Table of Contents HOLDINGS
Ltd
CONTENTS
PAGE
Corporate Information
2
Board of Directors
3
Chairman’s Statement
4
Managing Director’s Report
6
Directors’ Report
8
Statement of Corporate Governance
10
Directors’ Responsibility Statement
11
Report of the Independent Auditors
12
Statement of Financial Position
14
Statement of Profit or loss and Other Comprehensive Income
15
Statement of Changes in Equity
16
Statement of Cash flows
17
Notes to the Financial Statements
18
Analysis of Shareholders
34
Notice to Members
36
1
GB Holdings Annual Report 2015
Corporate Information HOLDINGS
Ltd
Nature of business
Manufacturing and distribution of rubber and chemical products.
Registration Number
510/68
Directors
Mr. G. G. Nhemachena (Chairman) Ms. S. P. Bango
(Deputy Chairperson)
Mr. W. Tsuroh
(Managing Director)
Mr. P. Munyanyi
(Finance Director)
Mr. O. M. Moyo
(Non executive)
Mr. P. C. C. Moyo
(Non executive)
Mr. C. E. Dhlembeu
(Non executive)
Mr. E. Mavengere
(Non executive)
Mr. T. Mabeza
(Non executive)
Mr. A. M. Sibanda
(Non executive)
Mr. I. Murefu
(Non executive )
Registered office
111 Dagenham Road Willowvale HARARE
Telephone Fax
669879 / 662681-6 663543-4
Main bankers
FBC Bank Limited Southerton Branch HARARE
Attorneys
Dube, Manikai and Hwacha Legal Practitioners Eastgate Complex HARARE
Auditors
BDO Zimbabwe Chartered Accountants 3 Baines Avenue P.O Box 334 HARARE
Transfer Secretaries
First Transfer Secretaries 1 Armagh Avenue, Eastlea, Harare P. O. Box 11 HARARE
GB Holdings Annual Report 2015
2
Board of Directors HOLDINGS
Ltd
G.G.Nhemachena Chairman
S.P. Bango Deputy Chairperson
C.E. Dhlembeu Non-Executive Director
P. Munyanyi Finance Director
P.C.C. Moyo Non-Executive Director
T. Mabeza Non-Executive Director
E. Mavengere Non-Executive Director
I. Murefu Non-Executive Director
3
O. M. Moyo Non-Executive Director
Ald A.M. Sibanda Non-Executive Director
W. Tsuroh Managing Director
GB Holdings Annual Report 2015
Chairman’s Report HOLDINGS
Ltd
Performance Turnover at USD 3.8 million increased by 26 % from prior year, driven by resurgent business in the Rubber Division and new market niches at Cernol Chemicals. Due to the improved plant throughput and the consequent overhead recoveries gross margin recovered from the prior year’s level. Operating cost at USD 3.376 million included a USD 1 million charge arising from costs associated with working capital shortages and impairment of debtors. As a result an operating loss of USD 1.787 million was recorded. Finance costs at USD 224 000 were 12 % lower than prior year's USD 254 000 due to reduced interest charges from financial institutions. Divisional Performance Rubber Division General Beltings volumes at 238 metric tonnes increased by 133 % from the prior year's 102 tonnes due to the positive responses and acceptance of the locally produced products. Turnover at USD 2.1 million increased by 98 % from the prior year's USD 1.1 million due to improved offtake by the mining and fertilizer industries. The Division continues to pursue its value proposition on quality product, back up service and price competitiveness based on economic volume throughput from its customers.
G.G.Nhemachena Chairman
Chemicals Division The Division's volumes declined by 17 % at 699 metric tonnes from the 840 tonnes recorded in the prior year as changing product mix and competition took up its toll. Nevertheless, the effort in diversifying revenue streams through new market niches resulted in turnover of USD 1.77 million being a decline of 12% on prior year's USD 2 million. The division benefited from its technical partnership with a world leader in lubricants and is confident of the growth prospects in this market segment. Similar technical alliances will be sought in the ensuing year while research and development work will further consolidate market positioning.
Introduction I hereby present the report for the year ended 31 December 2015 on the backdrop of unabating depression of commodity prices on the international markets which adversely affected the local mining sector's demand of the company's products. The local economy suffered setbacks from liquidity challenges and an El Nino induced drought which became a reality towards end of the year. These challenges exacerbated the deflationary trend in the country from the prior year and further reduced the aggregate downstream demand in the economy. Following the support from stakeholders and policy interventions in the prior year, the Rubber Division recovered some of its lost market share and restored its manufacturing capability of quality products. The mining sector which drives demand in the rubber division had to scale down operations due to the decline in mineral prices resulting in the company not achieving the targeted sales. Cernol Chemicals performance was adversely affected by the decline in the local manufacturing sector capability to absorb its products as cheap imports continued to make inroads into the economy. GB Holdings Annual Report 2015
Outlook The company believes that the groundwork covered in the last three years has assisted in capital preservation particularly its productive machinery capability and retention of key skills. This effort has seen the company's products being accepted by reputable customers it had lost and strengthens its opportunities for global partnerships. It is envisaged that such partnerships will facilitate the acceleration of market acceptability buttressed in high quality
4
Chairman’s Report (Contd)
HOLDINGS
Ltd
products and priced competitively.
Dividend At their meeting held on 24 March 2016, the Board considered that in view of the company's financial performance in the year, the need to address working capital challenges and successfully turnaround the business it was not financially feasible to declare a dividend.
Directorate Mr. P. C. C. Moyo resigned from the Board on 21 January 2016. Mr. P. C. C. Moyo served on the Board for 11 years and the company fully appreciates his service and wise counsel to the Board. Appreciation The company remains indebted to its employees commitment, management resilience and stakeholders patience in its turnaround journey. My fellow Directors I thank you for your support as you steer the company in these challenging times.
P. MUNYANYI SECRETARY 24 March 2016
By Order of The Board
G NHEMACHENA Chairman
5
GB Holdings Annual Report 2015
Managing Director’s Report HOLDINGS
Ltd
support from bankers in terms of short term capital availability and the reduced cost of money culminating in all performance indicators trending in the positive direction. Performance Commodity prices depression in the international markets and a deflationary trend in the domestic economy negatively affected the company's customers' ability to demand its products. Nevertheless turnover at USD 3.8 million was an increase of 26 % compared to the prior year 's turnover of USD 3million driven by resurgent business in the rubber division. The Chemicals Division recorded a decline in sales of 12% at USD 1.7 million due to the challenges being faced by the local manufacturing sector. Increased factory throughput and the consequent improved overhead recovery resulted in gross profit recovering from the USD 358 000 in 2014 to USD 1.2 million in 2016. Financing costs were 12% lower than prior year due to reduced interest costs and borrowing levels. Strategy Review The company seeks to consolidate its renewed market positioning through acceptable and sustainable commercial value propositions. Continuous engagement of various stakeholders including employees will remain pivotal in value creation and service delivery. The company will be alive to any economic capital raising options that may arise in order to address working capital deficiencies and the attendant costs. Investment in process controls, skills retention coupled with research and development will assist in providing technical back up to our customers.
W. Tsuroh Managing Director Overview The year under review marked the third year of implementing the company's turnaround strategy as identified in its Business Case justification case of 2012. The milestones set were informed by the effects of a multicurrency dispensation and the attendant liquidity challenges that had beset the domestic economy then. The broad milestones included stabilising the business in the face of numerous headwinds which included wanton importation of cheap competitor products, unsustainable cost of money, restive labour and market resentment which preferred imported products. Following the support from various stakeholders including government and the patience of our employees the company was afforded the opportunity to reengage the market to reassert its manufacturing capability and product quality.
Future Prospects The increased resonance in promoting the consumption of locally produced goods at national level , has strengthened the company's market positioning in comparison with imports. Concerted effort in reviving the mining sector through opening new mines and increasing output in existing ones is expected to result in increased demand of the company's products from the rubber division.
I am happy to report that the company has achieved the broad milestones of its strategy through the establishment of the strategic pillars which are capital preservation, market confidence and skills retention. The perceived financial risk in the company has been upgraded over the years as evidenced by the increased
Having gained product acceptance by the key players in the mining sector, cement and fertilizer industries the company will explore technological partnerships to enhance process efficiencies and honing of existing skills. The benefits from such an initiative is expected to improve customer value proposition through price and
GB Holdings Annual Report 2015
6
Managing Director’s Report (Contd) HOLDINGS
Ltd
quality competitiveness.
pursuit to turnaround the company. The wise counsel from the Board will forever be cherished. I look forward to your continued support.
The Chemicals division benefited from its strategic alliance with an internationally lubricant manufacturer and similar alliances will be pursued in its new market niches in the Processed Chemicals range. The national effort to resuscitate the local manufacturing sector through promoting the primary industries in agriculture and extractive industries is expected to spur the demand for the chemicals division products.
W Tsuroh Managing Director
Appreciation The company has managed to reach the turnaround milestones through the support of the various stakeholders who included but were not limited to Government Ministries , Bankers and Employees who rallied behind management and the Directorate in their
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GB Holdings Annual Report 2015
Directors Report HOLDINGS
Ltd
The Directors have pleasure in submitting to Shareholders, their report together with the audited financial statements of the company for the year ended 31 December 2015.
SUBSTANTIAL SHAREHOLDERS According to information received by the Directors, the following are the only shareholders beneficially holding, directly and indirectly, at 31 December 2015, in excess 5% of the issued share capital of the company:
ANNUAL RESULTS INVESTMENT IN PROPERTY, PLANT AND EQUIPMENT Capital expenditure for the year ended 31 December 2015 totalled US$19 512. These funds were spent mainly on the acquisition of computers. The proposed capital expenditure for 2016 is US$250 000 to be spent on vehicles, computerisation and plant refurbishment to attain efficiency.
SMM Holdings (Private) Limited 43% FBC Nominees 19% Workers Trust Management Share Participation 9% AUDITORS Messrs. BDO Zimbabwe Chartered Accountants offer themselves for re-appointment as Auditors of the company for the year ending 31 December 2015 and shareholders will be asked to re-appoint them and approve their fees for the year ended 31 December 2015.
DIVIDEND The board, at the meeting held on 26 March 2016, resolved that due to the working capital requirements of the company it was not prudent to declare a dividend for the year ended 31 December 2015.
EMPLOYMENT POLICIES The continued motivation of employees and management towards overall productivity enhancement is a fundamental feature of the company’s operating philosophy and is key to management of risk. This is achieved through training, development, information sharing and progressive cooperative contributions to operating methods and planning, supported by rewards at competitive levels, including short and long term incentives where appropriate.
SHARE CAPITAL As at 31 December 2015, the authorized share capital of the Company was $640 000 comprising 640 000 000 ordinary shares of US$0.001 cents each. Issued share capital is 536 588 624 ordinary shares of US$0.001 cents each with a value of US$536 588. Details of the authorised and issued share capital, including options available, are set out in note 7 to 8 of the financial statements. DIRECTORS AND THEIR INTERESTS Messrs, C. E. Dhlembeu, Alderman Sibanda and I Murefu retire by rotation in terms of Article 95 of the Company's Articles of Association and being eligible, offer themselves for re-election.
The company has employed policies which are appropriate to its business and markets and which attract, retain and motivate the quality of staff necessary to compete. These policies are required to provide equal employment opportunities, without discrimination based on gender, race or physical ability.
The names of the current Directors of the company are set out on page 3. No Director had, during or at the end of the year, any material interest in any contract with the company which could be considered to be significant in relation to the company’s business.
GB Holdings Annual Report 2015
8
Directors Report (Cont’d) HOLDINGS
Ltd
PAYMENTS TO SUPPLIERS The company agrees terms and conditions with suppliers before business takes place and its policy and practice is to pay agreed invoices in accordance with the terms of payment. By Order of the Board
P Munyanyi (Mr) COMPANY SECRETARY 24 March 2016 Harare
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GB Holdings Annual Report 2015
Statement of Corporate Governance HOLDINGS
Ltd
GB Holdings Limited is committed to an open approach to corporate governance. This process enables the company’s shareholders to derive the assurance that, in protecting and adding value to GB Holdings Limited’s financial and human resources investment, the company is being managed ethically, according to prudently determined risk parameters and in compliance with the best international practices. The Board is chaired by a non-executive director and currently comprises two executive and nine non-executive members. The executive directors generally have the responsibility for making and implementing operational decisions in running the company’s business. Nonexecutive directors support the skills and experience of the executive, contributing to formulation of policy and decision-making through their knowledge of, and experience in, other businesses and sectors. The Board, which meets at least quarterly, sets the strategic objectives of the company, determines investment and environmental policies, approves major capital expenditure, acquisitions and investments. The Board also agrees on performance criteria and delegates to management the detailed planning and implementation of the agreed policy, in accordance with appropriate risk parameters. It monitors compliance with policies, and achievement against objectives, by holding management accountable for its activities through the measurement and control of operations by regular reports to the Board including quarterly performance reporting and budget updates. However, to ensure that effective management controls exist on a day to day basis, the Board has delegated certain powers to committees.
Human Resources and Remuneration Committee The members of the Committee as at 31 December, 2015 were as follows: G.G Nhemachena Chairperson (Non-Executive) E. Mavengere Non-Executive A. Sibanda Non-Executive I.Murefu Non- Executive The operational management of the company is delegated to the Executive Committee, which is chaired by the Managing Director and includes the Finance Directorate and the divisional General Managers. The Committee meets not less than twice per quarter and ensures the implementation of strategy and policies.
G. G. Nhemachena Chairman 24 March 2016
These are: Audit and Risk Management Finance and Business Development Human Resources and Remuneration Audit and Risk Management Committee The members of the Committee as at 31 December, 2015 were as follows: O. M Moyo Chairperson (Non-Executive) C. E Dhlembeu Non-Executive I. Murefu Non-Executive Finance and Business Development Committee The members of the Committee as at 31 December, 2015 were as follows: S. P Bango Chairperson (Non-Executive) P. C.C Moyo Non-Executive T. Kufazvinei Non-Executive
GB Holdings Annual Report 2015
10
DIRECTORS' RESPONSIBILITY STATEMENT HOLDINGS
Ltd
The directors are required by the Companies Act (Chapter 24:03), to maintain adequate accounting records and are responsible for the content and integrity of the financial statements and related financial information included in this report. It is their responsibility to ensure that the financial statements fairly present the state of affairs of the company as at the end of the financial year and the results of its operations and cash flows for the year then ended, in conformity with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the financial statements. The financial statements are prepared in accordance with International Financial Reporting Standards and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments on the financial statements.
business and liquidity constraints affecting the company. Refer to note 24 to the financial statements for more information. The external auditors are responsible for independently auditing and reporting on the company's financial statements. The financial statements and related notes have been audited by the company's external auditors and their report is presented on pages 12 and 13. The financial statements and the related notes set out on pages 14 to 33, which have been prepared on the going concern basis, were approved by the Board and were signed on its behalf by:
The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the company and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the Board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the company and all employees are required to maintain the highest ethical standards in ensuring the company's business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the company is on identifying, assessing, managing and monitoring all known forms of risk across the company. While operating risk cannot be fully eliminated, the company endeavors to minimize it by ensuring that appropriate infrastructure, controls, systems and ethical behavior are applied and managed within predetermined procedures and constraints.
Mr. G. G. Nhemachena CHAIRMAN
Mr. W. Tsuroh MANAGING DIRECTOR 24 March 2016
The directors are of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the financial statements. However, any system of internal financial control can provide only reasonable and not absolute assurance against material misstatement or loss. The directors have assessed the ability of the company to continue operating as a going concern and acknowledge that the company has working capital constraints. The directors believe that the preparation of the financial statements on a going concern basis is still appropriate as they have undertaken measures to address the
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GB Holdings Annual Report 2015
Tel/Fax: +263 4 703876/7/8
Kudenga House
Cell: +263 772 573 266/7/8/9
3 Baines Avenue
[email protected]
P. O. Box 334
www.bdo.co.za
Harare Zimbabwe
REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF GB HOLDINGS LIMITED Report on the financial statements We have audited the accompanying financial statements of GB HOLDINGS LIMITED as set out on pages 14 to 33 which comprise the statement of financial position at 31 December 2015, the statement of profit or loss and other comprehensive income, the statement of changes in equity, the statement of cash flows for the year then ended, and the notes to the financial statements, which include a summary of the significant accounting policies and other explanatory notes. Directors' responsibility for the financial statements The company's directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act (Chapter 24:03. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view, of the financial position of GB HOLDINGS LIMITED as at 31 December 2015 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.
GB Holdings Annual Report 2015
12
Auditor’s Report HOLDINGS
Ltd
Emphasis of matter We draw your attention to note 23 to the financial statements which indicates that the company incurred a loss after tax of US$1,787,262 (2014:US$1,516,864) during the year ended 31 December 2015 and as at that date, the company's current liabilities exceeded its current assets by US$9,011,666 (2014: US$6,877,409). These conditions indicate the existence of a material uncertainty that may cast significant doubt about the company's ability to continue operating as a going concern. Our opinion is not qualified in respect of this matter. Report on other legal and regulatory requirements In our opinion, the financial statements have been prepared in compliance with the disclosure requirements of the Companies Act (Chapter 24:03).
BDO Zimbabwe Chartered Accountants
Harare 24 March 2016
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GB Holdings Annual Report 2015
STATEMENT OF FINANCIAL POSITION as at 31 December 2015 HOLDINGS
Ltd
Note
2015 US$
2014 US$
4
8,062,558
8,419,146
5 6
1,652,969 637,706 32,782 2,323,457
1,402,027 750,795 42,449 2,195,271
10,386,015
10,614,417
536,588 19,200 9,464,397 (12,061,369) (2,041,184)
536,588 19,200 9,464,397 (10,274,107) (253,922)
ASSETS Non-current assets Property, plant and equipment Current assets Inventories Trade and other receivables Bank and cash
Total assets EQUITY AND LIABILITIES Equity Share capital Share options reserve Non distributable reserve Accumulated loss
7 8
Non-current liabilities Deferred tax Long term portion of borrowings
9 10
556,461 535,615 1,092,076
914,900 880,759 1,795,659
Current liabilities Current portion of borrowings Trade and other payables Bank overdraft
10 11 12
544,998 10,781,638 8,487 11,335,123
240,000 8,502,598 330,082 9,072,680
Total liabilities
12,427,199
10,868,339
Total equity and liabilities
10,386,015
10,614,417
Mr G.G. Nhemachena CHAIRMAN
Mr W. Tsuroh MANAGING DIRECTOR 24 March 2016
GB Holdings Annual Report 2015
14
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 31 December 2015 HOLDINGS
Ltd
Note
2015 US$
2014 US$
13
3,887,209
3,081,617
Cost of sales
(2,605,867)
(2,723,443)
Gross profit
1,281,342
358,174
173,167
531,550
Revenue
Other income Operating expenses
(3,376,277)
(2,510,796)
Loss from operations
(1,921,768)
(1,621,072)
(223,933)
(253,863)
(2,145,701)
(1,874,935)
Finance charges Loss before tax
14
Income tax credit
15
358,439
358,071
(1,787,262)
(1,516,864)
-
-
Total comprehensive loss for the year
(1,787,262)
(1,516,864)
Number of shares in issue
536,588,624
536,588,624
Loss for the year Other comprehensive income
Basic loss per share (cents)
16
(0.00333)
(0.00283)
Diluted loss per share (cents)
16
(0.00329)
(0.00279)
Headline loss per share (cents)
16
(0.00315)
(0.00283)
15
GB Holdings Annual Report 2015
16
Balance at 31 December 2015
Total comprehensive loss for the year
Balance at 31 December 2014
Total comprehensive loss for the year
Balance at 1 January 2014
536,588
-
536,588
-
536,588
Share capital US$
19,200
19,200
-
19,200
Share options reserve US$
9,464,397
-
9,464,397
-
9,464,397
Nondistributable reserve US$
(12,061,369)
(1,787,262)
(10,274,107)
(1,516,864)
(8,757,243)
Accumulated loss US$
(2,041,184)
(1,787,262)
(253,922)
(1,516,864)
1,262,942
Total US$
STATEMENT OF CHANGES IN EQUITY
HOLDINGS
for the year ended 31 December 2015
Ltd
GB Holdings Annual Report 2015
STATEMENT OF CASH FLOWS for the year ended 31 December 2015 HOLDINGS
Ltd
Note
2015 US$
2014 US$
(2,145,701)
(1,874,935)
CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Adjusted for: Depreciation charge for the year Impairment loss Interest expense Profit on disposal of vehicles Operating cash outflows before working capital changes Changes in working capital Increase in inventories Decrease /(increase) in trade and other receivables Increase in trade and other payables Net cash inflows from operating activities
279,135 96,965 223,933 (23,280) (1,568,948)
653,566 253,863 (967,506)
(250,942) 113,089 2,279,040 572,239
(81,698) (271,274) 1,427,810 107,332
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of vehicles Purchase of equipment Net cash inflows/(outflows) to investing activities
23,280 (19,512) 3,768
(7,732) (7,732)
(223,933) (40,146) (264,079)
(253,863) 49,807 (204,056)
311,928
(104,456)
(287,633)
(183,177)
24,295
(287,633)
CASH FLOWS FROM FINANCING ACTIVITIES Interest paid (Decrease)/Increase in borrowings Net cash outflows to financing activities NET INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
GB Holdings Annual Report 2015
17
Notes to the Financial Statements for the year ended 31 December 2015 HOLDINGS
Ltd
1
GENERAL INFORMATION
1.1
Nature of business The main business of the company, which is incorporated in Zimbabwe (Registration Number 510/68), is that of producing rubber and chemical products.
1.2
information about rights of offset and related arrangements for financial instruments under an enforceable master netting arrangement (or similar arrangement.
=·IAS 32 Amendment to IAS 32 Financial Instruments: Presentation (amended December 2011 and effective annual periods commencing on or after 1 January 2014). Offsetting financial assets and financial liabilities.
Currency The financial statements are expressed in United States dollars (“US$”) which is both the functional and presentation currency.
2
ACCOUNTING POLICIES
2.1
Basis of preparation The principal accounting policies adopted in the preparation of financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are based on statutory records that are maintained under the historical cost convention.
=·IFRS 13 – Fair Value Measurement (2010 – 2012 Cycle), The amendment clarifies that short term receivables and payables with no stated interest rate can continue to be measured at the invoice amount without discounting, where the effect of discounting is immaterial.
=·IAS 24 Related Party Disclosures, The amendment clarifies that an entity that provides key management personnel services to the reporting entity (or to the parent of a reporting entity) is a related party of the reporting entity. However, it is not necessary to analyse the total amount paid into the categories set out in IAS 24.17
These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB).
b) New standards, interpretations and amendments not yet effective and not early adopted The following new standards, interpretations and amendments, which have not been applied in these financial statements, will or may have an effect on the company's future financial statements:
The preparation of financial statements in compliance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in note 3. 2.2
= Amendments to IAS 16 (Revaluation method – proportionate restatement of accumulated depreciation), the adoption is mandatory for adoption for periods beginning on or after I January 2016. Early adoption is permitted.
Changes in accounting policy and interpretations
= IAS 19 Employee Benefits (Amendment to IAS 19 a) New standards, interpretations and amendments effective from 1 January 2015
Employee Benefits: Discount rates) guidance in IAS 19 has been clarified and requires that high quality corporate bonds used to determine the discount rate for the accounting of employee benefits need to be denominated in the same currency as the related benefits that will be paid to the employee. Mandatory adoption for periods beginning on or after 1 January 2016. Early adoption permitted.
A number of new standards, interpretations and amendments effective for the first time for periods beginning on (or after) 1 January 2015, have been adopted in these financial statements. The nature and effect of each new standard, interpretation and amendment adopted by the company is detailed below. Note: not all new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2015 affected the company's annual financial statements:-
= Amendments to IAS 16 and IAS 38 – Clarification of Acceptable Methods of Depreciation and Amortisation, the adoption is mandatory for adoption for periods beginning on or after 1 January 2016. Early adoption is permitted.
=·IFRS 7 Financial Instruments: Disclosure – Offsetting financial assets and financial liabilitiesAdditional disclosures required in relation to
GB Holdings Annual Report 2015
18
Notes to the Financial Statements (Cont’d) for the year ended 31 December 2015 HOLDINGS
Ltd
= IFRS 9 Financial Instruments (2014):
are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
Incorporates the final requirements on all three phases of the financial instruments projects – classification and measurement, impairment, and hedge accounting. Application date is for annual reporting periods commencing on or after 1 January 2018.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the company will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in profit or loss. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
= IFRS 16 Leases - IFRS 16 eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Mandatory adoption for periods beginning on or after 1 January 2019.
= IFRS 15 Revenue from Contracts with Customers 2014-IFRS 15 Revenue from Contracts with Customers supersedes IAS 18 Revenue, IAS 11 C o n s t r u c t i o n C o n t r a c t s a n d re l a t e d Interpretations The objective of IFRS 15 is to clarify the principles of revenue recognition. This includes removing inconsistencies and perceived weaknesses and improving the comparability of revenue recognition practices across companies, industries and capital markets. In doing so IFRS 15 establishes a single revenue recognition framework. Mandatory adoption for periods beginning on or after 1 January 2018. 2.3
2.5.2 Financial liabilities The company's financial liabilities comprise of borrowings and trade and other payables. Borrowings are initially recognized at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the statement of financial position.
Revenue Revenue from the sale of rubber and chemical products is measured at the fair value of the consideration received or receivable and represent amounts receivable for goods provided in the normal course of the business net of discounts and value added tax. Revenue is recognised when the goods have been delivered to/or collected by the customer.
2.4
Post employment benefits Contributions to defined contribution pension schemes are charged to profit or loss in the year to which they relate.
2.5
Financial instruments
2.5.1 Financial assets The company classifies its financial assets as loans and receivables. Loans and receivables These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of services to customers. They are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue, and
Trade payables and other short-term monetary liabilities are initially recognized at fair value and subsequently carried at amortised cost using the effective interest rate method. 2.5.3 Fair value measurement hierarchy IFRS 7 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement. The fair value hierarchy has the following levels: (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); (b) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
19
GB Holdings Annual Report 2015
Notes to the Financial Statements (Cont’d) for the year ended 31 December 2015 HOLDINGS
Ltd
The level in the fair value hierarchy within which the financial asset or financial liability is categorised is determined on the basis of the lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety into only one of the three levels.
appropriate. The residual value of an asset is the estimated amount that would currently be obtained from disposal of the asset, after deducting the estimated costs of disposal, if the asset was already of the age and in condition expected at the end of its useful life.
2.5.4 De-recognition of financial assets Financial assets are derecognized when the rights to receive cash flows have expired or where they have been transferred and the company has also transferred substantially all risks and rewards of ownership.
Gains or losses on disposals are determined by comparing proceeds with the carrying amounts. These gains or losses are included in profit or loss. Impairment of property, plant and equipment The carrying amount of property, plant and equipment is reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. Impairment loss is recognised directly through profit or loss when the carrying amounts of the assets exceed the fair values of the respective assets.
Gains and losses are recognised in profit or loss when the financial assets are derecognized or impaired, as well as through the amortization process. 2.5.5 Impairment of financial assets A financial asset is deemed to be impaired when its carrying amount is greater than its estimated receivable amount, and there is evidence to suggest that the impairment occurred subsequent to the initial recognition of the asset in the financial statements. Impairment loss is recognised in profit or loss. 2.6
Property, plant and equipment Property, plant and equipment are initially measured at cost. Cost includes expenditure that is directly attributable to the acquisition of the asset. Subsequent costs are included in the asset's carrying amounts or recognised as separate assets, as appropriate, only when it is probable that future economic benefits associated with the items will flow to the entity and the costs can be measured reliably. All other repairs and maintenance costs are charged to profit or loss during the period in which they are incurred. Subsequent to initial measurement property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Annual depreciation is charged proportionately over the remaining useful life of an asset where its carrying amount is higher than its residual value. If the carrying amount is lower than the residual value, no depreciation is charged. Subject to the above property, plant and equipment are depreciated on a straight line basis over the remaining useful lives as follows: = Buildings 40 years = Plant and machinery 40 years = Motor vehicles 5 years = Office equipment 5-10 years = Land Not depreciated
De-recognition of property, plant and equipment An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from use or disposal. Any gains or losses are recognised in profit or loss. 2.7
Inventories Inventories are initially recognised at cost and subsequently at standard cost. Inventories are stated at the lower of cost and net realisable value, after making allowance for obsolete inventories. Cost is determined on a standard basis for finished goods, work in progress. Where standard cost differs significantly from actual cost, then actual cost is used. Raw materials are stated at actual cost. The cost of finished goods and work in progress comprises raw materials, other direct costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less costs of completion and selling expenses. Write downs to net realisable values and inventory losses are expensed in the period in which the write downs or losses occur.
2.8
Operating segments Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the executive management team including the Managing Director and the Finance Director.
2.9
Share options Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the profit or loss over the vesting
The assets' residual values and useful lives are reviewed at each reporting date and adjusted if
GB Holdings Annual Report 2015
20
Notes to the Financial Statements (Cont’d) for the year ended 31 December 2015 HOLDINGS
Ltd
period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non vesting condition is not satisfied. Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period. 2.10
deferred income tax asset relating to the deductible temporary difference arises from the initial recognition 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 deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures. Deferred tax assets are recognised only to the extent that it is probable that the temporary difference 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 at each reporting date are 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.
Income tax Unrecognised deferred income tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
(i) Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.
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. Income tax relating to items recognised directly in equity is recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax relate to the same taxable entity and the same taxation authority.
ii) 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 tax liabilities are recognised for all taxable temporary differences except: Where the deferred 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 utilized except: where the
2.11
Cash and cash equivalents For the purposes of the statement of cash flows, cash and cash equivalents comprise cash and bank balances and bank overdrafts.
2.12
Share capital Financial instruments issued by the company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The company's ordinary shares are classified as equity instruments.
2.13
21
Non-distributable reserve Non-distributable reserve represents a translation reserve arising from the change in functional currency of the company from Zimbabwe dollars to United
GB Holdings Annual Report 2015
Notes to the Financial Statements (Cont’d) for the year ended 31 December 2015 HOLDINGS
Ltd
States dollars on 1 February 2009. The reserve is the resultant balance after restatement of assets and liabilities previously denominated in Zimbabwe dollars to United States dollars. The balance will be realised through transfer to accumulated loss. 3.
flows from the receivables. (b) Impairment testing The company is required to test, on an annual basis, whether an asset has suffered any impairment. Impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount. The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. The determination of value in use requires the estimation of future cash flows and of a discount rate.
CRITICAL JUDGEMENTS IN APPLYING THE COMPANY'S ACCOUNTING POLICIES In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts presented in the financial statements and related disclosures. Use of available information and the application of judgment is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the financial statements. Significant judgments include:
(c) Going concern The operations of the company were significantly affected and may continue to be affected for the foreseeable future, by the adverse effects of the liquidity challenges in the economy. The ability of the company to continue operating as a going concern, in such an environment is subject to continual assessment.
(a) Trade receivables The company assesses its trade receivables for impairment at each reporting date. In determining whether an impairment loss should be recognised in profit or loss, the company makes judgments as to whether there is observable data indicating a measurable decrease in the estimated future cash
GB Holdings Annual Report 2015
22
23 -
Depreciation charge for the year 4,182,196 5,058,152 (875,956)
(126,703)
-
-
-
4,308,899 5,058,152 (749,253)
(133,973)
-
4,442,872 5,058,152 (615,280)
Buildings USD
3,082,202 6,178,639 (3,096,437)
(130,965)
(96,965)
-
909
3,309,223 6,177,730 (2,868,507)
(402,806)
1,154
3,710,875 6,176,576 (2,465,701)
Plant and machinery USD
12,227 577,663 (565,436)
(7,234)
-
(23,679) 23,679
18,000
1,461 583,342 (581,881)
(72,696)
-
74,157 583,342 (509,185)
Motor vehicles USD
34,933 306,489 (271,556)
(14,233)
-
-
603
48,563 305,886 (257,323)
(44,091)
6,578
86,076 299,308 (213,232)
Office equipment USD
8,062,558 12,871,943 (4,809,385)
(279,135)
(96,965)
(23,679) 23,679
19,512
8,419,146 12,876,110 (4,456,964)
(653,566)
7,732
9,064,980 12,868,378 (3,803,398)
Total USD
Land and buildings with a carrying amount of US$1 676 668 were pledged as security for the FBC Bank Limited loan and order finance facility. Land and buildings with a carrying amount of $2 580 768 were pledged as security for the CABS loan. The respective loans are disclosed in note 10 to the financial statements.
Accumulated depreciation and impairment loss
751,000 751,000 -
-
Impairment loss
Carrying amount at 31 December 2015 Gross carrying amount-cost
-
-
Disposal Carrying amount - cost Disposals depreciation
Additions
751,000 751,000 -
-
Depreciation charge for the year
Carrying amount at 31 December 2014 Gross carrying amount-cost Accumulated depreciation
-
751,000 751,000 -
Land USD
Additions
Carrying amount at 31 December 2013 Gross carrying amount-cost Accumulated depreciation
4 PROPERTY, PLANT AND EQUIPMENT
for the year ended 31 December 2015
Notes to the Financial Statements (Cont’d) HOLDINGS
Ltd
GB Holdings Annual Report 2015
Notes to the Financial Statements (Cont’d) for the year ended 31 December 2015 HOLDINGS
Ltd
2015 US$
2014 US$
905,683 604,786 99,772 42,728 1,652,969
815,185 436,170 103,407 47,265 1,402,027
868,929 (439,216) 429,713
989,407 (377,424) 611,983
207,993
138,812
637,706
750,795
5 INVENTORIES Raw materials Finished goods Consumables Work in progress
6 TRADE AND OTHER RECEIVABLES Trade receivables Less: Allowance for credit losses Trade receivables-net Other receivables Financial assets other than cash and cash equivalents classified as loans and receivables
The fair values of trade and other receivables classified as loans and receivables approximate fair values. As at 31 December 2015, trade receivables of US$126,822 (2014; US$258 000) were past due but not impaired. They relate to customers with a good payment history. The aging of these receivables is as follows: Up to 3 months 3 to 6 months 12 months and above
80,062 5,655 41,105 126,822
108,631 98,651 51,518 258,800
As at 31 December 2015, trade receivables amounting to US$439,216 (2014; US$377,424) were past due and impaired. The main factors considered in determining that the amounts are impaired is that the debtors either did not adhere to the agreed payment plans, have a default history or have been handed over to the company lawyers. The aging of these receivables is as follows: Up to 3 months 3 to 6 months 12 months and above 439,216 377,424 439,216 377,424
Movement in the impairment allowance for trade receivables are as follows: At the beginning of the year Provided/(Reversed) during the year At the end of the year
377,424 61,792 439,216
884,945 (401,946) 377,424
The movement in the impairment allowance has been included in the operating expenses line in profit or loss . Other classes of financial assets included within trade and other receivables do not contain impaired assets. 7 SHARE CAPITAL Authorised 640 000 000 ordinary shares of US$ 0.001 each
640,000
640,000
Issued and fully paid 536 588 624 ordinary shares of US$ 0.001 each
536,588
536,588
Unissued shares are under the control of the directors subject to the limitations imposed by the Companies Act (Chapter 24:03) and the requirements of the Zimbabwe Stock Exchange. GB Holdings Annual Report 2015
24
Notes to the Financial Statements (Cont’d) for the year ended 31 December 2015 HOLDINGS
Ltd
8 SHARE OPTION RESERVE The company operates an equity-settled remuneration scheme for the executive directors and certain senior employees. The only vesting condition being that the individual remains an employee of the company over the same period. Details of the share option plan are as follows:
Outstanding at the beginning of the year Exercised during the year Granted during the year Outstanding at the end of the year
2015 Number of options
2,014 Exercise price US$
2015 Number of options
2,014 Exercise price US$
6,400,000 6,400,000
0.003 0.003
6,400,000 6,400,000
0.003 0.003
The exercise price of the options outstanding at 31 December 2015 was US$0.003. Of the total number of options outstanding at 31 December 2015, 6,400,000 (2014: 6,400,000) had vested and were exercisable. The estimated fair value of the share options granted in the Employee Share Ownership scheme is US$0.003, which is equal to the share price at the date of grant. This was measured at the fair value of the equity instrument at the grant date. 2015 US$
2014 US$
2,042,577 (1,486,116) 556,461
2,142,471 (1,227,571) 914,900
914,900 (358,439) 556,461
1,272,971 (358,071) 914,900
722,615 357,998 1,080,613 (544,998) 535,615
832,082 288,677 1,120,759 (240,000) 880,759
9 DEFERRED TAX Analysis of deferred tax Accelerated wear and tear of property, plant and equipment Assessed losses Reconciliation Opening balance Recognised in profit or loss Closing balance
10 BORROWINGS Central African Building Society (CABS) FBC Bank Less: Short term portion of borrowings
The FBC short term loan facility accrues interest at 22% (2014:22%) per annum and is repayable in monthly instalments until 31 October 2017. The loans are secured by land and buildings with a carrying amount of $1 676 668. The CABS loan facility accrues interest at 10%(2014 10%) per annum and is repayable in monthly instalments until 30 June 2017. The loan is secured by land and buildings with a carrying amount of $2 580 768. 11 TRADE AND OTHER PAYABLES Trade Other payables Total financial liabilities, excluding loans and borrowings, classified as financial liabilities measured at amortised cost Value Added Tax and social security payables Total trade and other payables GB Holdings Annual Report 2015
25
1,200,945 7,171,069 8,372,014
1,010,336 5,908,963 6,919,299
2,409,624 10,781,638
1,583,299 8,502,598
Notes to the Financial Statements (Cont’d) for the year ended 31 December 2015 HOLDINGS
Ltd
2015 US$
2014 US$
8,487 8,487
321,595 8,487 330,082
12 BANK OVERDRAFT FBC Bank Limited Capital Bank Corporation Limited
The overdraft facilities accrue interest at 18% (2014: 18%) per annum. Land and buildings with a carrying amount of $669 565 were pledged as security for the Capital Bank Corporation Limited overdraft facility. 13 REVENUE Sale of chemicals Sale of rubber
1,768,184 2,119,025 3,887,209
2,009,757 1,071,860 3,081,617
279,135 1,303,745 36,750 51,773
653,566 1,364,864 59,011 37,063
71,285 452,693
68,059 440,149
14 LOSS BEFORE TAX Loss before tax is shown after taking into account the following:
Expenses Depreciation charge for the year Staff costs Audit fees Pension contributions Directors emoluments: - for services as directors - for other services
Included in depreciation charge for 2015 is a change in estimate amounting to $364,025 arising from the decision to revise the useful lives of the company’s useful lives of its plant. In accordance with its policy as explained above, the company reviews the estimated useful lives of its fixed assets on an ongoing basis. This review indicated that the actual lives of certain machinery and equipment at its manufacturing plants were longer than the estimated useful lives used for depreciation purposes in the company’s financial statements. As a result, effective 1 January 2015, the company changed its estimates of the useful lives of its plant and equipment to better reflect the estimated periods during which these assets will remain in service. The effect of this change in estimate was to reduce 2015 depreciation charge by $364,025, increase 2015 net income by $364,025, and increase 2015 basic and diluted earnings per share by $0.0006.
26
GB Holdings Annual Report 2015
Notes to the Financial Statements (Cont’d) for the year ended 31 December 2015 HOLDINGS
Ltd
2015 US$
2014 US$
(358,439) (358,439)
(358,071) (358,071)
(2,145,701)
(1,874,935)
(552,518)
(482,796)
194,079 (358,439)
124,725 (358,071)
(1,787,261)
(1,516,864)
536,588,624 6,400,000 542,988,624
536,588,624 6,400,000 542,988,624
15 INCOME TAX CREDIT Current tax Deferred tax Tax rate reconciliation Loss before tax Tax at statutory rate of 25.75% Tax effect of: Disallowable expenses
16 LOSS PER SHARE (LPS) Loss from continuing operations attributable to equity holders of the company Number of shares used in calculating loss per share Weighted average number of shares used in basic LPS Effect of employee share options Weighted average number of shares used in diluted LPS
Basic loss per share Basic loss per share is calculated by dividing the loss attributable to ordinary equity holders of the parent company by the average number of ordinary shares in issue during the year. Headline loss per share Headline loss per share is calculated by dividing the headline loss for the year attributable to ordinary equity holders of the parent company by the weighted average number of shares in issue during the year.
Headline loss is calculated as follows:Loss for the year attributable to ordinary holders of the parent Impairment loss Headline loss
(1,787,262) 96,965 (1,690,297)
(1,516,864) (1,516,864)
31,875 907 (8,487) 24,295
41,117 1,332 (330,082) (287,633)
17 CASH AND CASH EQUIVALENTS Bank and cash balances Cash on hand Bank overdraft
18 POST EMPLOYMENT BENEFITS National Social Security Authority scheme All employees are members of the National Social Security Authority Scheme which is a contributory pension scheme. The scheme is administered by the National Social Security Authority. This scheme was promulgated under the National Social Security Authority Act of 1989. The company's obligations under the scheme are limited to specific contributions as legislated from time to time and are presently 3.5% of pensionable emoluments up to a maximum of $24.50 per month. Contributions for the year were US$74,126 (2014: US$74,126)
27
GB Holdings Annual Report 2015
Notes to the Financial Statements (Cont’d) for the year ended 31 December 2015 HOLDINGS
Ltd
19
RELATED PARTY INFORMATION
19.1 Related party Reliable Cleaners (Private) Limited Steelnet Holdings Limited Regatta Financial Advisory Services SMM Holdings Limited FSI (Private) Limited 19.2
Related party transactions The following represent transactions with related parties during year:-
Related party Reliable Cleaners (Private) Limited 19.3
Nature of relationship Controlled by Managing Director Common shareholder Common shareholder Holding company Controlled by a director
Nature of transaction Sale of goods
COMPENSATION TO KEY MANAGEMENT Key management are employees who have authority, are responsible for planning, directing and controlling the activities of the company on a day to day basis. Short term employee benefits Long term benefits
20
Volume of transaction 2015 2014 US$ US$ 11,453 10,889
437,102 15, 592
439,267 882
452,693
440,149
FINANCIAL INSTRUMENTS- RISK MANAGEMENT The company is exposed through its operations to the following financial risks: 1. Credit risk 2. Cash flow interest rate risk 3. Liquidity risk In common with all other businesses, the company is exposed to risks that arise from its use of financial instruments. This note describes the company's objectives, policies and processes for managing those risks and methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the company's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from the previous periods unless otherwise stated in this note.
Principal financial instruments The principal financial instruments used by the company, from which financial instrument risk arises, are as follows: a) Trade and other receivables b) Bank and cash balances c) Trade and other payables d) Borrowings e) Bank overdraft
GB Holdings Annual Report 2015
28
Notes to the Financial Statements (Cont’d) for the year ended 31 December 2015 HOLDINGS
Ltd
A summary of the financial instruments held by category is provided below:
Financial assets Bank and cash Trade and other receivables
Financial liabilities
Borrowings Bank overdraft Trade and other payables
Loans and receivables 2015 US$
Loans and receivables 2014 US$
32,782 637,706 670,488
42,449 750,795 793,244
At amortised cost 2015 US$
At amortised cost 2014 US$
1,080,613 8,487 8,372,014 9,461,114
1,120,759 330,082 6,919,299 8,370,140
General objectives, policies and processes The Board has overall responsibility for the determination of the company's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure effective implementation of the objectives and policies to the company's executive management. The company's internal auditors also review the risk management policies and processes and report their findings to the board of directors. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the company's competitiveness and flexibility. Further details regarding these policies are set out below. 20.1 Credit risk Financial assets which potentially subject the company to concentrations of credit risk consists primarily of bank balances and trade and other receivables. The company's bank balances are placed with high quality financial institutions. The credit risk with respect to trade receivable is managed by individually assessing the credit worthiness of each customer before the company's standard credit terms are offered. Further disclosures regarding the trade and other receivables which are neither past due nor impaired are provided in Note 6. 20.2
Cash flow interest rate risk The company is exposed to cash flow interest rate risk from borrowings and the bank overdrafts. Interest rates on existing facilities are fixed.
20.3
Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The company manages its liquidity risk through regular review of daily, weekly, monthly cash flows. In events of critical gaps, the company uses its borrowing facilities which are limited to levels set by the board. The facilities are loans and overdraft as disclosed in note 10 and 12.
29
GB Holdings Annual Report 2015
Notes to the Financial Statements (Cont’d) for the year ended 31 December 2015 HOLDINGS
Ltd
"The table summarizes the maturity profile of the company’s financial liabilities at 31 December 2013 based on contractual undiscounted payments:"
At 31 December 2015
Borrowings Trade and other payables Bank overdraft
Up to 3 months US$
3 to 12 months US$
312,998 8,372,014 8,487 8,693,498
232, 000 232,000
Up to 3 months US$
3 to 12 months US$
68,154 6,919,299 330,082 7,317,535
171,846 171,846
1 to 5 years Over 5 years US$ US$ 535,615 535,615
Total US$
-
1,080,613 8,372,014 8,487 9,461,114
1 to 5 years Over 5 years US$ US$
Total US$
At 31 December 2014
Borrowings Trade and other payables Bank overdraft
21
880,759 880,759
-
1,120,759 6,919,299 330,082 8,370,140
SEGMENT INFORMATION Description of products from which each reportable segment derives its revenues The rubber segment is involved in the production and marketing of rubber products and conveyor belting products, generating 55% (2014: 35%) of the company's external revenue. The chemical segment is involved in the manufacturing, importation and distribution of chemical products and contributed 45% (2014: 65%) of the company's external revenue. Factors that management use to identify the company's reportable segments The company's reportable segments are strategic business units that offer different products. They are managed separately because each business requires different technology and marketing strategies. Measurement of operating segment profit or loss, assets and liabilities The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. The company evaluates performance on the basis of profit or loss from operations but excluding non-recurring losses, such as goodwill impairment, and the effects of share based payments. Segment assets exclude tax assets and assets used primarily for corporate purposes. Segment liabilities exclude tax liabilities and defined benefit liabilities. Loans and borrowings are allocated to the segments based on relevant factors (e.g. funding requirements). Details are provided in the reconciliation from segment assets and liabilities to the company position.
GB Holdings Annual Report 2015
30
Notes to the Financial Statements (Cont’d) for the year ended 31 December 2015 HOLDINGS
Ltd
21
SEGMENT INFORMATION (Cont'd) 2015
Revenue Inter-segmental revenue Revenue from external customers
CHEMICALS US$
RUBBER US$
COMPANY US$
1,768,184 1,768,184
2,119,025 2,119,025
3,887,209 3,887,209
86,404
203,147
279,135
404,738
1,517,030
1,921,768
30,518
193,415
223,933
Depreciation Segment loss
Finance expense Company loss before tax
2,145,701
2014 Revenue Inter-segmental revenue Revenue from external customers
2,009,757 2,009,757
1,071,860 1,071,860
3,081,617 3,081,617
Depreciation
190,884
462,682
653,566
Segment loss
522,854
1,098,218
1,621,072
98,394
172,465
253,863
Finance expense Company loss before tax
GB Holdings Annual Report 2015
1,874,935
31
Notes to the Financial Statements (Cont’d) for the year ended 31 December 2015 HOLDINGS
Ltd
CHEMICALS US$
RUBBER US$
COMPANY US$
19,512
-
19,512
Reportable segment assets Corporate head office assets Total company assets
4,445,266
5,931,757
10,377,023 8,992 10,386,015
Reportable segment liabilities Borrowings Corporate liabilities Liabilities Borrowings Deferred tax liabilities Total company liabilities
1,171,983 -
5,434,729 357,998
6,606,712 357,998
1,171,983
5,792,727
4,183,413 722,615 556,461 12,427,199
6,142
1,590
7,732
Reportable segment assets Corporate head office assets Total company assets
4,465,921
6,136,270
10,602,191 12,226 10,614,417
Reportable segment liabilities Borrowings Deferred tax liabilities Total company liabilities
2,637,721
5,484,877
8,502,598 1,450,841 914,900 10,868,339
2015 Additions to non-current assets
2014 Additions to non-current assets
22
MANAGEMENT OF CAPITAL The company's objective when maintaining capital are: i) To safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and ii) To provide adequate return to shareholders by pricing products and services commensurately with the level of risk. The company sets the amount of capital it requires in proportion to risk. The company manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.
The company's capital is made up of the following: 2014 US$ Share capital Share option reserve Non distributable reserve Accumulated loss
536,588 19,200 9,464,397 (12,061,369) (2,041,184)
32
2014 US$ 536,588 19,200 9,464,397 (10,274,107) (253,922)
GB Holdings Annual Report 2015
Notes to the Financial Statements (Cont’d) for the year ended 31 December 2015 HOLDINGS
Ltd
23
CAPITAL COMMITMENTS
Authorised but not contracted for
2015 US$
2014 US$
250,000
225,000
The capital expenditure will be funded from the company's own resources and borrowings. 24
GOING CONCERN CONSIDERATIONS The company is facing going concern uncertainties as shown by the following factors: The company incurred a loss after tax of US$1,787,262 (2014: US$ 1,516,864) resulting in an accumulated loss of US$12,061,369 as at 31 December 2015. As at the same date, the company had negative equity of US$2,041,184 (2014: US$253 922) As at 31 December 2015, the company's current liabilities exceeded current assets by US$9,011,666 (2014:$6,877,409). The directors are pursuing the following interventions: 1.
In pursuit of its agenda to promote the consumption of locally produced goods, the Government of Zimbabwe has enacted and will maintain Statutory Instrument (SI) 126 of 2014 in the ensuing year whose effect is the removal of the conveyor belts and other rubber products the company manufactures from the Open General import Licence for inclusion in the statutory instrument. The administration of the SI prohibits the importation of such products without a special import licence.
2. The above initiative has enabled the company to reengage with its lost market and gave it an opportunity to reassert its capability to manufacture products acceptable to its targeted market resulting in increased sales to the mining sector. In order to increase sales to the regained customers, the company deliberately reduced its prices by offering a 20 % price discount for the 1st quarter in 2016 with a promise to reduce the prices further if the volume throughput improves. 3. Given the asset preservation in the last three years, support from the authorities through the SI 126 of 2014, stakeholder patience which includes employees and creditors, the company is strongly positioned to seek potential technical partners who would enhance efficiencies in its value chain and improve the company’s value proposition to its customers. 4. The extension of the repayment period of the Distressed and Marginalised Areas Fund ( DIMAF) by a year to 2017 and the maintenance of monthly instalments at reasonable levels will allow the company to enhance its capacity utilisation and working capital management. 5. The arrangements with the tax authorities to repay the outstanding taxes at agreed rates which depend on deposits will allow the company to recover and extend the settlement period. 6. The increased and improved modus operandi of the order financing facility from the company’s Bankers will allow shorter cash cycles and improve competitiveness through economic procurement of raw materials. The above initiatives are likely to increase the demand of the company’s products and operating levels. Based on the above the directors believe that the preparation of the financial statements on a going concern basis is still appropriate. " 25
Events after the reporting date
25.1
These financial statements were approved by the Board of directors for issue on 24 March 2016. The directors have power to ammend the financial statements after issuance.
GB Holdings Annual Report 2015
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Shareholding Analysis HOLDINGS
Ltd
Top Ten Shareholders SMM HOLDINGS (PRIVATE) LIMITED FBC PENSION FUND GENERAL BELTINGS EMPLOYEE SHARE PARTICIPATION TRUST PRAKASH, RADIA STANBIC NOMINEES (PRIVATE)LIMITED ,, GENERAL BELTINGS MANAGEMENT SHARE PARTICIPATION TRUST CHITEPO, BERNARD NORMAN TSUROH, WILBROAD MAMWADI ABIGAI FREEMAN-NNR AKSIA TRUST
Total holding 231,893,327 100,455,283 47,909,266 18,128,897 15,275,803 12,365,408 11,149,839 10,514,091 8,720,108 5,844,793
% of total holding 0.43 0.19 0.09 0.03 0.03 0.02 0.02 0.02 0.02 0.01
Top Ten Shareholding
462,256,815
0.87
Remaining holding
71,331,808
0.13
Total Issued Shares
533,588,623
1.00
Analysis by category of Shareholders Industry No. of Shareholders Companies 122 Employee 13 Estate Late 1 Fund Managers 1 Insurance Companies 1 Investment Trusts And Property 12 Local Resident 934 Nominees Local 28 Non Resident 2 Non Resident Individual 11 Other Corporate Holdings 1 Pension Fund 6 Total 1,132
% of total shares 0.11 0.01 0.00 0.00 0.00 0.01 0.83 0.02 0.00 0.01 0.00 0.01 1.00
Total shares % of total s.holders 248,264,674 0.46 67,323,133 0.13 109 0.00 3,000 0.00 482,530 0.00 9,732,103 0.02 53,755,807 0.10 18,147,803 0.03 3,587,934 0.01 29,502,431 0.05 2,000 0.00 105,787,099 0.20 536,588,623 1.00
% of total shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.09 0.90 1.00
Total shares % of total s.holders 668,731 0.00 50 0.00 18,128,897 0.03 3,216,664 0.01 19,175 0.00 196,109 0.00 10,592,263 0.02 43,153 0.00 371,270 0.00 232,577,728 0.43 270,774,583 0.50 536,588,623 1.00
COUNTRIES
AUSTRALIA BOTSWANA KENYA MAURITIUS NAMIBIA SOUTH AFRICA SWEDEN UNITED KINGDOM UNITED STATES OF AMERICA WARRANT NOT PRESENTABLE ZIMBABWE Total
No. of Shareholders 1 1 1 1 1 3 2 5 1 101 1015 1,132
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GB Holdings Annual Report 2015
Notice to Shareholders
HOLDINGS
Ltd
SHAREHOLDING DISTRIBUTION Range 0 - 100193 101 - 200 201 - 500 501 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 50,000 50,001 - 100,000 100,001 - 500,000 500,001 - 1,000,000 1,000,001 - 10,000,000 10,000,001 Total
No. of Shareholders 0.17 52 108 114 286 100 156 39 42 13 22 7 1,132
GB Holdings Annual Report 2015
% of total shares 6,638 0.05 0.10 0.10 0.25 0.09 0.14 0.03 0.04 0.01 0.02 0.01 1.00
35
Total shares % of total s.holders 0.00 7,455 0.00 34,968 0.00 88,879 0.00 790,008 0.00 751,785 0.00 3,609,003 0.01 2,763,337 0.01 10,020,013 0.02 8,976,221 0.02 72,370,439 0.13 437,169,877 0.81 536,588,623 1.00
Notice to Members HOLDINGS
Ltd
Notice is hereby given that the thirteenth Annual General Meeting of members of the GB Holdings Limited will be held in the Cernol Chemicals Boardroom, 111 Dagenham Road, Willowvale, Harare on Wednesday 22 June 2016 at 11.30 hours for the following purposes: ORDINARY BUSINESS 1. To receive, consider and adopt the financial statements for the year ended 31 December 2015, together with the reports of Directors and Auditors thereon. 2. 2.1 3. 4. 5.
To elect Directors of the Company. Messrs, C. E. Dhlembeu, Alderman Sibanda and I Murefu retire by rotation in terms of Article 95 of the Company's Articles of Association and being eligible, offer themselves for re-election. To approve the remuneration of the Directors for the year ended 31 December 2015. To approve the remuneration of the Auditors for the year ended 31 December 2015. To appoint Auditors for the current year. The Auditors BDO Zimbabwe Chartered Accountants, being eligible, offer themselves for reappointment. A member entitled to attend and vote at the meeting may appoint any person or persons to attend, speak and vote in his stead. A proxy need not be a member of the Company. Proxy forms must be received at the registered office of the Company or be lodged with the Transfer Secretaries, First Transfer Secretaries (Private) Limited, 1 Armagh Avenue, Eastlea, P.O Box 11, Harare, not less than 48 hours before the meeting.
By Order of the Board
P. Munyanyi Company Secretary 27 May 2016
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GB Holdings Annual Report 2015
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Ltd
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Ltd
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Ltd
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Ltd
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