We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register to chat with like-minded investors on our interactive forums.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Masawara | LSE:MASA | London | Ordinary Share | JE00B42XFD25 | ORD USD0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 24.00 | 23.00 | 25.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMMASA
RNS Number : 3733Y
Masawara Plc
16 May 2016
16 May 2016
Masawara plc ("Masawara", the "Company" or the "Group")
Final results for the year ended 31 December 2015
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 2015.
The Company's financial statements for the year ended 31 December 2015 may be viewed on, or downloaded from, the Company's website at www.masawara.com.
Contact details
Masawara plc
(Masawara Zimbabwe (Private) Limited, the Company's Investment Advisor in Zimbabwe)
Rutendo Maziva/Oliver Lutz
+263 4 751805
Cenkos Securities plc (Nominated adviser and broker)
Nicholas Wells/Ian Soanes/Max Hartley
+44 20 7397 8900
CHAIRMAN'S STATEMENT
The year 2015 was in many ways a transformational year in our short history. We completed the acquisition of 100% of TA Holdings Limited ("TA Holdings"), the anchor investment in our portfolio, in April 2015. We then embarked on an extensive restructure of the TA Holdings Group, with the objective of rationalising and simplifying the structures, integrating TA Holdings within the Masawara Plc Group and making the overall structure more cost efficient. We also introduced a strong partner Sanlam Emerging Markets (Pty) Limited ("SEM"), which shares our operating ethos, into the Zimbabwe insurance cluster. Through this transaction that was completed in December 2015, SEM acquired an effective 40% shareholding in our Zimbabwe insurance companies (excluding the brokerage business).
Following the TA Holdings acquisition, the Investment Advisor made some significant management changes, with the former TA Holdings CEO, Gavin Sainsbury, assuming the position of Chief Operating Officer, and with Osbourne Majuru as Chief Financial Officer. Both have strong operational experience, which should further strengthen our capacity to manage our portfolio.
The operating environment in most of our markets continued to be difficult, particularly in Zimbabwe, which continued to stagnate and where the liquidity challenges worsened.
The TA Holdings acquisition, corporate restructuring and introduction of SEM into the Zimbabwe insurance cluster all had a positive impact on the portfolio. On completion, the restructuring is expected to result in cost savings and efficiencies, which should improve the bottom-line. The partnership with SEM, particularly the provision of technical services, has already started to pay off, and we expect to derive even greater benefits in the future and improve the market positions of all our insurance companies in Zimbabwe. In 2016, we strengthened our partnership with SEM, when it acquired 50% of Botswana Insurance Company, our short term insurance business in Botswana.
The Group incurred a loss after tax of $4.7 million for the year compared to a profit after tax of $16.1 million during the prior year. This was primarily as a result of a $12.5 million impairment of the Telerix Communications (Private) Limited ("Telerix") loan notes in 2015 (2014: $2.8 million) and a $2.0 million operating loss from Sable Chemical Industries ("Sable") from 25 June 2015 when the Group took control of the company and therefore started consolidating it as a subsidiary. In the prior period, Sable was accounted for as an associate and had no impact on the Group's results, as the investment in Sable had been fully impaired. The impairment of the Telerix loan notes was prudent in light of uncertainties of when the business will be in a position to fully repay the loans. The future of this business looks positive on the back of the acquisition by Dandemutande, Telerix's operating company, of the iWay Africa Zimbabwe (Private) Limited and Africa Online (Private) Limited customers and selected assets and liabilities in July 2015, as well as the commencement of a management contract awarded to Gondwana International Networks (Pty) Limited, a Pan-African IT specialist based in South Africa, which now co-owns Dandemutande following the transaction. The non-recurring income in the prior year comprised of a $6.2 million gain on disposal of our investment in Masawara Energy (Mauritius) Limited and a $10.0 million gain on the acquisition of TA Holdings.
Sable went through fundamental changes during October 2015, following the cessation of bulk power supplies to its Kwekwe plant, which it was using for the production of ammonia through electrolysis. Its performance was also affected by the drought experienced throughout Southern Africa. Sable has now adopted a new operating model based on full importation of ammonia. We believe that with the right level of financing, this new model is a better and more sustainable one.
2016 will be a year of further consolidation that will include:
-- Continued emphasis on restructuring and optimisation of the investment portfolio to unlock value and create a platform for future growth;
-- A focus on current investments and ensuring the companies are better positioned to grow market share, especially in Zimbabwe where the market size is expected to stagnate or contract;
-- Stronger focus on cash generation; and -- Supporting and providing strategic guidance to management of underlying investments.
It has been an exciting challenge to serve as Chairman of Masawara from the time of its listing on AIM in August 2010. It has given me the opportunity to participate in the efforts of the Company to act as a bellwether for international investment in the economy of Zimbabwe and the southern African Region. Masawara has now launched on a new phase of activity and one that I believe will carry it forward on a basis designed to make it even more successful. In standing down as Chairman at the next AGM in June, I am handing over to Christopher Getley with whom I have been collaborating to ensure a smooth transition. I hope to be able to maintain my happy relationship with Masawara. I remain available to contribute in whatever manner possible, particularly in any capital raising activities.
David Suratgar
16 May 2016
DIRECTORS' REPORT
The Directors present the audited financial statements of the Group for the year ended 31 December 2015.
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:
-- a 100% 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;
-- a significant 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;
-- a non-controlling interest in Telerix Communications (Private) Limited ("Telerix") and iWayAfrica Zimbabwe (Private) Limited ("iWayAfrica"), Zimbabwean broadband internet service providers.
Investment strategy
Masawara Plc principally invests in businesses and assets 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, joint ventures and disposals, 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 47 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 its investments are predominantly held. There is a further risk that investments made by the Group will not result in the originally envisaged cash generation or capital appreciation. This risk is managed by the careful evaluation of all proposed investments, with detailed due diligence work being undertaken, before any investments are made and ongoing monitoring of existing investments.
There is a risk that the illiquidity of the Zimbabwean equity and capital 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 29.
The success of the new ammonia importation model of Sable Chemical Industries Limited ("Sable") is reliant on the availability of third party debt, being to finance the working capital requirements and additional rail tank cars.
Going concern
Management prepared cash flow forecasts indicating there is adequate operating cash for the period to 30 June 2017. 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. As at the date of publishing these consolidated financial statements, Masawara Plc complied with all the loan covenants.
Results for the year
Overview
The following were the significant events for the year ended 31 December 2015:
-- This was the first full year of TA Holdings being consolidated into our results.
-- On 8 April 2015, Masawara Plc increased its ownership in TA Holdings from 75.74% to 100% after Masawara Holdings Mauritius Limited, a subsidiary of Masawara Plc, purchased the shares from the remaining shareholders.
-- In July 2015 the merger of the operations of Dandemutande Investments (Private) Limited ("Dandemutande"), (a wholly owned subsidiary of Telerix Communications (Private) Limited), iWay Africa (an associate of the Group) and Africa Online was concluded. The merger transaction resulted in Group reducing its effective shareholding in Dandemutande from 50% to 25.3%.
-- The Group gained control of Sable Chemical Industries Limited on 25 June 2015 and consolidated its results effective from that date (Note 8).
-- On 3 December 2015, the Group concluded the sale of a 40% interest in its Zimbabwean insurance businesses (with the exception of Minerva Risk Advisors (Private) Limited (Note 9).
-- Telerix loan notes, amounting to $12.5 million were fully impaired following a reassessment of their recoverability (Note 31.2.1).
The Group incurred a loss after tax of $4.6 million for the year compared to a profit after tax of $16.1 million during the prior year. The composition of the Group's statement of comprehensive income for the year ended 31 December 2015 is significantly different from the comparative results primarily due to the following:
-- In the current year TA Holdings was consolidated as a subsidiary for the full year. In the prior year, it was an associate for 11 months and the Group equity accounted for its 41.04% share of the results. From 1 December 2014, TA Holdings became a subsidiary after the Group purchased additional shares from the minority shareholders, resulting in consolidation of the TA Holdings results.
-- The prior year results include a bargain purchase gain of $10.0 million from the TA Holdings acquisition and a profit of $6.2 million from the disposal of Masawara Energy (Mauritius) Limited.
-- The current year results include the performance of Sable Chemical Industries Limited ("Sable") from 25 June 2015 when the Group took control of the company and therefore started consolidating it as a subsidiary. In the prior period, Sable was accounted for as an associate and had no impact on the Group's profit or loss, as the investment in Sable had been fully impaired.
-- There was a $12.5 million impairment of the Telerix loan notes in 2015 (2014: $2.8 million).
Due to the changes described above, the Directors have prepared a Proforma Consolidated Income Statement for the year ended 31 December 2015, assuming the TA acquisition was concluded on 1 January 2014 i.e. that TA Holdings was a subsidiary for the full comparative period. This is the Directors' view that this provides a better basis for the comparison of the results.
Consolidated unaudited proforma income statement for the year ended 31 December 2015
Hot Features
Premium
2015 2014
Notes US$'000 US$'000 Growth
INCOME
Gross insurance premium revenue 83,093 78,293 6%
Insurance premium ceded to reinsurers
on insurance contracts (31,246) (31,775) -2%
---------- ----------
Net insurance premium revenue 51,847 46,518 11%
Fees and commission income 19,888 19,734 1%
Hotel revenue 15,304 15,618 -2%
Manufacturing revenue a 11,661 -
Rental income from investment properties 3,019 3,096 -2%
Net total revenue 101,719 84,966 20%
Gain on bargain purchase of TA Holdings
Limited c - 9,973 -100%
Gain on bargain purchase of Sable
Chemicals Limited b 5,206 - 100%
Investment income 3,499 4,351 -20%
Realised and unrealised gains d 192 6,372 -97%
Other operating income a 9,055 1,820 398%
Unwinding of financial guarantee
- Telerix Communications (Pvt) Limited 295 534 -45%
---------- ----------
Total other income 18,247 23,050 1%
EXPENSES
Insurance claims and loss adjustment
expense (35,982) (32,232) 12%
Insurance claims and loss adjustment
recovered from insurers 9,392 9,699 -3%
---------- ----------
Net insurance claims (26,590) (22,533) 18%
Realised and unrealised losses (1,494) (1) -
Expenses for the acquisition of
insurance contracts (9,136) (11,589) -21%
Hotel cost of sales (5,475) (5,228) 5%
Manufacturing cost of sales a (1,623) - 100%
Property expenses (1,793) (1,655) -4%
Operating and administrative expenses a (62,677) (41,811) 50%
Impairment loss on loan notes - Telerix
Communications (Pvt) Limited (12,516) (2,853) -339%
Total net insurance claims and operating
expenses (121,304) (85,670) 42%
Finance costs a (2,620) (1,242) 111%
(Loss)/profit before share of profit
of associates and tax (3,958) 21,104 -119%
Share of profit of other associates 1,886 1,922 -2%
(Loss)/profit before tax (2,072) 23,026 -109%
---------- ----------
Add back impact of Sable Chemical 2,099 -
Limited a
Add back non-recurring items:
Profit on disposal of Masawara Energy
(Mauritius) Limited - (6,195)
Gain on bargain purchase of TA Holdings
Limited - (9,973)
Gain on bargain purchase of Sable (5,206) -
Chemicals Limited b
Impairment of Telerix Communications
(Pvt) Ltd loan notes 12,500 2,853
Revaluation loss on property, plant 640 -
and equipment
Adjusted profit before tax e 7,961 9,711 -18%
---------- ----------
Notes
a. These are the line items affected by the inclusion of Sable's results in 2015. Sable was consolidated from 24 June 2015 and had no impact on the prior year's results. Included in other operating income, administrative expenses and finance costs are $7.0 million, $19.8 million and $862,000 respectively, related to Sable.
b. The gain on bargain purchase was as a result of the Group taking control of Sable on 24 June 2015 (Note 8).
c. The gain on bargain purchase was as a result of the Group taking control of TA Holdings on 1 January 2014. The effective date has been changed from 1 December 2014 for the purposes of this Proforma, in order to have TA Holdings' reported as a subsidiary for the full 2014 year.
d. Realised gains in prior year included profit on disposal of Masawara Energy (Mauritius) Limited amounting to $6.2 million (Note 17.1)
e. The unusual and significant non-recurring items in 2015 and 2014 have been excluded to arrive at the adjusted profit before tax. The primary drivers for the 18% ($1.8 million) decline in profit compared to the prior year are:
-- a 3% ($1.3 million) increase in operating and administrative expenses (excluding Sable);
-- a $1.4 million increase in realised and unrealised losses and a $0.8 million decrease in investment income primarily as a result of the poor performance of the Zimbabwe Stock Exchange; and
-- a $0.6 million increase in finance costs due to new loans advanced to the Group for the acquisition of TA Holdings.
Group's performance by segment
Masawara Plc, classifies the Group's business units into different clusters i.e. insurance, hotels, agrochemicals, property (Joina City) and technology for the purpose of monitoring the operating results of business units and resource allocation to business units. The following shows the Group's performance by segment.
Insurance
All the insurance companies registered growth in gross written premium compared to the prior year, and all companies achieved underwriting profits for the year.
Profit after tax US$'000 US$'000
2015 2014
------------------------------------------ -------- --------
Botswana Insurance Company Limited 3,161 2,330
Lion Assurance Company (Uganda) 981 943
Zimnat Lion Insurance Company Limited
(Zimbabwe) 194 1,388
Zimnat Life Assurance Company (Zimbabwe) 3,310 2,313
Grande Reinsurance Company (Zimbabwe) 666 182
Minerva Risk Advisors Private Limited
(Zimbabwe) 780 1,003
9,092 8,159
----------------------------------------- ----------
For the companies operating in Botswana and Uganda, the results in their functional currencies of Botswana Pula (BWP) and Ugandan Shillings (UGX) were as follows:
Profit after tax BWP'000 BWP'000 Growth
2015 2014
---------------------------- -------------------- -------- -------
Botswana Insurance Company
Limited 31,525 20,634 53%
Profit after tax UGX'000 UGX'000 Growth
2015 2014
------------------------ ----------------------- ---------- -------
Lion Assurance Company
(Uganda) 3,202,180 2,467,124 30%
The key performance ratios of the insurance businesses as at year end were as follows:
Claims ratio Claims ratio Combined Combined
2015 2014 ratio 2015 ratio 2014
----------------------------- ------------- ------------- ------------ ------------
Botswana Insurance Company
Limited 53% 59% 91% 100%
Lion Assurance Company
(Uganda) 34% 32% 90% 87%
Zimnat Lion Insurance
Company Limited (Zimbabwe) 44% 34% 92% 81%
Zimnat Life Assurance
Company (Zimbabwe) 30% 32% 83% 79%
Grande Reinsurance Company
(Zimbabwe) 27% 38% 83% 94%
Hotels
The Zimbabwe hotels experienced increased levels of competition and incurred costs for the refurbishment of one of the Harare properties, which resulted in lower profit being recorded for the current year. The refurbishment of the Cresta Lodge Harare was completed during the year, improving occupancy levels at that hotel. The outside Zimbabwe hotels recorded an increase in profitability compared to the prior year in local currency, which was however not reflected when the results were translated to United States Dollars, due to the devaluation of the local currency during the year. Construction of a new hotel in Maun, Botswana that began during 2015 is progressing well.
Profit after tax US$'000 US$'000
2015 2014
------------------------------------- -------- --------
Cresta Hotels (Private) Limited
(Zimbabwe) 400 699
Cresta Marakanelo Limited (Botswana
and Zambia) 2,684 2,716
Group's 35% of Cresta Marakanelo
Limited Profit after tax 1,155 1,120
-------- --------
4,239 4,535
-------- --------
Profit after tax BWP'000 BWP'000 Growth
2015 2014
--------------------------- ------------------- -------- -------
Cresta Marakanelo Limited
(Botswana and Zambia) 26,761 24,058 11%
The key performance indicators of the hotel businesses as at year end were as follows:
Occupancy Occupancy RevPAR RevPAR
2015 2014 2015 2014
----------------------------- ---------- ---------- ------- -------
Cresta Hotels Private
Limited (Zimbabwe) 58% 54% $40 $40
Cresta Marakanelo (Botswana
and Zambia) 67% 54% $56 $47
Agro chemicals
The agro chemicals segment is comprised of Sable Chemical Industries Limited ("Sable") and Zimbabwe Fertiliser Company Limited ("ZFC"). The Group has a 22.5% interest in ZFC and accounts for it as an associate. The Group has a 50.6% interest in Sable, which until 24 June 2015 was accounted for as an associate. On 25 June 2015, TA Holdings obtained control of Sable following the liquidation of various intermediary companies. This resulted in TA Holdings having a direct shareholding of 50.6%, instead of the previous position where 41% was held directly and 9.6% was held through intermediaries that were not controlled by TA Holdings. Consequently, Sable was consolidated effective 30 June 2015 and assets and liabilities were taken on. In the prior year, although Sable incurred a loss, no share of the loss was recognized in the Group income statement because the investment in Sable was written down to $nil in 2013 in accordance with International Financial Reporting Standard, (refer to Note 3.1 for further details).
Due to the prevailing electricity shortage in Zimbabwe, on 12 October 2015 the electricity utility company curtailed the electricity supply to Sable. This resulted in the decommissioning of the electrolysis plant, and Sable moving to a new business model relying on the importation of ammonia in order to manufacture ammonium nitrate fertiliser. Sable's performance was further impacted by the drought experienced in Zimbabwe. This led to a significant decline in sales compared to the same period in the prior year and resulted in Sable incurring a loss of $4 million (Group's share of loss $2 million).
Joina City
The key performance indicators of Joina City as at year end were as follows:
Occupancy Occupancy Debtors Debtors Payments Payments
2015 2014 as % of as % of to shareholders to shareholders
revenue revenue 2015 2014
2015 2014
--------- ---------- ---------- --------- --------- ----------------- -----------------
Joina
City 62% 72% 22% 23% $970,000 $970,000
Group's
share n/a n/a n/a n/a $556,000 $556,000
Despite the tough market conditions characterised by liquidity constraints, lower disposal incomes, lower occupancies and an increase in defaulting tenants, Joina City maintained the same level of payments to the shareholders as prior year. This was despite the lower occupancies in 2015 and was achieved through improved debtors' collections. The decrease in occupancy was primarily as a result of the termination of the anchor tenant's lease during the last quarter of the year. In January 2016, a new anchor tenant was identified and commenced trading in March 2016. The office section occupancies continue to be a challenge, as some companies choose move out of the city centre, and management is not expecting the trend to change. Alternative uses for some of the vacant office space are being sought.
Technology
In July 2015 regulatory approvals were obtained for the merger of the operations of Dandemutande, (a wholly owned subsidiary of Telerix Communications (Private) Limited ("Telerix")), iWay Africa (an associate of the Group) and Africa Online, refer to Note 30.2 for further details). The merger resulted in an increased revenue base and a broader product and service offering. Following some restructuring and re-negotiation of key supply contracts, significant cost savings were realised during the last quarter of the year, and gross margins increased from 31% to 40% during the year. The business started generating profit at an EBITDA level during the last quarter of the year. However, due to the level of finance costs, was still incurring a loss after tax.
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 year ended 31 December 2013, 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 2015, the loan payable to CABS by Dandemutande had reduced to $635,000. Consequently, the Group reduced the liability relating to the guarantee by $295,000 (2014: $534,000) and this adjustment was disclosed as unwinding of financial guarantee on the consolidated income statement.
Despite the significant improvement in the performance of Dandemutande during the year, the Directors decided it was prudent to impair the loan notes in full ($12.5 million) as a result of the uncertainty in the timing of the loan repayments (Note 30.2.1). The impairment loss recognised in the prior year on the loan notes amounted to $2.9 million.
Cash flow for the year
The Group recorded an overall increase in cash and cash equivalents of $9.3 million from the previous year.
Net cash inflow from financing activities included proceeds from the sale of the Zimbabwe Insurance businesses of $10.9 million, proceeds from borrowings of $18.7 million, cash outflow of $2 million for repayment of borrowings and outflow of $158,000 for dividends paid to non-controlling interests of the Group.
Net cash flows used in investing activities was mainly attributable to the following investing activities:
-- Net cash outflow of $7.7 million for the purchase of financial instruments. -- Cash outflow of $8.3 million for the acquisition of TA Holdings Limited.
-- $3.8 million cash inflow that represents net cash acquired on obtaining control of Sable Chemicals Industries Limited.
-- Cash outflow of $2.6 million purchase of property, plant and equipment.
-- Cash outflow of $1.2 million relating to the payment of deferred consideration to Minet Group for purchase of Masawara's interest in Minerva Holdings (Private) Limited; and
-- Cash outflow of $1.2 million for loans granted to Telerix.
Financial position
Following the acquisition of Sable, current assets increased from $74.3 million as at 31 December 2014 to $136.2 million as at 31 December 2015 whilst the increase in non-current assets was offset by the impairment of the Telerix loan notes, resulting in a net decrease of $2.9 million to end the year at $152.0 million. The Group had cash and cash equivalents of $25.9 million as at 31 December 2015 (31 December 2014: $18.3 million). Current liabilities increased from $83.0 million as at 31 December 2014 to $130.2 million as at 31 December 2015 primarily due to the acquisition of Sable Chemicals Industries Limited. Non-current liabilities increased by $15.1 million primarily due to loan notes amounting to $11.0 million that were issued by the Group for the acquisition of TA Holdings.
The net asset value per share attributable to equity holders of the parent as at 31 December 2015 was $0.61 (31 December 2014: $0.69).
Outlook
It is anticipated that the economic conditions in Zimbabwe will further deteriorate during the year, and the liquidity in the market becoming even more constrained. The Zimbabwe Stock Exchange is expected to end the year with a loss in value, as it did in 2015. The Group's management will focus on finding opportunities to grow in the tough environment, employ various initiatives to increase their market share to ensure the companies remain sustainable and profitable.
The insurance businesses have registered growth during the first quarter of 2016 and this trend is expected to continue, resulting in another profitable year for this segment. Minerva Risk Advisors will be focusing on growing its health care broking book.
Price wars within the hospitality industry in Zimbabwe are expected to continue. Occupancies within the Cresta Zimbabwe hotels are expected to increase in future following the refurbishment of the Cresta Lodge rooms in 2015, as well as the restaurant refurbishment which is due to be completed during the second quarter of 2016.
At Joina City, attention will continue to be placed on retaining quality 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. An agreement has been signed with a cinema operator and renovations of the vacant space are due to commence during the second quarter with opening set for the third quarter of 2016. It is anticipated that the retail section will be fully tenanted by the third quarter resulting in an increase in turnover. We do not expect the office occupancies to increase significantly during 2016, as there is a trend in the market of businesses moving out of the city centre to industrial and suburban areas. Joina City is exploring various initiatives to improve debtors performance, including providing incentives for tenants who pay their rentals on time.
Sable's new business model, which is less reliant on electricity, is a more sustainable one than the electrolysis model previously used. Sable is in the process of securing third party financing for working capital and the refurbishment of rail tank cars. Whilst we are fairly confident that the new model will succeed, it is dependent on raising this finance.
The restructuring of the business will take some time to complete, therefore in the short term Sable is not expected to contribute positively to the Group's results. The Directors will continue to pursue strategic initiatives, which are aimed at procuring that Sable does not impact negatively on the Group's performance in the medium to long term.
The broadband internet market conditions are expected to become more competitive, with further downward pressure on the selling prices for the retail and commercial segments. Telerix's revenues are not forecast to grow significantly from organic growth due to the downward pressure on pricing, so there will be increased focus on cost control in order to protect margins. There are other initiatives being pursued to increase the Telerix customer base by acquiring customers from third parties or through a merger, which will strengthen Telerix's position in the market.
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
Mrs Maureen Erasmus
16 May 2016
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 (Resigned 18 December 2015)
Shingai Mutasa
Julian Vezey (Resigned 18 January 2016)
Stephen Folland
Christopher Getley (Appointed 18 December 2015)
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 members are Mr David Suratgar and Mr Stephen Folland. 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 auditors 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 auditors of the Group has unlimited access to the Board.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
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 judgments 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.
INDEPENT AUDITORS' REPORT TO THE MEMBERS OF MASAWARA PLC
Report on the financial statements
Our opinion
In our opinion, Masawara Plc's group financial statements (the "financial statements"):
-- give a true and fair view of the state of the group's affairs as at 31 December 2015 and of its loss and cash flows for the year then ended;
-- have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and
-- have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
What we have audited
The financial statements, included within the Annual report, comprise:
-- the Consolidated statement of financial position as at 31 December 2015;
-- the Consolidated income statement and consolidated statement of other comprehensive income for the year then ended;
-- the Consolidated statement of cash flows for the year then ended; -- the Consolidated statement of changes in equity; and
-- the notes to the financial statements, which include a summary of the significant accounting policies and other explanatory information.
The financial reporting framework that has been applied in their preparation comprises applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
In applying the financial reporting framework, the directors have made a number of subjective judgments, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.
Opinion on other matter
In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.
Other matters on which we are required to report by exception
Under the Companies (Jersey) Law 1991, we are required to report to you if, in our opinion we have not received all the information and explanations we require for our audit. We have no exceptions to report arising from this responsibility.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Article 113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What an audit of financial statements involves
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (ISAs (UK & Ireland)). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
-- whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed;
-- the reasonableness of significant accounting estimates made by the directors; and -- the overall presentation of the financial statements.
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Alison Baker
For and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants
London
16 May 2016
(a) The maintenance and integrity of the Masawara Plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
(b) Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Consolidated income statement for the year ended 31
December 2015
2015 2014
Notes US$ '000 US$ '000
INCOME
Gross insurance premium revenue 12.1 83,093 6,253
Insurance premium ceded to reinsurers
on insurance contracts 12.2 (31,246) (1,927)
---------- ----------------
Net insurance premium revenue 51,847 4,326
Fees and commission income 13 19,888 2,073
Hotel revenue 14 15,304 1,147
Manufacturing revenue 15 11,661 -
Rental income from investment properties 29 3,019 2,029
Net total revenue 101,719 9,575
Gain on bargain purchase of TA Holdings
Limited - 9,973
Gain on bargain purchase of Sable
Chemical Limited 8 5,206 -
Investment income 16 3,499 1,905
Realised and unrealised gains 17.1 192 7,787
Other operating income 18 9,055 515
Unwinding of financial guarantee
- Telerix Communications (Private)
Limited 30.2.1 295 534
---------- ----------------
Total other income 18,247 20,714
EXPENSES
Insurance claims and loss adjustment
expense 19.1 (35,982) (3,455)
Insurance claims and loss adjustment
recovered from reinsurers 19.2 9,392 2,603
---------- ----------------
Net insurance claims (26,590) (852)
Realised and unrealised losses 17.2 (1,494) (1)
Expenses for the acquisition of insurance
contracts 20 (9,136) (656)
Hotel cost of sales 21 (5,475) (183)
Manufacturing cost of sales 22 (1,623) -
Operating and administrative expenses 23 (62,677) (10,259)
Property expenses 29 (1,793) (1,655)
Impairment loss on loan notes - Telerix
Communications (Private) Limited 31.2.1 (12,516) (2,853)
Total net insurance claims and operating
expenses (121,304) (16,459)
Finance costs 24 (2,620) (758)
(Loss)/profit before share of profit
of associates and tax (3,958) 13,072
Share of profit of other associates
and joint ventures 30 1,886 780
Share of profit of associate - TA
Holdings Limited - 2,542
(Loss)/profit before tax (2,072) 16,394
Income tax expense 25 (2,585) (325)
---------- ----------------
(Loss)/profit for the year (4,657) 16,069
---------- ----------------
(Loss)/profit for the year attributable
to:
Owners of the parent (5,636) 15,432
Non-controlling interests 979 637
(Loss)/profit for the year (4,657) 16,069
---------- ----------------
Earnings per share:
Basic and diluted, on (loss)/profit
for the year attributable to owners
of the parent 26 (0.05) 0.13
Consolidated statement of other comprehensive income
for the year ended 31 December 2015
2015 2014
Notes US$ '000 US$ '000
(Loss)/profit for the year (4,657) 16,069
Other comprehensive (loss)/income,
net tax:
Items that may be subsequently reclassified
to profit or loss
Share of other comprehensive income
of associate - (993)
Exchange differences on translation
of foreign operations 39 (5,403) 424
Change in value of available-for-sale
financial assets 39 (16) 449
--------- ----------
(5,419) (120)
Items that will not be reclassified
to profit or loss
Share of other comprehensive income
of associate - 350
- 350
Total comprehensive (loss)/income (10,076) 16,299
--------- ----------
Total comprehensive (loss)/income
attributable to:
Owners of the parent (9,231) 15,662
Non-controlling interests (845) 637
Total comprehensive (loss)/income
for the year (10,076) 16,299
--------- ----------
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 2015
Notes 2015 2014
US$ '000 US$ '000
ASSETS
Property, plant and equipment 27 35,503 29,976
Intangible assets 28 3,660 4,675
Investment properties 29 46,832 46,685
Investment in associates and
joint ventures 30 12,593 13,261
Financial assets 31 52,285 59,255
Deferred tax asset 25.2 1,080 1,080
--------------------------------- ------- --------- ---------
Total non-current assets 151,953 154,932
--------------------------------- ------- --------- ---------
Inventory 32 13,999 308
Reinsurance assets 41.2 23,910 23,807
Insurance receivables 33 13,927 9,250
Deferred acquisition costs 34 2,966 -
Trade and other receivables 35 55,529 22,646
Cash and cash equivalents 36 25,912 18,300
--------------------------------- ------- --------- ---------
Total current assets 136,243 74,311
Non-current assets classified
as held for sale - 575
--------------------------------- ------- --------- ---------
Total assets 288,196 229,818
--------------------------------- ------- --------- ---------
EQUITY
Share capital 37 1,235 1,235
Share premium 37 80,102 80,110
Treasury shares 37 (232) (333)
Group restructuring reserve 38 (9,283) (9,283)
Other reserves 39 (3,999) 35
Non-distributable reserve 3.17.4 370 (695)
Retained earnings 7,205 13,547
--------------------------------- ------- --------- ---------
Equity attributable to owners
of the parent 75,398 84,616
Non-controlling interest 24,221 18,897
Total equity 99,619 103,513
--------------------------------- ------- --------- ---------
LIABILITIES
Financial liabilities 40 17,412 5,444
Deferred tax liabilities 25.3 7,989 7,506
Investment contracts 41.4 33,012 30,372
Total non-current liabilities 58,413 43,322
--------------------------------- ------- --------- ---------
Financial liabilities 40 19,083 9,427
Insurance contract liabilities 41.5 48,841 48,441
Deferred income 42 1,395 1,912
Income tax liability 220 114
Insurance payables 43 3,749 2,688
Provisions 44 5,032 1,824
Trade and other payables 45 51,844 18,577
--------------------------------- ------- --------- ---------
Total current liabilities 130,164 82,983
Total liabilities 188,577 126,305
--------------------------------- ------- --------- ---------
Total equity and liabilities 288,196 229,818
--------------------------------- ------- --------- ---------
MASAWARA PLC
Consolidated statement of changes in equity for the year ended 31 December 2015
Attributable to the owners of
the parent
US$ '000 US$'000
----------------------------------- ------------------------------------------------------------------ ---------------------------
Equity
Share Share Treasury Group Other Non Revaluation (Accumulated of Non-Controlling Total
Capital Premium Shares Restructuring Reserves Distributable Reserve Loss)/Retained Owners Interest Equity
Of
Reserve Reserves Earnings parent (NCI)
Note Note Note Note Note
Note 37 37 37 38 39 3.17.4
At 1 January
2014 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)/income - - - - (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)/income - - - - (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
a subsidiary - - - - - - - - - 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
---------------- -------- -------- --------- -------------- --------- -------------- ------------ --------------- -------- ---------------- ---------
(Loss)/profit
for the year - - - - - - - (5,636) (5,636) 979 (4,657)
Exchange
differences
on translation
of foreign
operations - - - - (3,584) - - - (3,584) (1,819) (5,403)
Net gain on
available
for sale
investments - - - - (11) - - - (11) (5) (16)
---------------- -------- -------- --------- -------------- --------- -------------- ------------ --------------- -------- ---------------- ---------
Total
comprehensive
loss - - - - (3,595) - - (5,636) (9,231) (845) (10,076)
---------------- -------- -------- --------- -------------- --------- -------------- ------------ --------------- -------- ---------------- ---------
Allocation of
treasury
shares - (8) 101 - - - - - 93 - 93
Share based
payment
transactions - - - - 98 - - - 98 - 98
Reserve
transfer
- Note 3.17.4 - - - - (168) 1,065 - (897) - - -
Increase in
shareholding
in subsidiary
- Note 7 - - - - - - - (1,226) (1,226) (8,859) (10,085)
NCI on
acquisition
of subsidiary
- Note 8 - - - - - - - - - 5,003 5,003
Disposal of NCI
in subsidiary-
Note 9 - - - - - - - 1,417 1,417 10,183 11,600
Adjustment to
TA Holdings
acquisition
accounting -
Note
31.4 - - - - (369) - - - (369) - (369)
Dividend paid - - - - - - - - - (158) (158)
---------------- -------- -------- --------- -------------- --------- -------------- ------------ --------------- -------- ---------------- ---------
At 31 December
2015 1,235 80,102 (232) (9,283) (3,999) 370 - 7,205 75,398 24,221 99,619
---------------- -------- -------- --------- -------------- --------- -------------- ------------ --------------- -------- ---------------- ---------
Consolidated statement of cash flows for the year
ended 31 December 2015
2015 2014
Notes US$ '000 US$ '000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash used in operations 46 (1,674) (3,607)
Investment income received 4,846 572
Finance costs paid (2,477) (479)
Income tax paid (2,247) (298)
Dividend received - 440
Net cash flows used in operating
activities (1,552) (3,372)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of additional shares
in TA Holdings Limited 7 (8,336) -
Acquisition of subsidiary, net
of cash acquired 8 3,823 -
Purchase of property, plant and
equipment 27 (2,599) (319)
Purchase of intangible assets 28 (190) -
Improvements to investment property 29 (160) -
Purchase of financial instruments 31.4 (33,083) (5,585)
Proceeds from disposal of financial
instruments 31.4 25,455 5,438
Deferred consideration payment
to Minet Group 40 (1,194) (354)
Proceeds on disposal of property,
plant and equipment 787 55
Proceeds on disposal of investment
property 50 -
Loans granted to related parties
* (1,222) (3,314)
Proceeds from repayment of loans
granted to related parties 100 46
Proceeds on sale of interest
in subsidiary - 400
Acquisition of subsidiary, net
of cash acquired - 4,686
Proceeds on disposal of joint
venture - 26,725
Fixed deposit - (1,500)
Net cash flows (used in)/generated
from investing activities (16,569) 26,278
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on disposal of shares
in a subsidiary 9 10,890 -
Proceeds from borrowings 18,689 500
Repayment of borrowings (2,035) (1,259)
Dividend paid (158) (4,000)
Net cash flows generated from/(used
in) financing activities 27,386 (4,759)
Net increase in cash and cash
equivalents 9,265 18,147
Net effect of exchange rate movements
on cash and cash equivalents (1,653) 103
Cash and cash equivalents at
1 January 18,300 50
--------- ---------
Cash and cash equivalents at
31 December 25,912 18,300
--------- ---------
* Loans granted to related parties is predominantly made up of loan notes amounting to $1,136,000 (2014: $3,303,000) that were granted to Telerix Communications (Private) Limited during the year ended 31 December 2015, refer to Note 31.2.1.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARED 31 DECEMBER 2015
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).
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 2015 were authorized for issue in accordance with a resolution of the Directors on 16 May 2016.
2. Basis of preparation
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 2017. 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.
As at the date of publishing these consolidated financial statements, Masawara Plc complied with the all loan covenants.
3 Significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out as follows. These policies have been consistently applied to all the years presented, unless otherwise stated.
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 parent.
3.3.2 Transactions and balances
Foreign currency transactions are translated into the parent'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.
Amortisation is provided for on a straight-line basis over the useful lives of the following classes of assets:
-- Brands: 5 - 15years -- Customer list: 10 years -- Computer software: 5 years 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.
3.10.2.2 Loans and receivables (including insurance receivables)
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 derecognized 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 opening balance of $695,000 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.
Current year movement of $1.065 million in the non distributable account represent to transfer of funds to statutory reserves by Lion Assurance Company of Uganda and Botswana Insurance Company (outside Zimbabwe insurance companies) as per Ugandan Insurance Act and the Insurance Industry Act of Botswana. The transfer is 5% and 15% of net profits after tax each year, respectively.
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.
3.23 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, if there are any, is reflected as additional share dilution in the computation of diluted earnings per share (Note 26).
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
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 2014, except for the following new and amended IFRS effective as of 1 January 2015:
-- Annual Improvements to IFRSs - 2010-2012 Cycle and 2011 - 2013 Cycle
-- Defined Benefit Plans: Employee Contributions - Amendments to IAS 19 The adoption of the improvements made in the 2012-2012 Cycle has required additional disclosures in our segment note.
Other than that, the adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods.
The Group also elected to adopt the following two amendments early:
-- Annual Improvements to IFRSs 2012-2014 Cycle, and
-- Disclosure Initiative: Amendments to IAS 1. As these amendments merely clarify the existing requirements, they do not affect the group's accounting policies or any of the disclosures.
5. Standards issued but not yet effective
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2015 reporting periods and have not been early adopted by the Group. The Group's assessment of the impact of these new standards and interpretations is set out below.
Title Nature of the Impact Mandatory
of the change application
standard date/ Date
of adoption
by Group
------------------------ ----------------------------- ------------------------------ -----------------------------
IFRS IFRS 9 addresses Following the Must be
9 Financial the changes applied
Instruments classification, approved by the for financial
measurement IASB years commencing
and derecognition in July 2014, the on or after
of financial Group 1 January
assets and no longer expects 2018.
financial any
liabilities impact from the Based on
and introduces new the transitional
new rules for classification, provisions
hedge accounting. measurement in the
and derecognition completed
In July 2014, rules IFRS 9,
the IASB made on the Group's early adoption
further changes financial in phases
to the assets and was only
classification financial permitted
and measurement liabilities. for annual
rules and also reporting
introduced While the Group periods
a new impairment has beginning
model. These yet to undertake a before
latest amendments detailed 1 February
now complete assessment of the 2015. After
the new financial debt that date,
instruments instruments the new
standard. currently rules must
classified as be adopted
available-for-sale in their
financial assets, entirety.
it
would appear that
they
would satisfy the
conditions
for classification
as
at fair value
through
other
comprehensive
income (FVOCI)
based
on their current
business
model for these
assets.
Hence there will
be
no change to the
accounting
for these assets.
There will also be
no
impact on the
group's
accounting for
financial
liabilities, as
the
new requirements
only
affect the
accounting
for financial
liabilities
that are
designated
at fair value
through
profit or loss and
the
group does not
have
any such
liabilities.
The new hedging
rules
align hedge
accounting
more closely with
the
group's risk
management
practices. As a
general
rule it will be
easier
to apply hedge
accounting
going forward as
the
standard
introduces
a more
principles-based
approach. The new
standard
also introduces
expanded
disclosure
requirements
and changes in
presentation.
The new impairment
model
is an expected
credit
loss (ECL) model
which
may result in the
earlier
recognition of
credit
losses.
The Group has not
yet
assessed how its
own
hedging
arrangements
and impairment
provisions
would be affected
by
the new rules.
------------------------ ----------------------------- ------------------------------ -----------------------------
Title Nature of the Impact Mandatory
of the change application
standard date/ Date
of adoption
by Group
---------- ------------------------- ---------------------------------------------------------------- ----------------------
IFRS The IASB has Management is currently Mandatory
15 issued a new assessing the impact for
Revenue standard for of the new rules and financial
from the has identified the years
Contracts recognition following areas that commencing
with of revenue. are likely to be affected: on or
Customers This * extended warranties, which will need to be accounted after
will replace for as separate performance obligations, which will 1 January
IAS 18 which delay the recognition of a portion of the revenue 2018.
covers
contracts Expected
for goods and * consignment sales where recognition of revenue will date of
services and depend on the passing of control rather than the adoption
IAS 11 which passing of risks and rewards by the
covers Group:
construction 1 January
contracts. * IT consulting services where the new guidance may 2018.
result in the identification of separate performance
The new obligations which could again affect the timing of
standard the recognition of revenue, and
is based on
the
principle * the balance sheet presentation of rights of return,
that which will have to be grossed up in future (separate
revenue is recognition of the right to recover the goods from
recognised the customer and the refund obligation)
when control
of a good or
service
transfers At this stage, the
to a customer Group is not able
- so the to estimate the impact
notion of the new rules on
of control the group's financial
replaces statements. The Group
the existing will make more detailed
notion of assessments of the
risks impact over the next
and rewards. twelve months.
The standard
permits a
modified
retrospective
approach for
the adoption.
Under this
approach
entities will
recognise
transitional
adjustments
in
retained
earnings
on the date
of
initial
application
(e.g. 1
January
2017), i.e.
without
restating the
comparative
period.
They will
only
need to apply
the new rules
to contracts
that are not
completed as
of the date
of
initial
application.
---------- ------------------------- ---------------------------------------------------------------- ----------------------
IFRS IFRS 16 supersedes The standard provides Mandatory
16 Leases IAS 17, 'Leases', a single lessee accounting for financial
IFRIC 4,'Determining model, requiring lessees years commencing
whether an Arrangement to recognise assets on or after
contains a Lease', and liabilities for 1 January
SIC 15,'Operating all leases unless 2019.
Leases - Incentives' the lease term is
and SIC 27, 'Evaluating 12 months or less
the Substance or the underlying
of Transactions asset has a low value.
Involving the Lessors continue to
Legal Form of classify leases as
a Lease'. operating or finance,
with IFRS 16's approach
to lessor accounting
substantially unchanged
from its predecessor,
IAS 17.
The standard has not
been assessed for
the 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 estimates, assumptions and critical judgments 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 Estimates and assumptions 6.1.1 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 property categories were valued by independent professional valuers (Dawn Property Consultancy and Bard Real Estate) differently as highlighted below.
6.1.1.1 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.
6.1.1.2 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 and future revenue streams) 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 2014 and 31 December 2015, 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 property, the valuer used the Implicit Investment Approach based on capitalization of income. This method is based on the principle that rents and capital values are inter-related. 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 property in the Harare central business district and surrounding areas. The estimated future rental income streams were discounted in order to determine the fair value of the investment properties, refer to Note 29 for more details on inputs used in the valuation.
6.1.1.3 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.
6.1.2 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.
6.1.3 Impairment assessment of investments in associates and joint ventures
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.
6.1.4 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. The Group fully impaired its $12.5 million loan note investment in Telerix Communications (Private) Limited. The Group assessed Telerix Communications (Private) Limited's cash flow forecasts, financial and operating position it concluded that Telerix Communications (Private) Limited will not be able to make capital and interest repayments in accordance with loan note contract (Note 30.1.2).
6.1.5 Valuation of insurance contract liabilities 6.1.5.1 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.
6.1.5.2 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.
Certain acquisition costs related to the sale of new policies are recorded as deferred acquisition costs ("DAC") and are amortised to the consolidated income statement over time. If the assumptions relating to future profitability of these policies are not realised, the amortisation of these costs could be accelerated and this may also require additional impairment write-offs to the consolidated income statement.
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:
Rate Rate
Variable 2015 2014
Inflation 6% 6%
Expense 5.5% 8%
Valuation interest rate 6.0% 10%
Discount rate 8.0% 8%
Discount rate annuitants 7.5% 6%
Mortality - The tables used for mortality were:
-- 80% of the 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 2015.
-- For new Cashpal policies, the base year (2015) expense per policy was set at $18 per annum. -- For Whole Life policies, the base year (2015) expense per policy was set at $31 per annum.
-- For Pension Plan policies, the base year (2015) expense per policy was set at $36 per annum.
-- For Individual Life Funeral policies, the base year (2014) expense per member was set at $23 per annum for all of the future years.
-- For Individual Life Funeral policies, the base year (2015) expense per member was set at $13 per annum for all of the future years.
-- For new Individual Life Funeral policies, expense per main member was set at $51 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 $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 2015 as follows:
-- 0% bonus, was awarded to Investment Contracts with DPF (Deposit Administration Contracts) and Individual Life Old Conventional Policies as at 31 December 2015.
-- 2% Bonus, split as 100% vested and 0% non-vested was awarded to Individual Life Whole Life with profits product as at 31 December 2015.
-- 2% Bonus, split as 100% vested and 0% non-vested was awarded to New Convectional Annuity Product as at 31 December 2015.
Transfer to shareholders
-- 10% of the cost of bonus on Whole Life with profits was transferred to the Shareholder Fund.
-- 25% of the cost of bonus on New Conventional Annuity Product was transferred to the Shareholder Fund
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:
Margin Margin
Assumption 2015 2014
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 35% 30% 10% 30%
Year 1 to 2 25% 20% 10% 20%
Year 2 to 3 15% 15% 15% 15%
Year 3 to 4 15% 5% 20% 5%
Year 5+ 5% 5% 20% 5%
The expected funeral lapse rates have been based on the lapse experience investigation done as at 30 September 2015.
6.2 Judgments 6.2.1 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.
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 Chemical Industries Limited
On 25 June 2015, the Group, through its wholly owned subsidiary, TA Holdings Limited, obtained control of Sable Chemical Industries Limited "Sable Chemicals". This was after the intermediary companies within the fertilizer industry shareholding structure were liquidated resulting in TA Holdings having a direct shareholding of 50.6%, instead of indirectly holding 50.6%. Masawara's indirect shareholding was through different companies, none of which Masawara had control over.
Under the new shareholding structure, the Group has the ability to appoint the majority of the Board members using its direct shareholding of 50.6%. The Group is therefore in a position to direct the relevant activities of Sable Chemicals Industries Limited. The Group is exposed to variable returns from Sable Chemicals as the profitability of Sable affects the Group (through profit after tax). In addition, the Group is in a position to affect the returns from Sable Chemicals through determining its financial and operating policies. Consequently, Sables Chemicals has been consolidated effective 30 June 2015. More details on the acquisition have been included in Note 8.
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 but has significant influence.
-- 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.
Due to the fact that the Group has the ability to exert significant influence on Marakanelo, it accounts for its investment in Marakanelo as an associate.
7 Increase in shareholding in TA Holdings Limited
Effective 8 April 2015, Masawara Plc increased its ownership in TA Holdings Limited "TA Holdings" from 75.74% to 100% when the High Court of Zimbabwe sanctioned a mandatory offer made by Masawara Plc to acquire shares from the remaining TA Holdings shareholders. The acquisition took place when Masawara Plc, through its wholly owned subsidiary Masawara Holdings (Mauritius) Limited "MHML" purchased 41,403,383 TA Holdings' shares representing 24.26% of TA Holdings' issued share capital for $10.3 million.
Notwithstanding the fact that the effective date of change in ownership interests was 8 April 2015, 1 April 2015 has been adopted as the date of change in ownership interest for accounting purposes. The exclusion of transactions that took place between 1 April 2015 and 8 April 2015 does not have a material impact on the consolidated financial statements.
This transaction was accounted for as an equity transaction with owners and the carrying amounts of Masawara Plc interest and non-controlling interest were adjusted to reflect the changes in their relative interest. The computation below shows how the loss on the change in degree of control in TA Holdings Limited was calculated. The loss was recognized directly in retained earnings and attributed to Masawara Plc.
2015
US$ '000
Cash consideration 8,336
Deferred consideration 1,945
---------
Total consideration 10,281
New shares issued by TA Holdings in 2015 (196)
Non controlling interest (8,859)
---------
Loss on acquisition recognized directly
in retained earnings 1,226
---------
8 Business combination
On 25 June 2015, Masawara Plc, through its wholly owned subsidiary, TA Holdings Limited, obtained control of Sable Chemical Industries Limited "Sable Chemicals". This was after the intermediary companies within the fertilizer industry shareholding structure were liquidated resulting in TA Holdings having a direct shareholding of 50.6%, instead of indirectly holding 50.6%. Masawara's indirect shareholding was through different companies, none of which Masawara had control over. Under the new shareholding structure, Masawara Plc has the ability to appoint the majority of the Board members using its direct shareholding of 50.6%. Effective 25 June 2015, Masawara Plc was in a position to direct the relevant activities of Sable Chemicals Industries Limited and is exposed to variable returns from Sable Chemicals. In addition, Masawara Plc is in a position to affect the returns from Sable Chemicals through determining its financial and operating policies. Consequently, Sable Chemicals has been consolidated effective 30 June 2015.
Notwithstanding the fact that the effective acquisition date of Sable Chemical Industries Limited was 25 June 2015, 30 June 2015 as been adopted as the acquisition date for accounting purposes. The exclusion of transactions that took place between 25 June 2015 and 30 June 2015 does not have a material effect on the consolidated financial statements.
The acquisition for no consideration resulted in a gain on bargain purchase amounting to $5.2 million and this has been recognized in the consolidated income statement. The transaction resulted in a gain on bargain purchase because the provisional value of the net assets acquired was higher than the fair value of the previously held investment and minority interest value. As highlighted above, through having control of Sable Chemicals, Masawara Plc is able to determine operational polices which will improve returns thus justifying a gain on bargain purchase.
If the business combination had taken place on 1 January 2015, the Group's total income would have been $138 million and the Group's loss after tax would have been $6.2 million.
The following table summarises the acquisition for no consideration, the value of assets acquired, liabilities assumed and the non-controlling interest at the acquisition date.
Footnotes Provisional
fair value
US$ '000
----------- ------------
Consideration transferred
Cash a -
Fair value previously held equity b -
Total consideration transferred -
Add fair value of non-controlling
interest c 5,003
Less fair value of identifiable assets acquired and
liabilities assumed
Property, plant and equipment d 6,556
Financial assets e 2
Inventory f 13,903
Trade and other receivables g 17,227
Cash resources h 3,823
Financial liabilities i (5,216)
Deferred tax liabilities j (500)
Trade and other payables k (25,586)
------------
Total assumed identifiable net
assets 10,209
Gain on bargain purchase 5,206
Footnotes
a. The business combination was achieved without any transfer of consideration as direct control was obtained through the liquidation of the intermediary companies within the fertilizer industry shareholding structure.
b. In the 2013 financial year, the investment in Sable Chemicals was impaired to $nil. As at the date of acquisition the previously recognized impairment losses had not been reversed because none of the conditions necessary for impairment reversal were present e.g. Sable Chemicals is still incurring losses. Consequently, the fair value in Sable Chemicals was maintained at $nil.
c. The fair value of non-controlling interest is the non-controlling interest's portion of the fair value of net assets on acquisition date.
d. Property was revalued as at 31 December 2014 by Dawn Property Consultancy (Private) Limited, professional valuers with recognized and relevant professional qualifications and with recent experience in the location and category of the property being valued. As at the acquisition date, there were no significant events that occurred that warrant changes to the value therefore the carrying amount of property approximates fair value.
e. Financial assets comprise of interest bearing deposits. The carrying amount of financial assets held at amortized cost approximated fair value at the date of the business combination due to the fact that the effective interest rate used to calculate the amortised cost approximated fair value.
f. Inventory is valued at the lower of cost or net realizable value using the weighted average cost method. The inventory balance as at 30 June 2015 approximated fair value.
g. Trade and other receivables carrying amount approximated fair value at 30 June 2015. Effect of discounting is immaterial due to the fact that trade and other receivables are expected to be recovered within one year.
h. Cash resources comprise cash at bank and cash on demand. The carrying amount of cash resources approximates fair value.
i. Financial liabilities comprise overdraft facilities and short term borrowings. The borrowings as at 30 June 2015 mature by 31 May 2016. Due to the short term nature of the borrowings, the effect of discounting is immaterial. The carrying amount approximates fair value.
j. Deferred tax liabilities were determined by applying appropriate tax rates on the temporary difference on assets and liabilities.
k. The carrying amount of 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.
Acquisition costs on the transaction were not significant.
9 Disposal of 40% interest in Masawara Investments (Mauritius) Limited
On 8 May 2015 Masawara Plc, through its wholly owned subsidiary Masawara Holdings (Mauritius) Limited "MHML" entered into a strategic equity relationship with Sanlam Emerging Markets Proprietary Limited "Sanlam" whereby Masawara Plc agreed to sell 40% of its shareholding in Masawara Investments (Mauritius) Limited "MIML" to Sanlam, for $11.6 million. MIML owns the Group's direct interest in Zimnat Life Assurance Company Limited, Zimnat Lion Insurance Company Limited and Grand Reinsurance Company (Private) Limited. Following the completion of the transaction, Masawara Plc owns 60% of MIML.
All the substantive conditions precedent were fulfilled with the final regulatory approval received on 3 December 2015. Consequently, the effective date of the transaction is 3 December 2015. However, for accounting purposes, an effective date of 1 December 2015 was adopted since there were no significant events and transactions that took place between 1 December 2015 and 3 December 2015.
A gain on the transaction amounting to $1.4 million was recognized directly in equity (specifically in retained earnings) as this represents a transaction with owners in their capacity as shareholders. The computation below shows how the gain on the transaction was calculated.
2015
US$ '000
Cash received 10,890
Consideration receivable 710
---------
Total consideration 11,600
Non controlling interest recognized (10,183)
---------
Gain on disposal recognized directly in
retained earnings 1,417
---------
Non controlling interest recognized was determined as 40% of net asset value of MIML at the effective date of the transaction i.e. 1 December 2015.
10 Segment information
The chief operating decision maker i.e. the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer classifies the Group's business units into different clusters i.e. hotels, insurance, technology, agrochemicals and properties for the purpose of monitoring the operating results of business units and resource allocation to business units. Segmentation of business units into different clusters is based on the type of product and service offering by the different companies.
In prior years, TA Holdings was reported as one segment because i.e. the operating results of TA Holdings Limited were reported to Masawara Plc as one business unit. Following the acquisition of TA Holdings Limited by Masawara Plc in 2014, the results of TA Holdings Limited companies are reported to Masawara Plc as separate segments based on products and services provided by the different businesses. As at 31 December 2015, the Group had five reportable segments which are listed below:
-- The Joina City segment which comprise of the Group's largest investment property that leases retail and office space at the Joina City building which is located in Harare, Zimbabwe's largest capital city.
-- The hotels segment which comprise of the Group's interest in Cresta Zimbabwe (Private) Limited and Cresta Marakanelo Limited.
Name of company Effective Country Principal activity
shareholding of incorporation
-------------------------- ---------------- ------------------ -------------------
Cresta Zimbabwe (Private) 100% Zimbabwe Hospitality
Limited and leisure
Cresta Marakanelo 35% Zimbabwe Hospitality
Limited. and leisure
-- Insurance segment comprise of the Group's investment in insurance businesses i.e. Zimnat Life Assurance Company Limited and its subsidiaries and joint venture, Zimnat Lion Insurance Company Limited, Grand Reinsurance (Private) Limited, Botswana Insurance Company Limited, Lion Assurance Company Limited and Minerva Risk Advisors (Private) Limited.
Name of company Effective Country Principal activity
shareholding of incorporation
----------------------- ----------------------- ------------------ -------------------
Zimnat Lion Assurance 100% Zimbabwe Life assurers
Company Limited
Zimnat Lion Insurance 100% Zimbabwe Short term
Company Limited insurers
Grand Reinsurance 100% Zimbabwe Reinsurance
(Private) Limited
Botswana Insurance 62% Botswana Short term
Company Limited insurers
Lion Assurance Company 54% Uganda Short term
Limited insurers
Minerva Risk Advisors 95% Zimbabwe Insurance brokers
(Private) Limited
-- Agrochemicals segment which comprise of the Group's investment in Sable Chemicals Industries Limited and Zimbabwe Fertlizer Company Limited.
Name of company Effective Country Principal activity
shareholding of incorporation
--------------------------- -------------- ------------------ -------------------
Sable Chemicals Industries 51% Zimbabwe Manufacturer
Limited of fertilizer
Zimbabwe Fertlizer 22% Zimbabwe Manufacturer
Company Limited and distributor
of fertilizer
and pesticides
-- Technology segment comprising Telerix Communications (Private) Limited, a company that is licensed to construct, operate and maintain public data internet access and Voice Over network in Zimbabwe and iWayAfrica Zimbabwe (Private) Limited, a broadband internet service company in Zimbabwe
Segment information
Joina Hotels Insurance Agrochemicals Technology Central IFRS Total
City Adjustments Group
Year ended 31 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
December
2015
Net insurance
premium
revenue - - 52,392 - - - (545) 51,847
Hotel and
manufacturing
revenue - 16,258 - 18,616 - - (7,909) 26,965
Rental income
from
investment
properties 1,886 - 1,133 - - - - 3,019
Net insurance
claims - - (26,653) - - - 63 (26,590)
Expenses for
acquisition
of insurance
claims - - (9,136) - - - - (9,136)
Hotel and
manufacturing
cost of sales - (5,475) - (1,623) - - - (7,098)
--------- --------- ------------------ -------------- ----------- ----------- ------------ ----------
Segment gross
profit/(loss) 1,886 10,783 17,736 16,993 - - (8,391) 39,007
Fees and
commission
income - - 19,867 - - 1,048 (1,027) 19,888
Gain on bargain
purchase - - - 5,206 - - - 5,206
Investment
income
and other
income - - 4,848 - 295 539 7,167 12,849
Net realized
and
unrealized
fair
values
gains/(losses) 133 - (1,147) - - - (288) (1,302)
Operating and
other
expenses - (9,554) (30,425) (18,229) - (10,127) 5,658 (62,677)
Property
expenses (1,537) - (256) - - - - (1,793)
Impairment loss
on loan notes - - - - - (12,516) - (12,516)
--------- --------- ------------------ -------------- ----------- ----------- ------------ ----------
Profit/(loss)
before
finance costs,
equity
accounted
earnings
and tax 482 1,229 10,623 3,970 295 (21,056) 3,119 (1,338)
Finance costs (84) - - (863) - (780) (893) (2,620)
Equity
accounted
earnings - 1,155 654 77 - - - 1,886
Income tax
expense 2 35 (2,063) 96 - (359) (296) (2,585)
Segment
profit/(loss)
after tax 400 2,419 9,214 3,280 295 (22,195) 1,930 (4,657)
--------- --------- ------------------ -------------- ----------- ----------- ------------ ----------
As at 31
December
2015
Non-current
assets 32,094 28,243 83,626 9,835 282 66,020 (68,147) 151,953
Current assets 281 3,976 87,942 36,793 - 20,108 (12,857) 136,243
--------- --------- ------------------ -------------- ----------- ----------- ------------ ----------
Segment assets 32,375 32,219 171,568 46,628 282 86,128 (81,004) 288,196
--------- --------- ------------------ -------------- ----------- ----------- ------------ ----------
Non-current
liabilities - (7,214) (43,089) (328) - (14,126) 6,344 (58,413)
Current
liabilities (6,501) (3,499) (76,505) (34,649) - (30,633) 21,623 (130,164)
--------- --------- ------------------ -------------- ----------- ----------- ------------ ----------
Segment
liabilities (6,501) (10,713) (119,594) (34,977) - (44,759) 27,967 (188,577)
--------- --------- ------------------ -------------- ----------- ----------- ------------ ----------
Joina Hotels Insurance Agrochemicals Technology Central IFRS Total
City Adjustments Group
Year ended 31 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
December
2014
Net insurance
premium
revenue - - 4,325 - - - (545) 4,326
Hotel and
manufacturing
revenue - 1,147 - - - - - 1,147
Rental income
from
investment
properties 2,029 - - - - - - 2,029
Net insurance
claims - - (852) - - - - (852)
Expenses for
acquisition
of insurance
claims - - (656) - - - - (656)
Hotel and
manufacturing
cost of sales - (183) - - - - - (183)
--------- --------- ------------------ -------------- ----------- ----------- ------------ ----------
Segment gross
profit/(loss) 2,029 964 2,817 - - - (545) 5,811
Fees and
commission
income - - 1,520 - - 645 (92) 2,073
Gain on bargain
purchase - - - - - 9,973 - 9,973
Investment
income
and other
income - 13 475 - 534 1,932 2,954
Net realized
and
unrealized
fair
values
gains/(losses) 860 - (1,122) - - 6,724 1,324 7,786
Operating and
other
expenses - (886) (2,394) - - (5,848) (1,131) (10,259)
Property
expenses (1,655) - - - - - - (1,655)
Impairment loss
on loan notes - - - - - (2,853) - (2,853)
--------- --------- ------------------ -------------- ----------- ----------- ------------ ----------
Profit/(loss)
before
finance costs,
equity
accounted
earnings
and tax 1,234 91 1,296 - 534 11,390 (444) 13,380
Finance costs (120) (38) (104) - - (496) - (758)
Equity
accounted
earnings - 93 5 241 3 3,281 (301) 3,322
Income tax
expense - (17) (190) - - (118) - (325)
Segment
profit/(loss)
after tax 1,114 129 1,007 241 537 14,057 (745) 16,069
--------- --------- ------------------ -------------- ----------- ----------- ------------ ----------
As at 31
December
2014
Non-current
assets 32,941 28,440 83,418 3,642 282 58,137 (51,928) 154,932
Current assets 268 1,719 76,369 - - 11,498 (14,968) 74,886
--------- --------- ------------------ -------------- ----------- ----------- ------------ ----------
Segment assets 33,209 30,159 159,787 3,642 282 69,635 (66,896) 229,818
--------- --------- ------------------ -------------- ----------- ----------- ------------ ----------
Non-current
liabilities (7,249) (7,214) 30,335 - - (70,520) 11,325 (43,323)
Current
liabilities (454) (3,274) (69,913) - - (13,361) 4,020 (82,982)
--------- --------- ------------------ -------------- ----------- ----------- ------------ ----------
Segment
liabilities (7,703) (10,488) (39,578) - - (83,881) 15,346 (126,305)
--------- --------- ------------------ -------------- ----------- ----------- ------------ ----------
Geographical information
The Group's share of TA Holdings Limited's revenues and non-current assets is split as follows:
2015 2014
US$ '000 US$ '000
Revenues
From Zimbabwe 84,203 59,155
Outside Zimbabwe (Botswana) 19,997 19,679
Outside Zimbabwe (excluding Botswana) 7,147 8,606
--------- ---------
Total 111,347 87,440
--------- ---------
Non-current assets
From Zimbabwe 87,167 80,014
Outside Zimbabwe (Botswana) 23,987 23,080
Outside Zimbabwe (excluding Botswana) 5,509 5,691
-------- --------
Total 116,663 108,785
-------- --------
11 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:
2015 2014
US$ '000 US$ '000
Within 1 year 2,527 2,455
After 1 year, but not more than
5 years 2,710 2,867
More than 5 years 1,250 178
--------- ---------
6,487 5,500
--------- ---------
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:
2015 2014
US$ '000 US$ '000
Within 1 year 1,031 1,020
After 1 year, but not more than
5 years 2,190 2,257
3,221 3,277
--------- ---------
12 Net insurance premium revenue
2015 2014
US$' 000 US$' 000
12.1 Gross insurance premium revenue
Life insurance 18,783 4,454
Non-life insurance 67,929 1,614
Change in unearned premium reserve (3,619) 185
-------- ------
Total gross premiums 83,093 6,253
-------- ------
12.2 Insurance premium ceded to reinsurers on insurance contracts
Life insurance (745) (31)
Non-life insurance (32,266) (1,896)
Change in unearned premium reserve 1,765 -
Total premiums ceded to reinsurers (31,246) (1,927)
--------- --------
13 Fees and commission income
Policyholder administration and
investment management services 3,731 1,057
Re-insurance commission received 7,098 466
Brokerage fees 9,059 550
------- ------
Total fees and commission income 19,888 2,073
------- ------
14 Hotel revenue
Accommodation 7,582 618
Food and beverages 5,887 529
Hotel management fees 1,835 -
------- ------
Total hotel revenue 15,304 1,147
------- ------
15 Manufacturing revenue
Ammonium nitrate sales 11,661 -
-------
16 Investment income
Interest and dividend income from 1,983 -
financial assets at fair value
Interest on bank deposits and
loans and receivables 394 156
Held to maturity financial instruments
interest income 1,122 1,749
Total investment income 3,499 1,905
-------- ------
17 Realised and unrealised (losses)/gains
17.1 Realised and unrealised gains
Gain on disposal of financial 71 -
assets
Profit on disposal of investment 17 -
properties
Fair value gains on investment
property - Note 29 104 860
Fair value gains on financial
assets - Note 31.4 - 204
Gain on loss of control of Minerva
Risk Advisors (Private) Limited - 528
Profit on disposal of Masawara
Energy (Mauritius) Limited - 6,195
---- ------
Total realised and unrealised
gains 192 7,787
---- ------
2015 2014
US$ '000 US$ '000
17.2 Realised and unrealised losses
Loss on disposal of property,
plant and equipment (123) (1)
Fair value loss on financial (731) -
assets - Note 31.4
Revaluation loss on property, (640) -
plant and equipment
Total realised and unrealised
losses (1,494) (1)
-------- ----
18 Other operating income
Ancillary hotel services 214 14
Sundry income 7,777 501
Motor pool income 86 -
Exchange gains 978 -
------ ----
Total other operating income 9,055 515
------ ----
19 Net insurance claims
19.1 Insurance claims and loss adjustment expense
19.1.1 Gross benefits and claims paid
Life insurance contracts (8,145) (577)
Non-life insurance contracts (26,527) (1,734)
--------- --------
Total gross benefits and claims
paid (34,672) (2,311)
19.1.2 Gross change in insurance contract liabilities
Change in life insurance contract
liabilities (3,730) 719
Change in non-life insurance contract
liabilities 2,420 (1,863)
--------- --------
Total gross change in contract
liabilities (1,310) (1,144)
Insurance claims and loss adjustment
expense (35,982) (3,455)
--------- --------
19.2 Insurance claims and loss adjustment expenses recovered from reinsurers
19.2.1 Claims recovered from reinsurers
Life insurance contracts 121 12
Non-life insurance contracts 8,919 728
------ ----
Total claims ceded to reinsurers 9,040 740
19.2.2 Change in insurance contract liabilities ceded to reinsurers
Change in non-life insurance contract
liabilities 352 1,863
---- ------
Total change in contract liabilities
ceded to reinsurers 352 1,863
Insurance claims and loss adjustment
expenses recovered from reinsurers 9,392 2,603
-------- --------
2015 2014
US$ '000 US$ '000
20 Expenses for the acquisition of insurance contracts
Commission paid (9,573) (619)
Change in deferred expenses 437 (37)
Total expenses for the acquisition
of insurance contracts (9,136) (656)
-------- ------
21 Hotel cost of sales
Employee benefits expense (3,464) (79)
Consumption of inventories (2,011) (104)
-------- ------
Total hotel cost of sales (5,475) (183)
-------- ------
22 Manufacturing cost of sales
Employee benefits expense (841) -
Consumption of inventories (782) -
--------
Total hotel cost of sales (1,623) -
--------
23 Operating and administrative expenses
Audit fees (1,282) (586)
Consultancy and due diligence costs (1,080) (1,103)
Exchange losses (3) (1)
Depreciation on property, plant
and equipment - Note 27 (1,858) (369))
Impairment loss on property, plant (88)
and equipment - Note 27 -
Impairment loss on intangible assets (333)
- Note 28 -
Amortisation of intangible assets
- Note 28 (769) (14)
Impairment loss on insurance receivables (571)
- Note 33 -
Impairment loss on trade receivables (351) -
Directors' remuneration - Note
49 (2,138) (1,513)
Staff costs (30,462) (2,657)
Other administration expenses (23,742) (4,016)
Total operating expenses (62,677) (10,259)
--------- ---------------------
The significant contributor to the Group's operating expenses, accounting for 89% of the total expenses, is Masawara's wholly owned subsidiary TA Holdings Limited. The significant increase in operating expenses from prior year is reflective of the fact that Masawara Plc accounted for one month TA Holdings expenses in 2014 whereas it accounted for the full year in 2015 and also consolidated Sable Chemicals Industries Limited effective 30 June 2015 which was equity accounted in 2014.
Staff costs and directors remuneration include share option expense amounting to $98,000 (2014: $311,000).
Short term staff costs (28,014) (2,657)
Short term staff costs in hotel (3,464)
cost of sales - Note 21 -
Short term staff costs in manufacturing (841)
cost of sales - Note 22 -
--------- --------
Total short term staff costs (32,319) (2,657)
Long term staff costs (1,335) -
Termination costs (1,604) -
--------- --------
Total staff costs (35,258) (2,657)
--------- --------
Short term staff costs include salaries and wages, long term staff costs include pension and social security costs and termination costs related to retrenchment costs.
During the year the Group obtained the following services from the company auditors and its investee companies.
2015 2014
US$ '000 US$ '000
Fees payable to company's auditors
and its associates for the audit
of parent company and consolidated
financial statements 325 300
Fees payable to company's auditors
and its associates for other services:
The audit of company's subsidiaries 646 586
Audit-related assurance services - 262
Other services 39 -
--------- ---------
Total 1,010 1,148
--------- ---------
24 Finance costs
Current borrowings:
Interest expense on bank loans (1,008) (299)
Interest expense on non bank loans (274) (131)
Interest expense on deferred consideration
payable to Minet Group (71) (328)
Non-current borrowings:
Interest expense on non bank loans (1,267) -
-------- ------
Total finance costs (2,620) (758)
-------- ------
25 Income taxes
The major components of income tax expense for the years ended 31 December 2015 and 31 December 2014 are shown below.
25.1 Income tax expense
Current tax expense (2,697) (282)
Deferred income tax 112 (43)
----------- ------
Income tax expense reported in
income statement (2,585) (325)
----------- ------
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 2015
(2014: 0%) is as follows:
Accounting (loss)/profit before
tax (2,072) 16,394
-------- -------
Tax at a standard rate of 0% (2014:
0%) - -
Effect of higher tax rates in Zimbabwe (3,737) (282)
Effect of higher tax rates in Botswana
and Uganda (175) -
Effect of non taxable income 2,914 -
Effect of non deductible expenses (1,962) -
Other adjustments 375 (43)
-------- -------
Income tax expense (2,585) (325)
-------- -------
Other adjustments on the tax reconciliation relate to items like withholdings tax, utilisation of previously unrecognised tax losses, tax adjustments relating to the previous years and differences arising from movements in unrealised (gains)/ losses.
25.2 Deferred tax asset
2015 2014
US$ '000 US$ '000
Deferred tax asset resulted from
the following:
Fair value loss relating to deferred
acquisition costs 640 640
Fair value adjustments on investment
in associates 440 440
Total 1,080 1,080
Reconciliation of deferred tax
asset
At 1 January 1,080 -
Acquisition of subsidiary - 1,080
At 31 December 1,080 1,080
------ ------
25.3 Deferred tax liability
Deferred tax liability resulted
from the following:
Revaluations of investment properties
to fair value 1,414 1,408
Provisions and other temporary
differences 6,104 5,564
Intangible assets 471 534
------ ------
Total 7,989 7,506
------ ------
Reconciliation of deferred tax
liability
At 1 January 7,506 1,365
Acquisition of subsidiary - 5,873
Acquisition of subsidiary - Note
8 500 -
Recognised in income statement (206) 249
Effects of exchange rates 189 19
At 31 December 7,989 7,506
------ ------
26 Earnings per share
Basic earnings per share amounts are calculated by dividing profit or loss for the year attributable to owners 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 profit or loss attributable to owners 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:
2015 2014
US$ '000 US$ '000
(Loss)/profit attributable to owners
of the parent for basic earnings
and diluted earnings (5,636) 15,432
2015 2014
'000 '000
Weighted average number of ordinary
shares for basic earnings per share
(Note 37) 123,187 123,065
Effect of dilution: share warrants 1,122 -
------------------- ---------
Weighted average number of ordinary
shares for diluted earnings per
share 124,309 123,065
------------------- ---------
2015 2014
US$ US$
Basic and diluted, on (loss)/profit
for the year attributable to owners
of the parent (0.05) 0.13
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.
Share warrants are in relation to the $11 million debt included in financial liabilities in Note 40.1. The share warrants give the debt investors the option but not the obligation to subscribe for, in aggregate, 1,402,500 shares in Masawara Plc at a strike price of GBP0.01.
27 Property, plant and equipment
Freehold Machinery Furniture, Capital Total
land and and vehicles fittings work in
buildings and other progress
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
----------- -------------- ----------- ---------- ---------
At 31 December
2015
Opening net
book value 23,789 2,392 3,016 779 29,976
Acquisition
of subsidiary
- Note 8 5,076 1,436 44 - 6,556
Additions 631 768 1,200 - 2 599
Disposals - (580) (207) - (787)
Depreciation (457) (778) (623) - (1 858)
Transfers 756 - - (756) -
Loss on revaluation (654) (137) - - (791)
Impairment
loss (36) (52) - - (88)
Exchange rates
movements (64) (10) (30) - (104)
Closing net
book value 29,041 3,039 3,400 23 35,503
----------- -------------- ----------- ---------- ---------
At 31 December
2015
Cost/valuation 30,637 4,596 4,260 23 39,516
Accumulated
depreciation
and impairment (1,596) (1,557) (860) - (4,013)
Closing net
book value 29,041 3,039 3,400 23 35,503
---------- ---------- -------- ---- ----------
At 31 December
2014
Opening net
book value 205 - 319 - 524
Additions - 102 12 205 319
Acquisition
of subsidiary 23,672 2,487 2,706 574 29,439
Depreciation (273) (31) (65) - (369)
Disposals - - (55) - (55)
Exchange rates
movement 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
-------- ------- -------- ---- --------
Fair values of freehold land and buildings
The revaluation of freehold land and buildings for the year ended 31 December 2015 was carried out by independent professional valuers (Bard Real Estate (Private) Limited and Dawn Property Consultancy (Private) Limited). The loss on revaluation net of applicable deferred income taxes was debited to the income statement because the Group did not have any revaluation surplus relating to the revalued asset in its revaluation reserve.
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 2014 and 31 December 2015. If land and buildings were stated on a historical cost basis, the amounts would be as follows:
2015 2014
US$ '000 US$ '000
Cost 12,454 6,579
Accumulated depreciation (1,174) (77)
--------- ---------
At 31 December 11,280 6,502
--------- ---------
Breakdown of freehold land and buildings
Hotel properties:
Cresta Lodge - Mutare Road, Harare,
Zimbabwe * 11,481 10,587
Cresta Oasis - Nelson Mandela Avenue
(CBD), Harare, Zimbabwe 4,479 5,740
Residential properties:
Burnside suburb, Bulawayo, Zimbabwe 110 120
Belmont flat, Harare, Zimbabwe 29 29
Sable Chemicals, Kwekwe 5,694 -
Commercial properties - Offices:
Gaborone Business Park, Botswana 2,927 2,992
Zimnat House - Nelson Mandela Avenue
(CBD), Harare, Zimbabwe 4,116 4,116
Number 134 George Silundika Street,
Bulawayo, Zimbabwe 205 205
Total 29,041 23,789
------- -------
* Includes no work in progress (2014: $357,000) on the Cresta Lodge (Harare) refurbishment project.
The Cresta Lodge, Mutare Road, was used a security for bank loan amounting to $3.8 million (2014: $4.2 million) (Note 40.1). For fair value hierarchy disclosures refer to Note 50.2.
28 Intangible assets
Software Customer Brands Total
list
US$ '000 US$ '000 US$ '000 US$ '000
At 31 December
2015
Opening net
book value 1,204 182 3,289 4,675
Additions 190 - - 190
Amortisation (341) (22) (406) (769)
Impairment (333) - - (333)
Effects of
exchange rate
movements (121) 18 - (103)
--------- --------- --------- ---------
At 31 December
2015 599 178 2,883 3,660
--------- --------- --------- ---------
Impairment loss on software relates to the write off of the Agillis system by Zimnat Lion Insurance Company "Zimnat Lion" during the year. The write off was necessitated by the failure to implement the system successfully. The likelihood of future economic benefits flowing to Zimnat Lion due to the use of Agillis was remote, therefore its value in use was $nil and Agillis system was fully written off. The impairment loss is included in operating and administrative expenses.
Brands include the Cresta South Africa Limited brand, Botswana Insurance Company Limited brand and the Lion Assurance Company Limited brand that were recognized when Masawara Plc assumed control over TA Holdings Limited in 2014. The initial fair value of the brands was determined by Brand Finance Africa (Proprietary) Limited.
Software Customer Brands Total
list
US$ '000 US$ '000 US$ '000 US$ '000
At 31 December
2015
Cost/valuation 1,394 182 3,289 4,865
Accumulated
amortization
and impairment (795) (4) (406) (1,205)
--------- --------- --------- ----------
Closing net
book value 599 178 2,883 3,660
--------- --------- --------- ----------
At 31 December
2014
Opening net - - - -
book value
Acquisition
of subsidiary 935 190 3,289 4,414
Additions 275 - - 275
Amortisation (6) (8) - (14)
--------- --------- --------- ----------
At 31 December
2014 1,204 182 3,289 4,675
--------- --------- --------- ----------
At 31 December
2014
Cost/valuation 1,210 190 3,289 4,689
Accumulated
amortization
and impairment (6) (8) - (14)
------ ------ ------ -------
Closing net
book value 1,204 182 3,289 4,675
------ ------ ------ -------
29 Investment properties
2015 2014
US$ '000 US$ '000
At 1 January 46,685 30,947
Additions 160 -
Disposals (50) -
Fair value adjustment 104 860
Acquisition of subsidiary - 15,453
Transfer to non-current assets held for sale - (575)
Effects of exchange rate movements (67) -
At 31 December 46,832 46,685
--------- ---------
The total property expenses, $1.8 million (2014:
$1.7 million), disclosed on the face of the income
statement are made up of direct operating expenses
that generated rental income, $955,000 (2014: $779,000)
and direct operating expenses that did not generate
rental income, $882,000, (2014: $876,000) detailed
as follows:
2015 2014
US$ '000 US$ '000
Group's share of:
Rental income derived from investment
properties 3,091 2,029
Direct operating expenses (including
repair and maintenance) generating
rental income during the year (955) (779)
Direct operating expenses (including
repair and maintenance) that did not
generate rental income during the
year (882) (876)
Profit arising from investment properties
at fair value (excluding fair value
adjustments, finance costs and finance
income) 1,254 374
--------- ---------
The following table shows the Group's largest investment property Joina City's fair value, insurance value and the gross replacement cost at 31 December 2014 and 31 December 2015.
Fair value Gross replacement Insured value
cost
2015 US$ '000 US$ '000 US$ '000
-------------------- ----------- ------------------ --------------
Value of the whole
property 56,000 90,332 102,564
Masawara's share
of the value 32,094 51,769 58,779
Fair value Gross replacement Insured value
cost
2014 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
2015 2014
US$ '000 US$ '000
Commercial - Offices:
Commercial building - Joina City,
Jason Moyo, Julius Nyerere, Harare,
Zimbabwe 32,094 31,807
Commercial building - Zimnat Plaza,
Kwame Nkrumah, Harare, Zimbabwe 8,200 8,200
Commercial building - Gweru, Zimbabwe 410 410
Commercial building - Elsworth, Zimbabwe 430 430
Commercial property - 72 Birmingham
Road, Harare, Zimbabwe 2400 2,400
Supermarket - 99 Harare Street, Harare,
Zimbabwe 810 810
Residential:
Makuti House, Nyanga, Zimbabwe 250 250
Northern suburbs, Harare, Zimbabwe 1320 1,400
Phakalane, Gaborone, Botswana 388 448
Industrial:
Warehouses - Msasa, Harare 530 530
Total 46,832 46,685
--------- ---------
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 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. The property valuations were carried out on the following basis:
The implicit 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 current prices in active markets for similar properties in a similar location and condition and transactions where offers had been made but the transaction had not been finalized. Professional judgement was used to adjust the market evidence.
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.
2015 2014
Joina City
Operating costs per sqm n/a $3-$4
Yield (market based adjusted for Joina
City conditions) 7.5% 7.5%-9%
Occupancy 100% 72%-90%
Estimated average retail space value
(market rent) per sqm per month in
Year 1 $11 $13-$15
Estimated office space value (market
rent) per sqm per month 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 n/a 5%
Rental growth for Year 5 - Year
10 n/a 10%
Advertising revenue per month 37,000 n/a
2015 2014
Other investment properties
Estimated market rentals per sqm
per month $3-$10 $3-$10
Yield (market based) 9%-11% 10%
Voids rate 0%-10% 0%-10%
Sensitivity analysis
The valuation of investment properties gives the highest and best value of the investment properties at 31 December 2015 as the current use of the properties represents the best use for the properties.
A sensitivity analysis has only been done for the three largest investment properties by value i.e. Joina City, Zimnat Mall and Birmingham commercial property.
The following table presents the sensitivity of the Group's share of the market based valuation of the Joina City to changes in the most significant assumptions underlying the valuation of the investment property. No 2015 figures have been shown for some of the inputs because the basis of valuation in 2015 was different from valuation in 2014.
Increase/(decrease) in valuation
2015 2014
US$ '000 US$ '000
Increase in discount rate by 100
basis points (7,000) (3,160)
Decrease in discount rate by 100
basis points 8,000 3,740
Impact of constant 5% growth rate
for the whole 10 year period n/a (6,143)
Impact of no growth rate in rentals n/a (13,982)
Impact of maintaining occupancy
at current 62% (2014: 71%) - no
reduction in voids (8,000) (7,291)
Impact of 20% reduction in exit
value n/a (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:
2015 2014
US$ '000 US$ '000
Other investment properties:
Zimnat Mall
Increase in capitalization rate
by 1 basis point (794) (794)
Decrease in capitalization rate
by 1 basis point 852 852
Void rate of 20% (959) (959)
Void rate at 0% 852 852
Increase in rent rates by 10% 761 761
Decrease in rent rates by 10% (868) (868)
Birmingham
Increase in capitalization rate
by 1 basis point (364) (364)
Decrease in capitalization rate
by 1 basis point 89 89
Void rate of 10% (384) (384)
Increase in rent rates by 10% 64 64
Decrease in rent rates by 10% (384) (384)
For fair value hierarchy disclosures, refer to Note 50.2.
30 Investment in associates and joint ventures
2015 2014
US$ '000 US$ '000
Investment in associates - Note
30.1 12,216 13,261
Investment in joint ventures -
Note 30.2 377 -
--------- ---------
Total 12,593 13,261
--------- ---------
Share of profit of other associates and joint venture that is disclosed on the face of the statement of comprehensive income is broken down as follows:
Zimbabwe Fertilizer Company Limited
- Note 30.1.1 77 -
Cresta Marakanelo Limited - Note
30.1.2 1,155 341
Continental Reinsurance Company
Limited - Note 30.1.3 236 -
Alexington Investments (Private)
Limited - Note 30.2.2 377 -
Other associates 41 3
Minerva Risk Advisors (Private)
Limited - 436
------ ----
Total 1,886 780
------ ----
Investments in iWayAfrica Zimbabwe (Private) Limited and Sovereign Health Zimbabwe Private Limited are not disclosed separately and are classified as other associates.
Share of profit of Minerva Risk Advisors (Private) Limited is $nil in current year because the Group fully consolidated Minerva Risk Advisors (Private) Limited following the acquisition of TA Holdings Limited on 1 December 2014.
30.1 Investment in associates
The following shows a summary of the composition of the carrying amount of the Group's investment in associates.
2015 2014
US$ '000 US$ '000
Zimbabwe Fertiliser Company Limited
- Note 30.1.1 3,580 3,629
Cresta Marakanelo Limited - Note
30.1.2 5,306 6,460
Continental Reinsurance Company
Limited - Note 30.1.3 2,600 2,890
Other associates 730 282
At 31 December 12,216 13,261
--------- ---------
Investment in other associates includes the Group's interest in iWayAfrica Zimbabwe (Private) Limited amounting to $282,000 and investment in Sovereign Health Zimbabwe Limited amounting to $448,000. There are no further disclosures for other associates because they are not material to the Group.
In 2014, Masawara Plc accounted for Sable Chemicals Industries Limited as an associate. However, effective 30 June 2015, Masawara Plc consolidated Sable Chemicals Industries Limited after it assumed control of it. Refer to Note 8 for more details.
30.1.1 Investment in Zimbabwe Fertiliser Company Limited ("ZFC")
The Group has a 22.5% (2014: 22.5%) interest in ZFC, a distributer of agrochemicals in Zimbabwe.
The following is a reconciliation of the Group's interest in ZFC:
2015 2014
US$ '000 US$ '000
At 1 January 3,629 -
Acquisition of subsidiary - 3,629
Share of profit of associate 77 -
Dividends received (126) -
At 31 December 3,580 3,629
---------- ----------
ZFC's total comprehensive profit after tax for the year ended 31 December 2015 amounted to $343,000 (2014: total comprehensive loss of $108,000).
Other ZFC's financial information for the year ended 31 December 2015 has been summarised in Note 30.1.4.
30.1.2 Investment in Cresta Marakanelo Limited ("Cresta Marakanelo")
The Group has a 35% (2014: 35%) interest in Cresta Marakanelo, a company which is incorporated in Botswana that provides hotel management services in Botswana and Zambia.
The following is a reconciliation of the Group's interest in Cresta Marakanelo:
2015 2014
US$ '000 US$ '000
At 1 January 6,460 -
Acquisition of subsidiary - 6,119
Share of profit of associate 1,155 341
Dividends received (404) -
Effects of exchange rate movements (1,905) -
At 31 December 5,306 6,460
---------- ----------
Cresta Marakanelo's total comprehensive income after tax for the year ended 31 December 2015 amounted to $2,904,000 (2014: $14,000). Other Cresta Marakanelo's financial information for the year ended 31 December 2015 has been summarised in Note 30.1.4.
30.1.3 Investment in Continental Reinsurance Company Limited (Botswana) ("Continental Re")
The Group has a 40% (2014: 40%) interest in Continental Re, a company which is incorporated in Botswana that provides treaty and facultative reinsurance for life assurance and short-term insurance companies in Southern Africa. The following is a reconciliation of the Group's interest in Continental Re:
2015 2014
US$ '000 US$ '000
At 1 January 2,890 -
Acquisition of subsidiary - 2,890
Share of profit of associate 236 -
Effects of exchange rate movements (526) -
At 31 December 2,600 2,890
---------- ----------
Continental Re's total comprehensive income after tax for the year ended 31 December 2015 was $591,000 (2014: $161,000). Other Continental Re's financial information for the year ended 31 December 2015 has been summarised in Note 30.1.4.
30.1.4 Summarised financial information of associates
Revenue Profit/(loss) Non-current Current Non-current Current
after assets Assets liabilities Liabilities
US$ tax US$ '000 US$ '000 US$ '000 US$ '000
'000 US$ '000
------------ -------------- ------------ ---------- ------------- -------------
Zimbabwe Fertilizer Company
Limited
2015 61,383 343 13,334 28,276 2,855 22,586
2014 59,556 1,861 3,755 27,055 4,069 20,826
Cresta Marakanelo
Limited
2015 32,046 2,683 14,356 7,778 3,923 3,491
2014 34,284 2,716 17,243 7,086 5,102 3,824
Continental Reinsurance
Company Limited
2015 6,120 591 244 11,707 2,826 3,630
2014 4,678 161 385 12,818 2,529 3,574
30.1.4 Summarised financial information of associates
Reconciliation of summarised financial information to carrying value of associates
ZFC Cresta Marakanelo Continental
Reinsurance
------- ------------------ -------------
2015
Net assets at
31 December 2015 16,169 14,720 5,495
Interest in associate 22.5% 35% 30.25%
------- ------------------ -------------
Share of net
assets 3,638 5,152 2,198
Goodwill - 3,087 -
Business combination
adjustment (58) (2,934) 402
Carrying amount at
31 December 2015 3,580 5,305 2,600
------- ------------------ -------------
2014
Net assets at
31 December 2014 16,130 15,403 7,100
Interest in associate 22.5% 35% 40%
------- ------- ------
Share of net
assets 3,629 5,393 2,840
Fair value adjustment - 1,067 50
Carrying amount at
31 December 2014 3,629 6,460 2,890
------- ------- ------
Cresta Marakanelo business combination adjustment relates to a write down of the equity accounted carrying amount of the investment in Cresta Marakanelo to fair value. The fair value was based on share price of Cresta Marakanelo on 1 December 2014, which was the date when Masawara Plc assumed control of TA Holdings Limited in the 2014 financial year.
30.2 Investment in joint ventures
The following shows a summary of the composition of the carrying amount of the Group's investment in joint ventures.
2015 2014
US$ '000 US$ '000
Telerix Communications (Private)
Limited - Note 30.2.1 - -
Alexington Investments (Private)
Limited "Alexington" 377 -
At 31 December 377 13,261
--------- ---------
Investment in Alexington was acquired during the year ended 31 December 2015. No further disclosures relating to Alexington have been included in the financial statements as it is not a significant joint venture.
30.2 Investment in joint ventures
30.2.1 Investment in Telerix Communications (Private) Limited ("Telerix")
The Group has a 50% (2014: 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 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 2015 amounted to $5.2 million (2014: $4.3 million 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 2015 was $635,000 and this resulted in the Group reducing it liability relating to the financial guarantee from $660,000 at 31 December 2014 to $365,000 at 31 December 2015.
The $295,000 that is disclosed in the income statement relates to the unwinding of the financial guarantee liability (2014: $534,000).
Merger transaction
In March 2015, Telerix Communications (Private) Limited agreed to merge the business of its subsidiary, Dandemutande Investments (Private) Limited "Dandemutande" with those of iWayAfrica (Private) Limited "iWay" and Africa Online (Private) Limited. Gondwana International Networks (Proprietary) Limited "GIN" is the ultimate parent of iWay and Africa Online and is a leading pan - African technology player with presence in 22 African countries.
The merger proceeded by way of iWay Zimbabwe and Africa Online Zimbabwe selling and transferring selected assets, liabilities and transferring employees to Dandemutande. As consideration, iWay Zimbabwe and Africa Online Zimbabwe were allocated shares constituting 26.75% and 22.75% respectively in Dandemutande. Following the completion of the transaction, Telerix reduced its shareholding in Dandemutande from 100% to 50.5% and GIN owns 49.5% equity interest in Dandemutande.
Despite the fact that Telerix owns 50.5% equity interest in Dandemutande, Telerix does not control Dandemutande because it does not have the power to control Dandemutande's relevant activities. Telerix therefore accounts for its interest in Dandemutande using the equity method.
The merger transaction had the impact of reducing Masawara Plc's effective interest in Dandemutande from 50% to 25.3%.
No further disclosures have been included in the financial statements as Telerix is not a significant joint venture.
31 Financial assets
2015 2014
US$ '000 US$ '000
Loans and receivable - Note 31.1 1,778 1,764
Held-to-maturity financial assets-
Note 31.2 22,364 22,475
Available-for-sale financial
assets - Note 31.3 374 817
Financial assets at fair value
through profit or loss - Note
31.4 27,769 34,199
Total 52,285 59,255
----------------- -----------------
31.1 Loans and receivables
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 had an initial repayment date of February 2016. However, the repayment date was extended to a date when the Joina City building has excess cash reserves to settle any current creditors of the company and capital expenditure. The change in the repayment date to a non fixed date has led to change in the classification of debentures from the held to maturity category in prior year to loans and receivables.
2015 2014
US$ '000 US$ '000
At 1 January 1,764 1,762
Finance income 35 35
Receipts (21) (33)
--------- ---------
At 31 December 1,778 1,764
--------- ---------
31.2 Held-to-maturity financial assets
Loan note - Note 31.2.1 - 11,380
Fixed deposit - Note 31.2.2 1,500 1,500
Debt securities - Note 31.2.3 20,864 9,595
Total held-to-maturity financial
assets 22,364 22,475
--------------- ---------------
31.2.1 Loan note
The loan note has variable interest rates, over a period of 5 years, beginning 21 March 2014, 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%
2015 2014
US$ '000 US$ '000
At 1 January 11,380 -
Transfer from loans and receivables
and debentures - 9,628
New loans granted during the
year 1,136 3,303
Interest received - 1,302
Impairment loss (12,516) (2,853)
At 31 December - 11,380
--------- ---------
The Group assessed Telerix Communications (Private) Limited's cash flow forecasts, financial and operating position it concluded that Telerix Communications (Private) Limited will not be able to make capital and interest repayments in accordance with loan note contract.
Masawara Plc fully impaired its $12.5 million loan note investment in Telerix Communications (Private) Limited "Telerix" after the following factors were considered:
-- Financial difficulties as evidenced by the loss incurred by Telerix and the inability to make any interest payments on the Loan Notes during the year.
-- Based on the current budgets, despite the improved performance from the business, the forecast cash flows are less than the initial forecasts and therefore it would take a number of years for Telerix to repay the loan notes. Cash flow forecasts for long periods tend to be less accurate in comparison with cash forecast for relatively shorter periods, resulting in inherent uncertainty around the future cash flows.
Based on the facts highlighted above, no interest income was recognized on the loan notes because it did not meet recognition criteria relating to recoverability.
31.2.3 Fixed deposit
The Group holds a $1.5 million (2014: $1.5 million) fixed deposit with Afrasia Bank Limited beginning 7 November 2015. The fixed deposit matures on 6 November 2016, earns interest at a rate of 1.5% per annum, which is payable quarterly.
31.2.4 Debt securities
The Group's investment in fixed interest rate unlisted debt securities amounted to $20.9 million (2014: $9.6 million).
31.3 Available for sale financial assets
2015 2014
US$ '000 US$ '000
Debt securities
- Unlisted (Uganda government
bonds) 374 817
----------------- -----------------
Total available for sale financial
assets 374 817
----------------- -----------------
31.4 Financial assets at fair value through profit or loss
Equity securities
- Listed 23,989 29,447
- Unlisted 3,780 4,752
--------------- ---------------
Total financial assets at fair
value through profit or loss 27,769 34,199
--------------- ---------------
31.4 Financial assets movement
The movement in the Group's financial assets is summarized in the table below by measurement category:
Held Available Fair value Total
to Maturity for sale through
profit
or loss
US$ '000 US$ '000 US$ '000 US$ '000
At 1 January 2015 24,239 817 34,199 59,255
Additions 25,799 617 7,803 34,219
Disposals (maturities
and sales) (14,623) (1,094) (10,096) (25,813)
Repayments (21) - - (21)
Fair value gains - (14) (731) (745)
Finance income 35 - - 35
Impairment loss (12,516) - - (12,516)
Business combination
- Note 8 - - 2 2
TA Holdings acquisition
accounting adjustment 1,270 119 (1,758) (369)
Effects of exchange
rate movements (41) (71) (1,650) (1,762)
------------- ---------- ----------- ---------
At 31 December 2015 24,142 374 27,769 52,285
------------- ---------- ----------- ---------
At 1 January 2014 9,021 - - 9,021
Acquisition of subsidiary 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 exchange
rate movements (371) 183 206 18
-------- -------- -------- --------
At 31 December 2014 24,239 817 34,199 59,255
-------- -------- -------- --------
TA Holdings acquisition accounting adjustment relates to a correction of the TA Holdings Limited take on balances when Masawara acquired TA Holdings in 2014. This qualifies as a re-measurement adjustment as it has been effected within one year of the acquisition of TA Holdings.
For fair value hierarchy disclosures, refer to Note 50.1.
32 Inventories
2015 2014
US$ '000 US$ '000
Hotel inventory 245 308
Manufacturing inventory 13,715 -
Other consumables 39 -
--------- ---------
Total inventories 13,999 308
--------- ---------
33 Insurance receivables
2015 2014
US$ '000 US$ '000
Due from agents, brokers
and intermediaries 14,737 9,489
Less: impairment allowance (810) (239)
Total insurance receivables 13,927 9,250
--------- ---------
Below is the movement in the provision for impairment.
At 1 January 239 182
Charge for the year 571 57
At 31 December 810 239
---- ----
The Group does not hold any collateral as security against potential default by all counterparties. As at 31 December 2015 insurance receivables amounting to $9.8 million (2014: $7.1 million) were fully performing.
As of 31 December 2015, insurance receivables of $4.1 million (2014: $1.5 million) were past due but not impaired. The ageing of these receivables is as follows:
3 - 6 months 2,060 1,458
Over 6 months 2,021 72
------ ------
4,081 1,530
------ ------
As at 31 December 2015, insurance receivables amounting to $810,000 (2014: $869,000) were impaired. The ageing of these receivables is as follows:
3 - 6 months - 95
Over 6 months 810 774
---- ----
810 869
---- ----
There are no credit ratings for insurance receivables. All counterparties are assessed before transacting with them. There have been some defaults in the past. Most of the defaults were fully recovered and the Group has stopped transacting with counter parties with a history of defaults.
34 Deferred acquisition costs
2015 2014
US$ '000 US$ '000
At 1 January - -
Current year provision 3,255 -
Effects of exchange rate (289) -
movements
Total deferred acquisition 2,966 -
costs
--------- ---------
35 Trade and other receivables
2015 2014
US$ '000 US$ '000
Gross trade receivables 49,613 13736
Allowance for credit loses (2,856) (633)
--------- ---------
Net trade receivables 46,757 13,103
Prepayments 1,636 1,887
Receivables from related parties 1,439 2,642
Rent and service charge receivables 88 142
Loans to Directors and employees 2,528 2,642
VAT receivables 10 3
Bills receivable 270 303
Other receivables 2,801 1,924
At 31 December 55,529 22,646
--------- ---------
Trade receivables are non-interest bearing and are generally on 30 - 90 day terms. The fair values of trade and other receivables 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 trade and other receivable balances, refer to Group's credit risk policy included in Note 47.1.
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:
2015 2014
US$ '000 US$ '000
At 1 January 307 238
Current year provision 23 133
Bad debts written off (77) (64)
At 31 December 253 307
--------- ---------
Loans to Directors and employees include loans granted to Directors amounting to $874,000 (2014: $692,000) (Note 49). Loans to Directors and employees are charged interest of 6% per annum.
36 Cash resources
2015 2014
US$ '000 US$ '000
Cash at banks and cash on hand 25,912 18,300
Total 25,912 18,300
--------- ---------
Cash at bank earns interest at floating rates based on daily bank deposit rates.
37 Share capital and share premium
Authorised shares 2015 2014
'000 '000
Authorised ordinary shares of
$0.01 each 35,000,000 35,000,000
Ordinary shares issued and fully paid
Number of US$
shares
At 1 January 2014 123,065,409 1,230,655
At 31 December 2014 123,065,409 1,230,655
Allocation of treasury shares 121,795 1,218
------------ --------------------
At 31 December 2015 123,187,204 1,231,873
------------ --------------------
Share capital and share premium movement
Number Share Treasury
of shares Share capital premium shares Total
US$ '000 US$ '000 US$ '000 US$ '000
Balance at 1 January
2014 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
Allocation of
treasury shares 121,795 - (8) 101 93
------------ -------------- --------- --------- ---------
Balance at 31
December 2015 123,187,204 1,235 80,102 (232) 81,105
------------ -------------- --------- --------- ---------
38 Group restructuring reserve
This reserve of $9,283,000 (2014: 9,283,000) 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 $40,466,000, 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 $9,283,000 which was recorded in the Group Restructuring Reserve.
39 Other reserves
2015 2014
US$
US$ '000 '000
At 1 January 35 (156)
Share based payment transactions 98 311
Exchange differences on translation
of foreign operations (3,584) 424
Net gain on available for sale investments (11) 449
Adjustment to TA Holdings acquisition
accounting - Note 31.4 (369) -
Reserve transfer (168) -
Share of associates' other comprehensive
income - (993)
At 31 December (3,999) 35
--------- ------
Within other reserves, 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.
The share options expired on 19 August 2015 and were forfeited because the vesting conditions were not met. Despite the fact that the vesting conditions were not met, the share based payment expense was recognized because the vesting conditions were treated as market conditions.
There were no other share options that were exercised during the year.
40 Financial liabilities
2015 2014
Non-current financial liabilities US$ '000 US$ '000
Long term bank loans - Note 40.1 15,450 4,273
Deferred consideration payable
to Minet Group - Note 40.3 - 1,171
Debentures payable - Note 40.5 1,962 -
Total 17,412 5,444
--------------- ------------------------------
Current financial liabilities
Current portion of long term bank
loans - Note 40.1 558 1,027
Loan payable to non-controlling
shareholder - Note 40.2 6,073 5,975
Deferred consideration payable
to Minet Group - Note 40.3 1,057 1,009
Short term bank loans and bank
overdraft - Note 40.4 10,557 1,416
Current portion of debentures
payable - Note 40.5 838 -
Total 19,083 9,427
------- ------
Movements in borrowings per category
40.1 Long term bank loans
2015 2014
US$ '000 US$ '000
At 1 January 5,300 -
Acquisition of subsidiary - 5,397
Additions 12,395 -
Repayments (1,493) (97)
Finance cost 644 -
Total bank loans 16,846 5,300
Less current portion of bank loans (1,396) (1,027)
---------- -----------------------------
Total long term bank loans 15,450 4,273
---------- -----------------------------
The long term bank borrowings comprise the following:
-- Long term loan of $1.2 million with an interest rate of 15% maturing in 2018. Long term loan in prior year amounted to $460,000, bore interest at a rate of 17% and matured in 2015.
-- Long term loan of $3.8 million with an interest rate of 11%, maturing in 2019. The $3.8 million long term borrowing is secured by a hotel property (Cresta Lodge) included in Note 27.
-- Long term loan of $11 million loan with an interest rate of 10%, maturing in 2018.
All borrowings are stated at amortised cost. The carrying amount of borrowings approximates fair value. All other borrowings are unsecured.
40.2 Loan payable to non-controlling shareholder
At 1 January 5,975 6,005
Finance cost 120 120
Repayment (52) (150)
------ ------
At 31 December 6,073 5,975
------ ------
Loan payable to non-controlling shareholder is unsecured, does not have fixed repayment terms and the loan began bearing interest with effect from 1 January 2013 at a rate of 2% per annum.
40.3 Deferred consideration payable to Minet Group
This relates to the amount payable to Minet Group for the acquisition of Minerva Holdings (Private) Limited. Refer to the reconciliation below.
At 1 January 2,180 2,207
Finance cost 71 327
Loan repayment (1,194) (354)
-------- --------
Total deferred consideration payable
to Minet Group "Minet" 1,057 2,180
Less current portion of deferred
consideration payable to Minet (1,057) (1,009)
-------- --------
Non-current portion of deferred
consideration payable to Minet - 1,171
-------- --------
40.4 Short term bank loans
2015 2014
US$ '000 US$ '000
At 1 January 1,416 331
New loans - cash 4,331 -
Acquisition of subsidiary - Note
8 5,216 -
Acquisition of subsidiary - 1,416
Accrued finance costs 40 6
Loan repayment (446) (309)
Finance costs paid - (28)
At 31 December 10,557 1,416
-------------------- --------------------
The short term bank borrowings comprise the following:
-- Overdraft facility of $960,000 (2014: $1.4 million) with an interest rate of 16% plus LIBOR rate. The Group had undrawn borrowing facilities of $100,000 (2014: $440,000) at the reporting date.
-- Short term bank loan of $7.1 million (2014: $nil) with an interest rate of 15%, maturing in September 2016 and another short term bank loan of $2.4 million (2014: $nil) with an interest rate of 12%, maturing in November 2016.
40.5 Debenture payable
The debenture payable amounting to $2.8 million bears interest at a rate of 10.5% and matures in September 2018. The debenture is secured by a hotel property (Cresta Oasis) included in Note 27.
41 Insurance and investment contract liabilities
41.1 Insurance contract liabilities
2015 2014
US$ '000 US$ '000
Short-term insurance contracts
- Claims reported and loss
adjustment expenses 14,615 16,717
- Claims incurred but not
reported 3,810 3,794
- Unearned premium 24,317 23,274
Long-term insurance contracts
- With fixed and guaranteed
terms 6,099 4,656
Total insurance contract liabilities,
gross 48,841 48,441
--------- ---------
41.2 Reinsurance assets
Short-term insurance contracts
- Claims reported and loss
adjustment expenses (9,299) (10,925)
- Claims incurred but not
reported (1,452) (1,489)
- Unearned premium (13,159) (11,393)
Total reinsurance assets (23,910) (23,807)
--------- ---------
41.3 Net insurance liabilities
2015 2014
US$ '000 US$ '000
Short-term insurance contracts
- Claims reported and loss
adjustment expenses 5,316 5,792
- Claims incurred but not
reported 2,358 2,305
- Unearned premium 11,158 11,881
Long-term insurance
- With fixed and guaranteed
terms 6,099 4,655
Total insurance liabilities,
net 24,931 24,633
--------- ---------
41.4 Investment contracts with and without discretionary participation features
At 1 January 30,372 -
Acquisition of subsidiary - 30,372
Movement for the year 2,640 -
At 31 December 33,012 30,372
------- -------
$17.4 million (2014: $17 million) related to investment contracts with discretionary participation features and $15.6 million (2014: $13.3 million) related to investment contracts with discretionary participation.
41.5 Insurance contract liabilities movement analysis
At 1 January 48,441 -
Acquisition of subsidiary - 47,369
Movement for the year 400 1,072
At 31 December 48,841 48,441
------- -------
42 Deferred income
At 1 January 1,912 2,600
Acquisition of subsidiary - 1,984
Disposal of Masawara Energy
(Mauritius) Limited - (2,600)
Utilisation of deferred income (268) (72)
Effects of exchange rate movements (249) -
At 31 December 1,395 1,912
------ --------
43 Insurance payables (amounts payable in direct insurance business)
At 1 January 2,688 -
Acquisition of subsidiary - 5,893
Net movement for the year 1,309 (3,257)
Effects of exchange rate movements (248) 52
At 31 December 3,749 2,688
------ --------
44 Provisions
2015 2014
US$ '000 US$ '000
At 1 January 1,824 -
Acquisition of subsidiary - 1,813
Acquisition of subsidiary 573
Charge to income statement 5,006 -
Utilised during the year (2,336) -
Exchange difference (35) 11
At 31 December 5,032 1,824
--------- ---------
The $1.8 million reflected in prior year as acquisition of subsidiary relates to TA Holding Limited provisions that were taken on by the Group when it acquired TA Holdings Limited on 1 December 2014.
The following table shows the movements of the Group's provisions by type. No similar disclosure was shown for 2014 because there no movements in the bonus and retrenchment provisions in 2014 and the movements in the leave pay provision, excluding the movement relating to the acquisition of TA Holdings Limited, were not significant.
Bonus provision Leave pay Retrenchment Total
provision provision
US$ '000 US$ '000 US$ '000 US$ '000
--------------------- ---------------- ----------- ------------- ---------
At 1 January 2015 758 1,066 - 1,824
Acquisition of
subsidiary 246 327 - 573
Charge to income
statement 2,385 1,016 1,605 5,006
Utilised during
the year (875) (1,461) - (2,336)
Effects of exchange rate movements (35) - - (35) --------------------- ---------------- ----------- ------------- --------- At 31 December 2015 2,479 948 1,605 5,032 --------------------- ---------------- ----------- ------------- ---------
Provisions are expected to be settled within a period of one year from year end.
45 Trade and other payables
2015 2014
US$ '000 US$ '000
Trade payables 26,212 10,968
Amounts due to related parties 102 102
Accrued expenses 5,377 2,882
Value Added Tax payable 14,855 996
Guest deposits 337 256
Financial guarantee contract 365 660
Other payables 4,596 2,713
------------------ ------------------
At 31 December 51,844 18,577
------------------ ------------------
Included in other payables is $2 million that relates to amounts payable to TA Holdings Limited's previous shareholders for the TA Holdings Limited shares that were acquired by Masawara Plc.
46 Cash generated from operating activities
2015 2014
US$ '000 US$ '000
(Loss)/profit before tax (2,072) 16,394
Adjustments to reconcile (loss)/profit
before tax to net cash flows
from operating activities:
Gain on bargain purchase of
Sable Chemicals 8 (5,206) -
Investment income 16 (3,499) (1,905)
Realized and unrealized gains 17.1 (192) (7,787)
Realized and unrealized losses 17.2 1,494 1
Unrealized exchange losses 23 3 1
Finance cost 24 2,620 758
Depreciation 27 1,858 369
Impairment loss on property,
plant and equipment 27 88 -
Amortisation of intangible
assets 28 769 14
Impairment loss on intangible
assets 28 333 -
Share of profit of other associates
and joint ventures 30 (1,886) (780)
Unwinding of financial guarantee
- Telerix 30.2.1 (295) (534)
Impairment loss on loan notes
- Telerix 31.2.1 12,516 2,853
Share-based payment transaction
expense 296 311
Share of profit of associate
- TA Holdings Limited - (2,542)
Gain on bargain purchase of
TA Holdings Limited - (9,973)
Insurance claims recovered
from reinsurers - 2,603
Loss on disposal of investments - 4
Working capital adjustments:
Decrease/(increase) in inventory 214 (13)
Increase in reinsurance receivables (103) (1,744)
Increase in deferred acquisition
costs (3,255) -
(Increase)/decrease in insurance
receivables (5,881) 2,174
(Increase)/decrease in trade
and other receivables (17,585) 291
Increase in loans to Directors
and employees (149) (566)
Increase in insurance contract
liabilities 2,724 1,165
Decrease in deferred income (268) (73)
Increase/(decrease) in insurance
payables 1,129 (2,122)
Increase in insurance liabilities 4,103 -
Increase /(decrease) in other
payables 10,570 (2,502)
--------- ---------
Cash generated used in operating
activities (1,674) (3,607)
--------- ---------
47 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 payables, other loans and investment 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:
47.1 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 2015 was $334,000 (2014: $385,000) of which 18% (2014: 31%) had been owed for 30 days and below. 6% of the outstanding tenants' receivables as at 31 December 2015 had been owed for between 30 days and 60 days, 7% had been owed for between 60 days and 90 days, and 69% had been owed for between 90 days and 120 days. There were no past due but not impaired tenant's receivables at 31 December 2015 (2014: $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 $78.2 million (2014: $77.6 million).
As of 31 December 2015, trade receivables of $39.2 million (2014: $ 5.8 million) were past due but not impaired. The ageing analysis of these trade receivables is as follows:
2015 2014
US$ US$
Up to 3 months 11,078 1,613
3 to 6 months 28,084 4,201
------- ------
Total 39,162 5,814
------- ------
As of 31 December 2015, trade receivables of $2.9 million (2014: $597,000) were impaired. The ageing analysis of these trade receivables is as follows:
Up to 3 months - 48
3 to 6 months 2,856 549
------ ----
Total 2,856 597
------ ----
The Group has no significant concentration of credit risk.
The credit quality of cash at banks can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates.
2015 2014
US$ '000 US$ '000
Cash at banks and short-term bank
deposits
AA+ 5,224 2,564
AA 2,724 1
AA- 8,993 7,749
A+ 1,900 1,489
A 59 -
A- 626 146
BBB+ 5,379 4,237
BBB 516 -
BB+ 148 57
LD - 79
Unrated (rating not available) 343 1,901
--------- ----------
25,912 18,223
Cash in hand - 77
Total cash and cash equivalents 25,912 18,300
--------- ----------
Investment
grade Description
AA+
AA
Very high credit quality. Protection factors
are very strong. Adverse changes in business,
economic or financial conditions would increase
AA- investment risk although not significantly
A+
High credit quality. Protection factors
are good. However, risk factors are more
variable and greater in periods of economic
A- stress.
BBB
Adequate protection factors and considered
sufficient for prudent investment. However,
there is considerable variability in risk
during economic cycles.
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
BB+ within this category
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
LD and/or interest payments (DD)
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
Unrated to liquidity management.
47.2 Liquidity risk
Liquidity risk is the risk that the Group may fail to 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 2015:
Maturity profile for liabilities
The amounts disclosed in the table are the contractual undiscounted cash flows.
Within 3 - 12 1- 5 years More than
31 December 2015 3 months months 5 years
US$ '000 US$' 000 US$ '000 US$ '000
Liabilities
Borrowings 436 13,804 22,255 -
Investment contracts
with DPF 240 439 10,473 6,265
Investment contracts
without DPF 193 594 11,031 3,776
Insurance contract - 48,840 - -
liabilities
Insurance payables 938 2,813 - -
Trade and other
payables 37,514 14,330 - -
---------- --------- ----------- ----------
39,321 80,820 43,759 10,041
---------- --------- ----------- ----------
Within 3 - 12 1- 5 years More than
31 December 2014 3 months months 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 - 48,441 - -
liabilities
Insurance payables 672 2,016 - -
Trade and other
payables 13,730 4,847 - -
---------- --------- ----------- ----------
15,135 64,246 25,412 9,364
---------- --------- ----------- ----------
47.3 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 31.1.1).
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% (2014: 16%) which reflects the fair market rates at the end of the reporting period.
Carrying amount Fair value
2015 2014 2015 2014
US$ '000 US$ '000 US$ '000 US$ '000
Cherryfield Investments
debentures 1,778 1,764 1,479 1,382
47.4 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
Increase Decrease
5% 5%
US$ '000 US$ '000
2015 2015
(Decrease)/increase in long-term
bank loans (358) 791
2014 2 014
(Decrease)/increase in long-term
bank loans (320) 707
As at 31 December 2015, 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 $66,080 (2014: $82,350).
Foreign currency risk
As a result of significant investment operations in Botswana, Uganda and South Africa, the Group's statement of financial position can be affected significantly by movements in the US$ 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 30% (2014: 42%) 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 2015 and profit after tax for the year then ended 31 December 2015.
2015 2015 2015
BWP UGX ZAR
Currency US$ equivalent $ '000 $ '000 $ '000
10% strengthening
Increase in shareholders'
equity 3,433 450 45
Increase in profit
after tax 259 109 10
10% weakening
Decrease in shareholders'
equity (2,809) (369) (37)
Decrease in profit after
tax (212) (89) (8)
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:
2015 2015 2015
BWP UGX ZAR
Currency US$ equivalent $'000 $'000 $'000
Monetary assets 32,445 14,218 458
Monetary liabilities 23,610 9,956 55
2014 2014 2014
BWP UGX ZAR
Currency US$ 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 $35.4 million (2014: $37.4 million).
47.6 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.
47.7 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, equitysecurities) 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 2015, the fair value of equities exposed to price risk was $27.5million (2014: $35.0 million). A 5% increase/decrease in each individual unit price would result in an increase or decrease in profit after tax by $1.4 million (2014: $1.8 million).
The Group has no significant concentration of price risk.
47.8 Capital management
The primary objective of the company's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholders value.
The company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, or issue new shares.
The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The
Group's current policy is to keep the gearing ratio below 40%. The Group includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents. Equity is equity attributable to ordinary equity holders of the parent.
2015 2014
US$ '000 US$ '000
Borrowings 36,495 14,871
Trade and other payables 51,844 18,577
Less cash and short-term deposits (25,912) (18,300)
--------- ---------
Net debt 62,427 15,148
Equity 75,398 84,616
Capital and net debt 137,825 99,764
Gearing ratio 45% 15%
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:
Statutory
Company limit 2015 2 014
--------------------------- --------------- ------- -------
Zimnat Lion 25% 49% 43%
Grand Reinsurance 25% 212% 225%
Lion Assurance, Uganda 25% 82% 85%
Botswana Insurance 20% 161% 176%
Zimnat Life Assurance
($'000) 500 16,486 14,483
Zimnat Financial Services
($'000) 25 1,006 606
Zimnat Asset management
($'000) 250 743 551
Minerva Risk Advisors
($'000) 450 2,352 2,512
47.9 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.
48 US$ Translation rates
2015 2015 2014 2014
Closing Average Closing Average
GBP/US$ 1.480 1.528 1.553 1.648
US$/BWP 11.074 9.973 9,420 8.856
US$/UGX 3377.000 3264.200 2775.000 2616.250
BWP/UGX 293.669 311.151 283.028 282.216
US$/ZAR 15.529 12.759 11.602 10.835
BWP/ZAR 1.366 1.238 1.198 1.191
EUR/US$ 1.091 1.110 1.215 1.329
BWP Botswana Pula
GBP British Pound Sterling
UGX Uganda Schillings
US$ United States Dollar
ZAR South African Rand
49 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 2015 Country of % equity interest
Incorporation
---------------------------------- ---------------- ------------------
Masawara Zimbabwe (Private)
Limited Zimbabwe 100%
FMI Investments (Private)
Limited Zimbabwe 100%
Melville Investments (Private)
Limited Zimbabwe 100%
Masawara Communications
Zimbabwe (Pvt) Ltd Zimbabwe 100%
Dubury Investments (Private)
Limited Zimbabwe 63.79%
TA Holdings Limited Zimbabwe 100%
Telerix Communications (Private)
Limited Zimbabwe 50%
Minerva Holdings (Private)
Limited Zimbabwe 100%
iWayAfrica Zimbabwe (Private)
Limited Zimbabwe 15.03%
Masawara (Mauritius) Limited Mauritius 100%
Masawara Communications
Mauritius Limited Mauritius 100%
Masawara Energy (Mauritius) Mauritius -
Limited
Masawara Holdings (Mauritius)
Limited Mauritius 100%
Masawara Investments (Mauritius)
Limited Mauritius 60%
Masawara Industries (Mauritius)
Limited Mauritius 100%
Masawara Hospitality (Mauritius)
Limited Mauritius 100%
31 December 2014 Country of % equity interest
Incorporation
---------------------------------- ---------------- ------------------
Masawara Zimbabwe (Private)
Limited Zimbabwe 100%
FMI Investments (Private)
Limited Zimbabwe 100%
Melville Investments (Private)
Limited Zimbabwe 100%
Masawara Communications
Zimbabwe (Pvt) Ltd 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% iWayAfrica Zimbabwe (Private) Limited Zimbabwe 15.03% Masawara (Mauritius) Limited Mauritius 100% Masawara Communications Mauritius Limited Mauritius 100% Masawara Energy (Mauritius) Limited Mauritius 51% Masawara Investments (Mauritius) Limited Mauritius 100% Masawara Industries (Mauritius) Limited Mauritius 100% Masawara Hospitality (Mauritius) Limited Mauritius 100%
The table below shows the breakdown of non controlling interests.
US$ US$
2015 2014
Dubury Investments (Private) Limited 658 647
Botswana Insurance Company Limited 10,038 9,182
Lion Assurance Company Limited 663 547
Minerva Risk Advisors (Private)
Limited 110 110
TA Holdings Limited - 8,411
Masawara Investment (Mauritius) 10,183 -
Limited
Sable Chemicals Industries Limited 2,569 -
------- -------
Total 24,221 18,897
------- -------
Summarised financial information on subsidiaries with material non-controlling interests
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
2015 2014
US$ '000 US$ '000
Current assets
Assets 125,719 74,771
Liabilities (118,246) (21,728)
------------------ -----------------
Total current assets 7,473 53,043
------------------ -----------------
Non-current
Assets 116,665 108,785
Liabilities (45,598) (93,005)
------------------ -----------------
Total non-current assets 71,067 15,780
------------------ -----------------
Net assets 78,540 68,823
Summarised statement of comprehensive income
Income 116,553 87,440
---------------- ----------------
Profit before income tax 14,486 12,366
Income tax expense (2,478) (3,084)
---------------- ----------------
Profit from operations 12,008 9,282
Other comprehensive loss (6,306) -
---------------- ----------------
Total comprehensive income 5,702 9,282
---------------- ----------------
Total comprehensive income allocated
to non-controlling interest (1,894) 1,767
Summarised cash flows
Cash flows from operating activities
Cash generated from operations 3,617 11,894
Income tax paid (2,247) (1,603)
---------------- ----------------
Net cash generated from operating
activities 1,370 10,291
Net cash used in investing activities (1,051) (5,402)
Net cash generated from/(used
in) financing activities 1,351 (3,056)
---------------- ----------------
Net increase in cash and cash
equivalents 1,670 1,833
Cash and cash equivalents at
the beginning of the year 17,585 16,800
Effect of foreign currency translation (1,595) (1,048)
---------------- ----------------
Cash and cash equivalents at
the end of the year 17,660 17,585
---------------- ----------------
Sales Purchases Balance Balance
to owed owed
Related from related to related by related
Parties Parties Parties Parties
US$ US$ '000 US$ '000
'000 US$ '000
-------- ------------- ----------- -----------
New World Property a
Managers (Private)
Limited
2015 - 439 - 166
2014 - 429 - 148
TA Holdings Limited
2015 - - - -
2014 3 - - -
Cherryfield Investments b
(Private) Limited
2015 - - 102 -
2014 - - 102 -
Head Biz (Private) c
Limited
2015 - - - -
2014 20 - - 14
Axis Fiduciary Limited d
2015 - 82 - -
2014 - 80 - -
BLC Chambers Limited d
2015 - - - -
2014 - - - -
Telerix Communications e
(Private) Limited
2015 50 21 - 14
2014 1,587 21 - 38
Turklane Investments f
(Private) Limited
2015 - - - 278
2014 30 - - 278
Total 2015 50 542 102 458
------ ---- ---- -----
Total 2014 1,640 530 102 478
------ ---- ---- -----
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 2015, Dubury Investments (Private) Limited paid property management fees of $156,000 (2014: $153,000) and security fees of $283,000 (2014: $276,000) to New World Property Managers (Private) Limited. The balance of $166,000 (2014: $148,000) owed by New World Property Managers (Private) Limited relates to rent collected from tenants, due to Dubury Investments (Private) Limited.
b. 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.
c. Head Biz (Private) Limited is a business run by the spouse of one of the Directors of Masawara Plc, and this company leased retail space at Joina City until it exited the Joina City in 2014.
d. 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.
e. 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.
f. 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.
As at 31 December 2015, Masawara Plc had not exercised its option.
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 2015, the Group recorded an impairment loss of $12.5 million (2014: $2.9 million) relating to investments in Telerix Communication (Private) Limited loan notes, for more details refer to Note 31.1.2. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which it operates.
Transactions with key management personnel
Directors' loans
Loans to Directors are unsecured and the interest rate is 6% per annum and are repayable within 5 years. Any loans granted are included in financial assets on the face of the statement of financial position.
Interest Amounts owed
received by related
parties
---------------- ----------------
Loans from/to related parties US$ '000 US$ '000
Key management personnel of the Group:
Directors' loans
2015 44 874 2014 29 692
Details of Directors' loans
2015 2014
US$ '000 US$ '000
S Mutasa 827 644
J Vezey 47 48
--------- ----------
Total 874 692
--------- ----------
Compensation of key management personnel of the Group
2015 2014
US$ '000 US$ '000
Short-term employee benefits 1,269 908
Share based payments 414 184
Medical benefits 77 44
--------- ----------
Total compensation paid to key management
personnel 1,760 1,136
--------- ----------
The amounts disclosed in the table are the amounts recognized as an expense during the reporting period related to key management personnel. The details of Directors' remuneration are as follows:
Year ended 31 December Share-based
2015 Fees Payment Medical Total
US$ US$ '000 US$ '000
'000 US$ '000
D Suratgar 95 - - 95
M Erasmus 90 - - 90
F Daniels 80 - - 80
I Rajahbalee 8 - - 8
J Harel - - - -
Y Deeney 90 - - 90
S Folland 15 - - 15
S Mutasa 538 - 72 610
J Vezey 731 414 5 1,150
Total remuneration 1,647 414 77 2,138
------- ------------ ---------- ----------
Year ended 31 December Share-based
2014 Fees Payment Medical Total
US$ US$ '000 US$ '000
'000 US$ '000
D Suratgar 95 - - 95
M Erasmus 90 - - 90
F Daniels 80 - - 80
I Rajahbalee 8 - - 8
J Harel 2 - - 2
Y Deeney 90 - - 90
S Folland 12 - - 12
S Mutasa 571 - 31 602
J Vezey 337 184 13 534
Total remuneration 1,285 184 44 1,513
------- ------------ ---------- ----------
Directors' interests in shares
2015 2014
Number Number of
of shares shares
D Suratgar - -
M Erasmus - -
F Daniels 3,666,667 3,666,667
I Rajahbalee - -
J Harel - -
Y Deeney - -
S Folland 20,000 -
S Mutasa 62,958,373 61,682,130
J Vezey 204,631 82,836
S Mutasa, through a family trust that controls FMI Holdings (Private) Limited, which owns the shares in Masawara Plc.
50 Fair value measurement 50.1 Financial assets fair value hierarchy
The following table presents the Group's financial assets that are carried at fair value at 31 December 2014 and 31 December 2015:
2015 Level Level Level Total
1 2 3
US$ '000 US$ '000 US$ '000 US$ '000
Available for sale
* Equity securities - 374 - 374
Financial assets at
fair value through
profit or loss
- Equity securities 23,989 - 3,780 27,769
Total 23,989 374 3,780 28,143
--------- --------- --------- ---------
2014 Level Level Level Total
1 2 3
US$ '000 US$ '000 US$ '000 US$ '000
Available for sale
* Debt securities - 817 - 817
Financial assets at
fair value through
profit or loss
* Equity securities 29,447 973 3,779 34,199
--------- --------- --------- ---------
Total 29,447 1,790 3,779 35,016
--------- --------- --------- ---------
There have been no transfers between Level 1, Level 2 and Level 3 during the period. The fair value hierarchy level at which a fair value measurement is categorised is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. Classifications are accumulated for each class of instruments and the totals for each class are presented. The fair value hierarchy levels are explained as follows:
Financial instruments in level 1
The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in Level 1. Instruments included in Level 1 comprise primarily Zimbabwe Stock Exchange, Botswana Stock Exchange and Uganda Stock Exchange equity investments classified as trading securities or available for sale.
Financial instruments in level 2
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Financial instruments in level 3
If one or more of the significant inputs is not based on observable market data (i.e. unobservable inputs), the instrument is included in Level 3.
Specific valuation techniques used to value financial instruments include quoted market prices or dealer quotes for similar instruments and discounted cash flow analysis. As at 31 December 2015, there were no financial assets were subject to offsetting, enforceable master netting arrangements and similar agreements.
Reconciliations of the carrying amounts of financial assets have been included in Note 31.4.
50.2 Non financial assets fair value hierarchy
The following table analyses the non-financial assets carried at fair value, by valuation method. The different levels have been defined as follows:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
-- Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).
-- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).
Level Level Level Total
1 2 3
US$ '000 US$ '000 US$ '000 US$ '000
2015
Freehold land and buildings
Hotels properties - - 15,960 15,960
Residential properties - - 5,833 5,833
Commercial properties
- offices - - 7,248 7,248
---------- ---------- --------- ---------
Total freehold land
and buildings - Note
27 - - 29,041 29,041
---------- ---------- --------- ---------
Investment properties
Commercial properties - - 44,344 44,344
Residential properties - - 1,958 1,958
Industrial properties - - 530 530
---------- ---------- --------- ---------
Total investment properties
- Note 29 - - 46,832 46,832
---------- ---------- --------- ---------
Level Level Level Total
1 2 3
US$ '000 US$ '000 US$ '000 US$ '000
2014
Freehold land and buildings
Hotels properties - - 16,327 16,327
Residential properties - - 149 149
Commercial properties
- offices - - 7,313 7,313
---------- ---------- --------- ---------
Total freehold land
and buildings - Note
27 - - 23,789 23,789
---------- ---------- --------- ---------
Investment properties
Commercial properties - - 44,057 44,057
Residential properties - - 2,098 2,098
Industrial properties - - 530 530
---------- ---------- --------- ---------
Total investment properties
- Note 29 - - 46,685 46,685
---------- ---------- --------- ---------
Key assumptions used in the valuation of properties and sensitivity analysis have been included in Note 29.
2014 disclosures on property have been restated i.e. in 2014, property was classified in the level 2 category but has been reclassified to level 3 category as that is more appropriate considering that there is no active market for such property.
Reconciliations of the carrying amounts of property have been included in Note 27 and Note 29.
51 Commitments and contingencies
Guarantee on loan acquired by Dandemutande Investments (Private) Limited
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 2015 was $635,000 and this resulted in the Group reducing it liability relating to the financial guarantee from $660,000 at 31 December 2014 to $365,000 at 31 December 2015.
52 Analysis of shareholder and policyholder assets and liabilities
Included in the Group's income statement for the year ended 31 December 2015 is the financial performance of Zimnat Life Fund, a wholly owned subsidiary of TA Holdings Limited. The financial performance of Zimnat Life Fund is attributable to policyholders. In terms of the Zimbabwean Insurance and Pensions Commissions Act (Chapter 24:21), separate accounting records should be maintained for shareholders and policyholders with regards to life assurance. The analysis of the financial performance attributable to TA Holdings shareholders and policyholders is shown below:
Shareholder Policyholder TA Group
2015 2015 2015
INCOME US$ '000 US$ '000 US$ '000
Gross insurance premium revenue 72,820 10,273 83,093
Insurance premiums ceded to
reinsurers on insurance contracts (31,105) (141) (31,246)
------------ ------------- ----------
Net insurance premium revenue 41,715 10,132 51,847
Fees and commission income 19,866 22 19,888
Investment income 2,345 2,041 4,386
Net realised (losses)/gains
on disposal of investments (80) 45 (35)
Net fair value gains/(losses) 823 (1,583) (760)
Hotel revenue 15,304 - 15,304
Manufacturing revenue 11,661 - 11,661
Other operating income 14,262 - 14,262
------------ ------------- ----------
Total income 105,896 10,657 116,553
------------ ------------- ----------
EXPENSES
Net insurance claims (17,586) (9,004) (26,590)
Expenses of acquisition of
insurance contracts (12,327) (8) (12,335)
Finance costs (1,780) - (1,780)
Hotel cost of sales (7,098) - (7,098)
Operating and administrative
expenses (54,526) (1,624) (56,150)
------------ ------------- ----------
Total expenses (93,317) (10,636) (103,953)
------------ ------------- ----------
Profit before share of profit
of associates 12,579 21 12,600
Share of profits of associates 1,913 - 1,913
------------ ------------- ----------
Profit before tax 14,492 21 14,513
Income tax expense (2,457) (21) (2,478)
------------ ------------- ----------
Profit for the year 12,035 - 12,035
------------ ------------- ----------
Shareholder Policyholder TA Group
2015 2015 2015
US$ '000 US$ '000 US$ '000
ASSETS
Property, plant and equipment 30,866 4,200 35,066
Intangible assets 2,607 - 2,607
Investment properties 10,298 4,440 14,738
Investment in associates 15,248 - 15,248
Financial assets 18,890 30,116 49,006
Inventory 13,998 - 13,998
Reinsurance assets 23,889 21 23,910
Deferred acquisition costs 2,965 - 2,965
Insurance receivables 13,927 - 13,927
Trade and other receivables 53,124 136 53,260
Cash and cash equivalents 17,659 - 17,659
------------ ------------- -----------
Total assets 203,471 38,913 242,384
------------ ------------- -----------
Shareholder Policyholder TA Group
2015 2015 2015
US$ '000 US$ '000 US$ '000
EQUITY AND LIABILITIES
Issued share capital 1,933 - 1,933
Share premium 184 - 184
Non-distributable reserves 24,428 - 24,428
Available for-sales financial
reserve 66 - 66
Foreign currency translation
reserve (12,087) - (12,087)
Revaluation reserve 33,551 - 33,551
Retained earnings 14,744 - 14,744
--------- ------- ----------
Equity attributable to equity
holders of the parent 62,819 - 62,819
Non-controlling interests 15,721 - 15,721
--------- ------- ----------
Total equity 78,540 - 78,540
--------- ------- ----------
Non-current liabilities
Borrowings 15,875 - 15,875
Deferred tax liability 6,174 - 6,174
Deferred income 1,396 - 1,396
Investment contracts with
DPF - 17,417 17,417
Investment contracts without
DPF - 15,595 15,595
Insurance contract liabilities 43,232 5,608 48,840
Insurance payables 3,750 - 3,750
Taxation payable 3,604 - 3,604
Provisions 214 10 224
Trade and other payables 50,686 283 50,969
--------- ------- ----------
Total liabilities 124,931 38,913 163,844
--------- ------- ----------
Total equity and liabilities 203,471 38,913 242,384
--------- ------- ----------
Shareholder Policyholder TA Group
2014 2014 2014
INCOME US$ '000 US$ '000 US$ '000
Gross insurance premium revenue 71,503 7,427 78,930
Insurance premiums ceded to
reinsurers on insurance contracts (32,256) (156) (32,412)
------------ ------------- ---------
Net insurance premium revenue 39,247 7,271 46,518
Fees and commission income 19,862 50 19,912
Investment income 2,673 1,647 4,320
Net realised (losses)/gains
on disposal of investments (582) 63 (519)
Net fair value gains/(losses) 1,422 (1,566) (144)
Hotel revenue 15,618 - 15,618
Other operating income 1,735 - 1,735
------------ ------------- ---------
Total income 79,975 7,465 87,440
------------ ------------- ---------
EXPENSES
Net insurance claims (16,458) (6,075) (22,533)
Expenses of acquisition of
insurance contracts (11,581) (7) (11,588)
Finance costs (773) - (773)
Hotel cost of sales (5,228) - (5,228)
Operating and administrative
expenses (35,257) (1,357) (36,614)
------------ ------------- ---------
Total expenses (69,297) (7,439) (76,736)
------------ ------------- ---------
Profit before share of profit
of associates 10,678 26 10,704
Share of profits of associates 1,662 - 1,662
------------ ------------- ---------
Profit before tax 12,340 26 12,366
Income tax expense (3,058) (26) (3,084)
------------ ------------- ---------
Profit for the year 9,282 - 9,282
------------ ------------- ---------
Shareholder Policyholder TA Group
2014 2014 2014
US$ '000 US$ '000 US$ '000
ASSETS
Property, plant and equipment 25,296 4,200 29,496
Intangible assets 3,310 - 3,310
Investment properties 10,428 4,450 14,878
Investment in associates 15,913 - 15,913
Financial assets 18,034 26,578 44,612
Non-current asset held for
sale 575 - 575
Inventory 308 - 308
Reinsurance assets 23,786 21 23,807
Deferred acquisition costs 3,200 - 3,200
Insurance receivables 9,250 - 9,250
Trade and other receivables 20,625 111 20,736
Cash and cash equivalents 17,585 - 17,585
------------ ------------- ----------
Total assets 148,310 35,360 183,670
------------ ------------- ----------
Shareholder Policyholder TA Group
2014 2014 2014
US$ '000 US$ '000 US$ '000
EQUITY AND LIABILITIES
Issued share capital 1,919 - 1,919
Non-distributable reserves 23,363 - 23,363
Available for-sales financial
reserve 449 - 449
Foreign currency translation
reserve (8,172) - (8,172)
Revaluation reserve 34,448 - 34,448
Retained earnings 4,948 - 4,948
------------ ------------- ---------
Equity attributable to equity
holders of the parent 56,955 - 56,955
Non-controlling interests 11,868 - 11,868
------------ ------------- ---------
Total equity 68,823 - 68,823
------------ ------------- ---------
Non-current liabilities
Borrowings 6,716 - 6,716
Deferred tax liability 5,564 - 5,564
Deferred income 1,912 - 1,912
Investment contracts with
DPF - 17,091 17,091
Investment contracts without
DPF - 13,281 13,281
Insurance contract liabilities 44,294 4,147 48,441
Insurance payables 2,060 627 2,687
Taxation payable 104 10 114
Provisions 1,824 - 1,824
Trade and other payables 17,013 204 17,217
------------ ------------- ---------
Total liabilities 79,487 35,360 114,847
------------ ------------- ---------
Total equity and liabilities 148,310 35,360 183,670
------------ ------------- ---------
53 Subsequent events
Disposal of interest in Botswana Insurance Company Limited
On 22 January 2016, the Group sold 12% of its interest in Botswana Insurance Company Limited resulting in a reduction of its shareholding from 62% to 50%. The consideration received amounted to $2.4 million. The transaction will result in an increase in non controlling interest of $2.1 million.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR XQLFFQEFXBBB
(END) Dow Jones Newswires
May 16, 2016 09:32 ET (13:32 GMT)
1 Year Masawara Chart |
1 Month Masawara Chart |
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
