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| 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 : 9253Z
Masawara Plc
23 September 2015
23 September 2015
Masawara plc ("Masawara", the "Company" or the "Group")
Interim results for the six month period ended 30 June 2015
Masawara, an investment company focused on acquiring interests in companies based in Zimbabwe and the southern African region, is pleased to announce its unaudited results for the six month period ended 30 June 2015.
The Company's interim financial statements for the six month period ended 30 June 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
Financial review
The Directors present the interim unaudited results for the six-month period ended 30 June 2015.
Performance
The Group achieved a profit after tax of $6.1 million for the half year ended 30 June 2015 compared to a profit after tax of $4.4 million incurred during the same period last year. The composition of the Group's statement of comprehensive income for the six months ended 30 June 2015 is significantly different from the comparative results as in the prior period, TA Holdings Limited ("TA Holdings") was an associate hence the Group only accounted for its share of the results i.e. 41.04% of the TA Holdings results. From 1 December 2014, TA Holdings Limited became a subsidiary after the Group purchased additional shares from the minority shareholders, resulting in full consolidation of the TA Holdings results.
The net movement in profit after tax is attributable to mainly the following transactions:
-- TA Holdings Limited contributed $9.0 million to the Group's profit after tax in comparison to prior period where only the share of profit of the associate of $1.5 million was accounted for in the Group results.
-- In the prior period results, $6.7million was recognized as profit on disposal of Masawara (Energy) Mauritius Limited and gain on loss of control in Minerva Risk Advisors (Private) Limited. In the current period, $5.2 million was recognized as gain on bargain purchase on obtaining control in Sable Chemicals Industries, thus a 22% decrease in gains arising from equity transactions.
-- Interest income charged on funds advanced to Telerix Communications (Private) Limited ("Telerix") increased from $0.7 million to $1.8 million in the current period. The increase from the previous period was as a result of the increase in amounts advanced to Telerix since 30 June 2014. The impairment loss recognized against these loans for the six months ended 30 June 2015 amounted to $1.2 million in comparison to $2.5 million recognized in the same period last year.
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.
The performance of the individual investee companies is summarized below.
TA Holdings Limited
TA Holdings Limited achieved a profit after tax for the six months ended 30 June 2015 of $9.0 million, in comparison to a profit of $3.4 million achieved during the same period in the prior year. The increase was largely attributable to the gain on bargain purchase of $5.2 million recognized on obtaining control over Sable Chemicals Industries Limited ("Sable Chemicals). On 25 June 2015, TA Holdings obtained control of Sable Chemicals Industries Limited after the intermediary companies within the fertilizer industry shareholding structure were liquidated, with no consideration paid to other shareholders, resulting in TA Holdings having a direct shareholding of 50.6%. Consequently, Sable Chemicals was consolidated effective 30 June 2015 and assets and liabilities were taken on and the gain on bargain purchase of $5.2 million recognized. Though Sable incurred a loss for the six months ended 30 June 2015, 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 3.3 for further details).
In addition, the improved results were due to the fact that all the companies within the TA Holdings Group achieved better than prior period results with the exception of Cresta Zimbabwe.
Telerix Communications (Private) Limited ("Telerix")
In the six months to 30 June 2015, Telerix incurred a loss after tax of $1.4 million (2014: $2.1 million). The Group did not recognize its share of losses of Telerix during the six month period ended 30 June 2015, as required by IAS 28 Investments in Associates and Joint Ventures, after the Group's investment in Telerix was reduced to $nil during the year ended 31 December 2012.
The reduction in the loss incurred was a result of a decrease in the finance costs from $1.1milion in the prior period to $0.4 million in the six months ended 30 June 2015, following significant repayments of the loan facilities made since 30 June 2014. Operating costs and other overheads decreased by 8% from the prior period owing to cost cutting initiatives that were implemented by management.
During the year ended 31 December 2013, the Group provided a guarantee to Telerix, limited to the value of $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 to CABS as at 31 December 2013 was $2,036,709 and this resulted in the Group recognising a liability amounting to $1,193,715 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 30 June 2015, the loan payable to CABS by Dandemutande was $712,000. Consequently, the Group reduced the liability relating to the guarantee by $242,000 and this adjustment was disclosed as part of share of profit of associates in the statement of comprehensive income.
Joina City
The Group's share of the results of its investment in Joina City was a profit of $211,000 (2014: $221,000).
As at 30 June 2015, the building's occupancy level was 62% which represented a 14% decrease in occupancy from the occupancy at 30 June 2014 of 72%. The office tower occupancy reduced to 43% in comparison with the occupancy level at 30 June 2014 of 52% and the retail occupancy level was 77% (2013: 87%). The decrease in the retail occupancy was due to termination of leases for defaulting tenants. The office occupancy decreased due to the termination of a lease by one of the tenants and the office space is yet to be taken up.
Investment property and Joina City
The carrying amount of the investment property as at 30 June 2015 has slightly increased from the value as at 31 December 2014 due to improvements to the building. The Directors assessed the potential changes to the inputs to the valuation and were of the opinion that there have been no material changes from the previous reporting period, 31 December 2014, therefore no valuations were performed at interim period, 30 June 2015. The fair values of the investment property, land and buildings as at 31 December 2014 was determined by Dawn Property Consultancy (Private) Limited and Bard Real Estate (Private) Limited. The valuers are registered with the Real Estate Institute of Zimbabwe and have experience in the category of investment property valued. An updated valuation will be incorporated into the accounts as at 31 December 2015.
Going concern
Management prepared cash flow forecasts indicating there is adequate operating cash for the period to 31 December 2016. In assessing the ability of the Group to continue as a going concern, the proceeds from the sale of a minority 40% interest in Masawara Investments Mauritius Limited (Note 16) were included in the forecast and 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.
Cash flow for the six-month period
The Group recorded an overall increase in cash and cash equivalents of $5.7 million from the previous period. $2.8 million was generated from operating activities, $7.3 million was used in investing activities and $10.6 million was generated from financing activities.
Net cash flows used in investing activities was mainly attributable to the following investing activities:
-- Cash outflow of $1.5 million purchase of property, plant and equipment, an outflow of $6.7 million for the purchase of non-controlling shares in TA Holdings Limited;
-- $3.8 million cash inflow which represents net cash acquired on obtaining control of Sable Chemicals Industries Limited;
-- 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
-- net cash outflow of $926,000 for purchase of financial instruments.
Net cash inflow of $10.6 million was the net of proceeds from borrowings of $11.5million, cash outflow of $788,000 for repayment of borrowings and outflow of $119,000 for dividends paid to non-controlling interests of the Group.
Financial position
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Following the acquisition of Sable Chemicals Industries Limited, the non-current assets increased from $154.9 million as at 31 December 2014 to $163.7 million as at 30 June 2015 whilst the current assets increased by $52.7million. The Group had cash and cash equivalents of $24.0 million as at 30 June 2015 (31 December 2014: $18.3 million). Current liabilities increased from $83.0 million as at 31 December 2014 to $128.1 million as at 30 June 2015 primarily due to the acquisition of Sable Chemicals Industries Limited. Non-current liabilities increased by $17.3 million mainly due to loan notes amounting to $11.0 million that were issued by the Group as well as an increase in the insurance business which resulted in investment contracts increasing by $6.9 million.
Outlook
It is anticipated that the economic conditions in Zimbabwe will further deteriorate during the year, with the country's growth prospects having been revised down from 3.4% to 1.5%. The deterioration of the economic conditions has manifested itself in the declining financial results of some of the leading listed clients on the Zimbabwe Stock Exchange. In spite of the difficult operating environment, various initiatives are in place at the investee companies to remain sustainable and profitable.
Following the acquisition of TA Holdings in December 2014, the Group embarked on an in-depth strategic review and restructure of the entire Group portfolio. The restructure is ongoing and once complete, revenues and operations are expected to improve as a result of streamlining activities, consolidation of duplicated activities and engagement of strategic technical partners.
The insurance businesses have been growing and this growth is expected to continue in the next six months and budgets for the 2015 financial year are expected be met. This will be achieved through the implementation of aggressive growth strategies.
The Group is still optimistic that a viable electricity tariff will be finalized for Sable Chemicals. Sable Chemicals is currently engaging in studies to explore the use of Coal Bed Methane as an alternative feedstock in the manufacture of hydrogen. Increased revenue for Sable Chemicals is usually expected in the second half of the year as opposed to the first six months as more sales are made in the rainy season.
It is not expected that office occupancies at Joina City will increase as there is an increased trend in businesses moving out to industrial areas. Retail occupancies are expected to increase as more tenants take up space.
Price wars within the hospitality industry are expected to continue. Occupancies within the Cresta Zimbabwe hotels are expected to increase following the refurbishment of the Cresta Lodge.
Subsequent to 30 June 2015, regulatory approvals where obtained for the merger of the operations of Dandemutande, (a wholly owned subsidiary of Telerix Communications (Private) Limited), iWay Africa (an associate of the Group) and Africa Online, refer to note 16 for further details). The integrated business is expected to result in increased revenue owing to broader services offered and increased market penetration. Cost savings are also expected to result in improved results.
Principal risks and uncertainties
The principal risks and uncertainties affecting the business relate to the political and economic environment of Zimbabwe, where the investments are predominantly held. There is a further risk that investments made by the Group will not result in the envisaged cash generation or capital appreciation. This risk is managed by the careful evaluation of all proposed investments, with detailed due diligence work being undertaken, before any investments are made and ongoing monitoring of existing investments.
There is a risk that the illiquidity of the Zimbabwean equity and bond markets may affect the valuation of the Group's investment in investment property in the short to medium term.
Due to losses incurred by Telerix and its cash flow constraints, there is a risk that the loan notes granted to Telerix may be further impaired in future. However, improved results are expected following the merger transaction discussed above.
Following the implementation of the merger transaction in Dandemutande and the partial disposal of non-controlling interest in the Zimbabwe insurance companies, (further discussed in note 16), synergies expected may not be realised immediately.
Further details on Group's risk are discussed in the annual report for the 2014 financial year.
Unaudited interim consolidated statement of comprehensive income
for the six months ended 30 June 2015
Hot Features
Premium
June 2015 June 2014
------------- -------------
Unaudited
----------------------------
Notes US$ '000 US$ '000
INCOME
Gross insurance premium revenue 40,318 -
Insurance premium ceded to reinsurers
on insurance contracts (16,193) -
------------------------------------------- ------ ------------- -------------
Net insurance premium revenue 24,125 -
Fees and commission income 10,096 -
Hotel revenue 6,770 -
Rental income from investment properties 990 999
------------------------------------------- ------ ------------- -------------
Net total revenue 41,981 999
Gain on loss of control of a subsidiary - 528
Gain on bargain purchase of Sable
Chemicals Industries Limited 3.3 5,206 -
Profit on disposal of joint venture - 6,195
Investment income 4,442 720
Net realised and unrealised losses (875) -
Other operating income 969 -
------------------------------------------- ------ ------------- -------------
Total income 51,723 8,442
EXPENSES
Insurance claims and loss adjustment
expense (16,900) -
Insurance claims and loss adjustment
recovered from insurers 4,763 -
------------------------------------------- ------ ------------- -------------
Net insurance claims (12,137) -
Expenses for the acquisition of insurance
contracts (6,600) -
Hotel cost of sales (2,659) -
Property expenses (720) (717)
Operating and administrative expenses (21,861) (4,859)
Share of profit for joint venture-
Telerix Communications (Private)
Limited 6.2 242 295
Total net insurance claims and operating
expenses (43,735) (5,281)
Finance costs (1,115) (243)
------------------------------------------- ------ ------------- -------------
Profit before share of profit of
associates and tax 6,873 2,918
Share of profit of other associates 453 1,505
------------------------------------------- ------ ------------- -------------
Profit before tax 7,326 4,423
Income tax expense (1,203) (61)
------------------------------------------- ------ ------------- -------------
Profit for the period 6,123 4,362
------------------------------------------- ------ ------------- -------------
Profit for the year attributable
to:
Equity holders of parent 4,673 4,338
Non-controlling interests 1,450 24
------------------------------------------- ------ ------------- -------------
Profit for the period 6,123 4,362
------------------------------------------- ------ ------------- -------------
Earnings per share 4
Basic earnings per share 0.04 0.04
Diluted earnings per share 0.04 0.04
Profit for the period 6,123 4,362
Other comprehensive income, net tax:
-
Items that may be subsequently reclassified
to profit or loss
Share of other comprehensive income
of associate - 324
Exchange differences on translation
of foreign operations (2,449) -
Change in value of available-for-sale
financial assets (4) -
--------------------------------------------- -------- ------
(2,453) 324
Total comprehensive income for the
period 3,670 4,686
---------------------------------------------- -------- ------
Total comprehensive income attributable
to:
Equity holders of parent 3,146 4,662
Non-controlling interests 524 24
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---------------------------------------------- -------- ------ Total comprehensive income for the period 3,670 4,686 ---------------------------------------------- -------- ------
Interim consolidated statement of financial position as at 30 June 2015
December
Notes June 2015 2014
---------- ---------
Unaudited Audited
---------- ---------
US$'000 US$'000
ASSETS
Non-current assets
Property, plant and
equipment 36,899 29,976
Intangible assets 4,533 4 675
Investment properties 46,757 46,685
Investment in associates
and joint venture 6 12,663 13,261
Financial assets 7 61,741 59,255
Deferred tax asset 1,080 1 080
Total non-current assets 163,673 154,932
--------------------------------- ------ ---------- ---------
Current assets
Inventory 14,140 308
Reinsurance assets 25,318 23,807
Deferred acquisition
costs 530 -
Insurance receivables 13,433 9,250
Trade and other receivables 49,035 22,646
Income tax asset 489 -
Cash and cash equivalents 24,046 18,300
--------------------------------- ------ ---------- ---------
Total current assets 126,991 74,311
Non-current assets classified
as held for sale - 575
--------------------------------- ------ ---------- ---------
Total assets 290,664 229,818
--------------------------------- ------ ---------- ---------
EQUITY AND LIABILITIES
Share capital 1,235 1,235
Share premium 80,110 80,110
Treasury shares (333) (333)
Group restructuring
reserve (9,283) (9,283)
Other capital reserves (1,654) 35
Non-distributable reserve (273) (695)
Retained earnings 16,523 13,547
Equity attributable to equity
holders of the parent 86,325 84,616
Non-controlling interest 15,685 18,897
Total equity 102,010 103,513
--------------------------------- ------ ---------- ---------
Non-current liabilities
Financial liabilities 8.1 15,433 5,444
Deferred tax liabilities 7,899 7,506
Investment contracts 37,246 30,372
Total non-current liabilities 60,578 43,322
--------------------------------- ------ ---------- ---------
Current liabilities
Financial liabilities 8.2 14,883 9,427
Insurance contract liabilities 49,017 48,441
Deferred income 1,779 1,912
Income tax liability - 114
Insurance payables 4,284 2,688
Provisions - 1,824
Trade and other payables 58,113 18,577
Total current liabilities 128,076 82,983
Total liabilities 188,654 126,305
--------------------------------- ------ ---------- ---------
Total equity and liabilities 290,664 229,818
--------------------------------- ------ ---------- ---------
Interim consolidated statement of changes in equity
for the six months ended 30 June 2015
Attributable to the equity holders of the parent
US$ '000
------------------------------------------------------------------------------------------------------------------------------- --------
Share Share Treasury Group Retained Other Non Revaluation Total Non-controlling Total
Capital Premium Shares Restructure Profit/ Capital Distributable Reserve Interest Equity
Reserve (Loss) Reserve Reserves US$'000 US$'000
Balance at 1
January
2014 1,235 84,110 (333) (9,283) (12,280) (156) (695) 10,045 72,643 1,288 73,931
Profit for the
period - - - - 4,338 - - - 4,338 24 4,362
Other
comprehensive
income for the
period - - - - - 324 - - 324 - 324
------------------- ------ -------- ---------------- -------------------- --------- -------- -------------- ------------ -------- ---------------- --------
Total
comprehensive
income for the
period - - - - 4,338 324 - - 4,662 24 4,686
------------------- ------ -------- ---------------- -------------------- --------- -------- -------------- ------------ -------- ---------------- --------
Dividend paid - (4,000) - - - - - - (4,000) - (4,000)
Loss of control of
subsidiary - - - - - - - - - (910) (910)
Share based
payment
transactions - - - - - 204 - - 204 - 204
------------------- ------ -------- ---------------- -------------------- --------- -------- -------------- ------------ -------- ---------------- --------
Total
contributions
by and
distributions
to owners of the
parent recognized
in equity - (4,000) - - - 204 - - (3,796) (910) (4,706)
------------------- ------ -------- ---------------- -------------------- --------- -------- -------------- ------------ -------- ---------------- --------
Balance at 30 June
2014 (unaudited) 1,235 80,110 (333) (9,283) (7,942) 372 (695) 10,045 73,509 402 73,911
------------------- ------ -------- ---------------- -------------------- --------- -------- -------------- ------------ -------- ---------------- --------
Balance at 1
January
2015 1,235 80,110 (333) (9,283) 13,547 35 (695) - 84,616 18,897 103,513
Profit for the
period - - - - 4,673 - - - 4,673 1,450 6,123
Other
comprehensive
income for the
period - - - - - (1,527) - - (1,527) (926) (2,453)
----------------- ----------- ------------------- ---------------- --------------------- ----------- -------------- ------------------------ --------------------- --------------- -------------- ------------
Total
comprehensive
income for the
period - - - - 4,673 (1,527) - - 3,146 524 3,670
----------------- ----------- ------------------- ---------------- --------------------- ----------- -------------- ------------------------ --------------------- --------------- -------------- ------------
Dividend paid - - - - - - - - - (119) (119)
Share based
payment
transactions - - - - - 74 - - 74 - 74
----------------- ----------- ------------------- ---------------- --------------------- ----------- -------------- ------------------------ --------------------- --------------- -------------- ------------
Total
contributions
by and
distributions
to owners of
the
parent
recognized
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in equity - - - - - 74 - - 74 (119) (45)
----------------- ----------- ------------------- ---------------- --------------------- ----------- -------------- ------------------------ --------------------- --------------- -------------- ------------
Additional
non-controlling
interest
arising
on acquisition
of
Sable Chemicals - - - - - - - - - 5,003 5,003
Purchase of
additional
shares in TA
Holdings - - - - (1,293) - - - (1,293) (8,859) (10,152)
Reserves
transfers - - - - (404) (236) 422 - (218) 239 21
----------------- ----------- ------------------- ---------------- --------------------- ----------- -------------- ------------------------ --------------------- --------------- -------------- ------------
Total changes in
ownership
interests
that do not
result
in change in
control - - - - (1,697) (236) 422 - (1,511) (3,617) (5,128)
----------------- ----------- ------------------- ---------------- --------------------- ----------- -------------- ------------------------ --------------------- --------------- -------------- ------------
Balance at 30
June
2015
(unaudited) 1,235 80,110 (333) (9,283) 16,523 (1,654) (273) - 86,325 15,685 102,010
----------------- ----------- ------------------- ---------------- --------------------- ----------- -------------- ------------------------ --------------------- --------------- -------------- ------------
Unaudited interim consolidated statement
of cash flows
for the six months ended 30 June
2015 June 2015 June 2014
---------- ----------
Notes Unaudited
----------------------
US$'000 US$'000
Cash flows generated from/ (used
in) operating activities 9 1,437 (3,325)
Finance income received 2,762 352
Finance costs paid (526) (87)
Dividend received - 440
Income tax paid (830) (61)
---------------------------------------- ------ ---------- ----------
Net cash flows generated from
/ (used in) operating activities 2,843 (2,681)
Cash flows from investing activities
Purchase of property, plant and
equipment (1,476) (5)
Proceeds on part disposal of Minerva
Risk Advisors - 400
Proceeds from disposal of joint
venture - 26,725
Proceeds on disposal of equipment 195 -
Proceeds from repayment of loans
granted to related parties 29 19
Purchase of non-controlling interests'
shares in TA Holdings Limited (6,740) -
Acquisition of subsidiary, net
of cash acquired 3,823 -
Purchase of financial instruments (14,373) -
Proceeds from sale of financial
assets 13,447 -
Deferred consideration payment
to Minet Group (1,194) (354)
Loans issued to investee company (993) (2,467)
---------------------------------------- ------ ---------- ----------
Net cash flows (used in) / generated
from investing activities (7,282) 24,318
Cash flows from financing activities
Proceeds from borrowings 11,526 -
Repayment of loans (788) (776)
Dividend paid (119) (4,000)
---------------------------------------- ------ ---------- ----------
Net cash flows generated from
/ (used in) financing activities 10,619 (4,776)
Net effect of exchange rate movement
on cash and cash equivalents (434) -
Net increase in cash and cash
equivalents 5,746 16,861
Cash and cash equivalents at 1
January 18,300 50
---------------------------------------- ------ ---------- ----------
Cash and cash equivalents at 30
June 24,046 16,911
---------------------------------------- ------ ---------- ----------
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 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), an associate called iWayAfrica Zimbabwe (Private) Limited (a broadband internet service company), and a joint venture called 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 interim financial statements consolidate those of the Company, its subsidiaries and the Group's interest in associates and a joint venture (together referred to as "the Group").
2 Basis of preparation
The interim consolidated financial statements for the six months ended 30 June 2015 have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting.
The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's Annual Financial Statements for the year ended 31 December 2014. The interim consolidated financial statements have been drawn up using accounting policies and presentation consistent with those applied in the audited accounts for the year ended 31 December 2014 except as described as below.
IFRIC 21 'Levies'
The Group has adopted IFRIC 21 'Levies'. IFRIC 21 addresses the accounting for a liability to pay a levy if that liability is within the scope of IAS 37 'Provisions'. The interpretation addresses what the obligating event is that gives rise to pay a levy, and when a liability should be recognized. The Group is not currently subject to significant levies. The adoption of the interpretation has had no effect on the financial statements for the period ended 30 June 2015. The Group does not expect IFRIC 21 to have a significant effect on the results for the financial year ending 31 December 2015.
Other amendments to IFRS effective for the financial year ending 31 December 2015 are not expected to have a material impact on the Group.
Estimates
In preparing these condensed interim financial statements, the significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2014.
Going Concern
Management prepared cash flow forecasts indicating that there is adequate operating cash for the period to September 2016. In assessing the liability 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 continue as a going concern. The Directors reviewed the cash flow forecasts prepared by management when assessing the ability of the Group 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 the financial statements and accordingly, the financial statements have been prepared on the going concern basis.
3 Significant events
The following significant events that have a material effect on the financial statements of the Group took place during the six months period ended 30 June 2015.
3.1 Issue of debt instruments
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On 9 February 2015 Masawara Holding Mauritius Limited ("MHML") (a wholly owned subsidiary of Masawara Plc) issued 10% fixed rate notes ("Notes") to FirstRand Bank Limited, AfrAsia Bank Limited and Sanlam Life Namibia Limited ("the debt investors") due 36 months after issue, in consideration of an aggregate amount of $11.0 million. The amount was used to fund part of the consideration payable to TA Holdings Limited's minority shareholders. As part of the financing agreement with the debt investors, Masawara Plc issued warrants to the debt investors which gives the debt investors the option but not the obligation to subscribe for, in aggregate, 1,402,500 shares in Masawara Plc at a strike price of GBP0.01.
The option to subscribe for the shares was accounted for as a derivative financial liability as the functional currency of the Group is US$ and the warrant instrument is denominated in GBP. The fair value of the embedded derivative at initial recognition, calculated using the intrinsic value method, amounted to $1.1million and is included under non-current financial liabilities. The carrying value of the debt at initial recognition was determined as the difference between the consideration received of $11million and the fair value of the embedded derivative of $1.1million i.e. $9.9 million.
The effective interest rate of this liability element on initial recognition was 14.2% per annum. The loan notes are secured by the Group's 100% shareholding in TA Holdings Limited and the Group's share in Joina City.
3.2 Increase in shareholding in TA Holdings Limited
On 8 April 2015 Masawara Plc increased its ownership in TA Holdings Limited "TA Holdings" from 75.74% to 100%. This took place when Masawara Plc, through its wholly owned subsidiary Masawara Holdings (Mauritius) Limited ("MHML", purchased 41,403,383 TA Holding's shares representing 24.26% of TA Holdings issued share capital for $10.4 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 effect on the interim consolidated financial statements.
The change in ownership interest was accounted for as an equity transaction and the carrying amounts of Masawara Plc interest and non-controlling interest were adjusted to reflect the changes in their relative interests. The difference between the amount by which the non-controlling interests were adjusted ($8.9 million) and the fair value of the consideration paid ($10.2 million) was recognized directly in retained earnings and attributed to Masawara Plc.
3.3 Business combination
On 25 June 2015, the Group, through its wholly owned subsidiary, TA Holdings Limited, obtained control of Sable Chemicals 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%. 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.
Notwithstanding the fact that the effective acquisition date of Sable Chemicals Industries Limited was 25 June 2015, 30 June 2014 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 interim 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 interim consolidated statement of comprehensive income. 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 Chemical Industries, the Group is able to determine operational polices which will improve returns thus justifying a gain on bargain purchase.
As the acquisition date for accounting purposes is 30 June 2014, the Group's interim consolidated financial statements do not include the components of the statement of comprehensive income for Sable Chemicals Industries. If the business combination had taken place on 1 January 2015, the Group's gross revenue would have been $84.1 million and the Group's loss after tax would have been $11.0 million.
The following table summarises the acquisition for no consideration, the value of assets acquired, liabilities assumed and the non-controlling interest at the acquisition date.
Footnotes Provisional
fair value
US$ '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 Limited was impaired to $nil. As at the date of acquisition the previously recognized impairment losses had not been reversed. Consequently, the fair value in Sable Chemical Limited 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 Bard Real Estate (Private) Limited and Dawn Properties (Private) Limited, professional valuers with recognized and relevant professional qualifications and with recent experience in the location and category of the property being valued. 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 fair value 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.
4 Earnings per share
Basic earnings per share amounts are calculated by dividing net profit or loss for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
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The following reflects the income and share data used in the basic and diluted earnings per share computations:
June 2015 June 2014
-------------------------- -----------------------
Unaudited
---------------------------------------------------
US$'000 US$'000
Net profit attributable to ordinary
equity holders of parent for basic
earnings and diluted earnings 4,673 4,338
June 2015 June 2014
-------------------------- -----------------------
Number of shares
---------------------------------------------------
'000 '000
Weighted average number of ordinary
shares for basic earnings per share 123,065 123,065
Effect of dilution: share warrants 1,122 -
-------------------------- -----------------------
Weighted average number of ordinary
shares for diluted earnings per
share 124,187 123,065
-------------------------- -----------------------
June 2015 June 2014
----------- ----------
Unaudited
-----------------------
US$ US$
Basic earnings per share 0.04 0.04
Diluted earnings per share 0.04 0.04
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.
5 Investment properties
The carrying value of the investment properties as at 30 June 2015 has slightly increased from the carrying value as at 31 December 2014 due to improvements on the buildings. There were no changes due to valuation. Directors assessed the potential changes to the inputs to the valuation and were of the opinion that there have not been a material change from the previous reporting period. Fair valuation of investment properties as at 31 December 2014 were carried out by independent professional valuers, Dawn Property Consultancy (Private) Limited and Bard Real Estates (Private) Limited. The valuers are registered with the Real Estate Institute of Zimbabwe and have experience in the locations and categories of investment properties held by the Group.
There is a risk that the illiquidity of the Zimbabwean capital market may affect the valuation of the Group's investment properties in the short to medium term.
6 Investment in associates and joint venture
Investment in associates includes investments in iWayAfrica (Private) Limited ("iWayAfrica), Zimbabwe Fertiliser Company Limited, Cresta Marakanelo Limited and Continental Reinsurance Company Limited.
Sables Chemicals Industries Limited ceased to be an associate on 30 June 2015 when TA Holdings Limited obtained control (see note 3.3). No share of loss was recognized for the six months ended 30 June 2015 because the investment in Sable Chemicals was written down to $nil in 2013 in accordance with International Accounting Standards.
Investment in joint venture relates to investment in Telerix Communications (Private) Limited ("Telerix").
6.1 Investment in associates
Summarised financial information for the associates is shown below:
June 2015 December
2014
---------- ------------------------
Unaudited Audited
---------- ------------------------
US$'000 US$'000
Balance at the beginning of
the period 13,261 19,880
Share of profit from associate 453 3,322
Dividend received (421) (440)
Share of other comprehensive
loss - (641)
Fair value loss on fair valuation
of previously held equity - (7,565)
Transfer to investments in subsidiary - (15,005)
Fair value of investment in
Minerva Risk Advisors - 1,072
Acquisition of subsidiary - 12,638
Exchange rate movement (630) -
Balance at the end of the period 12,663 13,261
---------- ------------------------
6.2 Investment in joint venture
Investment in Telerix was written off to $nil by share of losses during the year ended 31 December 2012.
The reconciliation below shows the movement of unrecognized share of losses in Telerix Communications (Private)
Limited:
June 2015 December
2014
---------- ---------
Unaudited Audited
---------- ---------
US$'000 US$
4,288 2,224
Unrecognised share of losses
for the period 720 2,064
----------
Closing balance 5,008 4,288
---------- ---------
During the year ended 31 December 2013, the Group provided a guarantee to Telerix amounting to $1,5million, in relation to $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 30 June 2015 was $712,000 and this resulted in the Group reducing its liability relating to the financial guarantee from $666,000 as at 31 December 2014 to $424,000 at 30 June 2015.
The $242,000 that is disclosed as share of profit of Telerix in the statement of comprehensive income during the six month ended 30 June 2015 relates to the unwinding of the financial guarantee liability.
7 Financial assets
June 2015 December
2014
---------- ---------
Unaudited Audited
---------- ---------
US$'000 US$'000
Held-to- maturity financial
assets 32,692 24,239
Available-for-sale financial
assets 732 817
Financial assets at fair value
through profit or loss 28,317 34,199
Total 61,741 59,255
---------- ---------
The Group recognized impairment losses amounting to $1,2million (2014: $2.5million) relating to the Telerix loan
notes and this is disclosed in the statement of comprehensive income. An impairment test was carried out due to the
fact that Telerix has recurring losses and may not have adequate resources on maturity to settle the loan notes.
8 Financial liabilities
8.1 Financial liabilities - non-current
June 2015 December
2014
---------- ---------
Unaudited Audited
---------- ---------
US$'000 US$'000
Long term bank loans 14,316 4,273
Derivative financial liability 1,071 -
Other financial liabilities 46 -
Deferred consideration payable to
Minet Group - 1,171
15,433 5,444
---------- ---------
8.2 Financial liabilities - current
June 2015 December
2014
---------- ---------
Unaudited Audited
---------- ---------
US$'000 US$'000
Current portion of long term bank
loans 942 1,027
Loan payable to non-controlling interest
shareholder 6,034 5,975
Deferred consideration payable to
Minet Group 1,130 1,009
Short term bank loans 5,216 -
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Other financial liabilities 45 -
Bank overdraft 1,516 1,416
14,883 9,427
---------- ---------
9 Cash generated from operating activities
June 2015 June 2014
Notes Unaudited
-------------------
US$'000 US$'000
Profit before tax 7,326 4,423
Adjustments to reconcile profit before tax to net cash
flows from operating activities:
Share of profit of associates
and joint venture (695) (1,800)
Gain on bargain on purchase
of Sables Chemicals Industries (5,206) -
Gain on loss of control of Minerva
Risk Advisors - (528)
Profit on disposal of joint
venture - (6,195)
Impairment of financial assets 1,249 2,511
Loss on disposal of property,
plant and equipment (33) -
Depreciation and amortization 1,017 29
Unrealized exchange losses - 3
Fair value gain on financial
instruments (374) -
Share-based payment transaction
expense 271 204
Finance income (4,409) (720)
Finance cost 1,115 243
Working capital adjustments:
Increase in inventory 72 -
Increase in reinsurance receivables (2,107) -
Increase in deferred acquisition
costs (624) -
Increase in insurance receivables (4,516) -
increase in trade and other
receivables (10,013) (127)
Increase in insurance contract
liabilities 5,602 -
Gross change insurance liabilities 2,728 -
Decrease in deferred income (66) -
Increase in insurance payables 1,664 -
Increase in loans to Directors
and employees (72) (340)
Increase in trade and other
payables 8,508 (1,028)
----------------------------------------------------------- --------- --------
Cash generated from / (used
in) operating activities 1,437 (3,325)
----------------------------------------------------------- --------- --------
10 Segment information
For management purposes, the Group is organised into business units based on their products and services and has four reportable segments as follows:
-- The Joina City, referred to as "Investment Property" in the prior year interim consolidated financial statements, segment leases retail and office space at the Joina City building partly owned by the Group.
-- TA Holdings Limited, ("TA Holdings") a subsidiary, is a diversified investment company that holds stakes in insurance, agro-chemical and hospitality businesses across sub-Saharan Africa. TA Holdings has been treated as one operating segment because the chief operating decision maker, Masawara, views TA Holdings as one segment when deciding how to allocate resources and in assessing performance. Intersegment revenue of $2.1 million was eliminated within TA Holdings.
-- The Group's interest in Minerva Risk Advisors (Private) Limited ("Minerva Risk Advisors") has been accounted for as part of TA Holdings for segment reporting purposes This is because the financial performance of Minerva Risk Advisors is reported to Masawara Plc on a monthly basis as part of TA Holdings.
-- Telerix Communications (Private) Limited, an associate, is a company that is licensed to construct, operate and maintain public data internet access and Voice Over network in Zimbabwe.
-- iWayAfrica Zimbabwe (Private) Limited, an associate, is a broadband internet service company in Zimbabwe.
-- Comparative figures include Energy segment which represents the Group's interest in the Energy segment that was disposed on 31 January 2014.
Management monitors the operating results of its business units separately for the purposes of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on segment profit or loss, and is measured consistently with operating profit or loss in the consolidated financial statements.
Six months ended 30 June
2015
TA Holdings Total
Joina Telerix iWayAfrica Central Group
City
US$ US$ '000 US$ US$ '000 US$ US$ '000
'000 '000 '000
Net insurance premium
revenue - 24,125 - - - 24,125
Fees, commission income
and
hotel revenue - 16,866 - - - 16,866
Rental income from
investment
property 990 - - - - 990
Net realised and
unrealised
gains and other income - 1,342 - - - 1,342
Net insurance claims - (12,137) - - - (12,137)
Expenses for acquisition
of
insurance contracts - (6,600) - - - (6,600)
Hotel cost of sales,
administrative
and operating expenses - (20,106) - - (3,397) (23,503)
Property expenses (720) - - - - (720)
Equity accounted earnings - 487 242 (34) - 695
Depreciation - (989) - - (28) (1,017)
Investment income - 2,518 - - 1,924 4,442
Finance costs (59) (430) - - (626) (1,115)
Gain on bargain purchase
of
Sable Chemicals
Industries
Limited - 5,206 - - - 5,206
Impairment loss on
financial
assets - - - - (1,248) (1,248)
Income tax expense - (1,273) - - 70 (1,203)
Profit for the period 211 9,009 242 (34) (3,305) 6,123
-------- ------------ ---------- ------------- ---------- ----------
As at 30 June 2015
Segment assets 33,815 193,033 - 248 - 227,096
-------- ------------ ---------- ------------- ---------- ----------
Central non-current assets 60,565
Central current assets 3,003
----------
Total assets 290,664
----------
Segment liabilities (8,070) (163,819) - - - (171,889)
-------- ------------ ---------- ------------- ---------- ----------
Central non-current
liabilities (5,559)
Central current
liabilities (11,206)
----------
Total liabilities (188,654)
----------
Six months ended 30 June
2014
TA Holdings Total
Joina Telerix iWayAfrica Energy Central Group
City
US$ US$ '000 US$ US$ '000 US$ US$ US$ '000
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'000 '000 '000 '000
Rental income from
investment
property 999 - - - - - 999
Gain on disposal of joint
venture - - - - 6,195 - 6,195
Hotel cost of sales,
administrative
and operating expenses - - - - - (2,319) (2,319)
Property expenses (718) - - - - - (718)
Equity accounted earnings - 2,028 295 5 - - 2,328
Depreciation - - - - - (29) (29)
Investment income - - - - - 720 720
Finance costs - - - - - (243) (243)
Impairment loss on
financial
assets - - - - - (2,511) (2,511)
Income tax expense - - - - - (61) (61)
Profit for the period 281 2,028 295 5 6,195 (4,443) 4,361
-------- ------------ ---------- ------------- --------- ---------- ---------
As at 30 June 2014
---------
Segment assets 33,090 22,058 - 284 - - 55,432
-------- ------------ ---------- ------------- --------- ---------- ---------
Central non-current assets 12,051
Central current assets 17,441
Total assets 84,924
---------
Segment liabilities (7,728) - - - - - (7,728)
-------- ------------ ---------- ------------- --------- ---------- ---------
Central non-current
liabilities (1,028)
Central current
liabilities (2,257)
Total liabilities (11,013)
---------
Geographical information
Investment property
The Joina City building is situated in Harare and therefore all revenues and assets are from Zimbabwe.
Telerix
Telerix Communications (Private) Limited is situated in Harare and only offer services in Zimbabwe, therefore all revenues and assets are from Zimbabwe.
iWayAfrica
iWayAfrica Zimbabwe (Private) Limited is situated in Harare and only offer services in Zimbabwe, therefore all revenues and assets are from Zimbabwe.
TA Holdings Limited
TA Holdings Limited has operations in Zimbabwe, Botswana, South Africa and Uganda. The Group's share of TA Holdings Limited's revenues and non-current assets is split as follows:
June 2015 June 2014
-------------------------------- ----------
Unaudited
--------------------------------------------
US$ US$
Revenues
From Zimbabwe 31,579 11,446
Outside Zimbabwe 12,971 5,753
-------------------------------- ----------
Total 44,550 17,199
-------------------------------- ----------
December
June 2015 2014
---------- ---------
Unaudited Audited
---------- ---------
US$ US$
Total assets
From Zimbabwe 117,453 80,014
Outside Zimbabwe 75,580 28,771
Total 193,033 108,785
---------- ---------
11 Related party disclosures
The financial statements include the financial statements of Masawara Plc, the subsidiaries, joint venture and associates. Except for the change in interest in TA Holdings Limited (See note 3.2) and acquisition of a subsidiary Sable Chemicals Industries Limited which was previously and associate (See note 3.3), the related party relations have not changed from the previous reporting period, i.e. as at 31 December 2014.
The following table provides the total amount of transactions that have been entered into with related parties during the six month period ended 30 June 2014 and 30 June 2015.
Sales Purchases Balance Balance
to owed owed
related from related to related by related
parties parties parties parties
US$'000 US$'000 US$'000 US$'000
New World Property
Managers (Private)
Limited
2015 - - - 140
2014 - 101 - 148
TA Holdings Limited
2015 - - - -
2014 2 - - -
Cherryfield Investments
(Private) Limited
2015 - - 102 -
2014 - - 102 -
Head Biz (Private)
Limited
2015 28 - - 42
2014 23 - - 14
Axis Fiduciary Limited
2015 - 24 - 24
2014 - - - -
BLC Chambers Limited
2015 - - - -
2014 - - - -
Telerix Communications
(Private) Limited
2015 - 11 - 2
2014 33 11 - 38
Turklane Investments
(Private) Limited
2015 - - - 248
2014 - - - 278
Total 2015 28 35 102 456
-------- ------------- ----------- ------------
Total 2014 58 112 102 478
-------- ------------- ----------- ------------
Terms and conditions of transactions with related parties
The sales and purchases from related parties are made at terms equivalent to those that prevail in arm's length transactions. Outstanding balances as at 30 June 2015 are unsecured and settlement occurs in cash.
As detailed per the 31 December 2014 annual report, credit risk from loans receivable from associates is managed by the Group Treasury Manager.
Directors' loans
There were no changes to the terms and conditions on directors' loans that existed as at the last reporting date.
Interest Amounts
received owed
US$'000 US$'000
June 2015 21 806
December 2014 29 692
Directors' remuneration
June 2015 June 2014
---------- ----------
Unaudited
----------------------
US$'000 US$'000
Short-term employee benefits 394 575
Share based payments 44 121
Directors' fees 197 121
Medical benefits 6 5
---------- ----------
Total 641 822
---------- ----------
Directors' interests in shares
Number of shares
Number of shares
June 2015 December
2014
------------------------
D Suratgar - -
M Erasmus - -
F Daniels 3,666,667 3,666,667
I Rajahbalee - -
Y Deeney - -
S Folland 20,000 -
S Mutasa 62,958,373 63,158,373
J Vezey 82,836 82,836
Total 66,727,876 66,907,876
----------- -----------
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S Mutasa, through a family trust that controls FMI Holdings (Private) Limited, which owns the shares in Masawara Plc.
12 Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk, credit risk, liquidity risk, operational risk, and start-up risk. The interim consolidated financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 31 December 2014
There have been no changes in the risk management department or in any risk management policies since year end.
13 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".
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 table was determined by using the DCF method using a discount rate of 16% which reflects the fair market rates at the end of the reporting period.
Carrying amount Fair value
June 2015 December June 2015 December
2014 2014
US$ '000 US$ '000 US$ '000 US$ '000
Cherryfield Investments
debenture 1,766 1,764 1,471 1,382
The basis of calculation of fair values disclosed above is the same as that used in the 2014 financial statements. The Directors assessed that cash and cash equivalents, other receivables and other payables approximate their carrying amounts largely due to the short-term maturities of these instruments.
13.1 Financial assets fair value hierarchy
As detailed per the 31 December 2014 annual report, the fair value hierarchy at which a fair value measurement is categorized is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.
The following table provides the fair value measurement hierarchy of the Group's financial assets and financial liabilities that are carried at fair value.
There have been no transfers between Level 1, level 2 and level 3 during the period.
June 2015
Level Level Level Total
1 2 3
US$ '000 US$ '000 US$ '000 US$ '000
Assets
Available for sale
* Debt securities - 732 - 732
Financial assets at
fair value through
profit or loss
* Equity securities 23,313 915 4,089 28,317
--------- --------- --------- ---------
Total assets 23,313 1,647 4,089 29,049
--------- --------- --------- ---------
Liabilities
Derivative financial liability - 1,071 - 1,071
Total liabilities - 1,071 - 1,071
--------------------------- ------ ------
December 2014
Level Level Level Total
1 2 3
US$ '000 US$ '000 US$ '000 US$ '000
Assets
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
--------- --------- --------- ---------
Liabilities - - - -
--------- --------- --------- ---------
13.2 Non-financial assets fair value hierarchy
Level Level Level Total
1 2 3
US$ '000 US$ '000 US$ '000 US$ '000
----------------------------- ---------- --------- --------- ---------
June 2015
Freehold land and buildings
Hotels properties - 16,762 - 16,762
Residential properties - 4,302 - 4,302
Commercial properties
- offices - - 7,358 7,358
Commercial properties-
manufacturing - - 2,705 2,705
----------------------------- ---------- --------- --------- ---------
Total freehold land
and buildings - 21,064 10,063 31,127
----------------------------- ---------- --------- --------- ---------
Investment properties
Commercial properties - - 44,147 44,147
Residential properties - 2,080 - 2,080
Industrial properties - 530 - 530
----------------------------- ---------- --------- --------- ---------
Total investment properties - 2,610 44,147 46,757
----------------------------- ---------- --------- --------- ---------
December 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 - 16,476 7,313 23,789 ----------------------------- ---- ------- ------- --------- Investment properties Commercial properties - - 44,057 44,057 Residential properties - 2,098 - 2,098 Industrial properties - 530 - 530 ------------------------------ --- ------- ------- ------- Total investment properties - 2,628 44,057 46,685 ------------------------------ --- ------- ------- -------
There have been no transfers between Level 1 and Level 2 during the period.
Fair value of assets and liabilities disclosed in level 3 did not have an effect on profit or loss because they are stated at amortised cost and not at fair value. As detailed in Note 5 there were no valuations done as at 30 June 2015. Key assumptions used in the valuation of properties are consistent with the information as per the 2014 annual report.
14 Commitments and contingencies
Guarantee on loan acquired by Dandemutande Investments (Private) Limited
On 12 February 2013, Masawara Plc provided a co-guarantee (together with other Telerix Communications Private Limited shareholders), limited to a maximum of $1.5 million, on a $2.5 million loan that was acquired by Dandemutande Investments (Private) Limited, a wholly owned subsidiary of Telerix Communications (Private) Limited, from Central African Building Society. Masawara pledged its ordinary shares in TA Holdings Limited up to a value of $1.5 million as security to support the aforesaid guarantee. As at 30 June 2015, the loan balance payable to Central African Building Society by Dandemutande Investments (Private) Limited was $712,000 (Masawara's guarantee was $424,000 at 30 June 2015 (2013: $660,000).
Telerix Communication (Private) Limited letter of support
On 28 March 2014, the Masawara Group provided a letter of support pledging that it will, and is in a position to, at the request of Telerix, place sufficient funds up to a maximum of $3.6 million to meet Telerix's obligation as and when they fall due during the 12 month period from 28 March 2014. As at 30 June 2015, Masawara had advanced $3.4million (31 December 2014: $2.4million) of the funds pledged to Telerix.
15 Legal and compliance matters
Litigation commenced by former employees in respect of the Zuva acquisition
During the period under review, the High Court dismissed an application made by two former employees of Zuva against Masawara Zimbabwe and the Minister of Indigenisation seeking a revocation of the approval that the Minister issued in February 2011 in respect of the transaction. Although the Masawara Group disposed of its interest in Zuva on 31 January 2014, Masawara Zimbabwe (Private) Limited, a wholly owned subsidiary of Masawara Plc, is still cited as a nominal respondent in the application. Subsequent to the dismissal by the High Court of the application, the employees filed an appeal to the Supreme Court. The appeal is being opposed and legal counsel believe that the appeal has very little prospects of success.
16 Events after the reporting period
Merger transaction
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