation rates

 


2014

Closing

2014

Average

2013

Closing

2013

Average

 

GBP/US$

1,553

1.648

1.649

1.564

US$/BWP

9.420

8.856

8.646

8.279

US$/UGX

2775.000

2616.250

2527.000

2555.090

BWP/UGX

283.028

282.216

280.890

300.625

US$/ZAR

11.602

10.835

10.488

9.635

BWP/ZAR

1.198

1.191

1.181

1.131

EUR/US$

1.215

1.329

1.377

1.328






BWP                       Botswana Pula

GBP                        British Pound Sterling

UGX                        Uganda Schillings

US$                         United States Dollar

ZAR                        South African Rand

 

48           Related party disclosures

 

The financial statements include the financial statements of Masawara Plc and its subsidiaries, joint venture and associates listed in the following table.

 

31 December 2014

Country of Incorporation

% equity interest




Masawara Zimbabwe (Private) Limited      

Zimbabwe

100%

FMI Investments (Private) Limited      

Zimbabwe

100%

Melville Investments (Private) Limited

Zimbabwe

100%

Masawara Communications Zimbabwe (Private) Limited       

Zimbabwe

100%

Dubury Investments (Private) Limited 

Zimbabwe

63.79%

TA Holdings Limited

Zimbabwe

75.74%

Telerix Communications (Private) Limited

Zimbabwe

50%

Minerva Holdings (Private) Limited

Zimbabwe

100%

Minerva Risk Advisors (Private) Limited

Zimbabwe

95%

iWayAfrica Zimbabwe (Private) Limited   

Zimbabwe

15.03%

Masawara (Mauritius) Limited  

Mauritius

100%

Masawara Communications Mauritius Limited

Mauritius

100%

Masawara Energy (Mauritius) Limited         

Mauritius

-

Masawara (Mauritius) Holdings Limited  

Mauritius

100%

 

31 December 2013

Country of Incorporation

% equity interest




Masawara Zimbabwe (Private) Limited      

Zimbabwe

100%

FMI Investments (Private) Limited      

Zimbabwe

100%

Melville Investments (Private) Limited

Zimbabwe

100%

Masawara Communications Zimbabwe (Private) Limited       

Zimbabwe

100%

Dubury Investments (Private) Limited 

Zimbabwe

63.79%

TA Holdings Limited   

Zimbabwe

41.04%

Telerix Communications (Private) Limited

Zimbabwe

50%

Minerva Holdings (Private) Limited

Zimbabwe

100%

Minerva Risk Advisors (Private) Limited

Zimbabwe

64.75%

iWayAfrica Zimbabwe (Private) Limited   

Zimbabwe

15.03%

Masawara (Mauritius) Limited  

Mauritius

100%

Masawara Communications Mauritius Limited

Mauritius

100%

Masawara Energy (Mauritius) Limited         

Mauritius

51%

 

Summarised financial information on subsidiaries with material non-controlling interests

 

The table below shows the breakdown of non controlling interests.

 


US$

US$


2014

2013




Dubury Investments (Private) Limited

647

378

Botswana Insurance Company Limited

9,182

-

Lion Assurance Company Limited

547

-

Minerva Risk Advisors (Private) Limited

110

909

TA Holdings Limited

8,411

-

At 31 December  

18,897

1,287

 

Set out below is the summarised financial information for TA Holdings Limited, a subsidiary that has non-controlling interests that are material to the Group. The following information are the amounts before inter-company eliminations.

 

Summarised statement of financial position


TA Holdings Limited


2014

2013

            

US$ '000

US$ '000




Current assets



Assets

74,771

59,838

Liabilities

(21,728)

(12,432)

Total current assets

53,043

47,406




Non-current



Assets

108,785

96,376

Liabilities

(93,005)

(82,879)

Total non-current assets

15,780

13,497




Net assets

68,823

60,903

 

Summarised statement of comprehensive income

Income

87,440

76,829

Profit/(loss) before income tax

12,366

(2,901)

Income tax expense

(3,084)

(2,786)

Profit/(loss) from continuing operations

9,282

(5,687)

Other comprehensive income

-

-

Total comprehensive income/(loss)

9,282

(5,687)




Total comprehensive income allocated to non-controlling interest

1,767

2,075

 

Summarised cash flows

Cash flows from operating activities



Cash generated from operations

11,894

7,094

Income tax paid

(1,603)

(823)

Net cash generated from investing activities

10,291

6,271

Net cash generated used in investing activities

(5,402)

(2,261)

Net cash (used in)/generated financing activities

(3,056)

307

Net increase/(decrease) in cash and cash equivalents

1,833

4,317

Cash and cash equivalents at the beginning of the year

16,800

13,528

Effect of foreign currency translation

(1,048)

(1,045)

Cash and cash equivalents at the end of the year

17,585

16,800

               

                                                 


Sales to

Purchases

Balance owed

Balance owed



Related

from related

to related

by related



Parties

Parties

Parties

Parties



US$ '000

US$ '000

US$ '000

US$ '000







New World Property Managers (Private) Limited

a





2014


-

429

-

148

2013


375

-

156







TA Holdings Limited

b





2014


3

-

-

-

2013


8

-

-

36







Cherryfield Investments (Private) Limited

c





2014


-

-

102

-

2013


-

-

102

-







Head Biz (Private) Limited

d





2014


20

-

-

14

2013      


38

32

-

-







Axis Fiduciary Limited

e





2014


-

80

-

-

2013


-

66

35

-







BLC Chambers Limited

e





2014


-

-

-

-

2013


-

42

-

-

 

Masawara Energy (Mauritius) Limited






2014

f

-

-

-

-

2013


48

-

8

-

 

Telerix Communications (Private) Limited

g





2014


1,587

21

-

38

2013


111

24

-

-







Turklane Investments (Private) Limited

h





2014


30

-

-

278

2013


27

-

-

248

Total 2014


1,640

530

102

478

Total 2013         


232

539

145

440

 

a. New World Property Managers (Private) Limited, a fellow subsidiary of FMI Holdings (Private) Limited, was engaged as the Joina City property manager commencing 1 November 2009. During the year ended 31 December 2014, Dubury Investments (Private) Limited paid property management fees of $153,000 (2013: $127,000) and security fees of $276,000 (2013: $247,000) to New World Property Managers (Private) Limited. The balance of $148,000 (2013: $156,000) owed by New World Property Managers (Private) Limited relates to rent collected from tenants, due to Dubury Investments (Private) Limited.

 

b. TA Holdings Limited was accounted for as an associate before Masawara obtained control over it effective 24 November 2014. Transactions related to interest on a loan that was granted to TA Holdings Limited which was fully repaid during the year.

 

c. Cherryfield Investments (Private) Limited is a co-owner of Joina City, and the amount payable relates to payments made by Dubury Investments (Private) Limited on behalf of Cherryfield Investments (Private) Limited.

 

d. Head Biz (Private) Limited is a business run by the spouse of one of the Directors of Masawara Plc, and this company leases retail space at Joina City.

 

e. Axis Fiduciary Limited and BLC Chambers Limited are businesses which two of the Directors have significant influence in. The amounts paid were in line with the agreements signed for the provision of secretarial and legal services.

 

f. Masawara Energy (Mauritius) Limited "MEM" was a joint venture of the Group which was disposed off on 31 January 2014, refer to Note 34. Transactions and balances in prior year related to a loan that was receivable from MEM that was settled when Masawara disposed off its investment in MEM.

 

g. Telerix Communications (Private) Limited ("Telerix") is a joint venture of the Group. Purchases from Telerix relate to bandwidth purchases by Masawara Plc from Telerix during the year and sales to Telerix relates to amounts charged to Telerix for consultancy services provided during the year. The amount receivable from Telerix relates to unpaid consultancy fees and loan notes at year end. In addition to the loan receivable disclosed in this note, loans notes receivable from Telerix have been disclosed in Note 29.1.

 

h. Turklane Investments (Private) Limited is a fellow shareholder of iWayAfrica Zimbabwe (Private) Limited ("iWayAfrica"). The loan receivable from Turklane bears interest at a rate of 12% per annum. Interest is payable on 28 June 2013, 30 June 2014 and 30 June 2015 and the capital is repayable on 30 June 2015. The loan is secured by Turklane's shares in iWayAfrica and in the event that Turklane fails to repay capital and accrued interest by 30 June 2015, Masawara Plc has the option to convert the unpaid capital and accrued interest into equity.

 

The conversion option of the Turklane loan, which is an embedded derivative that is required to be separated and carried at fair value with fair value gains or losses being recognized in the income statement, is not currently exercisable as it can only be exercised at the end of the loan term i.e. 30 June 2015.

 

The fair value of the embedded derivative, at the inception date of the loan and at 31 December 2014, could not be determined reliably because the Turklane shares are not publicly traded and the conversion ratio for the number of shares is based on future financial performance of iWayAfrica. IAS 39 Financial Instruments Measurement requires that when the fair value of the embedded derivative cannot be determined reliably, then the whole instrument should be carried at fair value through profit or loss. However, the fair value of the combined instrument cannot be determined reliably because the shares in iWayAfrica are not publicly traded.

 

Mr Francis Daniels, a director of Masawara Plc, has significant influence over the Esi Wilhemina Daniels Memorial Trust, which is a shareholder of Masawara Plc. No transactions occurred during the year between Esi Wilhemina Daniels Memorial Trust and the Group.

 

The parent

The immediate and ultimate parent and ultimate controlling party of Masawara Plc is FMI Holdings (Private) Limited. FMI Holdings (Private) Limited does not produce financial statements available for public use. A family trust, controlled by a Director of Masawara Plc, has a 100% interest in FMI Holdings (Private) Limited.

 

Terms and conditions of transactions with related parties

Outstanding balances as at year-end are unsecured, interest free and settlement occurs in cash. For the year ended 31 December 2014, the Group recorded an impairment loss of $2.9 million (2013: $261,000) relating to investments in Telerix Communication (Private) Limited loan notes, for more details refer to Note 28.3. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which it operates.

 

Transactions with key management personnel

 

Directors' loans

Loans to Directors are unsecured and the interest rate is 6% per annum and are repayable within 5 years. Any loans granted are included in financial assets on the face of the statement of financial position.

 


Interest received

Amounts owed by related parties

Loans from/to related parties

        US$ '000                                               

        US$ '000                                               

              Key management personnel of the Group:

              Directors' loans

2014

29

692

2013

                23

570

 

Details of Directors' loans 

                                                                                                                                                            


2014

2013


US$ '000

US$ '000




S Mutasa

644

508

J Vezey

48

62

Total

692

570

 

Compensation of key management personnel of the Group

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