AFRICAN DISTILLERS LIMITED REVIEWED FINANCIAL INFORMATION
For the half year ended 30 September 2023
Financial Highlights
INFLATION ADJUSTED | HISTORIC COST | |||||
September | September | September | September | |||
2023 | 2022 | 2023 | 2022 | |||
ZW$ | ZW$ | ZW$ | ZW$ | |||
Revenue - billions | 134.0 | 52.3 | 109.5 | 11.4 | ||
Operating income - billions | 28.3 | 6.9 | 31.5 | 2.7 | ||
Earnings per share - cents | 18 882 | 1 750 | 18 000 | 1 960 | ||
Government taxes remitted - billions | 45.7 | 14.1 | 38.4 | 3.1 | ||
CHAIRMAN'S STATEMENT
Overview
The operating environment under review was characterised by an unstable exchange rate and high inflation
particularly in the first quarter while the second quarter had relative price stability and tight ZW$ liquidity. Consumer
demand was negatively impacted by currency induced pricing distortions in the formal retail channel. The informal trade benefitted from the stable and competitive pricing in US Dollars. Consumer spending was also spurred by the
election related activities.
Volume performance
The Company recorded a volume growth of 11% above prior year benefitting from good product availability across all key brands, intensified product distribution and brand innovation. Spirits category grew by 8% leveraging on the premiumisation of the Whitestone brand and firm demand on the affordable range. Wine volume grew by 7% driven
by increased market penetration in the second quarter. Ready to Drink ("RTD") segment registered a growth of 14% despite competition from lower priced smuggled imports.
Financial performance
In inflation adjusted terms, revenue increased by 156% to ZW$ 134 billion whilst operating income increased by 311% to ZW$ 28.3 billion. In historic cost terms, revenue increased by 861% to ZW$ 109.5 billion whilst operating income increased by 1063% to ZW$ 31.5 billion. In USD Turnover for the half year was at USD 25.7 million. Revenue
growth in both inflation adjusted and historical terms was driven by the higher volume, favourable sales mix, and replacement cost-based pricing while operating profit increased due to volume growth and strict cost containment
measures.
Future prospects
The Company welcomes the efforts of the authorities to stabilise the economy and remains hopeful that the current
stability in exchange rates and inflation can be sustained. Management continues to focus on supplying its full range of products to the market, identifying opportunities to grow, defend market share and improve profitability through product innovation, production efficiencies and cost control.
Dividend
The board has recommended an interim dividend of US$ 0.0030 per share, amounting to US$ 355,882.
M M Valela
Chairman
DIVIDEND DECLARATION
Notice is hereby given that the Board of Directors declared a final dividend, number 96, of US$ 0.0030 per share
payable in respect of all the qualifying ordinary shares of the Company. This dividend is in respect of the half year ended 30 September 2023.
FINAL DIVIDEND | ||
Dividend Number | 96 | |
Announcement Date | 05 November 2023 | |
Record Date | 17 November 2023 | |
Last Date to Trade | 14 November 2023 | |
Ex-Dividend Date | 15 November 2023 | |
Payment Date | 08 December 2023 | |
Dividend Amount | US$355 882 | |
Dividend per Share | US$0.0030 | |
By order of the Board |
- Mutamuko Company Secretary
Reviewed Condensed Interim Statement of Profit or Loss and
Other Comprehensive Income
For the half year ended 30 September 2023
INFLATION ADJUSTED | HISTORIC COST | |||||||
September | September | September | September | |||||
2023 | 2022 | 2023 | 2022 | |||||
Supplementary | Supplementary | |||||||
Reviewed | Reviewed | Information | Information | |||||
Notes | ZW$000 | ZW$000 | ZW$000 | ZW$000 | ||||
Revenue | 3 | 134 000 584 | 52 346 763 | 109 458 730 | 11 388 762 | |||
Cost of sales | (65 545 437) | (30 895 573) | (45 439 060) | (5 503 116) | ||||
Gross profit | 68 455 147 | 21 451 190 | 64 019 670 | 5 885 646 | ||||
Other income | 535 158 | 169 637 | 373 418 | 40 259 | ||||
Distribution costs | (4 872 083) | (1 525 054) | (4 044 381) | (333 292) | ||||
Administrative expenses | (2 772 736) | (1 311 942) | (2 319 148) | (303 353) | ||||
Other operating expenses | (33 023 701) | (11 891 326) | (26 572 012) | (2 585 426) | ||||
Operating income | 28 321 785 | 6 892 505 | 31 457 547 | 2 703 834 | ||||
Interest income | 8 928 | 5 998 | 7 376 | 1 197 | ||||
Interest expense | (1 559 012) | (428 666) | (1 217 116) | (105 073) | ||||
Net exchange gains/(losses) | (5 886 371) | 1 270 362 | (4 098 593) | 266 642 | ||||
Net monetary gain/(loss) | 11 996 547 | (1 288 640) | - | - | ||||
Profit before taxation | 4 | 32 881 877 | 6 451 559 | 26 149 214 | 2 866 600 | |||
Tax | 6 | (10 504 818) | (4 395 478) | (4 795 741) | (563 364) | |||
Profit for the period | 22 377 059 | 2 056 081 | 21 353 473 | 2 303 236 | ||||
Other comprehensive income | - | - | - | - | ||||
Total comprehensive income | 22 377 059 | 2 056 081 | 21 353 473 | 2 303 236 | ||||
Earnings per share (Cents): | ||||||||
Basic | 18 882 | 1 750 | 18 000 | 1 960 | ||||
Headline | 18 882 | 2 107 | 18 000 | 1 982 | ||||
Diluted | 18 331 | 1 659 | 17 475 | 1 858 | ||||
Reviewed Condensed Interim Statement of Financial Position
As at 30 September 2023
INFLATION ADJUSTED | HISTORIC COST | |||||||
September | March | September | March | |||||
2023 | 2023 | 2023 | 2023 | |||||
Supplementary | Supplementary | |||||||
Reviewed | Reviewed | Information | Information | |||||
Notes | ZW$000 | ZW$000 | ZW$000 | ZW$000 | ||||
ASSETS | ||||||||
Non-current assets | ||||||||
Property, plant and equipment | 7 | 11 180 674 | 10 337 405 | 2 595 694 | 1 161 223 | |||
Long term loans receivable | 512 493 | 189 257 | 512 493 | 61 367 | ||||
Deferred taxation | - | - | - | 256 597 | ||||
11 693 167 | 10 526 662 | 3 108 187 | 1 479 187 | |||||
Current assets | ||||||||
Inventories | 8 | 59 348 940 | 34 425 854 | 39 916 017 | 9 748 671 | |||
Trade and other receivables | 9 | 30 623 023 | 18 234 066 | 27 943 405 | 5 617 869 | |||
Cash and cash equivalents | 5 310 002 | 5 756 801 | 5 310 002 | 1 866 658 | ||||
Current tax asset | 13 | 468 718 | - | 468 718 | - | |||
95 750 683 | 58 416 721 | 73 638 142 | 17 233 198 | |||||
Total assets | 107 443 850 | 68 943 383 | 76 746 329 | 18 712 385 | ||||
EQUITY AND LIABILITIES | ||||||||
Capital and reserves | ||||||||
Share capital | 687 325 | 687 325 | 1 187 | 1 187 | ||||
Share premium | 3 003 462 | 3 003 462 | 14 998 | 14 998 | ||||
Share option reserve | 1 239 327 | 963 718 | 95 560 | 52 942 | ||||
Non-distributable reserve | - | - | 5 361 | 5 361 | ||||
Accumulated profit | 41 769 391 | 23 758 685 | 23 343 519 | 6 160 137 | ||||
Total capital and reserves | 46 699 505 | 28 413 190 | 23 460 625 | 6 234 625 | ||||
Non-current liabilities | ||||||||
Deferred taxation | 9 336 425 | 2 048 594 | 1 877 784 | - | ||||
Current liabilities | ||||||||
Trade and other payables | 10 | 29 076 336 | 23 197 094 | 29 076 336 | 7 521 719 | |||
Current tax liability | 147 947 | 3 734 924 | 147 947 | 1 211 059 | ||||
Short-term borrowings | 11 | 22 183 637 | 11 549 581 | 22 183 637 | 3 744 982 | |||
51 407 920 | 38 481 599 | 51 407 920 | 12 477 760 | |||||
60 744 345 | 53 285 704 | |||||||
Total liabilities | 40 530 193 | 12 477 760 | ||||||
107 443 850 | 76 746 329 | |||||||
Total equity and liabilities | 68 943 383 | 18 712 385 | ||||||
Ordinary shares in issue (Actual) (millions) | 122 | 122 | 122 | 122 | ||||
Ordinary shares in issue | ||||||||
(Weighted average) (millions) | 119 | 118 | 119 | 118 | ||||
Current ratio (:1) | 2 | 2 | 1 | 1 | ||||
Shareholders' equity per share (Cents) | 38 278 | 23 278 | 19 230 | 3 329 | ||||
Middle market price (Cents) | 173 926 | 29 859 | 173 926 | 29 859 | ||||
Reviewed Condensed Interim Statement of Cash Flows
For the half year ended 30 September 2023
INFLATION ADJUSTED | HISTORIC COST | ||||||||
September | September | September | September | ||||||
2023 | 2022 | 2023 | 2022 | ||||||
Supplementary | Supplementary | ||||||||
Reviewed | Reviewed | Information | Information | ||||||
Notes | ZW$000 | ZW$000 | ZW$000 | ZW$000 | |||||
Cash flow from operating activities | |||||||||
Cash generated from trading | |||||||||
after non-cash items | 12 | 16 841 413 | 11 478 454 | 18 175 860 | 3 100 530 | ||||
Changes in working capital | (25 686 122) | (399 096) | (25 191 583) | (1 222 704) | |||||
Cash flows (utilised in)/generated | |||||||||
from operations | ( 8 844 709) | 11 079 358 | (7 015 723) | 1 877 826 | |||||
Interest received | 8 928 | 5 998 | 7 376 | 1 197 | |||||
Interest paid | (1 559 012) | (428 666) | (1 217 116) | (105 073) | |||||
Income tax paid | (6 828 650) | (1 830 647) | (4 193 191) | (377 643) | |||||
Net cash flows (utilised in)/generated | |||||||||
from operating activities | (17 223 443) | 8 826 043 | (12 418 654) | 1 396 307 | |||||
Cash flows from investing activities | |||||||||
Purchase of property, plant and equipment | (1 633 121) | (2 510 029) | (1 547 839) | (604 960) | |||||
Increase in long-term loans receivable | (1 127 474) | (166 658) | (724 740) | (40 742) | |||||
Proceeds from repayment of | |||||||||
long-term loans receivable | 425 658 | 85 149 | 273 613 | 16 365 | |||||
Net cash flows utilised in investing activities | (2 334 937) | (2 591 538) | (1 998 966) | (629 337) | |||||
Cash flows from financing activities | |||||||||
Dividends paid to owners of the Company | (4 366 353) | (233 364) | (4 170 091) | (57 050) | |||||
Proceeds from short term loans | 66 704 292 | - | 42 877 506 | - | |||||
Repayment of short term loans | (42 020 177) | - | (27 010 562) | - | |||||
Net cash flows generated from/(utilised in) | |||||||||
financing activities | 20 317 762 | (233 364) | 11 696 853 | (57 050) | |||||
Net movement in cash and cash equivalents | 759 382 | 6 001 141 | (2 720 767) | 709 920 | |||||
Net foreign exchange difference | 3 592 401 | (291 198) | 3 592 401 | (55 966) | |||||
Inflation effect on cash and cash equivalents | (4 143 682) | (4 043 974) | - | - | |||||
Cash and cash equivalents at | |||||||||
beginning of the period | 981 925 | 1 014 936 | 318 392 | 108 166 | |||||
Cash and cash equivalents at end of the period | 1 190 026 | 2 680 905 | 1 190 026 | 762 120 | |||||
Comprising:- | |||||||||
Bank balances and cash | 5 310 002 | 5 415 849 | 5 310 002 | 1 539 602 | |||||
Bank overdraft | (4 119 976) | (2 734 944) | (4 119 976) | (777 482) | |||||
1 190 026 | 2 680 905 | 1 190 026 | 762 120 |
DIRECTORATE: M M Valela (Chairman), *S Muchenje (Managing Director), S W Klopper, A. Makamure, R H M Maunsell, *M L Ndachena, N Samuriwo, R Pieters - *EXECUTIVE DIRECTORS
AFRICAN DISTILLERS LIMITED REVIEWED FINANCIAL INFORMATION
For the half year ended 30 September 2023
Reviewed Condensed Interim Statement of Changes In Shareholders' Equity
For the half year ended 30 September 2023
INFLATION ADJUSTED | HISTORIC COST | ||||||
September | September | September | September | ||||
2023 | 2022 | 2023 | 2022 | ||||
Supplementary | Supplementary | ||||||
Reviewed | Reviewed | Information | Information | ||||
ZW$000 | ZW$000 | ZW$000 | ZW$000 | ||||
Shareholders' equity at | |||||||
beginning of the period | 28 413 190 | 24 940 929 | 6 234 625 | 1 841 074 | |||
Changes in issued share capital | |||||||
Exercise of share options | - | - | - | - | |||
Changes in share premium | |||||||
Exercise of share options | - | - | - | - | |||
Changes in share option reserve | |||||||
Recognition of share based payments expense | 275 609 | 82 715 | 42 618 | 16 189 | |||
Transfer from share option reserve due | |||||||
to exercise of share options | - | - | - | - | |||
Changes in accumulated profit | |||||||
Transfer from share option reserve due | |||||||
to exercise of share options | - | - | - | - | |||
Total comprehensive income for the period | 22 377 059 | 2 056 081 | 21 353 473 | 2 303 236 | |||
Dividend declared | (4 366 353) | (849 520) | (4 170 091) | (232 209) | |||
Shareholders' equity at end of the period | 46 699 505 | 26 230 205 | 23 460 625 | 3 928 290 |
Notes to the Reviewed Condensed Interim Financial Results
For the half year ended 30 September 2023
1 Basis of preparation
The reviewed condensed interim financial statements of African Distillers Limited have been prepared in accordance
with IAS 34 - Interim Financial Reporting and in a manner required by the Companies and Other Business Entities
Act (Chapter 24:31) and the Zimbabwe Stock Exchange Listing Requirements.
1.1 Hyperinflation
The financial statements of the Company are presented in Zimbabwean dollars. They have been prepared under the inflation-adjustedaccounting basis in line with the provisions of International Accounting Standard 29 "Financial
Reporting in Hyperinflationary Economies" (IAS 29), hence the historical cost information has been restated for changes in the general purchasing power of the Zimbabwe Dollar and appropriate adjustments and reclassifications have been made. Accordingly, the inflation-adjusted financial statements represent the primary financial statements of the Company. The historical cost financial statements have been provided by way of supplementary information.
IAS 29 requires that financial statements prepared in the currency of a hyperinflationary economy be stated in terms of a measuring unit current at the balance sheet date and that corresponding figures for previous periods be stated in the same terms as the latest balance sheet date. The restatement has been calculated by means of
conversion factors derived from estimated CPIs obtained from movement of the Total Consumption Poverty Line
(TCPL) published by the Zimbabwe Statistical Agency (ZIMSTAT).
TCPL has been used to estimate inflation for the current period because research conducted by the Institute of Chartered Accountants of Zimbabwe (ICAZ) has indicated that there is a 99% correlation between TCPL and Consumer Price Index (CPI). The use of TCPL data also allows for comparability of the Company's financial results with other players in the market who have adopted the same inflation benchmark in Zimbabwe.
The conversion factors used to restate the interim financial results are as follows:
Conversion | |||
Index | Factor | ||
30-Sep-23 | 44 721 | 1.00 | |
31-Mar-23 | 14 501 | 3.08 | |
30-Sep-22 | 12 713 | 3.52 | |
31-Mar-22 | 4 766 | 9.38 |
CPI Sensitivity
The analysis below seeks to demonstrate the sensitivity of the estimated CPI to some key financial statement line
items.
Estimated CPI | |||
30-Sep-23 | 44 721 | ||
31-Mar-23 | 14 501 | ||
Average CPI September 2023 | 35 152 | ||
Effect on key financial statement line items | Effect of 10% | Effect of 10% | |
increase in CPI | decrease in CPI | ||
Reviewed Inflation | Reviewed Inflation | ||
adjusted 2023 | adjusted 2023 | ||
Profit for the period | 2 412 806 | (2 412 806) | |
Total equity | 4 845 050 | (4 845 050) |
Management has determined that the change in the inflation measurement technique, that is, use of estimated
CPIs in February to September 2023 constitute a change in accounting estimate, rather than a prior period error.
The effect on the change in future periods is not disclosed because it is impractical to determine an estimate for the future inflation under volatile and hyperinflationary conditions. This increases the estimation uncertainty in
objectively evaluating information about those measurements. It is reasonably possible, on the basis of existing knowledge that outcomes within the next financial year will be materially different from the current forecasts and assumptions could require a material adjustment to the carrying amount of the assets or liabilities affected.
-
Accounting policies
The accounting policies adopted in the preparation of the interim condensed financial statements are consistent with those followed in the preparation of the Company's annual financial statements for the year ended 31 March 2023, except for the adoption of new standards effective as of 1 January 2023. The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
Several amendments apply for the first time in 2023, but do not have an impact on the interim condensed financial statements of the Company. -
Historical information
The historical financial disclosure is shown as supplementary information. The information does not comply with the
International Financial Reporting Standards in that it has not taken into account the requirements of International
Accounting Standard 29 (Financial Reporting in Hyper inflationary Economies). As a result, the auditors have not issued a review conclusion on the historic financial information.
2 Share buy back
The Company is holding 3 434 842 (2022: 3 434 842) of its own shares as treasury stock. No additional shares were acquired during the period.
Notes to the Reviewed Condensed Interim Financial Results
For the half year ended 30 September 2023
INFLATION ADJUSTED | HISTORIC COST | ||||||
September | March | September | March | ||||
2023 | 2023 | 2023 | 2023 | ||||
Supplementary | Supplementary | ||||||
Reviewed | Reviewed | Information | Information | ||||
ZW$000 | ZW$000 | ZW$000 | ZW$000 | ||||
3 Revenue | |||||||
Spirits | 80 857 548 | 29 897 125 | 66 087 040 | 6 490 969 | |||
Ready-to-drink (RTDs) | 47 139 169 | 19 764 287 | 38 528 106 | 4 376 574 | |||
Wines | 8 719 857 | 4 081 630 | 7 126 973 | 847 331 | |||
(Discounts) | (2 715 990) | (1 396 278) | (2 283 389) | (326 112) | |||
134 000 584 | 52 346 763 | 109 458 730 | 11 388 762 |
All revenue is recognised at a point in time.
4 Profit before tax
This is stated after charging the following items of significance:
Depreciation | 789 065 | 419 334 | 113 319 | 26 016 |
Staff costs | 20 909 333 | 7 567 534 | 17 302 741 | 1 669 687 |
Loss on disposal of property, | ||||
plant and equipment | 787 | 602 | 49 | 3 |
- Related party transactions
Delta Corporation Limited ("Delta") and Heineken Beverages ("Heineken")/Distell Ltd each have an effective
shareholding of 51.14% (September 2022: 50.98%) and 28.35% (September 2022: 28.61%) in the Company.
Effective 26 April 2023, Heineken BV acquired the Company's major shareholder and partner, Distell Ltd. This resulted in dissolution of Distell Ltd and the formation of Heineken Beverages, a company created by merger of
Heineken South African unit, Distell and Namibia Breweries. Consequently, Distell Ltd's shareholding in the Company was transferred to Heineken Beverages effective 26 April 2023.
The following transactions of significance were carried out with related parties at arm's length and in accordance with normal business operations of the Company:
INFLATION ADJUSTED | HISTORIC COST | ||||||
September | September | September | September | ||||
2023 | 2022 | 2023 | 2022 | ||||
Supplementary | Supplementary | ||||||
Reviewed | Reviewed | Information | Information | ||||
ZW$000 | ZW$000 | ZW$000 | ZW$000 | ||||
Heineken Beverages | |||||||
("Heineken")/Distell Ltd | |||||||
Purchase of raw materials | 3 014 886 | 3 293 448 | 2 448 119 | 623 075 | |||
Purchase of finished products for sale | 2 619 840 | 1 312 459 | 1 820 678 | 240 527 | |||
Purchase of property, plant and | |||||||
equipment and spares | 145 495 | 109 242 | 110 660 | 20 830 | |||
Royalties on finished goods produced | |||||||
and sold under license | 3 200 604 | 1 420 561 | 2 593 021 | 264 408 | |||
8 980 825 | 6 135 710 | 6 972 478 | 1 148 840 | ||||
Delta Corporation Limited | |||||||
Purchase of raw materials | - | 65 250 | - | 12 420 | |||
IT Costs | 219 174 | 68 933 | 189 493 | 13 096 | |||
219 174 | 134 182 | 189 493 | 25 516 | ||||
6 Taxation | |||||||
Current income tax expense | 3 216 988 | 2 595 063 | 2 661 361 | 539 259 | |||
Deferred tax | 7 287 830 | 1 800 416 | 2 134 380 | 24 105 | |||
10 504 818 | 4 395 478 | 4 795 741 | 563 364 |
INFLATION ADJUSTED | HISTORIC COST | |||||||
September | March | September | March | |||||
2023 | 2023 | 2023 | 2023 | |||||
Supplementary | Supplementary | |||||||
Reviewed | Reviewed | Information | Information | |||||
Notes | ZW$000 | ZW$000 | ZW$000 | ZW$000 | ||||
7 Property, plant and equipment | ||||||||
Movement in the property, plant and | ||||||||
equipment balance for the period: | ||||||||
Balance at the beginning of the period | 10 337 405 | 7 541 092 | 1 161 223 | 248 642 | ||||
Additions | 1 633 121 | 3 764 191 | 1 547 839 | 995 100 | ||||
Depreciation | (789 065) | (957 050) | (113 319) | (82 488) | ||||
Disposals | (787) | (10 828) | (49) | (31) | ||||
Balance at the end of the period | 11 180 674 | 10 337 405 | 2 595 694 | 1 161 223 | ||||
8 Inventories | ||||||||
Finished products | 21 375 847 | 11 131 027 | 10 241 350 | 2 992 203 | ||||
Maturing spirits and wines | 1 790 499 | 842 371 | 1 181 680 | 195 906 | ||||
Raw materials | 36 194 887 | 22 464 748 | 28 493 676 | 6 561 251 | ||||
Allowance for obsolete Inventory | (12 293) | (12 293) | (689) | (689) | ||||
Inventories at end of the period | 59 348 940 | 34 425 854 | 39 916 017 | 9 748 671 | ||||
9 Trade and other receivables | ||||||||
Trade receivables | 11 651 530 | 6 856 900 | 11 651 530 | 2 223 368 | ||||
Prepayments - relating to | ||||||||
inventory purchases # | 18 896 179 | 11 414 325 | 16 216 561 | 3 406 550 | ||||
Other receivables * | 154 013 | 79 722 | 154 013 | 25 850 | ||||
Allowance for credit losses | (78 699) | (116 881) | (78 699) | (37 899) | ||||
30 623 023 | 18 234 066 | 27 943 405 | 5 617 869 |
- Other receivables includes sundry debtors, staff welfare and study loans.
- Included in prepayments are balances with related parties as follows:
Heineken Beverages | |||||||
("Heineken")/Distell Ltd | 849 306 | 481 075 | 352 137 | 876 | |||
10 Trade and other payables | |||||||
Trade payables - local | 5 311 607 | 1 510 353 | 5 311 607 | 489 736 | |||
Trade payables - foreign | 7 857 482 | 13 291 688 | 7 857 482 | 4 309 865 | |||
Accruals and other payables ^ | 15 907 247 | 8 395 053 | 15 907 247 | 2 722 118 | |||
29 076 336 | 23 197 094 | 29 076 336 | 7 521 719 |
- Accruals and other payables includes leave pay provision, long service awards, accruals for statutory payments and other sundry creditors. Included in trade payables are balances with related parties as follows;
DIRECTORATE: M M Valela (Chairman), *S Muchenje (Managing Director), S W Klopper, A. Makamure, R H M Maunsell, *M L Ndachena, N Samuriwo, R Pieters - *EXECUTIVE DIRECTORS
AFRICAN DISTILLERS LIMITED
REVIEWED FINANCIAL INFORMATION
For the half year ended 30 September 2023
Notes to the Reviewed Condensed Interim Financial Results
For the half year ended 30 September 2023
INFLATION ADJUSTED | HISTORIC COST | |||||
September | March | September | March | |||
2023 | 2023 | 2023 | 2023 | |||
Supplementary | Supplementary | |||||
Reviewed | Reviewed | Information | Information | |||
Notes | ZW$000 | ZW$000 | ZW$000 | ZW$000 |
10 Trade and other payables (continued)
Heineken Beverages
("Heineken")/Distell Ltd | 4 120 402 | 9 556 900 | 4 120 402 | 3 098 850 |
Delta Corporation Limited | - | 36 768 | - | 11 922 |
The average credit period on local purchases is 7 days while the average credit period for foreign purchases is more than 90 days.
11 Short-term borrowings
Short-term borrowings comprise of:
Short term loans | 18 063 660 | 6 774 705 | 18 063 660 | 2 196 716 |
Bank Overdraft | 4 119 976 | 4 774 876 | 4 119 976 | 1 548 266 |
22 183 636 | 11 549 581 | 22 183 636 | 3 744 982 |
Short term loans includes US$600 000/ZW$3.3 billion (March 2023: US$600 000/ZW$1.85 billion) unsecured loan from Delta with a six-monthtenure and bank loans at 12-monthtenure.
The company also has US$2 million overdraft facility with the bank at 10% interest and ZW$2.15 billion overdraft facilities with the banks at 75% interest.
INFLATION ADJUSTED | HISTORIC COST | ||||||
September | September | September | September | ||||
2023 | 2022 | 2023 | 2022 | ||||
Supplementary | Supplementary | ||||||
Reviewed | Reviewed | Information | Information | ||||
Notes | ZW$000 | ZW$000 | ZW$000 | ZW$000 | |||
12 Cash generated from trading | |||||||
Profit before taxation | 32 881 877 | 6 451 559 | 26 149 214 | 2 866 600 | |||
Exchange (gain)/loss | (9 339 080) | 309 015 | (9 339 080) | 87 846 | |||
Depreciation | 789 065 | 419 334 | 113 319 | 26 016 | |||
Loss on disposal of property, | |||||||
plant and equipment | 787 | 602 | 49 | 3 | |||
Share option expense | 275 609 | 82 715 | 42 618 | 16 189 | |||
Interest income | (8 928) | (5 998) | (7 376) | (1 197) | |||
Interest expense | 1 559 012 | 428 666 | 1 217 116 | 105 073 | |||
Net monetary (gain)/ loss | (9 316 929) | 3 792 561 | - | - | |||
16 841 413 | 11 478 454 | 18 175 860 | 3 100 530 |
- Uncertain tax treatment
There have been significant currency changes in Zimbabwe since 2018. These changes created some uncertainties in the treatment of transactions for taxes due to the absence of clear guidelines. During the fiscal year ended March 2023, the Company became subject to an investigative audit by the Zimbabwe Revenue Authority (ZIMRA) in relation to non-payment of Income tax in foreign currency for the financial years 2019 to 2022. The income tax for the mentioned years had been paid in full in ZW$. The results of the audit were issued in June 2023 and ZIMRA raised an assessment to the Company amounting to US$1,841,221.46 being principal amount, interest and penalty.
The Company, after seeking legal advice, has contested the assessment and the case is presently in the Courts.
The management, backed by legal counsel, believes that the Company has substantial and factual defences to the claims and allegations made by ZIMRA. As the final outcome of the legal proceedings is uncertain, no provision for any related income tax liability has been made in these interim financial statements. Management believes that
the "most likely amount" to be settled by the Company is zero, hence no tax liability recognised. The company will assess the implications of the final outcome once the case has been concluded and will appropriately account for any liabilities that may arise as a result.
To comply with the provision of the Income Tax Act Section 69 (1) which states that "The obligation to pay any
tax chargeable shall not be suspended pending a decision on any objection or appeal", the company agreed on a settlement plan with ZIMRA. As at period end, the company had paid a total of USD$85,221.46 (i.e. equivalent to ZW$468,718,037.00). The amount has been recognised in these interim financial statements as Current tax asset. - Contingent liabilities
With regards to Note 13 above, no provision for any interest and penalty liability, arising from the claims by ZIMRA against the Company, has been made in these interim financial statements. The Company has been advised by its legal advisers that it is possible, but not probable, that an outflow of resources embodying economic benefits will be required to settle the interest and penalty. The total interest and penalty amounts to US$524,467.15. - Capital commitments
The Company has no firm capital commitments. - Going concern
The Directors have assessed the ability of the Company to continue as a going concern and believe that the preparation of these condensed interim financial results on a going concern basis is appropriate.
It is anticipated that the economy will grow positively in the ensuing year and with the promised stable and consistent economic policies, this will also trigger Company growth. Accessibility of foreign currency is key to
smooth running of the business, and the Company has been able to access its foreign currency requirements needs from both trading and financial sector and this is also anticipated to continue in the ensuing year.
- Events after the reporting period
There were no significant events after the period under review. - Auditor's review statement
The Company condensed inflation adjusted interim financial statements have been reviewed by the Company's external auditors, Ernst & Young Chartered Accountants (Zimbabwe).
The auditors have issued an adverse review conclusion with respect to non-compliance with International Accounting
Standard 21 "The Effects of Changes in Foreign Exchange Rates", including historical errors not adjusted in terms of international Accounting Standards 8 "Accounting Policies, Changes in Accounting Estimates and Errors" and the application of the International Accounting Standards 29; "Financial Reporting in Hyper inflationary Economies"
The independent review conclusion on the condensed inflation adjusted interim financial statements is available for inspection at the registered office of the Company. The engagement partner responsible for this review is Mr Fungai Kuipa (PAAB Practising Certificate Number 335).
DIRECTORATE: M M Valela (Chairman), *S Muchenje (Managing Director), S W Klopper, A. Makamure, R H M Maunsell, *M L Ndachena, N Samuriwo, R Pieters - *EXECUTIVE DIRECTORS
Ernst & Young | Tel: +263 24 2750905-14 or 2750979-83 |
Chartered Accountants (Zimbabwe) | Fax: +263 24 2750707 or 2773842 |
Registered Public Auditors | Email: admin@zw.ey.com |
Angwa City | www.ey.com |
Cnr Julius Nyerere Way / | |
Kwame Nkrumah Avenue | |
P O Box 62 or 702 | |
Harare | |
Zimbabwe |
Report on Review of Interim Financial Information
To the Shareholders of African Distillers Limited
Introduction
We have reviewed the accompanying Interim Condensed Inflation Adjusted Financial Information of African Distillers Limited ('the Company'), as set out on pages 8 to 17, which comprise the Interim
Condensed Inflation Adjusted Statement of Financial Position as at 30 September 2023 and the related Interim Condensed Inflation Adjusted Statement of Profit or Loss and Other Comprehensive Income, Interim Condensed Inflation Adjusted Statement of Changes in Equity and Interim Condensed Inflation Adjusted Statement of Cash Flows for the half-year period then ended and explanatory notes.
Management is responsible for the preparation and fair presentation of this Interim Condensed
Inflation Adjusted Financial Information in accordance with the International Financial Reporting Standards ('IFRS'). Our responsibility is to express a conclusion on this Interim Condensed Inflation
Adjusted Financial Information based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim condensed inflation adjusted financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Basis for Adverse Review Conclusion
Non-compliance with International Financial Reporting Standards IAS 21 - The Effects of Changes in Foreign Exchange Rates and IAS 8 - Accounting Polices, Changes in Accounting Estimates and Errors:
Exchange rate used in the prior year and current half year
Effective 1 August 2020 to 30 September 2023, management applied an internally generated exchange rate (transaction rate) to translate foreign denominated transactions and balances to the functional and reporting currency, the Zimbabwe Dollar (ZW$). We believe that the use of a transaction rate is inappropriate for financial reporting as it does not meet the definition of a spot rate as the rate is not accessible through a legal exchange mechanism. We believe that management should have applied the auction exchange rate and/or the Willing-Buyer-Willing-Seller (WBWS) exchange rate as determined by the interbank market, as either one of these two rates met the International Financial Reporting Standards definition of a spot rate.
A member firm of Ernst & Young Global Limited | 5 |
Independent Auditor's Report (Continued)
African Distillers Limited
The errors resultant from the use of incorrect exchange rates impact both current half year and prior year numbers. The prior year errors should have been corrected retrospectively in accordance with IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors.
As no retrospective adjustments in terms of IAS 8 have been made, the corresponding amount for Cash and cash equivalents on the Inflation Adjusted Statement of Financial Position is materially misstated. Our prior period audit report was also modified due to this matter.
Additionally, the following current period and prior period elements are impacted due to the continuing matter:
- Virtually all Interim Condensed Inflation Adjusted Statement of Profit or Loss and Other Comprehensive Income items are materially misstated except for other income, Interest income and Interest expense.
- The Interim Condensed Inflation Adjusted Statement of Financial Position items that are affected are as follows:
- Elements for which misstatements could be quantified on the Inflation adjusted Statement of financial position:
Element | 30 September 2023 | 31 March 2023 | ||
Amount | Misstatement | Amount | Misstatement | |
ZW$ | ZW$ | ZW$ | ZW$ | |
Trade and other | 29,076,336,000 | 1,357,859,350 | 23,197,094,000 | 4,503,564,111 |
payables |
- Elements on the on the Inflation adjusted Statement of financial position for which misstatements could not be quantified due to the volume of transactions (amounts rounded to the nearest thousand):
- Inventories stated at ZW$59,348,940, (31 March 2023: ZW$34,425,854),
- Accumulated profit stated at ZW$41,769,391, (31 March 2023: ZW$23,758,685),
- Deferred taxation stated at ZW$9,336,425, (31 March 2023: ZW$2,048,594) and
- Current tax liability stated at ZW$147,947, (31 March 2023: ZW$3,734,924).
The Interim Condensed Inflation Adjusted Statements of Changes in Equity and Cash Flows were consequently impacted.
Consequential impact on IAS 29 - 'Financial Reporting in Hyperinflationary Economies'
Furthermore, notwithstanding that IAS 29 has been applied correctly, it is noted that its application was based on prior and current periods' financial information which was not in compliance with IAS 21 / IAS 8 as described above. Had the correct base numbers been used, the above stated accounts would have been materially different. Consequently, the Net monetary adjustment of ZW$11,996,547,000 (2022: ZW$1,288,640,000) on the Interim Condensed Inflation Adjusted Statement of Profit or Loss and Other Comprehensive Income are impacted.
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Independent Auditor's Report (Continued)
African Distillers Limited
The effects of the above departures from IFRS are material and pervasive to the Interim Condensed Inflation Adjusted Financial Information.
Adverse Conclusion
Our review indicates that, because the of the matters outlined in the basis for adverse conclusion, as described in the preceding paragraph, the Interim Condensed Inflation Adjusted Financial information does not present fairly, in all material respects, the financial position of the Company as at 30 September 2023, and of its financial performance and its cash flows for the half-year period then ended in accordance with the International Financial Reporting Standards.
The engagement partner on the review engagement resulting in this review conclusion report on the Interim Condensed Inflation Adjusted Financial Information is Mr. Fungai Kuipa (PAAB Practicing Certificate Number 335).
Ernst & Young
Chartered Accountants (Zimbabwe)
Registered Public Auditors
Harare
02 November 2023
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African Distillers Ltd. published this content on 06 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 November 2023 07:02:49 UTC.