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Masawara Plc (MASA)

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Friday 27 September, 2013

Masawara Plc

Half Yearly Report

RNS Number : 1030P
Masawara Plc
27 September 2013
 



Masawara plc

 

("Masawara" or the "Company")

 

Interim Results for the six months ended 30 June 2013

 

 

Masawara, an investment company focused on acquiring interests in companies based in Zimbabwe and the southern African region, is pleased to announce its interim results for the six months ended 30 June 2013.

 

 

 

Contact details

 

Masawara plc

 

Oliver Lutz/Rutendo Maziva +263 4 751805

 

 

Cenkos Securities plc (Nominated adviser and broker)

 

Nicholas Wells/Max Hartley +44 20 7397 8900

 

 

 

 

 

Financial review

 

The Directors present the unaudited interim results for the six-month period ended 30 June 2013.

 

Performance

 

The results for the six-month period ended 30 June 2013 are set out in the financial statements below.

 

The Group incurred a loss after tax of $1.3 million for the half year ended 30 June 2013, compared to a loss after tax of $4.2 million incurred during the same period last year. The reduction in losses was mainly attributable to:

 

·      Improved performance by TA Holdings Limited which recorded a profit after tax of $2.8 million (Group's share $483,000), an increase from $1 million (group's share $57,000) in the previous year.

·      Following a decision taken by the Directors to dispose of the Group's investment in Masawara Energy (Mauritius) Limited ("MEM"), the investment was treated as a non-current asset held for sale and the Group was no longer required to recognise its share of the losses of MEM from 1 February 2013.

·      Following the reduction of the investment in Telerix Communications (Private) Limited ("Telerix") to nil during the year ended 31 December 2012, and in compliance with International Accounting Standards, the Group has discontinued recognising any further losses from the investment.

 

An overview of the performance of the individual underlying investments has been provided below.

 

TA Holdings Limited

TA Holdings Limited's operating profit before investment income decreased by 8% to $2.6 million, from $2.8 million achieved during the same period last year. This decrease in the operating profit was mainly attributable to increased claims in the life assurance business, reduced profitability of Cresta Zimbabwe (as a result of the refurbishments that are currently underway at Cresta Lodge (Harare) and Sprayview (Victoria Falls)), and an 11% depreciation of the Botswana Pula against the United States Dollar. However, investment income increased to $2.3 million from $0.8 million recorded in the previous period, predominantly due to fair value gains on equities. The agrochemicals associate companies' share of losses amounted to $1 million in comparison to $1.7 million recorded during the same period last year. This resulted in TA Holdings Limited achieving a profit after tax of $2.8 million (2012: $1 million), with the Group's share of profit after tax for the period amounting to $483,000 (2012: $57,000).

 

During the period under review, the Group increased its shareholding in TA Holdings Limited from 39.22% as at 31 December 2012 to 41.04% as at 30 June 2013. A gain on bargain purchase of additional shares in TA Holdings Limited amounting to $104,000 was recognised in the Group statement of comprehensive income.

 

Joina City

The office tower occupancy level increased from 49% in December 2012 to 52% in June 2013. The retail section occupancy decreased from 90% to 88% during the period as a result of the termination of leases for defaulting tenants. The Group's share of revenue increased to $939,000 from $722,000 during the same period last year as a result of rental reviews performed during the period under review and an increase in office occupancy, which also led to an increase in parking revenues.

 

For the period under review, the Group's share of profits amounted to $92,000 (2012: loss of $76,000). The improved performance is mainly attributable to the increase in revenue, while operating costs remained relatively unchanged from the previous period. 

 

Based on the most recent independent valuation as at 31 December 2012, the Directors have assessed the potential changes to the inputs to the valuation of the investment property and are of the opinion that there has not been a material change to the fair value of the building from the previous reporting date. There is a risk that the illiquidity of the Zimbabwean capital market may affect the valuation of the Group's investment property in the short to medium term. As detailed in the financial statements for the year ended 31 December 2012, there are no buildings that are comparable to the Group's investment property in Zimbabwe, which poses a greater degree of uncertainty than that which exists in a more active market in estimating market values of investment property.

 

Telerix Communications (Private) Limited("Telerix")

Extensive marketing and a new tariff that was introduced during the period led to a 106% increase in the number of uMAX subscribers between 31 December 2012 and 30 June 2013. However, the strong volume and revenue growth achieved by the company was dampened by finance costs that weighed down profitability.

 

In the six months to 30 June 2013 the company incurred a loss after tax of $2.9 million (2012: loss of $2.8 million). As highlighted above, following the reduction of the investment in Telerix Communications (Private) Limited ("Telerix") to nil during the year ended 31 December 2012, and in compliance with International Accounting Standards, the Group has discontinued recognising any further losses from the investment.

 

Masawara Energy (Mauritius) Limited (discontinued operations)

On 1 February 2013, the Directors made a decision to dispose of the energy segment consisting of the Group's investment in Masawara Energy (Mauritius) Limited ("MEM") and, therefore, classified it as a disposal group held for sale. Consequently, the share of losses of MEM were only accounted for one month in the Group's interim results. The Group's share of loss of the discontinued operations amounted to $176,000 (2012: $1.5 million for the six-month period).

 

Going concern

 

Management prepared cash flow forecasts indicating that there is adequate operating cash for the period to September 2014 and short-term facilities will be utilised to fund any operating cash flow deficit that may arise post September 2014. The Directors reviewed the cash flow forecasts prepared by management when assessing the ability of the Group to continue operating as a going concern. Based on the review of the Group's cash flow forecasts, the Directors believe that the Group will have sufficient resources to continue to trade as a going concern for a period of at least 12 months from the date of approval of these financial statements and accordingly, the financial statements have been prepared on the going concern basis.  The Directors also assessed the probability of the MEM sale transaction not being concluded within twelve months from the date of approval of these financial statements as unlikely and therefore have a reasonable expectation that the Group will not require any facilities in the foreseeable future. The Directors therefore believe that this transaction will have a positive impact on the Group's cash flows in the short term and the foreseeable future.

 

Cash flow for the six-month period

 

The Group recorded an overall decrease in cash and cash equivalents of $1.6 million from 31 December 2012. $1.9 million was utilised in operating activities, $3,000 was utilised in investing activities and $350,000 was generated from financing activities. The net cash of $3,000 utilised in investing activities was after accounting for a $320,000 cash outflow relating to the purchase of TA Holdings Limited additional shares, an outflow of $177,000 for additional loans granted to related parties and an inflow of $494,000 for loan repayments made by related parties.  The cash inflow from financing activities related to a $350,000 loan that was obtained from a bank during the period under review (Note 4.3).

 

Financial position

 

Non-current assets decreased from $87.9 million as at 31 December 2012 to $65 million as at 30 June 2013, primarily as a result of the reclassification of the investment in joint venture to discontinued operations held for sale. The Group had cash and cash equivalents of $459,000 at 30 June 2013 (31 December 2012: $2.1 million).

The net asset value per share attributable to equity holders of the parent as at 30 June 2013 was $0.65 (31 December 2012: $0.67).

 

Outlook

 

TA Holdings Limited

Despite the current liquidity challenges in Zimbabwe, underwriting profits for the full year are expected to be ahead of underwriting profits recorded in the previous year as TA Holdings Limited will continue to review all cost structures to ensure that expense ratios reduce to regional norms. However, premium rate pressure is expected to continue in Botswana which may constrain growth in underwriting profits outside Zimbabwe. For the agrochemicals business, TA Holdings Limited will continue to engage the Zimbabwean government and the electricity authorities to secure a viable tariff for continued operations. The refurbishment of the Zimbabwe hotels is expected to be complete by the end of the 2013 financial year and during this period there will be a reduction in the rooms available for sale which will continue to restrain revenues in the last quarter of this year.

 

Joina City

Joina City will continue to employ the best initiatives to ensure that quality tenants are selected, which will increase occupancy levels and reduce the level of doubtful debts. The collection of amounts receivable from debtors has improved from the previous reporting period and the property manager will continue to focus on this area.

 

Telerix Communications (Private) Limited("Telerix")

Masawara Plc will continue to provide financial support to Telerix Communications (Private) Limited, as the company focuses on increasing its subscriber base.

 

Masawara Energy (Mauritius) Limited (discontinued operations)

The disposal of Masawara Energy (Mauritius) Limited is expected to be concluded prior to the end of this financial year and a number of investment opportunities are being appraised by the Investment Advisor.

 

By Order of the Board

Masawara Plc

 

Mr Julian Vezey

26 September 2013

 

 

 

MASAWARA PLC

Unaudited interim consolidated statement of comprehensive income

for the six months ended 30 June 2013






 

 


June 2013



June 2012



Unaudited


Notes

 US$









Continuing operations






Revenue


938,685



721,825

Share of profit of associate - TA Holdings Limited

11.2

483,201



57,118

Share of profit/(loss) of other associates

11

24,687



(1,445,940)

Gain on bargain purchase of additional shares in an associate

11.2

103,578



392,112

Other property expenses

5

(847,113)



(797,269)

Administrative expenses

5

(289,012)



(282,362)

Other operating expenses

5

(1,804,958)



(1,255,425)

Operating loss


(1,390,932)



(2,609,941)

Finance costs

6

(63,563)



(606,488)

Finance income


302,254



489,316

Loss before tax from continuing operations


(1,152,241)



(2,727,113)

Income tax expense

7

-



-

Loss for the period from continuing operations


(1,152,241)



(2,727,113)







Discontinued operations






Share of loss of discontinued operations

14

(175,950)



(1,498,897)

Loss for the period


(1,328,191)



(4,226,010)







Other comprehensive income:






Share of other comprehensive (loss)/income in associates net of tax                                                   

11.2

(799,007)



4,944

Total comprehensive loss for the period, net of tax                             

(2,127,198)



     (4,221,066)

 

 

Loss for the period attributable to:

Equity holders of parent


(1,371,086)



(4,086,357)

Non-controlling interests


42,895



(139,653)

Loss for the period


(1,328,191)



(4,226,010)

 

Total comprehensive loss attributable to:

Equity holders of parent


(2,170,093)



(4,081,413)

Non-controlling interests


42,895



(139,653)

Total comprehensive loss for the period


(2,127,198)



(4,221,066)

 

Earnings per share:                                                                                                 8

 

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

 

(US$0.01)   

(US$ 0.03)

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

(US$0.01)   

(US$ 0.02)

 

 

MASAWARA PLC

Unaudited interim consolidated statement of financial position

as at 30 June 2013

 




 

Restated


Notes

June 2013

December 2012

June 2012



Unaudited

Audited

Unaudited



                US$

                US$

                US$

ASSETS





Non-current assets





Property, plant and equipment


334,846

362,678

387,557

Financial assets

9

9,082,010

8,652,466

4,415,511

Investment property

10

32,915,728

32,915,728

32,842,083

Investment in associates

11.1

22,692,393

22,559,482

23,444,594

Investment in joint venture

12

-

23,427,737

22,399,433

Total non-current assets


65,024,977

87,918,091

83,489,178






Current assets





Other receivables

13

1,601,955

2,025,086

8,406,491

Cash resources


458,716

2,087,254

3,506,512

Discontinued operations classified as held for sale

14

23,251,787

-

-

Total current assets


25,312,458

4,112,340

11,913,003






Total assets


90,337,435

92,030,431

95,402,181






EQUITY AND LIABILITIES





Share capital


1,234,655

1,234,655

1,234,655

Share premium


84,109,545

84,109,545

84,109,545

Treasury shares


(332,724)

(332,724)

-

Group restructuring reserve


(9,283,142)

(9,283,142)

(9,283,142)

(Accumulated loss)/retained profit


(3,965,199)

(2,594,113)

2,356,083

Other capital reserve


(901,748)

(102,741)

(1,100,375)

Non-distributable reserve


(695,244)

(695,244)

(695,244)

Revaluation reserve


9,862,778

9,862,778

8,928,038

Equity attributable to equity holders of the parent


80,028,921

82,199,014

85,549,560

Non-controlling interest


1,197,577

1,154,682

1,239,970

Total equity


81,226,498

83,353,696

86,789,530






Non-current liabilities





Financial liabilities

15.1

5,990,821

5,977,120

5,705,432

Deferred tax


1,463,101

1,463,101

1,463,101

Total non-current liabilities


7,453,922

7,440,221

7,168,533






Current liabilities





Financial liabilities

15.2

353,792

-

1,055,631

Income tax liability


7,681

7,681

-

Accounts payable


1,295,542

1,228,833

388,487

Total current liabilities


1,657,015

1,236,514

1,444,118

Total liabilities


9,110,937

8,676,735

8,612,651






Total equity and liabilities


90,337,435

92,030,431

95,402,181


MASAWARA PLC

Unaudited interim consolidated statement of changes in equity

for the six months ended 30 June 2013



 

 

Attributable to the equity holders of the parent





US$ '000




Share

Share

Treasury

Group

Retained

Other

Non

Revaluation

Total

Non-controlling

Total

 

Capital

Premium

Shares

Restructure

Profit/

Capital

Distributable

Reserve


Interest

Equity

 




Reserve

(Loss) 

Reserve

Reserves



US$'000

US$'000

 

Balance at 31 December 2011 (as previously reported)

1,235

84,110

-

(9,283)

6,575

(986)

(695)

7,648

88,604

1,379

89,983

 

Prior period adjustments - Note 18

-

-

-

-

(132)

-

-

1,102

970

-

970

 

Balance at 31 December 2011 (as restated)

1,235

84,110

-

(9,283)

6,443

(986)

(695)

8,750

89,574

1,379

90,953

 

Loss for the period

-

-

-

-

(4,086)

-

-

-

(4,086)

(140)

(4,226)

 

Other comprehensive income for the period

-

-

-

-

-

5

-

178

183

-

183

 

Total comprehensive income/(loss) for the period

-

-

-

-

(4,086)

5

-

178

(3,903)

(140)

(4,043)

 

Share based payment transactions

-

-

-

-

-

(120)

-

-

(120)

-

(120)

 

Balance at 30 June 2012 (as restated)

1,235

84,110

-

(9,283)

2,357

(1,101)

(695)

8,928

85,551

1,239

86,790

 

Profit/(loss) for the period

-

-

-

-

(4,951)

-

-

-

(4,951)

(85)

(5,036)

 

Other comprehensive loss for the period

-  

-

-  

-  

-  

(327)

-  

935  

608

-

608

 

Total comprehensive income/(loss) for the period

-

-

-

-

(4,951)

(327)

-

935

(4,343)

(85)

(4,428)

 

Share buy-back

-

-

(333)

-

-

-

-

-

(333)

-

(333)

 

Shareholder contribution

-

-

-

-

-

937

-

-

937

-

937

 

Share based payment transactions

-

-

-

-

-

388

-

-

388

-

388

 

Balance at 31 December 2012

1,235

84,110

(333)

(9,283)

(2,594)

(103)

(695)

9,863

82,200

1,154

83,354

 

Profit/(loss) for the period

-

-

-

-

(1,371)

-

-

-

(1,371)

43

(1,328)

 

Other comprehensive income/(loss) for the period

-

-

-

-

-

(799)

-

-

(799)

-

(799)

 

Total comprehensive income/(loss) for the period

-

-

-

-

(1,371)

(799)

-

-

(2,170)

43

(2,127)

 

Balance at 30 June 2013

1,235

84,110

(333)

(9,283)

(3,965)

(902)

(695)

9,863

80,030

1,197

81,227

 


























MASAWARA PLC

Unaudited interim consolidated statement of cash flows




 

for the six months ended 30 June 2013

 


June 2013


June 2012

 


Notes

Unaudited

 



US$


US$

 

 

OPERATING ACTIVITIES






Loss before tax from continuing operations


(1,152,241)


(2,727,113) 

 

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




 




 

Share of profit of associate - TA Holdings Limited

11.2

(483,201)


(57,118)

 

Gain on bargain purchase of additional shares of an associate

11.2

(103,578)


(392,112)

 

Share of profit/(loss) of other associates

11

(24,687)


1,445,940

 

Depreciation of equipment


27,658


27,701

 

Unrealised exchange gain


645


10,140

 

Share-based payment transaction expense


-


(119,807)

 

Finance income


(302,254)


(489,316)

 

Finance cost

6

63,563


606,488

 

Working capital adjustments:





 

Decrease/(increase) in rent receivable and sundry receivables


54,954


(319,107)

 

Increase in loans and receivables


(87,275)


(93,828)

 

Increase/(decrease)in accounts payable


66,709


(86,965)

 



(1,940,097)


(2,195,097)

 

Interest received


10,861


77,376

 

Interest paid


(46,070)


(281,093)

 

Net cash flows used in operating activities


(1,975,306)


(2,398,814)

 

 

INVESTING ACTIVITIES





 

Purchase of property, plant and equipment


(195)


(16,730)

 

Acquisition of additional shares in associate

4.2

(320,452)


(352,079)

 

Release of financial asset - deposit


-


2,181,881

 

Loan repayments from related parties


493,641


-

 

Loans issued to related parties


(176,616)


(3,490,896 )

 

Net cash flows used in investing activities


(3,232)


(1,677,824)

 

 

FINANCING ACTIVITIES





 

Proceeds from borrowings

15.2

350,000


39,855

 

Repayment of loan


-


(7,500,000)

 

Net cash flows (used in)/from financing activities


350,000


(7,460,145)

 






 

Net increase/(decrease) in cash and cash equivalents


(1,628,538)


(11,536,783)

 

Cash and cash equivalents at 1 January


2,087,254


15,043,295

 

Cash & cash equivalents at 30 June


458,716


3,506,512

 

 

 

 

 

MASAWARA PLC

 

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2013

 

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 registered office is located at Queensway House, Hilgrove Street in St Helier, Jersey and it is managed from Unicorn Centre, 18N Frère Felix de Valois Street, Port Louis in Mauritius.

 

The investment portfolio of the Company includes the 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), Zuva Petroleum (Private) Limited (importer and distributor of petroleum products in Zimbabwe), iWayAfrica Zimbabwe (Private) Limited (a broadband internet service company), 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) and Minerva Holdings (Private) Limited (a company that has operations in Pensions Consulting and Administration, Insurance Risk Advisory and Reinsurance Broking) which was acquired subsequent to the period under review, refer to Note 21 for more details. 

 

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

 

2      Basis of preparation

 

The interim consolidated financial statements for the six months ended 30 June 2013 have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting.

 

The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's Annual Financial Statements for the year ended 31 December 2012. The interim consolidated financial statements have been drawn up using accounting policies and presentation consistent with those applied in the audited accounts for the year ended 31 December 2012.

 

Going Concern

Management prepared cash flow forecasts indicating that there is adequate operating cash for the period to September 2014 and short-term facilities will be utilized to fund any operating cash flow deficit that may arise post September 2014. The Directors reviewed the cash flow forecasts prepared by management when assessing the ability of the Group to continue operating as a going concern. Based on the review of the Group's cash flow forecasts, the Directors believe that the Group will have sufficient resources to continue to trade as a going concern for a period of at least 12 months from the date of approval of these financial statements and accordingly, the financial statements have been prepared on the going concern basis.  The Directors also assessed the probability of the sale transaction of Masawara Energy (Mauritius) Limited not being concluded within twelve months from the date of approval of these financial statements as unlikely and therefore have a reasonable expectation that the Group will not require any facilities in the foreseeable future. The Directors therefore believe that this transaction will have a positive impact on the Group's cash flows in the short term and the foreseeable future.

 

3      Dividends

 

There were no dividends declared or paid during the six months ended 30 June 2013.

 

4      Significant events

 

The following significant events that have a material effect on the financial statements of the Group took place during the six- month period ended 30 June 2013.

 

 

 

 

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

On 1 February 2013, the Directors made a decision to dispose of the energy segment consisting of the Group's investment in Masawara Energy (Mauritius) Limited and, therefore, classified it as a disposal group held for sale. The Directors considered the joint venture met the criteria to be classified as held for sale at that date for the following reasons:

·      MEM is available for immediate sale and can be sold to a potential buyer in its current condition.

·      The Board had a plan to sell MEM and has signed a share purchase agreement with a potential buyer.

·      The Board expects the sale to be completed within the next 12 months.

For more details on the discontinued operation, refer to Note 14.

 

4.2      Acquisition of additional interest in TA Holdings Limited

On 31 May 2013, the Group acquired an additional 1.82% interest in TA Holdings Limited when FMI Investments (Private) Limited purchased 3,000,000 shares on the Zimbabwe Stock Exchange for $320,452, including brokers fees. The additional interest in TA Holdings Limited was acquired at less than the fair value of the share of net assets acquired. The difference between the cost of shares acquired and the fair value of the share of net assets acquired resulted in negative goodwill amounting to $103,578 that has been included as income in the determination of the Group's share of TA Holdings Limited's profit for the period.

 

4.3       Loan facility secured

On 31 May 2013, the Group secured a $350,000 loan from BancABC for the purpose of acquiring the 3,000,000 TA Holdings Limited shares disclosed above. The loan bears interest at a rate of 13% per annum, payable monthly, and the capital portion is repayable on 31 May 2014.

 

4.4       Overdraft facility secured

On 25 June 2013, the Group secured a $2 million loan facility from Afriasia Bank Limited for the purpose of meeting working capital requirements should the need arise. The loan facility is for a twelve month period from the grant date. The outstanding loan amount will bear interest at a rate of 12% above the 3 Month US$ Libor rate per annum. Interest and capital are repayable on 25 June 2014. As at the date of issue of these interim financial results, the Group had not drawn down on the overdraft facility.

 

4.5       Conversion of Telerix Communications Private Limited ("Telerix") preference shares into debentures

            As highlighted in the financial statements for the year ended 31 December 2012, Telerix requested the Group to roll over its preference shares for an additional two year period from the due date, 4 April 2013. On 4 April 2013 the Group converted its preference shares in Telerix into 2,478 debentures at $1,000 per debenture, pending the approval of the conversion of the preference shares into debentures by the Telerix shareholders. The subscription of the debentures was ratified by the Telerix shareholders at an Annual General Meeting held in August 2013. The debentures are redeemable 731 days from the date of issue at par, bearing a coupon rate of 12% per annum, payable quarterly and they are convertible into ordinary shares at a rate of 10 new ordinary shares per $1,000 of debentures.

 

4.6      Acquisition of Minerva Holdings (Private) Limited

Subsequent to the period ended 30 June 2013, the Group acquired 69.75% of the issued share capital of Minerva Holdings (Private) Limited. For more details refer to Note 21.

 

 

5         Administrative, property and other expenses

 

            Property expenses are mainly made up of day to day expenditure incurred on the investment property e.g. electricity, rates, security costs and repairs and maintenance works on the building. Property expenses did not change significantly from the previous reporting period as the occupancy level, at 72% changed slightly from 73% occupancy reported during the same period last year.

 

The major components of administrative and other expenses are staff costs, directors' fees, advisory fees and  consultancy fees relating to due diligence exercises carried out for potential acquisitions and disposals. The increase in other operating expenses in comparison with the same period in the previous year is mainly due to $490,000 legal fees incurred during the period that related to the disposal of Masawara Energy (Mauritius) Limited.

 

6         Finance costs

 

Finance costs decreased significantly from the previous period mainly due to the fact that finance costs for the six month period ended 30 June 2012 included imputed interest on shareholder loans of $272,000 and interest on the Alveir Management Limited loan of $275,000 which were not incurred during the six month period ended 30 June 2013.

 

7         Income tax expense

 

There was no income tax expense during the six month period ended 30 June 2013 because the Group did not have any taxable income during the period under review. Income tax expense for the associates and discontinued operations has been taken into account in the Group's share of post tax profit or loss from associates and discontinued operations.

 

8         Earnings per share

 

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

 

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

 

The following reflects the income and share data used in the basic and diluted earnings per share computations:

 


June 2013

June 2012


                   US$

                US$

Net loss attributable to ordinary equity holders of parent for  basic earnings and diluted earnings

(1,371,086)

(4,086,357)




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

(1,195,136)

(2,587,460)

 

Weighted average number of ordinary shares for basic earnings per share

123,065,409

123,465,409

Effect of dilution: shares allocated

-

-

Weighted average number of ordinary shares for diluted earnings per share

123,065,409

123,465,409

 


June 2013

June 2012


US$

US$




Basic and diluted earnings per share

(US$0.01)

(US$ 0.03)




Basic and diluted earnings per share from continuing operations

(US$0.01)

(US$ 0.02)

 

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.

 

9         Financial assets

               

Financial assets comprise the following:

               


June 2013

December 2012

June 2012


Unaudited

Audited

Unaudited


US$

US$

US$





Debenture investment

8,557,340

6,277,256

1,662,985

Preference shares

-

2,107,108

2,289,607

Loans and receivables

524,670

268,102

462,919

Total

9,082,010

    8,652,466

4,415,511

 

The decrease in the preference shares balance and the corresponding increase in the debenture investment balance was due to the fact that the Group converted the preference shares held in Telerix Communications (Private) Limited into debentures during the period under review. For more details refer to Note 4.5.

 

10       Investment property

               

As detailed in the 31 December 2012 annual report, the Directors adjusted the investment property value determined by independent professional valuers, CB Richard Ellis Zimbabwe (Private) Limited downwards by 9% in light of the state of debtors (tenants are slow paying) and the leasing progress (the building occupancy level only increased by 10% to 73% from the previous year) in order to arrive at the Directors' best estimate of the fair value of the investment property.

 

Based on fact that the tenants are still slow paying, leasing progress is still slow and also the fact that the Directors assessed the potential changes to the inputs to the valuation and were of the opinion that there has not been a material changes from the previous reporting period, the carrying value of the investment property remained the same as it was at 31 December 2012. There is a risk that the illiquidity of the Zimbabwean capital market may affect the valuation of the Group's investment property in the short to medium term. As detailed in the financial statements for the year ended 31 December 2012, there are no buildings that are comparable to the Group's investment property in Zimbabwe, which poses a greater degree of uncertainty than which exists in a more active market in estimating market values of investment property.

 

11       Investment in associates

               

Investment in associates includes investments in TA Holdings Limited ("TA Holdings"), Telerix Communications (Private) Limited ("Telerix") and iWayAfrica (Private) Limited ("iWayAfrica").



June 2013



Unaudited

Unaudited

 



US$

US$

 





 

Share of loss of Telerix - Note 11.3


-

(1,433,178)

 

Share of profit/(loss) of iWayAfrica - Note 11.4


24,687

(12,762)

 

Share of profit/(loss) of other associates


24,687

(1,445,940)

 

 

 

 

11.1    Aggregate group investments in associates

 



June 2013

  December 2012

June 2012

 



Unaudited

Audited

Audited



US$

US$

US$






TA Holdings Limited - Note 11.2


22,463,689

            22,355,465

             21,270,588

Telerix Communications (Private) Limited - Note 11.3


-

                                -

               1,969,691

iWayAfrica Zimbabwe (Private) Limited - Note 11.4

228,704

204,017

       204,315

Total

22,692,393

22,559,482

23,444,594

 

11.2    Summarised financial information in respect of TA Holdings Limited


June 2013

  December 2012

June 2012


Unaudited

Audited

Unaudited


US$

US$

US$





Opening balance

22,355,465

19,316,870

19,316,870

Prior period adjustment -  Note 18

-

1,147,465

1,147,465

Opening balance (restated)

22,355,465

20,464,335

20,464,335

Share of profit

483,201

523,531

57,118

Share of other comprehensive (loss)/income

(799,007)

397,618

4,944

Purchase of additional shares  - Note 4.2

320,452

612,613

352,079

Gain on bargain purchase of additional shares

103,578

357,368

392,112

Closing carrying amount of investment in associate

22,463,689

22,355,465

21,270,588

 


June 2013

  December 2012

June 2012


Unaudited

Audited

Unaudited


US$

US$

US$

Share of the associate's revenue and profit:




Revenue

15,984,190

28,436,069

12,660,067

Profit for the period

483,201

523,531

57,118

Gain on bargain purchase of additional shares

103,578

397,618

392,112

Other comprehensive (loss)/profit for the period

(799,007)

612,613

4,944

 

Share of other comprehensive loss of TA Holdings Limited predominately relates to foreign currency translation reserve movements that arose as a result of the depreciation of the Botswana Pula against the United States Dollar during the period under review.

 

The investment in TA Holdings Limited is assessed for impairment at each reporting date owing to the decline in the share price of TA Holdings Limited on the Zimbabwe Stock Exchange. As at 30 June 2013, the Directors concluded that the investment was not impaired as the value in use was determined to be $25.2 million, which was above the carrying amount of $22.4 million. Furthermore, the share price alone cannot be used as the only indicator of impairment since the Zimbabwean stock market is not liquid, and small trades can result in big swings in the share price. The significant assumptions used for the impairment computation were the same as those used at 31 December 2012 as the market and economic conditions did not materially change from then.

 

11.3    Summarised financial information in respect of Telerix Communications (Private) Limited ("Telerix")

 


June 2013

  December 2012

June 2012


Unaudited

Audited

Unaudited


US$

US$

US$





Opening balance

-

3,402,869

3,402,869

Share of loss

-

 (3,402,869)

(1,433,178)

Closing balance 

-

-  

1,969,691

 

Share of the associate's revenue and loss:




Revenue

1,030,692

1,471,001

650,668

Loss for the period

-

(3,402,869)

(1,433,178)

 

As highlighted in the financial statements for the year ended 31 December 2012, Masawara Plc discontinued recognising its share of further losses after the investment in Telerix was nil in accordance with IAS 28 Investment in Associates. The reconciliation below shows the movement of unrecognized share of losses in Telerix Communications (Private) Limited:

 




US$





Opening balance 1 January 2013



368,570

Unrecognised share of losses for the period



1,493,719

Closing balance  30 June 2013



1,862,289

 

11.4    Summarised financial information in respect of iWayAfrica Zimbabwe (Private) Limited

 


June 2013

  December 2012

June 2012


Unaudited

Audited

Unaudited


US$

US$

US$





Opening balance

204,017  

217,077

217,077

Share of profit/(loss)

24,687

(13,060)  

(12,762)

Closing balance 

228,704

204,017  

204,315

 

Share of the associate's revenue and profit/(loss):




Revenue

1,691,440

237,716

139,914

Profit/(loss) for the period

24,687

(13,060)

(12,762)

 

 

12        Investment in joint venture, Masawara Energy (Mauritius) Limited (MEM)

 

 


June 2013

  December 2012

June 2012

 


Unaudited

Audited

Unaudited

 


US$

US$

US$

 





Opening balance

23,427,737

23,898,330

23,898,330

Loan capitalized

-

1,782,000

-

Share of loss of discontinued operations

(175,950)

(2,252,593)

(1,498,897)

Transfer to non-current asset held for sale category - Note 14

(23,251,787)

-

-

Closing balance 

-

23,427,737

22,399,433

 

The carrying amount of the investment in MEM will be recovered through sale following a board decision to dispose of the investment, refer to Note 14 for more details. It is the Group's policy to classify 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.

 

Upon classification of the investment in MEM as non-current asset held for sale, the Group ceased equity accounting of its investment in MEM as required by International Accounting Standard 28 and accounted for it in accordance with International Financial Reporting Standard ("IFRS") 5. 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 sell. On 1 February 2013, the date on which the investment in MEM was reclassified to the held for sale category, the carrying amount of investment in joint venture was lower than fair value less cost to sell, consequently no adjustments were effected to the carrying amount of the investment as at 1 February 2013.

 

13       Other receivables


June 2013

  December 2012

June 2012


Unaudited

Audited

Unaudited


US$

US$

US$





Receivables from related parties

1,497,690

1,696,279

7,988,099

Rent and service charges

37,199

104,277

108,941

Loans to Directors and employees

-

169,293

-

Sundry receivables

67,066

55,237

309,451

Total

1,601,955

2,025,086

8,406,491

 

14       Discontinued operations classified as held for sale

 

On 1 February 2013, the Directors decided to sell the Group's entire shareholding in Masawara (Energy) Mauritius Limited "MEM" (the investment vehicle that holds the Group's interest in Zuva Petroleum (Private) Limited) to Woble Investments (Private) Limited for $24.9 million. It is expected that all regulatory approvals for the sale of the investment in MEM, which is reported under the energy operating segment, will be obtained within twelve months from the date of approval of these financial statements. Below are summarized financial results of the discontinued operations. The results for 2013 are only for the month of January 2013, prior to the classification as held for sale.

 


June 2013

  December 2012


Unaudited

Audited

Unaudited


US$

US$

US$





Discontinued operation classified as held for sale - carrying amount

23,251,787

-

-

Share of revenue and loss of the discontinued operation:




Revenue

7,912,650

102,563,500

47,755,898

Share of loss of discontinued operations

(175,950)

(2,252,593)

(1,498,897)

 

15       Financial liabilities

 

15.1    Financial liabilities - non current

 

 


June 2013

December 2012

June 2012

 


Unaudited

Audited

Unaudited

 


US$

US$

US$





Opening balance

5,977,120

5,433,745

5,433,745

Accrued finance costs

59,771

543,375

271,687

Finance costs paid

(46,070)

-

-

Closing balance

5,990,821

5,977,120

5,705,432

 

Non-current financial liabilities consist of a loan from a non-controlling shareholder. The loan is unsecured, does not have fixed repayment terms and the loan began bearing interest in January 2013 at a rate of 2% per annum. Prior to 1 January 2013 the loan was not interest bearing and the interest expense recorded in the previous periods was as a result of imputing of interest at an open market rate of 10%, in line with International Financial Reporting Standards.

 

15.2    Financial liabilities - current

 


June 2013

December 2012

June 2012

 


Unaudited

Audited

Unaudited

 


US$

US$

US$





Opening balance

-

8,462,068

8,462,068

Loan drawdown

350,000

-

39,855

Loan repayment

-

(7,775,069)

(7,775,069)

Accrued finance costs

3,792

250,069

328,777

Loan forgiveness

-

(937,068)

-

Closing balance

353,792

-

1,055,631

 

The $350,000 loan was secured on 31 May 2013 from BancABC. The loan bears interest at a rate of 13% per annum, payable monthly, and the capital portion is repayable on 31 May 2014.

 

 

 

 

 

 

 

 

 

 

 

 

 

16       Segment information

 

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

 

·      The Investment Property segment leases retail and office space at the Joina City building partly owned by the Group.

 

·      TA Holdings Limited, an associate, is a diversified investment company that holds stakes in insurance, agro-chemical and hospitality businesses across sub-Saharan Africa and is listed on the Zimbabwe Stock Exchange.

 

·      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.

 

·      Energy segment, which incorporates Masawara Energy (Mauritius) Limited with a wholly owned subsidiary, Zuva Petroleum (Private) Limited, a long established importer and distributor of petroleum products in Zimbabwe. Masawara Energy (Mauritius) Limited is a joint venture of the Group. Subsequent to the period end, the Group made a decision to dispose the energy segment and consequently reclassified the entire energy segment from investment in joint venture to non-current asset held for sale category, for more details refer to Note 4.1 and Note 14.

 

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.

 

Segment assets for the Investment Property segment represent the Group's share of the Joina City building ($32,915,728), debenture investment ($1,751,977), tenant receivables ($252,360) and other assets ($34,419).

 



Six months ended 30 June 2013














Investment property

TA Holdings

Telerix

iWayAfrica

Energy

Total

Group


US$

US$

US$

US$

US$

US$








Rent and service charge income

938,685

-

-

-

-

938,685

Property operating expenses

(847,113)

-

-

-

-

(847,113)

Gain on bargain purchase

-

103,578

-

-

-

103,578

Equity accounted earnings

-

483,201

-

24,687

-

507,888

Segment profit/(loss)

91,572

586,779

-

24,687

-

703,038

Other operating expenses






(1,804,958)

Administrative expenses






(289,012)

Finance costs






(63,563)

Finance income






302,254

Loss before tax from continuing operations





(1,152,241)

Share of loss of discontinued operation





(175,950)

Loss before tax






1,328,191

 

As at 30 June 2013

 







Segment assets

34,954,484

22,463,689

-

228,704

-

57,646,877

Central non-current assets






7,664,879

Central current assets






1,773,892

Non-current assets held for sale






23,251,787

Total assets






90,337,435








Segment liabilities

(7,728,870)





(7,728,870)

Central current liabilities






(1,382,067)

Total liabilities






(9,110,937)









 

 













 

 

 

 

 

 

Six months ended 30 June 2012














Investment property

TA Holdings

Telerix

iWayAfrica

Energy

Total

Group


US$

US$

US$

US$

US$

US$








Rent and service charge income

721,825

-

-

-

-

721,825

Property operating expenses

(797,269)

-

-

-

-

(797,269)

Gain on bargain purchase

-

392,112

-

-

-

392,112

Equity accounted earnings

-

57,118

(1,433,178)

(12,762)

-

                                   (1,388,822)

Segment profit/(loss)

(75,444)

449,230

(1,433,178)

(12,762)

-

(1,072,154)

Other operating expenses






(282,362)

Administrative expenses






(1,255,425)

Finance costs






(606,488)

Finance income






489,316

Loss before tax from continuing operations





(2,727,113)

Share of loss of discontinued operation





(1,498,897)

Loss before tax






(4,226,010)

 

As at 30 June 2012

 







Segment assets

34,505,068

21,270,588

1,969,691

204,315

22,399,433

80,349,095

Central non-current assets






7,728,589

Central current assets






7,324,497

Total assets






95,402,181








Segment liabilities

(8,224,164)

-

-

-

-

(8,224,164)

Central current liabilities






(388,487)

Total liabilities






(8,612,651)









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 offer services in Zimbabwe, therefore all revenues and assets are from Zimbabwe.

 

iWayAfrica

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

 

Energy

Masawara Energy (Mauritius) Limited's significant assets that generate revenue are located in Zimbabwe through its wholly owned subsidiary, Zuva Petroleum (Private) Limited. Zuva Petroleum (Private) Limited imports and distributes petroleum products across Zimbabwe hence all revenues and assets of the energy segment have been deemed to be from Zimbabwe. During the period under review the Board decided to dispose of the energy segment. As at 30 June 2013, the sale transaction was not completed. For more details, refer to Note 14.

 

                TA Holdings Limited

TA Holdings Limited has operations in Zimbabwe, Botswana, South Africa and Uganda. The Group's share of TA Holdings Limited's revenues and non-current assets is split as follows:

 


June 2013

June 2012


Unaudited

Unaudited


US$

US$

Revenues



From Zimbabwe

11,912,551

6,637,395

Outside Zimbabwe

4,071,639

6,022,672

Total

15,984,190

12,660,067

 


June 2013

December 2012


Unaudited

Audited


US$

  US$

Total assets

From Zimbabwe

35,847,193

30,626,898

   Outside Zimbabwe

31,817,507

29,764,058

Total

67,664,700

60,390,956

 

17           Related party disclosures

 

The financial statements include the financial statements of Masawara Plc, the subsidiaries, joint venture and associates. The related party relations have not changed from the previous reporting period, i.e. as at 31 December 2012.

 

The following table provides the total amount of transactions that have been entered into with related parties during the six months ended 30 June 2013 and 30 June 2012.

 

 

Sales to

Purchases

Balance owed

Balance owed


related

from related

to related

by related


parties

Parties

parties

parties


US$

US$

US$

US$






AON Zimbabwe (Private) Limited





2013

-

10,000

-

-

2012

-

10,000

-

-






New World Property Managers (Private) Limited





2013

-

192,823

-

215,161

2012

-

166,063

-

238,152






TA Holdings Limited





2013

4,411

-

-

51,854

2012

6,978

-

-

89,687






Cherryfield Investments (Private) Limited





2013

-

-

96,750

-

2012

-

-

22,483

-






Head Biz (Private) Limited





2013

21,978

-

-

-

2012

21,978

-

-

21,372






Axis Fiduciary Limited





2013

-

-

-

-

2012

-

21,799

18,193

-






Masawara Energy (Mauritius) Limited





2013

48,169

-

262,487

414,298

2012

-

-

-

2,701,622

 

Telerix Communications (Private) Limited





2013

30,558

14,400

-

582,078

2012

93,132

14,400

-

4,728,980






Turklane Investments (Private) Limited





2013

12,645

-

-

234,299

2012

11,790

-

-

208,286

Total 2013

117,761

217,223

359,237

1,497,690

Total 2012         

133,878

206,982

40,676

7,988,099

 

Terms and conditions of transactions with related parties

The sales and purchases from related parties are made at terms equivalent to those that prevail in arm's length transactions. Outstanding balances as at 30 June 2013 are unsecured, interest free and settlement occurs in cash. There are no guarantees received or provided for any related party receivables or payables.

 

Amounts receivable from related parties also include debentures in Telerix Communications (Private) Limited and these have been included in financial assets on the statement of financial position. For more details refer to Notes 4.5 and Note 9.

 

As detailed per the 31 December 2012 annual report, credit risk from loans receivable from joint ventures and associates is managed by the Group Treasury Manager.

 

Directors' loans

There were no changes to the terms and conditions on directors' loans that existed as at the last reporting date.

 


Interest received

Amounts owed


US$

US$




June 2013

9,395

367,679

December 2012

15,746

257,881

                                                                                                                                                                                               

Directors' remuneration


June 2013

June 2012


Unaudited


US$

US$

 

Short-term employee benefits

433,390

414,995

Directors' fees

123,923

123,923

Medical benefits       

5,820

4,914

Total

563,133

543,832

 

The amounts disclosed in the table are the amounts recognized as an expense during the reporting period.

 

Directors' interests in shares

 

As at 30 June 2013, S Mutasa owned 61,682,130 (2012: 61,682,130) shares in Masawara Plc, F Daniels owned 3,666,667 (June 2012: 3,666,667) shares in Masawara Plc, and J Vezey owned 82,836 shares in Plc (June 2012: nil). The other directors had no interests in the shares of the company (June 2012: nil).

 

18        Prior year adjustments

 

Prior year adjustments relates to correction errors identified in the TA Holdings Limited's "TA Holdings" 2012 investment in associates opening balance that had erroneously been understated by $2,925,713 (Masawara Plc share, $1,147,465). The understatement was as a result of overstated TA Holdings' share of profit of associates by $337,287 (Masawara Plc share, $132,470) and understated TA Holdings' share of surplus on revaluation of property plant and equipment of associates by $2,810,222 (Masawara Plc share, $1,102,169) in years 2009 and 2010 and also an understatement of TA Holdings' share of surplus on revaluation of property plant and equipment of associates by $452,778 in 2011 (Masawara Plc share $177,580).

 

 

19        Capital commitments

 

As highlighted in the financial statements for the year ended 31 December 2012, the Telerix Communications (Private) Limited ("Telerix") shareholders provided letters of support pledging that they will, and are in a position to, at the request of Telerix, place sufficient funds up to a specified limit for Telerix to meet its obligations as and when they fall due during the next twelve months. Masawara Plc's share of the pledge to support Telerix was limited to $1.4 million and it was granted on 25 June 2013 for a twelve month period from the grant date. As at the date of signing off of these interim results, the Group had disbursed $582,000 of the pledged amount to Telerix.

 

20        Legal and compliance matters

 

On 5 October 2012, two former managers of Zuva Petroleum (Private) Limited ("Zuva"), an employee who is in the process of being retrenched and a former contract employee filed an application in the High Court of Zimbabwe against the Minister of Youth, Indigenisation and Economic Empowerment ("the Minister") and Masawara Zimbabwe (Private) Limited ("Masawara Zimbabwe") seeking a revocation of the approval that the Minister granted in February 2011 for the Masawara group to acquire the former BP and Shell assets.

 

Both the Minister and Masawara Zimbabwe opposed the application. In his opposing affidavit, the Minister, amongst other things, stated that he had no intention of revoking the approval. The matter was heard towards the end of June 2013 and judgment was reserved. The matter is therefore still pending, and the Directors of the Company believe that the court application has no merit and that it will be dismissed by the Court.

 

21        Events after the reporting period

 

Approval of the acquisition of Minerva Holdings (Private) Limited

On 21 August 2013, Masawara (Mauritius) Limited, a wholly owned subsidiary of Masawara Plc, acquired a 100% shareholding in Minerva Holdings (Private) Limited which in turn owns 69.75% of Aon Zimbabwe (Private) Limited's issued share capital. The consideration for the acquisition will be based on the underlying earnings of Aon Zimbabwe (Private) Limited over the next three years, and will be capped to a maximum of $2.8 million. The consideration is payable over 3 years, with the first payment payable on 30 April 2014. The Group intends for Minerva Holdings (Private) Limited to ultimately only own a 45% share of Aon Zimbabwe (Private) Limited. Aon Zimbabwe (Private) Limited has operations in Pensions Consulting and Administration, Insurance Risk Advisory and Reinsurance Broking. Aon Zimbabwe (Private) Limited reported revenues of $4.2 million and a profit after tax of $1.2 million for the period ended 30 June 2013 (unaudited interim results).

 

 


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