Seed : FY22 Results & Audit Opinion

SEED CO LIMITED

SUSTAINABILITY STATEMENT

Seed Co is committed to sustainable ethical business practices, the protection of the environment, and economic development while improving the livelihoods of all its stakeholders, including but not limited to employees, farmers, consumers, and communities. To this end, the DNA of our seed-to-feed business is to innovate and make available climate-smarthigh-yielding seed solutions, agronomic support, and training for the efficient utilisation of arable land and other farming inputs to sustainably make both small and large scale farming profitable enterprises that feeds both people and livestock with catalytic effects on critical economic value chains.

ABRIDGED GROUP INCOME STATEMENT

	Inflation adjusted	Historical cost
	Audited	Restated*	Unaudited
	Mar 2022	Mar 2021	Mar 2022	Mar 2021
	ZWL'm	ZWL'm	ZWL'm	ZWL'm
Revenue	9,311.9	10,100.4	6,890.4	4,773.6
Cost of sales	(6,226.4)	(3,630.4)	(3,156.8)	(1,650.2)
Gross profit	3,085.5	6,470.0	3,733.6	3,123.4
Other income	1,869.6	1,566.6	1,460.5	812.4
Operating expenses	(2,847.4)	(2,482.8)	(2,195.8)	(1,060.4)
Operating profit	2,107.7	5,553.8	2,998.3	2,875.4
Net finance costs	(851.8)	(775.8)	(629.2)	(434.7)
Net monetary loss	(995.7)	(3,298.7)	-	-
Share of profit from associates and JV	290.5	406.5	454.2	448.6
Profit before tax	550.7	1,885.8	2,823.3	2,889.3
Income tax expense	(1,201.2)	(453.5)	(642.1)	(574.4)
(Loss)/ profit for the year	(650.5)	1,432.3	2,181.2	2,314.9
Attributable to:
Equity holders of the parent	(650.5)	1,432.3	2,181.2	2,314.9
BEPS - cents	(258.43)	579.45	866.50	936.54
DEPS - cents	(258.43)	566.67	866.50	915.88
HEPS - cents	(281.94)	502.92	917.08	892.22

ABRIDGED GROUP STATEMENT OF OTHER COMPREHENSIVE INCOME

	Inflation adjusted	Historical cost
	Audited	Restated*	Unaudited
	Mar 2022	Mar 2021	Mar 2022	Mar 2021
	ZWL'm	ZWL'm	ZWL'm	ZWL'm
(Loss)/ profit for the year	(650.5)	1,432.3	2,181.2	2,314.9
Exchange differences^	1,604.8	1,853.4	1,604.8	1,073.2
Revaluation net of tax	1,038.0	(797.0)	2,671.1	1,319.6
Total comprehensive income for the
year	1,992.3	2,488.7	6,457.1	4,707.7

SHORT-FORM FINANCIAL ANNOUNCEMENT

Issued in terms of practice Note 13 of the Zimbabwe Stock Exchange (ZSE)

ABRIDGED GROUP STATEMENT OF FINANCIAL POSITION

	Inflation adjusted	Historical cost
	Audited	Restated	Unaudited
	Mar 2022	Mar 2021	Mar 2022	Mar 2021
	ZWL'm	ZWL'm	ZWL'm	ZWL'm
Assets	19,172.8	23,045.8	18,198.9	10,056.9
Property, plant & equipment (PPE)	6,322.0	4,740.5	6,322.0	2,745.0
Investments in associates & JV^	4,527.2	8,105.0	4,444.3	2,244.5
Other financial assets	642.2	731.7	642.2	423.7
Inventories	3,311.8	2,773.7	2,431.4	778.6
Receivables	4,110.2	5,771.5	4,099.6	3,330.4
Cash and cash equivalents	259.4	923.4	259.4	534.7
Equity and liabilities	19,172.8	23,045.8	18,198.9	10,056.9
Shareholders' equity	12,903.5	16,300.4	12,807.7	6,345.1
Loans and borrowings	3,088.6	3,923.1	3,088.6	2,271.7
Deferred tax liability	2,313.5	1,231.8	1,435.4	519.1
Payables and provisions	867.2	1,590.5	867.2	921.0

ABRIDGED GROUP STATEMENT OF CASH FLOWS

	Inflation adjusted	Historical cost
	Audited	Restated	Unaudited
	Mar 2022	Mar 2021	Mar 2022	Mar 2021
	ZWL'm	ZWL'm	ZWL'm	ZWL'm
Profit before tax	550.7	1,885.8	2,823.3	2,889.3
Reconciling items to net cash flows	902.6	1,074.7	375.2	108.0
Working capital changes	1,075.5	(5,017.7)	(2,204.4)	(3,328.0)
Tax paid	(1,159.6)	(509.0)	(755.5)	(118.6)
Effects of monetary changes	995.7	3,298.7	-	-
Operating cash flows	2,364.9	732.5	238.6	(449.3)
PPE disposal proceeds	14.6	18.2	13.6	9.7
Purchase of PPE	(435.7)	(683.0)	(393.6)	(326.8)
Non-current financial assets changes	89.4	(701.6)	(218.5)	(418.6)
Dividends received	3.3	4.1	2.4	1.6
Interest received	2.3	1.3	2.1	0.7
Investing cash flows	(326.1)	(1,361.0)	(594.0)	(733.4)
Net proceeds from borrowings	2,096.7	5,664.9	816.9	2,207.0
Interest paid	(854.0)	(777.1)	(631.2)	(435.4)
Financing cash flows	1,242.7	4,887.8	185.7	1,771.6
Net cash flows during the year	3,281.5	4,259.3	(169.7)	588.9
Effects of net monetary movement on
cash and cash equivalents	(3,801.0)	(3,414.2)	-	-
Effects of exchange rate	(144.5)	(120.7)	(105.6)	(88.0)
Opening cash and cash equivalents	923.4	199.0	534.7	33.8
Closing cash and cash equivalents	259.4	923.4	259.4	534.7

ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY

	Inflation adjusted	Historical cost
	Audited	Restated	Unaudited
	Mar 2022	Mar 2021	Mar 2022	Mar 2021
	ZWL'm	ZWL'm	ZWL'm	ZWL'm
Opening shareholders' equity	16,322.5	13,829.8	6,345.1	1,635.0
Comprehensive income	(3,427.8)	2,488.6	6,457.2	4,707.7
Share based payments	11.2	4.1	7.8	2.4
Decrease in investment in associates	(2.4)	-	(2.4)	-
Closing shareholders' equity	12,903.5	16,322.5	12,807.7	6,345.1

		DIRECTORS	D E B Long (Group Chairman), P Gowero (Group Deputy Chairman), M Nzwere (Group CEO)*, J Matorofa (Group CFO)*,
			R C D Chitengu, Dr D Garwe, R Fournier, M S Ndoro, F Savin, P Spadin. *Executive

SEED CO LIMITED	SHORT-FORM FINANCIAL ANNOUNCEMENT
	Issued in terms of practice Note 13 of the Zimbabwe Stock Exchange (ZSE)

SUPPLEMENTARY INFORMATION				COMMENTARY

1. Corporate information

Seed Co Limited is a company which is incorporated and domiciled in Zimbabwe and listed on the Zimbabwe Stock Exchange.

2. Basis of preparation

The basis of preparation of these financial statements is International Financial Reporting Standards (IFRS) with the exception of IAS 8 and IAS 21 as stated in the audit report.

Inflation adjusted financial statements have been drawn up using the conversion factors derived from the Consumer Price Index (CPI) prepared by the Zimbabwe Central Statistical Office. The conversion factors used for the IAS 29 restatements are as follows:

Overview

The period under review witnessed an unstable economic environment dominated by a weakening currency, volatile exchange rates and pricing distortions. Although the decline in Covid-19 cases and the subsequent removal of lockdown restrictions was a notable development towards normalization of operations, the cost of production soared because of inflationary pressures. Most farmers delayed planting due to late rains and a mid-season dry spell compounded the situation which resulted in notable crop write-offs during the season. The country now expects a below-normal harvest.

Financial Performance

Inflation-adjusted turnover was 8% lower than prior year and this is attributable to volume reduction and pricing challenges.

	Index	Conversion factor	Other income increased when compared against prior year due to exchange gains
Closing as at 31 March 2022	4.766.10	1.00	on inter-company debtors and non-seed sales.
Closing as at 31 March 2021	2.759.83	1.73	Operating expenditure rose in response to market rate-based purchase prices.
Average for the year ended 31 March 2022	3.582.86	1.37	The rise was also partly attributable to payroll-related costs and depreciation on
Average for the year ended 31 March 2021	2.083.51	2.57	revalued assets and expenses that were billed at market rate instead of the
Inter-Bank Rate.

IAS 29 discourages the publication of historical cost financial statements as the inflation adjusted results are the primary records. However, the historical cost results are included as supplementary information to allow for comparability during the transitional phase of applying the Standard and to meet most user requirements.

3. Accounting policies

The principal accounting policies of the Group have been consistently followed in all material respects.

		Inflation adjusted	Historical cost
		Audited	Restated	Unaudited
		Mar 2022	Mar 2021 Mar 2022	Mar 2021
		ZWL'm	ZWL'm	ZWL'm	ZWL'm
4.	Capital expenditure (CAPEX)	435.7	683.0	393.6	326.8
5.	Depreciation	306.2	690.1	184.5	120.1
				US$'m	US$'m
6. Commitments for CAPEX			4.0M	3.8M

8. Directorate

Mr. D. Jacquemond retired from the Board during the year and was replaced by

1. Fournier.

9. Dividend

In view of the uncertain local and global economy, the Board decided not to declare a dividend.

10. Auditor's statement

The consolidated inflation adjusted financial statements from which this abridged version has been extracted, have been audited by Ernst & Young Chartered Accountants (Zimbabwe). An adverse opinion has been issued thereon in respect of non-compliance with the requirements of International Accounting Standard (IAS) 21, "The effects of foreign exchange rates" and International Accounting Standard (IAS) 8 -" Accounting Polices, Changes in Accounting Estimates and Errors", equity accounting of associates and joint ventures with underlying matters; associate property, plant and equipment accounting policy unadjusted to conform with the group accounting policy; and valuation of property, plant and equipment, due to lack of market evidence to "support property valuation inputs"; and the consequential impact of applying IAS29 "Financial Reporting in Hyperinflationary Economies" on an incorrect base.

The auditor's opinion on the Group's inflation adjusted annual financial statements is available for inspection at the Company's registered office. The engagement partner for this audit is Mr Fungai Kuipa (PAAB Practicing Certificate Number 335).

11. Approval of financial statements

The underlying financial statements from which this abridged set was extracted were approved by the Board and duly signed by the Chairman and CEO.

Finance costs were 9% of turnover compared to 8% prior year. The appetite to borrow more was caused by a mismatch between receipts and payments arising out of delayed payments from Government schemes and a sharp increase in prices for both operating expenses and seed deliveries.

The contribution from associates and joint ventures was nearly a third lower than prior year mainly due to the 35% reduction in profitability of the continental associate operations.

Financial Position

The rise in property, plant and equipment was driven by new acquisitions and revaluation of old assets. Notable among the additions was the artificial maize seed drying plant completed and commissioned during the year under review.

Inventories were higher than prior year due to larger volumes of wheat seed held at year end in preparation for the winter cropping season and the unsold maize seed stock carried over into the next trading year.

Borrowings rose by 35% from prior year historical levels and this was driven by the need to cover the funding gap created by increased grower payment rates, rising operating costs and delayed payments from key customers including Government schemes.

Outlook

The challenging Zimbabwean economic situation is not expected to end soon with increasing uncertainty in view of upcoming elections next year. The Global economy is also facing unprecedented challenges stemming from Covid-19 as well as climate change and now new shocks arising from the conflict in Ukraine. Whilst these developments impact fragile economies the most, the unavoidable need to focus on food security and import substitution is expected to spur investment in agriculture in Zimbabwe and on the African continent. The Group is better positioned to leverage its strong brand and intellectual property to actively participate in enhancing primary food production to plug supply gaps.

The continuation of the gap between official and alternative market exchange rates in Zimbabwe will however continue to weigh down real profitability as selling prices are linked to official rates while virtually all business costs track alternative rates.

D. E. B. Long	M. Nzwere	T. Chatiza
Chairman	CEO	Group Secretary
7 July 2022	7 July 2022	7 July 2022

		DIRECTORS	D E B Long (Group Chairman), P Gowero (Group Deputy Chairman), M Nzwere (Group CEO)*, J Matorofa (Group CFO)*,
			R C D Chitengu, Dr D Garwe, R Fournier, M S Ndoro, F Savin, P Spadin. *Executive

Ernst & Young	Tel: [phone] or 2750979-83
Chartered Accountants (Zimbabwe)	Fax: [phone] or 2773842
Registered Public Auditors	Email: [e-mail]
Angwa City	www.ey.com
Cnr Julius Nyerere Way /
Kwame Nkrumah Avenue
P O Box 62 or 702
Harare
Zimbabwe

Independent Auditor's Report

To the Shareholders of Seed Co Limited

Report on the Audit of the Consolidated Inflation Adjusted Financial Statements

Adverse Opinion

We have audited t he consolidated inflat ion adjust ed financial stat ement s of Seed Co Limit ed and it s subsidiaries (t he Group), as set out on pages 11 to 69, which comprise the Consolidat ed inflat ion adjusted st at ement of financial posit ion as at 31 March 2022, and the Consolidat ed inflat ion adjust ed st at ement of profit or loss and ot her comprehensive income, Consolidat ed inflat ion adjusted st at ement of changes in equit y and Consolidat ed inflation adjust ed st at ement of cash flows for the year then ended, and not es to t he Consolidat ed inflat ion adjust ed financial st at ement s, including a summary of significant account ing policies and ot her explanat ory not es.

In our opinion, because of t he significance of t he mat t ers discussed in t he Basis for Adverse Opinion sect ion of our report , t he accompanying Consolidat ed inflat ion adjust ed financial st at ement s do not present fairly t he financial posit ion of the Group as at 31 March 2022, and it s financial performance and cash flows for the year t hen ended in accordance wit h Internat ional Financial Report ing St andards (IFRSs) and t he requirement s of t he Companies and Ot her Business Ent ities Act (Chapt er 24:31).

Basis for Adverse Opinion

Matter 1: Non-compliance with International Financial Reporting Standards IAS 21 - The Effect s of Changes in Foreign Exchange Rat es and IAS 8 - Account ing Polices, Changes in Account ing Est imat es and Errors.

Impact of t he prior year modificat ion on t he current year audit report for t he year ended 3 1 March 2 0 2 2 and opening balances

a) Historical date of change in functional currency

As explained in not e 2 .1 to t he Consolidat ed Inf lat ion Adjust ed Financial St at ement s, t he Group changed its funct ional and report ing currency from United Stat es Dollar (US$ ) to Zimbabwe Dollars (ZWL) on 22 February 2019 in compliance wit h Stat utory Inst rument 33 of 2019 . We believed that t he change occurred on 1 October 2018 in terms of IAS21 given t he significant monetary and exchange cont rol policy changes wit nessed in Zimbabwe from 2016 t hrough to 2019 .

Management in compliance wit h St atut ory Inst rument 33 of 2019, prospect ively applied the change in funct ional currency from USD to ZWL from 23 February 2019, which we disagreed wit h. The correct approach would have been a ret rospective restat ement as a prior period error in terms of IAS 8 .

We were unable for the year ended 31 March 2021 t o satisfy ourselves concerning Investment in associat es and joint vent ure, Inventories, Foreign currency t ranslat ion reserve, share premium, share based payment reserve, Asset Revaluat ion Reserve, ret ained earnings and deferred t ax liabilit ies on t he Consolidat ed inflation adjust ed st at ement of financial posit ion.

A member firm of Ernst & Young Global Limited

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Independent Auditor's report (continued)

Seed Co Limit ed

Since opening balances affect the determinat ion of financial performance, we were unable t o det ermine whether adjustments t o Deferred t ax movement (included in Income Tax Expense), Cost of sales, share of exchange differences on t ranslat ion of foreign operat ion income and Share of ot her comprehensive income on t he Consolidat ed inflat ion adjusted st at ement of profit or loss and ot her comprehensive income and working capit al changes on t he Consolidat ed inflat ion adjust ed St at ement of cashflows might be necessary for t he year ended 31 March 2021 .

Our audit opinion on the Consolidat ed inflat ion adjust ed financial st at ement s for t he period ended 31 March 2021 was modified accordingly. Our opinion on t he current period's consolidat ed inflat ion adjusted financial st at ements is also modified because of t he possible effect of t his mat t er on t he comparabilit y of t he current period's figures and t he corresponding figures.

b) Use of exchange rates which did not meet IAS21 requirements in prior year

Furt her cont ribut ing t o t he prior year modified opinion was the t ranslat ion of foreign denominat ed t ransactions and balances to ZWL using exchange rat es which did not meet IAS21 requirement s. Management has not rest at ed the prior year amount s in line wit h t he requirement s of IAS8 . As opening balances ent er into the det ermination of financial performance, t he following amounts on t he Consolidat ed inflat ion adjust ed st at ement of profit or loss for t he year ended 31 March 2022 are impacted:

• Depreciat ion (included in ot her operat ing expenses) stat ed at ZWL 306 188 132 (2021: ZWL 690 057 975)
• Deferred t ax movement (included in Income Tax Expense) st at ed at ZWL 717 051 939 (2021: ZWL (584 662 949))
• Cost of sales st at ed at ZWL 6 226 384 417 (2021: ZWL 3 630 406 949)
• Ot her income st at ed at ZWL 1 869 580 886 (2021: ZWL 1 566 566 718)

Consequent ly, ret ained earnings st at ed at ZWL 1 325 239 496 (2021: ZWL 7 398 259 285 ) on t he Consolidat ed inflat ion adjust ed stat ement of changes in equit y for t he year ended 31 March 2022 is impacted. The misst at ement s could not be quant ified as an appropriat e exchange rat e could not be ident ified for t he period.

Furt her t o t he amount s list ed above, the f ollowing corresponding numbers remain misst at ed on t he Consolidat ed inflat ion adjusted financial st at ement s; Propert y, Plant and Equipment , Invent ories, Trade and ot her receivables, Cash and cash equivalent s, foreign t rade payables included in Amount s due t o relat ed parties, Deferred tax liabilit ies, long term and short -t erm borrowings, Revenue and Finance cost s. Our opinion on t he current period's financial st at ement s is t herefore also modified because of t he possible effect s of t his mat t er on comparabilit y of t he current period figures and corresponding figures.

c) Inappropriate accounting for blocked funds

In prior year, t he Group's foreign denominat ed liabilit ies relat ing t o amounts held wit h the cent ral bank were inappropriat ely held at USD1: ZWL1 instead of t ranslat ing t hem at an IAS21 compliant exchange rat e. Management has not rest at ed the prior year amount s in line wit h the requirement s of IAS 8 t o correct t his error . Consequent ly, corresponding amounts for Amount s due t o relat ed part ies on t he Consolidat ed inflat ion adjust ed st at ement of financial posit ion remain misst ated, impacting comparabilit y of t he current year and prior period figures. Furt her, as opening balances ent er the det erminat ion of financial performance, exchange gain/ loss (included in ot her income) st at ed at ZWL 1 483 417 524 (2021: ZWL 178 211 306 ) on t he Consolidat ed inflation adjust ed st at ement of profit or loss and ret ained earnings st at ed at ZWL 1 325 239 496 (2021: ZWL 7 398 259 285 ) on the Consolidat ed inflat ion adjust ed stat ement of changes in equit y remain impacted.

d) Inappropriate translation of a foreign associate on consolidation

In prior year, the foreign associat e was t ranslat ed t o Group functional and report ing currency of ZWL at an inappropriat e exchange rat e which did not meet IAS21 requirements. The misst atement could however not be quant ified as an appropriate exchange rat e has not been ident ified. Management has not restat ed t he prior year amount s in line wit h t he requirements of IAS 8 .

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