TIDMLZM
RNS Number : 9947R
LonZim PLC
11 November 2011
LonZim Plc
("LonZim" or "the Company")
Results for the year ended 31 August 2011
LonZim Plc (AIM:LZM), the investment company specifically
focused on the recovery of Zimbabwe, is pleased to announce its
full year results to 31 August 2011.
A copy of the Company's annual report is available on the
Company's website at www.lonzim.co.uk and will be posted to
shareholders shortly.
LonZim was established in December 2007 to specifically focus on
Zimbabwe and has built a strong portfolio of assets and operations
that are well positioned to grow as the Zimbabwean economy
recovers.
-- As a result of the improving economic stability in Zimbabwe,
LonZim continued to see progress in its operations during the
year.
-- The company had net assets of GBP30.878m on 31 August 2011.
-- The market capitalisation of the company was GBP12.499m on 10 November 2011.
-- LonZim reported a turnover of GBP5.926m for the year (2009:
GBP4.900m) - a 21% year-on-year growth.
-- Trading remained extremely challenging during the period as
Zimbabwe comes out of economic turmoil but by the year end the
company had started to see profitable trading in its main
operations.
-- Turnover growth was strong in both the Hotels and Support
Services division and gross margin across the group rose by over
55%.
-- With the growth of the market, the majority of LonZim's
subsidiary companies have become more established reducing their
need for head office support for their operations going
forward.
Enquiries
LonZim Plc
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David Lenigas Executive Chairman +44 (0) 7881 825 378
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Geoffrey White Chief Executive Officer +44 (0) 7717 307 308
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David Armstrong Finance Director +44 (0) 7833 054 693
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WH Ireland Ltd: Nomad and Broker
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James Joyce +44 (0) 20 7220 1666
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Pelham Bell Pottinger
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Gavin Davis +44 (0) 20 7861 3159
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Charles Goodwin +44 (0) 20 7861 3117
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Chief Executive's Review
LonZim Plc ("LonZim") has seen a continuing recovery in the
Zimbabwean economy, building improved economic stability. The
general economic activity levels in Zimbabwe are starting from a
very low base but, encouragingly, this is growing month on month,
achieving a reported 8.1% growth in GDP in 2010.
Zimbabwe remains a country with strong potential. The
fundamentals are still in place to recreate the historic levels of
economic activity that were seen in the eighties and nineties when
Zimbabwe was one of the most successful economies in Africa driven
by agriculture, mining and tourism.
Zimbabwe has the necessary infrastructure for rapid economic
recovery and the workforce continues to be one of the most skilled
and literate in Africa. The necessary power supply to support
industry remains a significant challenge, but this is also
improving as plans to increase output are implemented and further
production capacity comes on-line.
During the period LonZim has remained focused on its core
objective to own and develop a range of strong businesses, build
first class management teams in those businesses and capitalise
them as necessary to be first back to market as the economy
recovers and grows.
From a management perspective, each LonZim business has a strong
local management team that is expert in its field, and has a good
understanding of their respective markets in Zimbabwe. The Company
strives to attract and retain quality management and sees this as
an essential element for success. An example of this is Fungai
Makani, the General Manager at LonZim's Leopard Rock Hotel, winning
the best Private Sector Tourism Manager of the Year Award at the
National Annual Tourism Awards for 2011. The management team across
LonZim are all experienced and skillful and we believe they will be
able to drive the businesses forward over the coming years.
From a capital investment perspective, LonZim's subsidiaries are
coming to the end of their redevelopment phase. Each business has
had the necessary capital investment required to position them at
the forefront of their market. Notably, the refurbishment of the
Leopard Rock Hotel has developed the property into an international
standard venue that is now attracting conferences and guests from
around the world. Celsys, the commercial printing company, has
purchased and installed a range of further printing presses and
finishing equipment to make it into one of the leading print
companies in Zimbabwe. FMNA has seen the investment into its
instant messaging systems create a business that now has access to
a mobile telecom subscriber base of over 45 million and, during the
year, it has seen its first real revenues being generated from
Econet in Zimbabwe.
LonZim has historically striven to be the best in each market
where it operates. As the economy recovers, each LonZim business is
well positioned to benefit and, importantly, has the necessary
skills, resources and capabilities to grow.
Group turnover for the year was GBP5,926,000 compared to the
previous year of GBP4,900,000, generating a loss before tax of
GBP6,611,000, which compared to the previous year's loss before tax
of GBP5,716,000. Gross profit for the year has increased by 55%
(GBP1,200,000) when compared to the previous year.
With the continued economic development in Zimbabwe, the high
historic costs of keeping businesses open and restructuring for
recovery are coming to an end and normal trading margins are
returning to the market.
An operational review of the companies within the LonZim
portfolio follows:
Leopard Rock Hotel (Pvt) Limited ("Leopard Rock") (100%
holding)
This iconic property, with a worldwide reputation, has completed
its initial refurbishment program and has brought in high calibre
staff to position the hotel as one of Zimbabwe's leading
properties. The General Manager won the best Private Sector Tourism
Manager of the Year Award in Zimbabwe and the restaurant has an
enviable reputation. The hotel is seeing strong growth in occupancy
driven by a growing understanding that it is back at the top of
Zimbabwe's market, combined with the increasing need for
conferences and accommodation as the economy recovers. The golf
course remains a strong attraction for the property and the next
phase of development will include upgrading it to its original
championship standard and, potentially, the addition of a spa to
ensure the hotel offers a total destination package. Plans to
further develop the 400 hectare game park are also under
review.
The hotel industry is expected to be one of the sectors of the
economy that will recover the fastest and the market for the
Leopard Rock Hotel is demonstrably beginning to recover. At year
end the Leopard Rock Hotel was independently valued at US$18.50
million (GBP11.32 million) (2010: US$15.25 million (GBP9.83
million)).
Gardoserve (Pvt) Limited (trading as "Millchem") (100%
holding)
Millchem, which formerly traded as Millpal, is an industrial
chemical distributor and as such its success is directly linked
with the size and growth of the economy. During the year the
company has seen a strong recovery in the sector, and has revised
and rebuilt its supplier network to meet the forecast growing
demand for chemicals in the industrial and mining sectors. Millchem
is the leading supplier of industrial solvents and metal treatment
products in Zimbabwe. During the year it has established new routes
of supply to ensure that it provides an exceptional service to its
customers and is highly competitive as the market recovers.
Specifically, after entry into the mining industry, encouraging
growth has been noted in the supply of chemicals to the mining
industry as levels of output begin to recover.
Celsys Limited ("Celsys") (60% holding)
Celsys, which is listed on the Zimbabwe Stock Exchange, has
established itself as one of the leading commercial and security
printing companies in Zimbabwe and undertook a significant
refurbishment of its premises during the year. The management team
has been strengthened and the addition of new equipment, finishing
and processing capabilities puts Celsys at the forefront of its
market. Revenues and margins started at a very low base but Celsys
has established a strong position in the printing market and, as a
result of its professional service levels, is seeing very strong
growth in the market as it recovers. The average size of each order
is increasing and monthly revenues are developing well.
Celsys also leases ATMs and POS machines to banks in Zimbabwe.
This business is driven by a minimum guaranteed lease payment
combined with a fee per transaction. The use of ATMs across the
country has increased significantly during the year.
ForgetMeNot Africa (B.V.I.) Limited ("FMNA") (51% holding)
FMNA provides 'message optimiser' applications for mobile
phones, turning basic GSM phones into 'smart phones', providing
access to e-mail, Facebook and instant messaging services via even
the most basic cellphone handset, which is an important facility
for Africa. During the year, LonZim purchased the exclusive rights
for the FMNA product platform in Africa for US$1 million (GBP0.61
million).
FMNA's major success has been with Econet Zimbabwe which is now
producing monthly revenues. Other networks where FMNA has been
deployed include Safaricom Kenya, Econet Lesotho, Globacom Nigeria,
Warid Congo and Yu and Essar in Kenya.
FMNA now has access to over 45 million cellphone subscribers in
6 countries and plans to expand throughout Africa as the product
range is developed and its services are synchronised to interact
with individual networks.
Paynet Limited ("Paynet") (100% holding)
Paynet provides electronic data interchange ("EDI") SWITCH
services for all 25 banks in Zimbabwe. The number of transactions
processed in the country can be directly correlated with the growth
and size of the economy. Paynet has seen the number of transactions
handled in the year more than double, a clear sign of the economic
recovery that is underway. Paynet also provides transaction
services for over 1,000 of Zimbabwe's largest corporate
companies.
Autopay (Pvt) Limited ("Autopay"), a subsidiary of Paynet, is
the market leading salary bureau and payroll software provider.
Like Paynet, Autopay has seen strong growth, with the number of
payslips processed growing rapidly. Autopay has grown its customer
base to over 160 payrolls in Zimbabwe.
Tradanet (Pvt) Limited ("Tradanet"), also a subsidiary of
Paynet, provides processing of payroll backed loans to corporate
employees. The business has seen strong growth during the year as
workers become more confident in the employment environment and, as
a result, are seeking credit facilities. Defaults on this type of
loan remain very low and the business is seeing the average size
and number of loans increase. The loan book arranged through a
local financial institution in Zimbabwe and administrated by
Tradanet, has grown to US$50 million (GBP30.58 million) as the
market has recovered.
Indigenization
Following an extensive review and in-depth discussions the
Company submitted a proposed indigenization plan to the Government,
which has been welcomed and approved. The process is subject to
various clarifications and recommendations. The plan outlines an
agreed process whereby, via Zimbabwean financial institutions,
state institutions and the wider population, it is possible for 51%
of the equity in the Company to be acquired by Zimbabweans over a
four year period.
Disposal
On 4 October 2011, LonZim announced that it had completed an
agreement with Lonrho Hotels (Holdings) Limited to dispose of its
80% holding in Aldeamento Turistico de Macuti SARL for US$5.1
million (GBP3.1 million), a company with a long lease on a
prospective coastal development site in Beira, Mozambique, as part
of LonZim's growing focus on the economic opportunities within
Zimbabwe.
Change in reporting currency
The Directors have made the decision for the Company to report
in US Dollars going forward in order to give a clearer
understanding of the Company's performance, reflecting the profile
of the Group's revenue and results, which are primarily in US
Dollars. The change is effective from 1 September 2011 and the
interim results for the six months ending 29 February 2012 will
therefore be reported in US Dollars.
Funding
Post year end the Company raised GBP917,341 from an existing
shareholder via a placing of 3,988,439 shares at a price of 23
pence per share to provide working capital for the Group's existing
businesses and to provide the Company with the ability to continue
implementing its investment strategy.
Geoffrey White
Director & Chief Executive Officer
11 November 2011
Corporate Responsibility
LonZim has continued with its programme of corporate
responsibility activities, which it recognises is an important
component of building successful businesses.
Protecting the environment and supporting local communities
The Group sees the importance of protecting the environment in
which its companies operate and seeks to contribute to local
communities:
-- The Leopard Rock Hotel, in conjunction with Wildlife
Environmental Protection Unit (WEPU), the business community and
National Parks, has started an anti-poaching unit whereby a Leopard
Rock employee is a part of the WEPU unit on a voluntary basis and
spends one day a week on WEPU duties. The National Parks training
facility has seen more than 300 snares being cleared from the area
and several arrests for poaching have been effected by WEPU scouts,
thus preserving a vital component of Zimbabwe's tourism
industry.
-- Leopard Rock also organised training with the National Parks
for all its employees and the neighbouring community to learn about
protected species of flowers, animals and trees and hunting laws to
protect the flora and fauna in the area.
-- Paynet has developed a relationship with a local children's
home with a view to identifying initiatives and projects which it
will sponsor on an ongoing basis. For the coming year, Paynet has
paid the school fees for four disabled and disadvantaged children
and is financing the repair of some of the home's facilities, which
Paynet employees will be involved with.
-- Celsys has supported various local institutions by providing free printing services.
Investing in our workforce and their wellbeing
LonZim is committed to attracting and retaining quality human
resources to support the development of Group companies and
encourages professional development of all Group employees:
-- Paynet has continued to endorse its Skillsoft Learning
Initiative Paynet Zimbabwe ("LIPZ") programme which offers network
and systems administration as well as customer support services
training. Of the nine students trained last year, all found
employment after completing the programme, three of whom are now
working at Paynet.
-- Paynet is looking to build on the success of the LIPZ
programme and is currently shortlisting potential candidates from
local universities with the aim of taking on four Information
Technology Industrial undergraduates on placement for the
forthcoming year for an eight month attachment period.
-- Millchem actively encourages employees' studies and assists
with the payment of course fees for professional development.
Members of management are also sent on seminars and short courses
to enhance their leadership and performance skills.
-- Celsys provide loans to employees for approved work related
courses and degrees. The loans are then refunded upon successful
completion of the course. Employee retention is encouraged by the
existence of long service award bonuses for every five consecutive
years worked at the company.
-- Leopard Rock Hotel provides ongoing hotel management training
to university students. The hotel has also collaborated with a
local Polytechnical College to train restaurant service staff. The
most successful are taken on as entry-level employees.
-- The Group conducts all of its activities in a manner which
achieves the highest practicable standards of health and safety to
ensure employees' wellbeing:
-- Millchem operates to strict hazardous chemical safety
standards and is also guided by the National Social Security
Authority standards to protect the welfare of its employees. These
ensure that employees are sent for medical tests every one to two
years to make sure that they are not being adversely affected by
constant contact with hazardous chemicals. Safety clothing is also
purchased for employees every year.
-- First aid training is encouraged across the Group.
Directors
David Lenigas, 50, Executive Chairman
David Lenigas holds a Bachelor of Applied Science in Mining
Engineering. He has extensive experience operating in the public
company environment and is the Executive Chairman of Lonrho Plc and
is also Chairman of Leni Gas & Oil Plc, Solo Oil Plc, and
Lonrho Mining Limited and is a Director of Vatukoula Gold Mines Plc
and Reef Resources Ltd.
Geoffrey White, 50, Director and Chief Executive Officer
Geoffrey White is a Director and the Chief Executive Officer of
Lonrho Plc and holds a BSc in Economics and Management Science.
During his career he has held senior management roles with Thomas
Tilling Plc, BTR Plc, Dee Corporation Plc, Asda Plc and latterly
worked for five years for a private investment fund based in
London.He has been responsible for the planning, financing,
development and management of a range of projects in the leisure,
industrial and natural resource sectors. These projects include
establishing joint ventures with international corporations such as
Hilton Hotels International, Ford Motors (PAG), Praton
International GmbH and FFS Refiners (Pty) Ltd.
David Armstrong, 46, Finance Director
David Armstrong (FCA) is also the Finance Director of Lonrho
Plc. David brings with him extensive experience of operating across
Africa having been, until October 2004, the Commercial Director of
Diageo Africa with combined functional responsibility for finance,
information systems, strategy and business development. He
contributed to the successful deployment of Diageo's pan-African
growth strategy, encompassing over 50 countries. More recently, he
has been the COO of McArthurGlen in the UK and Europe.
Emma Priestley, 38, Executive Director
Emma Priestley worked in investment banking for five years
following a career as a mining engineer. She has a background in
mining and financial services having worked with consultants IMC
Mackay & Schnellman, investment bank CSFB, advisors VSA
Resources and Ambrian Partners, where she worked as a corporate
broker and advisor. Emma is a graduate of Camborne School of Mines,
a Chartered Mining Engineer and Chartered Mineral Surveyor. She is
also an Executive Director of Lonrho Plc.
Paul Turner, 64, Non-Executive Director
Paul Turner is a Chartered Accountant and past President of the
Institute of Chartered Accountants of Zimbabwe. He is a highly
respected and knowledgeable member of the Zimbabwean business
community. He was a partner at Ernst & Young in Harare,
Zimbabwe, for over thirty years and brings an unparalleled level of
experience in the structure and operation of businesses in
Zimbabwe.
Paul Heber, 48, Non-Executive Director
Paul Heber is an investment manager and stockbroker with more
than 20 years experience in global stock markets, following 3 years
in the oil industry. Formerly with SGHambros, Nat West and WI Carr,
he is now with bespoke boutique Savoy Investment Management (with
in excess of GBP1.2 billion of private and institutional funds
under management), regulated by both the FSA in London and the FSB
in Johannesburg. He has a broad pan-African clientele alongside his
domestic UK, European and Bermudan business. Paul is also a
Non-Executive Director of Shanta Gold Plc.
Jean Ellis, 42, Non-Executive Director
Jean Ellis is a Chartered Accountant and Chartered Tax Advisor,
and holds an Insolvency Practitioner's license. She is the senior
partner in the regional firm of Chartered Accountants, Duncan
Sheard Glass, having been a partner there since 2002. Prior to
this, she was Group Financial Controller and Tax Manager of Lonrho
Plc and holds a number of directorships for its subsidiary
companies. Jean has a Bachelor of Arts degree in Pure Mathematics
from Liverpool University. Jean was formerly Finance Director of
Lonrho Plc and is now a Non-Executive Director of that company. She
was also formerly Finance Director of LonZim Plc.
Colin Orr-Ewing*, 69, Non-Executive Director
Colin Orr-Ewing is a graduate of Oxford University in Geography
and has been involved in the natural resources sector for 35 years.
He began his career as an investment manager for the Shell Pension
Fund in London after completing his education as a Certified
Accountant. His experience covers both the oil and mining
industries and he has been a director of UK and Canadian oil
companies and Irish and Canadian mining companies. Mr Orr-Ewing
also advises a fund management company on its natural resources
portfolios and has extensive experience in international financial
affairs. He was deeply involved in the oil industry from 1971
through to 1987 with numerous companies in the North Sea, Libya,
Nigeria and Algeria.
* Colin Orr-Ewing resigned as a Director on 31 October 2011.
Statement of Directors' Responsibilities in Respect of the
Directors' Report and the Financial Statements
The Directors are responsible for preparing the Directors'
Report and the financial statements in accordance with applicable
law and regulations. In addition, the Directors have elected to
prepare the Group and Parent Company financial statements in
accordance with International Financial Reporting Standards.
The Group and Parent Company financial statements are required
to give a true and fair view of the state of affairs of the Group
and Parent Company and of the profit or loss of the Group for that
period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with
International Financial Reporting Standards; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Parent
Company will continue in business.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Parent
Company's transactions and disclose with reasonable accuracy at any
time its financial position. They have general responsibility for
taking such steps as are reasonably open to them to safeguard the
assets of the Group and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation governing the preparation and
dissemination of financial statements may differ from one
jurisdiction to another.
Directors' Report For the year ended 31 August 2011
The Directors of LonZim Plc submit their report, together with
the audited financial statements for the year ended 31 August
2011.
Principal activities
During the year, the Group was an investment company with a
portfolio of investments in Zimbabwe and the Beira Corridor in
Mozambique. Post year end, on 4 October 2011, LonZim announced that
it had completed an agreement to dispose of its 80% holding in
Aldeamento Turistico de Macuti SARL, a company with a long lease on
a prospective coastal development site in Beira, Mozambique, as
part of LonZim's growing focus on the economic opportunities within
Zimbabwe.
Investment Strategy
The Company's investment objective is to provide Shareholders
with long term capital appreciation through the investment of its
capital primarily in Zimbabwe and, if appropriate, the region of
Mozambique known as the Beira Corridor, which links Zimbabwe to the
coast. While the Company does not have a particular sectoral focus,
utilising the investment skills of the Directors and their
advisors, the Company seeks to identify individual companies in
sectors best positioned to benefit should there be radical
improvements in Zimbabwe's economy. The Company may make
investments in the tourism, accommodation, infrastructure,
transport, commercial and residential property, technology,
communications, manufacturing, retail, services, leisure,
agricultural and natural resources sectors. The Company may also
make investments in businesses outside Zimbabwe that have a
significant exposure to assets, businesses or operations within
Zimbabwe. The Company will also look into expanding businesses and
brands currently owned by Lonrho Plc ("Lonrho"), or in which
Lonrho, has an interest in Zimbabwe. The Company will only be able
to achieve its investment objective in the event the Zimbabwean
economy radically improves.
Whilst there will not be any limit on the number or size of
investments the Company can make in any sector, the Directors seek
to diversify the Company's investments across various sectors in
order to mitigate risk and to avoid concentrating the portfolio in
any single sector.
The Company's interest in a proposed investment or acquisition
may range from a minority position to full ownership. The Company
intends, in any event, to actively manage the operations of the
companies it has invested in. The Company has an established
management team in Zimbabwe to provide local day to day management
of companies and businesses acquired. Wherever possible the Company
will seek to achieve Board control or financial control of its
portfolio companies. Indigenization legislation within Zimbabwe
may, however, prevent the Company from acquiring majority
shareholder control in Zimbabwean businesses.
The Directors believe that through their individual and
collective experience of investing and managing acquisitions and
disposals in Africa, they have the necessary skills to manage the
Company and, with the assistance of Lonrho under the management
services agreement detailed in the Company's AIM admission
document, to source deal flow. Prior to any investment decisions
being taken by the Board of the Company, a thorough due diligence
process is undertaken by the Company's appointed specialist
financial and legal advisors.
The Company's investment strategy is dependent upon future
radical improvement in the Zimbabwean economy, and it is therefore
possible that a significant period of time may elapse before an
investment by the Company will produce any returns. However, there
is no guarantee that the economy in Zimbabwe will improve.
Accordingly, the Company may not be able to make any profits and
may incur losses.
The Directors intend to seek the consent of the Shareholders for
the investment policy on an annual basis. The Company, Directors
and Lonrho will comply as a matter of policy with the US Office of
Foreign Assets Control and the European Union Council Regulation
(EC) No. 314/2004 regulations.
Results
The Group made a consolidated loss after non-controlling
interests of GBP5,988,000 (2010: loss GBP4,375,000) during the year
and this has been transferred to reserves. This is after charging
amortisation of intangible assets of GBP1,750,000 (2010:
GBP1,729,000) (see note 11).
Share capital
On 29 November 2010, the Company announced that it had raised
GBP4,987,904 by way of a placing of 17,813,944 new ordinary shares
at 28p per share, resulting in the issued share capital of the
Company being increased to 54,145,469 ordinary shares.
Post year end, on 16 September 2011, the Company announced that
it had raised GBP917,341 by way of a placing of 3,988,439 new
ordinary shares at 23p per share, resulting in the issued share
capital of the Company being increased to 58,133,908 ordinary
shares.
Business review and development
The Chief Executive's review of operations contains information
on developments during the year and key potential future
developments.
The requirements of the enhanced business review in relation to
strategy and progress thereon are contained in the Chief
Executive's review of operations. The principal risks and
uncertainties relate to the revenue generation in the Group's
businesses which, being located in Africa, are subject to
respective government policies, political stability, general
economic conditions in the relevant country and exposure to foreign
currency movements.
The Group monitors cash flow as its primary key performance
indicator. Given current global financial conditions, the Directors
are carefully monitoring cash resources within the Group and have
instigated a number of initiatives to ensure funding will be
available for meeting obligations as they fall due and planned
projects. If such funding cannot be secured, the projects will be
delayed or cancelled to ensure that the Group can manage its cash
resources for the foreseeable future and hence the financial
statements have been prepared on a going concern basis. The Group
also uses a number of other key performance indicators which are
measured at different tiers in the operation. At the top level, the
Group tracks turnover, gross margin, contribution to overheads,
cash generation and performance against budget.
The Directors wish to mitigate risk by proper evaluation of
every investment that is made and have therefore developed a risk
analysis reporting procedure, which links into the Company's
Corporate Governance procedures.
Further information regarding the Group's policies and exposure
to financial risk can be found in note 25 to the financial
statements.
Post balance sheet events
Details of significant events since the reporting date are
contained in note 32 to the financial statements.
Dividends
The Directors do not recommend the payment of a dividend (2010:
GBPNil).
Corporate governance
Compliance with the UK Corporate Governance Code
The Directors recognise the value of the UK Corporate Governance
Code (formerly the Combined Code on Corporate Governance) and,
whilst under AIM rules full compliance is not required, the
Directors have considered the recommendations and applicability in
respect of the Company insofar as is practicable and appropriate
for a public company of its size.
Board of Directors
During the year the Board of Directors comprised of four
Executive Directors, one of whom is the Chairman, and four
Non-Executive Directors. Mr Colin Orr-Ewing subsequently resigned
as a Director on 31 October 2011 and the Board has commenced a
review of suitable Non-Executive Directors to complement the skills
of the existing team. The Directors are of the opinion that the
Board comprises a suitable balance to enable the recommendations of
the Code to be implemented to an appropriate level. The Board,
through the Chairman and Chief Executive Officer in particular,
maintains regular contact with its advisors, public relations
consultants and institutional investors in order to ensure that the
Board develops an understanding of the views of the major
shareholders of the Company.
The Board meets quarterly and is responsible for formulating,
reviewing and approving the Company's strategy, financial
activities and operating performance. Day to day management is
devolved to the executive management who are charged with
consulting the Board on all significant financial and operational
matters. Consequently, decisions are made promptly following
consultation amongst the Directors and managers concerned, where
necessary and appropriate.
All necessary information is supplied to the Directors on a
timely basis to enable them to discharge their duties effectively
and all Directors have access to independent professional advice at
the Company's expense, as and when required.
The Chairman is available to meet with institutional
shareholders to discuss any issues and concerns regarding the
Group's governance. The Non-Executive Directors can also attend
meetings with major shareholders, if requested.
The participation of both private and institutional investors at
the Annual General Meeting is welcomed by the Board.
Internal controls
The Directors acknowledge their responsibility for the Company's
and the Group's systems of internal control, which are designed to
safeguard the assets of the Group and ensure the reliability of
financial information for both internal use and external
publication. Overall control is ensured by a regular detailed
reporting system covering the state of the Group's financial
affairs. The Board has developed procedures for identifying,
evaluating and managing the significant risks that face the Group,
which will be implemented in the coming months.
Any system of internal control can provide only reasonable, and
not absolute, assurance that material financial irregularities will
be detected or that the risk of failure to achieve business
objectives is eliminated.
Committees
The Board has devolved duties to the following committees:
Audit Committee
The role of the Audit Committee is to oversee the nature and
scope of the annual audit, management's reporting on internal
accounting standards and practices, financial information and
accounting systems and procedures and the Company's financial
reporting statements. The Audit Committee's primary objectives
include assisting the Directors in meeting their responsibilities
in respect of the Company's continuous financial disclosure
obligations and overseeing the work of the Company's external
auditors. The Audit Committee comprises Paul Turner (Chairman),
Paul Heber and Jean Ellis.
Remuneration Committee
The Remuneration Committee makes recommendations to the Board on
the remuneration policy that applies to Executive Directors and
senior employees. During the year the members of the the
Remuneration Committee were Paul Heber (Chairman), Paul Turner and
Colin Orr-Ewing. Subsequent to Colin Orr-Ewing's resignation on 31
October 2011, the Remuneration Committee comprises Paul Heber
(Chairman) and Paul Turner.
Nomination Committee
The Nomination Committee is responsible for identifying
candidates to fill vacancies on the Board, as and when they arise,
and nominate them for approval by the Board. The Nomination
Committee comprises Paul Heber (Chairman), Paul Turner and Geoffrey
White.
Declared substantial shareholdings
The Directors have been advised of the following shareholdings
at 10 November 2011 in 3 per cent. or more of the Company's issued
share capital:
Number of Percentage
shares of the
issued
capital
Lonrho Plc 13,324,010 22.92%
Consilium Emerging Market Absolute Return
Master Fund Ltd 8,179,466 14.07%
HSBC Client Holdings Nominee (UK) Limited 5,815,050 10.00%
MKM Longboat Multi-Strategy Master Fund 4,860,000 8.36%
Frank Russell Company / Russell Investments
Limited 4,385,284 7.54%
Directors
The following Directors have held office during the year: Mr D A
Lenigas (appointed 7 November 2007); Mr G T White (appointed 7
November 2007); Ms E K Priestley (appointed 7 November 2007); Mrs J
M Ellis (appointed Finance Director 7 November 2007 and became a
Non-Executive Director 6 October 2009 upon appointment of Mr D J
Armstrong); Mr P D Heber (appointed 7 November 2007); Mr P Turner
(appointed 1 July 2008); Mr C Orr-Ewing (appointed 14 September
2009); Mr D J Armstrong (appointed 6 October 2009).
Mr C Orr-Ewing resigned as Director on 31 October 2011.
Biographical details of all Directors are set out on pages 6 and
7.
Directors' share interests
The Directors' interests in the shares of the Company at the
beginning and end of the year were as follows:
At 31.08.11 At 01.09.10
Directors No of shares No of shares
D A Lenigas 250,000 250,000
G T White 150,000 150,000
E K Priestley Nil Nil
J M Ellis Nil Nil
P D Heber 176,496 50,000
P Turner Nil Nil
D Armstrong Nil Nil
C Orr-Ewing 25,000 25,000
Share options held by the Directors are detailed in note 19 of
the financial statements.
All of the above interests are recorded in the Company's
Register of Directors' Share and Debenture Interests. No Director
has a beneficial interest in the shares or debentures of any of the
Company's subsidiary undertakings.
There have been no other changes in Directors' share interests
since 31 August2011.
Anti-Corruption and Bribery Policy
The Company has in place an Anti-Corruption and Bribery Policy
which has been adopted by the Company across all divisions of the
Group. The Board has overall responsibility for ensuring compliance
by Directors, employees and other persons associated with the Group
with applicable legal and ethical obligations. The Company's
Finance Director has primary and day-to-day responsibility for
implementation of the policy. Management at all levels of the Group
are responsible for ensuring those reporting to them are made aware
of, and understand, the policy. The policy gives guidance on risk
identification and the procedures to follow where a risk is
identified, together with clear guidelines on gifts, entertainment
and donations.
Insurance
The Company has Directors' and Officers' liability insurance
cover in place for Group Directors.
Share price performance
Between 1 September 2010 and 31 August 2011 the share price
varied between a high of 33p and a low of 19.1p. At 31 August 2011
the mid-market price of the shares at close of business was 21.5p.
At 10 November 2011 the mid-market price of the shares was
21.5p.
Political and charitable donations
No political or charitable donations have been made by the Group
during the year, save for those disclosed on page 5. The Group is
involved with a number of charitable projects through its
subsidiaries, details of which are also set out on page 5.
Payment to suppliers
The Group does not follow any code or standard with regard to
the payment of its suppliers. The Group's policy is to agree terms
and conditions with suppliers in advance; payment is then made in
accordance with the agreement provided the supplier has met the
terms and conditions. Amounts due to suppliers at the reporting
date are contained in note 23.
Change in reporting currency
The Directors have made the decision for the Company to report
in US Dollars going forward in order to give a clearer
understanding of the Company's performance, reflecting the profile
of the Group's revenue and results, which are primarily in US
Dollars. The change is effective for the results for the six months
ending 29 February 2012.
Auditors
A resolution to re-appoint KPMG Audit LLC and to authorise the
Directors to fix their remuneration will be proposed at the Annual
General Meeting.
The Directors who held office at the date of approval of this
Directors' Report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company's
Auditors are unaware; and each Director has taken all the steps
that he/she ought to have taken as a Director to make
himself/herself aware of any relevant audit information and to
establish that the Company's Auditors are aware of that
information.
Annual General Meeting
The notice of meeting, together with a form of proxy, will be
sent out separately at a later date.
On behalf of the Board
A. Dent.
Company Secretary
11 November 2011
Report of the Independent Auditors, KPMG Audit LLC, to the
members of LonZim Plc
We have audited the Group and Parent Company financial
statements (the "financial statements") of LonZim Plc for the year
ended 31 August 2011 which comprise the Consolidated Income
Statement, the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Changes in Equity, the Consolidated and
Company Statements of Financial Position, the Consolidated and
Company Statements of Cash Flows and the related notes. The
financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs).
This report is made solely to the Company's members, as a body.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of Directors and Auditor
As explained more fully in the Directors' Responsibilities
Statement set out on page 8, the Directors are responsible for the
preparation of financial statements that give a true and fair view.
Our responsibility is to audit, and express an opinion on, the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
(APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Group's circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the Directors; and the overall
presentation of the financial statements.
Opinion on the financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the Group and
Parent Company's affairs as at 31 August 2011 and of the Group's
loss for the year then ended; and
-- have been properly prepared in accordance with IFRSs.
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man
IM99 1HN
11 November 2011
Consolidated income statement
For the year ended 31 August 2011
Note 2011 Total 2010 Total
GBP000 GBP000
Revenue 4 5,926 4,900
Cost of sales 5 (2,560) (2,734)
------------ -----------
Gross profit 3,366 2,166
Operating costs 5 (9,602) (8,311)
------------ -----------
Results from operating activities before
net finance (costs)/income (6,236) (6,145)
Finance income 7 183 439
Finance costs 7 (558) (10)
------------ -----------
Net finance (costs)/income (375) 429
------------ -----------
Loss before tax (6,611) (5,716)
Income tax 8 42 582
------------ -----------
Loss for the year (6,569) (5,134)
------------ -----------
Attributable to:
Owners of the Company 17 (5,988) (4,375)
Non-controlling interests 17 (581) (759)
------------ -----------
Loss for the year (6,569) (5,134)
------------ -----------
Basic loss per share (pence) 9 (12.4p) (12.4p)
Diluted loss per share (pence) 9 (12.4p) (12.4p)
The Directors consider that all results derive from continuing
activities.
Consolidated statement of comprehensive income
For the year ended 31 August 2011
Note 2011 2010
GBP000 GBP000
Loss for the year 17 (6,569) (5,134)
Other comprehensive income
Foreign currency translation differences
for overseas operations 17 (605) (89)
Revaluation of property, plant and equipment 17 1,298 2,546
Total comprehensive loss for the year (5,876) (2,677)
-------- --------
Attributable to:
Owners of the Company (5,343) (2,022)
Non-controlling interests (533) (655)
-------- --------
Total comprehensive loss for the year (5,876) (2,677)
-------- --------
Consolidated statement of changes in equity
For the year ended 31 August 2011
2011 2010
Non-controlling Non-controlling
Owners interests Owners interests
of the Total of Total
Company the Company
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 September 31,670 240 31,910 32,579 895 33,474
Total comprehensive
loss for the year (5,343) (533) (5,876) (2,022) (655) (2,677)
Transaction with owners
of the Company
Share issue net of issue
costs 4,844 - 4,844 1,113 - 1,113
At 31 August 31,171 (293) 30,878 31,670 240 31,910
--------- ---------------- -------- ------------- ---------------- --------
Consolidated and Company statements of financial position
As at 31 August 2011
Note Group Company Group Company
2011 2011 2010 2010
GBP000 GBP000 GBP000 GBP000
Assets
Property, plant and equipment 10 19,597 83 18,548 24
Goodwill 11 4,325 - 4,325 -
Other intangible assets 11 4,253 2,320 5,534 3,645
Investment in subsidiaries 12 - 2,736 - 2,736
Deferred tax assets 21 798 - 645 -
--------- --------- -------- --------
Total non-current assets 28,973 5,139 29,052 6,405
--------- --------- -------- --------
Assets held for sale 10 2,111 - 3,557 -
Other investments 13 67 - 101 -
Inventories 14 498 - 339 -
Trade and other receivables 15 2,760 23,666 2,922 21,761
Cash and cash equivalents 16 658 365 291 38
--------- --------- -------- --------
Total current assets 6,094 24,031 7,210 21,799
--------- --------- -------- --------
Total assets 35,067 29,170 36,262 28,204
--------- --------- -------- --------
Equity
Issued share capital 17,18 5 5 4 4
Share premium 17,18 38,310 38,310 33,467 33,467
Revaluation reserve 17,18 3,918 - 2,750 -
Foreign exchange reserve 17 (943) - (420) -
Share based payment reserve 17,18,19 165 165 165 165
Retained losses 17 (10,284) (11,155) (4,296) (7,694)
--------- --------- -------- --------
Total equity attributable to
owners of the Company 17 31,171 27,325 31,670 25,942
Non-controlling interests 17 (293) - 240 -
--------- --------- -------- --------
Total equity 30,878 27,325 31,910 25,942
--------- --------- -------- --------
Liabilities
Provisions 20 628 628 628 628
Deferred tax liabilities 21 815 - 933 -
--------- --------- -------- --------
Total non-current liabilities 1,443 628 1,561 628
--------- --------- -------- --------
Bank overdrafts 16 29 - - -
Current tax liabilities 160 35 41 35
Interest bearing loans 22 917 917 963 963
Trade and other payables 23 1,640 265 1,787 636
--------- --------- -------- --------
Total current liabilities 2,746 1,217 2,791 1,634
--------- --------- -------- --------
Total liabilities 4,189 1,845 4,352 2,262
--------- --------- -------- --------
Total equity and liabilities 35,067 29,170 36,262 28,204
--------- --------- -------- --------
These financial statements were approved by the Board of
Directors and authorised for issue on 11 November 2011. They
were signed on their behalf by:
G White Director & Chief Executive Officer
Consolidated and Company statements of cash flows
For the year ended 31 August 2011
Note Group Company Group Company
2011 2011 2010 2010
GBP000 GBP000 GBP000 GBP000
Cash flows from operating activities 24 (3,510) (2,139) (3,384) (2,061)
Increase in inventories 24 (159) - (145) -
Decrease/(increase) in cash
due from customers 24 162 (1,905) 19 (1,423)
(Decrease)/increase in cash
due to suppliers 24 (147) (372) (621) 38
--------- --------- --------- ---------
Cash used in operations 24 (3,654) (4,416) (4,131) (3,446)
Interest paid (147) - (14) -
Interest received 183 43 - 25
--------- --------- --------- ---------
Net cash used in operating activities 24 (3,618) (4,373) (4,145) (3,421)
--------- --------- --------- ---------
Cash flows from investing activities
Proceeds from disposal of property, 677 - - -
plant and equipment
Purchase of property, plant
and equipment 10 (1,011) (98) (1,705) -
Purchase of intangibles 11 (661) - - -
Proceeds from sale of investments 87 - 1,630 -
Acquisition of investments 13 (37) - - -
--------- --------- --------- ---------
Net cash used in investing activities (945) (98) (75) -
--------- --------- --------- ---------
Cash flows from financing activities
Proceeds from the issue of share
capital 17,18 4,987 4,987 1,113 1,113
Transaction costs of issue of
shares 17,18 (143) (143) - -
(Repayment of)/proceeds from
loans (46) (46) 963 963
--------- --------- --------- ---------
Net cash from financing activities 4,798 4,798 2,076 2,076
--------- --------- --------- ---------
Net increase/(decrease) in cash
and cash equivalents 235 327 (2,144) (1,345)
Cash and cash equivalents at
1 September 291 38 2,431 1,383
Foreign exchange movements 103 - 4 -
--------- --------- --------- ---------
Cash and cash equivalents at
31 August 629 365 291 38
--------- --------- --------- ---------
Notes to the financial statements
For the year ended 31 August 2011
1. Reporting entity
LonZim Plc (the "Company") is a company incorporated in the Isle
of Man. The consolidated financial statements of the Group for the
year ended 31 August 2011 comprise the Company and its subsidiaries
(together referred to as the "Group" and individually as "Group
entities").
The financial statements were authorised for issue by the
Directors on 11 November 2011.
2. Basis of preparation
Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the E.U. On publishing the parent company financial
statements here together with the Group financial statements, the
Company is taking advantage of the fact whereby under the Isle of
Man Companies Act 2006 there is no requirement to present a company
statement of comprehensive income in consolidated financial
statements.
Functional and presentation currency
The consolidated financial statements are presented in sterling,
which is the Company's functional currency. All financial
information presented has been rounded to the nearest thousand.
As of 1 September 2011, the Company changed its reporting
currency to the US Dollar.
Basis of measurement
The consolidated financial statements have been prepared on the
historical cost basis except for the following:
- aircraft measured at fair value;
- financial assets held for trading are measured at fair value; and
- land, buildings and plant and equipment are measured at revalued amounts.
New standards and interpretations not yet adopted
At the date of authorisation of the financial statements, the
following standards, which have not been applied to these financial
statements, were in issue but not yet effective:
- Amendments to IAS 1 Presentation of Financial Statements;
- Amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets;
- Amendments to IAS 19 Employee Benefits;
- IAS 27 Separate Financial Statements;
- IAS 28 Investments in Associates and Joint Ventures;
- IFRS 7 Disclosures - Transfers of Financial Assets;
- IFRS 9 Financial Instruments;
- IFRS 10 Consolidated Financial Statements;
- IFRS 11 Joint Arrangements;
- IFRS 12 Disclosure of Interests in Other Entities; and
- IFRS 13 Fair Value Measurement.
The Directors anticipate that the adoption of these standards in
future periods will have no material impact on the financial
statements of the Group.
Use of estimates and judgements
The preparation of financial statements in conformity with IFRSs
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from these estimates. The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision
and future periods if the revision affects both current and future
periods.
Judgements made by management in the application of IFRSs that
have significant effect on the financial statements and estimates
with a significant risk of material adjustment in the next year are
discussed in note 3.
Going concern
The Group's business activities and financial performance are
set out in the Chief Executive's Review on pages 2 to 4. In
addition, note 25 to the financial statements includes the Group's
objectives, policies and processes for managing its capital; its
financial risk management objectives; details of its financial
instruments and hedging activities; and its exposure to credit and
liquidity risk.
The Group has access to sufficient financial resources for its
needs. As a consequence, the Directors believe that the Group is
well placed to manage its business risks successfully despite the
current economic outlook.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the annual report and financial statements.
3. Significant accounting policies
The following accounting policies have been applied consistently
by Group.
(a) Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an investee
entity so as to obtain benefits from its activities. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date that control commenced until the
date that control ceases.
The interest of non-controlling shareholders is stated at the
non-controlling interests' proportion of the fair values of the
assets and liabilities recognised. Subsequently, losses applicable
to the non-controlling interests are allocated against their
interests even if doing so causes the non-controlling interests to
have a deficit balance.
The results of entities acquired or disposed of during the year
are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate.
Where necessary, the financial statements of the subsidiaries
are adjusted to conform to the Group's accounting policies.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Business combinations
The acquisition of subsidiaries is accounted for using the
acquisition method. The cost of the acquisition is measured at the
aggregate of the fair values, at the date of exchange of assets
given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquiree, plus
any costs directly attributable to the business combination. The
acquiree's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3
are recognised at their fair values at the acquisition date, except
for non-current assets that are classified as held for sale in
accordance with IFRS 5, which are recognised and measured at fair
value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the cost of the
business combination over the Group's interest in the fair value of
the identifiable assets, liabilities and contingent liabilities
recognised.
If, after reassessment, the Group's interest in the net fair
value of the acquiree's identifiable assets, liabilities and
contingent liabilities exceeds the cost of the business
combination, the excess is recognised immediately in the income
statement. The interest of non-controlling shareholders in the
acquiree is initially measured at the non-controlling interests'
proportion of the net fair value of the assets, liabilities and
contingent liabilities recognised.
(b) Intangible assets
Goodwill
Goodwill arising on consolidation is recognised as an asset.
Following initial recognition, goodwill is subject to impairment
reviews, at least annually, and measured at cost less accumulated
impairment losses. The recoverable amount is estimated at each
reporting date. Any impairment loss is recognised immediately in
the income statement and is not subsequently reversed when the
carrying amount of the asset exceeds its recoverable amount.
Any impairment losses recognised in respect of cash generating
units are allocated first to reduce the carrying amount of any
goodwill allocated to cash-generating units (groups of units) and
then to reduce the carrying amount of other assets in the unit
(groups of units) on a pro rata basis.
On disposal of a subsidiary the attributable amount of goodwill
is included in the determination of the gain or loss on
disposal.
Other intangible assets
Other intangible assets are measured initially at cost and are
amortised on a straight-line basis over their estimated useful
lives. The carrying amount is reduced by any provision for
impairment where necessary.
On a business combination, as well as recording separable
intangible assets already recognised in the statement of financial
position of the acquired entity at their fair value, identifiable
intangible assets that are separable or arise from contractual or
other legal rights are also included in the acquisition statement
of financial position at fair value.
Amortisation of intangible assets is charged over their useful
economic life, on the following basis:-
Non-compete agreement 5 [1/2] years
Licences 5-6 years
Brand name 7 years
(c) Foreign currencies
The individual financial statements of each Group company are
presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial
position of each Group company are expressed in pounds sterling,
which is the functional currency of the Company, and the
presentational currency for the consolidated financial
statements.
As of 1 September 2011, the Company changed its reporting
currency to the US Dollar.
In preparing the financial statements of the individual
companies, transactions denominated in foreign currencies are
translated into the respective functional currency of the Group
entities using the exchange rates prevailing at the dates of
transactions. Non-monetary assets and liabilities are translated at
the historic rate. Monetary assets and liabilities denominated in
foreign currencies are translated into the functional currency at
the rates of exchange ruling at the reporting date. Non-monetary
assets and liabilities denominated in foreign currencies that are
measured at fair value are retranslated to the functional currency
at the exchange rate at the date that the fair value was
determined. Exchange differences arising on the settlement of
monetary items, and on the retranslation of monetary items, are
included in the income statement for the year, as either finance
income or finance costs depending on whether foreign currency
movements are in a net gain or net loss position. Exchange
differences arising on the retranslation of non-monetary items
earned at fair value are included within the income statement for
the period except for differences arising on the retranslation of
non-monetary items in respect of which gains and losses are
recognised directly in equity. For such non monetary items, any
exchange component of that gain or loss is also recognised directly
in other comprehensive income.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing at the reporting date.
Income and expenses are translated at the average exchange rates
for the period, unless exchange rates fluctuate so as to have a
material impact on the financial statements during that period, in
which case the exchange rates at the date of transactions are used.
Exchange differences arising, if any, are recognised in other
comprehensive income and are transferred to the Group's foreign
currency translation reserve within equity. Such translation is
recognised as income or as expenses in the period in which the
operation is disposed of.
(d) Taxation
The tax expense represents the sum of current tax and deferred
tax.
Current taxation
Current tax is based on taxable profit for the period for the
Group. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the reporting date.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the tax profit nor the accounting
profit. Deferred tax liabilities are recognised for taxable
temporary differences arising on the investments in subsidiaries
and associates, except where the Group is able to control the
reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited to
equity, in which case the deferred tax is also dealt with in
equity.
Deferred tax assets and liabilities are off set when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
3. Significant accounting policies
(e) Other investments
Other asset investments are stated at cost less accumulated
impairment losses.
(f) Property, plant and equipment
Long leasehold land and buildings, plant and machinery, motor
vehicles and fixtures and fittings are stated in the statement of
financial position at their revalued amounts, being the fair value
at the date of revaluation, less any subsequent accumulated
depreciation and subsequent accumulated impairment losses.
Revaluations are performed with sufficient regularity such that the
carrying amount does not differ materially from that which would be
determined using fair values at the reporting date.
Any revaluation increase arising on the revaluation of such
assets is credited to the revaluation reserve, except to the extent
that it reverses a revaluation decrease for the same asset
previously recognised as an expense, in which case the increase is
credited to the income statement to the extent of the decrease
previously charged. A decrease in carrying amount arising on the
revaluation of such asset is charged as an expense to the extent
that it exceeds the balance, if any, held in the revaluation
reserve relating to a previous revaluation of that asset.
Depreciation on revalued assets is charged to the income statement.
On subsequent sale or retirement of a revalued asset, the
attributable revaluation surplus remaining is transferred directly
to retained earnings.
All other assets are stated at depreciated historical cost less
accumulated depreciation and accumulated impairment losses.
Depreciation is charged so as to write off the cost or valuation
of assets, other than land, over their estimated useful lives, on
the following basis:
Freehold buildings 2% of cost
Leasehold land and buildings Over the term of the lease
Plant and machinery 10% of cost
Motor cars 15%-25% of cost
Fixtures and fittings 15%-25% of cost
The gain or loss arising on the disposal of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in the income
statement for the year.
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets, or where
shorter, over the relevant lease term.
No depreciation is provided on freehold land.
In respect of aircraft, subsequent costs incurred which lend
enhancement to future periods such as long term scheduled
maintenance and major overhaul of aircraft and engines are
capitalised and amortised over the length of the period benefiting
from these enhancements, except when assets are held for sale they
are accrued over the time to the next maintenance overhaul. All
other costs relating to maintenance are charged to the income
statement as incurred.
Property, plant and equipment identified for disposal are
reclassified as assets held for resale.
(g) Impairment of assets excluding goodwill
At each reporting date, the Group reviews the carrying amounts
of its tangible and intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of any impairment
loss. Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell
and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value and the risks specific to the asset for which the estimates
of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. Impairment loss is recognised as an expense
immediately, unless the relevant asset is carried at a revalued
amount in which case the reversal of the impairment loss is treated
as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised as income immediately, unless
the relevant asset is carried at a revalued amount, in which case
the reversal of the impairment loss is treated as a revaluation
increase.
(h) Financial instruments
Non-derivative financial instruments comprise investments in
equity, trade and other receivables, cash and cash equivalents,
loans and borrowings and trade and other payables.
Financial assets and financial liabilities are recognised in the
Group's statement of financial position when the Group becomes a
party to the contractual provisions of the instrument.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand
deposits and other short term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value. Bank overdrafts that are
repayable on demand and form an integral part of the Group's cash
management are included as a component of cash and cash equivalents
for the purpose of the statement of cash flows.
Trade receivables
Trade receivables are initially measured at fair value and are
subsequently measured at amortised cost using the effective
interest rate method. Appropriate allowances for estimated
recoverable amounts are recognised in profit or loss when there is
objective evidence the asset is impaired.
Trade payables
Trade payables are initially measured at fair value and are
subsequently measured at amortised cost using the effective
interest rate method.
Financial liabilities
Financial liabilities are classified according to the substance
of the contractual arrangements entered into.
Capital management
The Board's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the business. The Board of Directors monitors
the return on capital, which the Group defines as net operating
income divided by total shareholders' equity, excluding
non-controlling interests.
Bank borrowings
Interest bearing bank loans and overdrafts are recorded at the
proceeds received, net of direct issue costs. Finance charges,
including premiums payable on settlement or redemption and direct
issue costs, are accounted for on an amortised cost basis to the
income statement using the effective interest method and are added
to the carrying amount of the instrument to the extent that they
are not settled in the period in which they arise.
Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
(i) Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost comprises direct materials and where applicable direct
expenditure and attributable overheads that have been incurred in
bringing the inventories to their present location and condition.
Net realisable value represents the estimated selling price less
all estimated costs of completion and costs to be incurred in
marketing, selling and distribution.
(j) Share based payments
The Group provides benefits to certain employees (including
senior executives) of the Group in the form of share based
payments, whereby employees render services in exchange for shares
or rights over shares (equity-settled transactions).The cost of
these equity-settled transactions with employees is measured by
reference to the fair value of the equity instruments at the date
at which they are granted. The fair value is determined by using a
Black-Scholes model. The dilutive effect, if any, of outstanding
options is reflected as additional share dilution in the
computation of earnings per share.
The grant date fair value of options granted to employees is
recognised as an employee expense with a corresponding increase in
equity over the period that the employees become unconditionally
entitled to the options.
(k) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair
value less attributable transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised
cost with any difference between cost and redemption value being
recognised in the income statement over the period of the
borrowings on an effective interest basis.
(l) Dividends
Interim dividends are recognised as a liability in the period in
which they are proposed and declared.
Final dividends are recognised when approved by the
shareholders.
(m) Provisions
A provision is recognised in the statement of financial position
when the Group has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation. If the
effect is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
(n) Revenue recognition
Revenue is derived from the sale of goods and services and is
measured at the fair value of consideration received or receivable,
after deducting discounts, volume rebates, value-added tax and
other sales taxes. A sale of goods and services is recognised when
recovery of the consideration is probable, there is no continuing
management involvement with the goods and services and the amount
of revenue can be measured reliably.
A sale of goods is recognised when the significant risks and
rewards of ownership have passed to the buyer, the associated costs
and possible return of goods can be estimated reliably. This is
when title and insurance risk have passed to the customer and the
goods have been delivered to a contractually agreed location.
A sale of services is recognised when the service has been
rendered.
Aircraft lease income is recognised on an accruals basis over
the period of the lease.
(o) Leases
Leases are classified according to the substance of the
transaction. A lease that transfers substantially all the risks and
rewards of ownership to the lessee is classified as a finance
lease. All other leases are classified as operating leases.
Finance leases
Finance leases are capitalised at their fair value or, if lower,
at the present value of the minimum lease payments, each determined
at the inception of the lease. The corresponding liability is shown
as a finance lease obligation to the lessor. Leasing repayments
comprise both a capital and finance element. The finance element is
written off to the income statement so as to produce an
approximately constant periodic rate of charge on the outstanding
obligations. Such assets are depreciated over the shorter of their
estimated useful lives and the period of the lease.
Operating leases
Operating lease rentals are charged to the income statement on a
straight line basis over the period of the lease.
(p) Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset, which are assets
that necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use or sale. Investment income earned on the temporary
investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for
capitalisation.
All other borrowing costs are recognised in the income statement
in the period in which they are incurred.
(q) Loss per share
Basic loss per share is calculated based on the weighted average
number of ordinary shares outstanding during the year. Diluted loss
per share is based upon the weighted average number of shares in
issue throughout the year, adjusted for the dilutive effect of
potential ordinary shares. The only potential ordinary shares in
issue are employee share options.
(r) Non-current assets held for sale
Non-current assets that are expected to be recovered primarily
through sale or distribution rather than through continuing use are
classified as held for sale. Immediately before reclassification as
held for sale, the assets are remeasured in accordance with the
Group's accounting policies. Thereafter generally the assets are
measured at the lower of their carrying amount and fair value less
costs to sell. Impairment losses on initial classification as held
for sale and subsequent gains and losses on remeasurement are
recognised in the profit or loss. Gains are not recognised in
excess of any cumulative impairment loss.
(s) Segment reporting
A segment is a distinguishable component of the Group that is
engaged either in providing products or services (business
segment), or in providing products or services within a particular
economic environment (geographical segment), which is subject to
risks and rewards that are different from those of other
segments.
4. Segment reporting
Segment information is presented in respect of the Group's
business and geographical segments. The primary format, business
segments, is based on the Group's management and internal reporting
structure. The results of the business segments are reviewed
regularly by the Group's CEO to make decisions about resources to
be allocated to the segment and to assess its performance, and for
which discrete financial information is available.
Inter-segment pricing is determined on an arm's length
basis.
Segment results that are reported to the CEO include items
directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Unallocated items comprise mainly
income-earning assets and revenue, interest-bearing loans,
borrowings and expenses, and corporate assets and expenses
primarily relating to Company's head office.
Segment capital expenditure is the total cost incurred during
the period to acquire segment assets that are expected to be used
for more than one period.
There is no inter-segment revenue.
Business segments
For management purposes, the Group is currently organised into
four main business segments.
- Aviation
- Hotels
- Support Services
- Industrial chemical products
- Security printing products
- Telecoms
- Payroll services
- Head Office
Geographical segments
Support services and hotels operate in various parts of Zimbabwe
and the Beira Corridor of Mozambique. Separate geographical
analysis has therefore not been presented.
Business segments
Aviation Hotels Support Head Office Consolidated
Services
2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue from
external
customers 401 901 1,332 810 4,193 3,189 - - 5,926 4,900
======= ======= ======= ======= ======== ========= ======== ========= ========= =========
Total revenue 401 901 1,332 810 4,193 3,189 - - 5,926 4,900
======= ======= ======= ======= ======== ========= ======== ========= ========= =========
Segment result 299 (112) (743) (585) (2,212) (2,675) - - (2,656) (3,372)
Unallocated
central expenses - - - - - - (3,580) (2,773) (3,580) (2,773)
======= ======= ======= ======= ======== ========= ======== ========= ========= =========
Operating
profit/(loss) 299 (112) (743) (585) (2,212) (2,675) (3,580) (2,773) (6,236) (6,145)
======= ======= ======= ======= ======== ========= ======== ========= ========= =========
Net financing
(expense)/income (560) 113 (258) - 323 - 120 316 (375) 429
Income tax
credit/(expense) - - 87 7 (45) 575 - - 42 582
======= ======= ======= ======= ======== ========= ======== ========= ========= =========
(Loss)/profit
for the year (261) 1 (914) (578) (1,934) (2,100) (3,460) (2,457) (6,569) (5,134)
======= ======= ======= ======= ======== ========= ======== ========= ========= =========
All revenues relate to sale of goods, services and lease
income.
Unallocated central expenses include the following non-cash
items during the year:
2011 2010
GBP000 GBP000
- amortisation (see note 11) 1,750 1,729
- depreciation (see note 10) 40 14
Aviation Hotels Support Services Head Office Consolidated
2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Segment assets 3,765 5,059 15,914 16,463 6,517 3,688 8,870 11,052 35,067 36,262
Unallocated assets
======= ======= ======= ======= ========= ======== ======= ======= ======= =======
Total assets 3,765 5,059 15,914 16,463 6,517 3,688 8,870 11,052 35,067 36,262
======= ======= ======= ======= ========= ======== ======= ======= ======= =======
Segment liabilities 437 644 1,404 1,106 2,080 1,831 268 771 4,189 4,352
Total liabilities 437 644 1,404 1,106 2,080 1,831 268 771 4,189 4,352
======= ======= ======= ======= ========= ======== ======= ======= ======= =======
Depreciation - 318 124 54 293 292 39 14 456 678
======= ======= ======= ======= ========= ======== ======= ======= ======= =======
Amortisation of
intangible assets - - - - - - 1,750 1,729 1,750 1,729
======= ======= ======= ======= ========= ======== ======= ======= ======= =======
5. Group net operating costs
Fees payable to the Company's Auditors for:
The audit of the Group's annual financial
statements 110 100
The audit of the Company's subsidiaries
pursuant to legislation 30 20
----- -----
Total audit fees 140 120
2011 2010
GBP000 GBP000
Cost of sales 2,560 2,734
Administrative expenses 9,602 8,311
---------- ---------
Net operating costs 12,162 11,045
---------- ---------
Administrative expenses include management related overheads for
operations and head office.
Operating costs include:
Depreciation of property, plant
and equipment 456 678
Amortisation of intangibles
(other than goodwill) 1,750 1,729
Operating lease rentals
Land and buildings 12 33
Staff costs 2,586 2,236
Gain on investments 16 361
6. Personnel expenses
The aggregate remuneration comprised (including Executive
Directors):
2011 2010
GBP000 GBP000
Wages and salaries 2,512 2,143
Compulsory social security contributions 74 93
2,586 2,236
------- -------
The average number of employees (including Executive Directors)
was:
2011 2010
Number Number
Support services 198 179
Hotels 157 145
Head Office 7 7
------- -------
362 331
------- -------
2011 2010
GBP000 GBP000
Remuneration of Directors
Directors' emoluments (see note 30) 240 444
------- -------
52,776
7. Net finance (costs)/income
2011 2010
GBP000 GBP000
Recognised in income statement:
Net gain on financial instruments designated
at fair value
through profit or loss - 361
Bank interest receivable - 14
Loan interest receivable 183 -
Foreign exchange gain - 64
-------- -------
Finance income 183 439
Foreign exchange loss (411) -
Bank interest payable (147) (10)
-------- -------
Finance costs (558) (10)
-------- -------
Net finance (costs)/income (375) 429
-------- -------
The foreign exchange loss of GBP411k (2010: gain of GBP64k) has
arisen on the translation of intercompany balances.
8. Taxation
Income tax recognised in the income statement
2011 2010
GBP000 GBP000
Current tax expense
Current period 112 63
Deferred tax expense/(credit)
Origination and reversal of temporary differences (154) (645)
------- -------
Total income tax credit in income statement (42) (582)
------- -------
Reconciliation of effective tax rate
2011 2010
GBP000 GBP000
Loss before tax (6,611) (5,716)
Income tax using the U.K. corporation tax
rate 28% (2010: 28%) (1,851) (1,600)
Net losses where no group relief is available 1,851 1,600
- -
-------- --------
Deferred tax
2011 2010
GBP000 GBP000
Charge relating to intangible assets - -
Relating to losses in subsidiaries (154) (645)
------- -------
(154) (645)
------- -------
Corporation tax is calculated as 28 per cent of the estimated
assessable loss for the year. Taxation for other jurisdictions is
calculated at the rates prevailing in the respective
jurisdictions.
Deferred tax is recognised as an asset on the basis that the
Group will generate future profits to offset against the asset. The
asset is derived from the losses which the Group has experienced to
date.
9. Loss per share
The calculation of the basic and dilutive loss per share is
based on the following:
Earnings
2011 2010
GBP000 GBP000
Loss for the purposes of basic loss per share
being net loss attributable to equity holders
of the parent (5,988) (4,375)
Effect of dilutive potential ordinary shares - -
--------- ---------
Loss for the purposes of diluted loss per
share (5,988) (4,375)
--------- ---------
Number of shares
2011 2010
Number Number
000s 000s
Weighted average number of ordinary shares
for the purposes
of basic loss per share 48,207 35,215
Effect of dilutive potential ordinary shares
- Share options 500 500
-------- --------
Weighted average number of ordinary shares
for the purposes
of diluted loss per share 48,707 35,715
-------- --------
In the current year and the previous year, the Group made a loss
and the effect of the share options is therefore anti-dilutive.
10. Property, plant and equipment
2011 Group
Long Furniture
Freehold leasehold fixtures Held
land land Plant Motor and for
and and and vehicles fittings Subtotal sale Total
buildings buildings machinery
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cost or valuation
At 1 September 2010 12,542 4,443 486 318 1,289 19,078 4,171 23,249
Additions in year 46 - 387 224 354 1,011 - 1,011
Disposals in year - - - (49) (2) (51) (351) (402)
Fair value adjustment (153) - - - - (153) (855) (1,008)
Revaluation 1,298 - - - - 1,298 - 1,298
Effect of movements in
foreign exchange (634) 53 (21) (8) (10) (620) (240) (860)
----------- ----------- ----------- ---------- ----------- ---------- ------- --------
Balance at 31 August
2011 13,099 4,496 852 485 1,631 20,563 2,725 23,288
----------- ----------- ----------- ---------- ----------- ---------- ------- --------
Accumulated
depreciation
At 1 September 2010 117 - 53 112 248 530 614 1,144
Adjustment re
disposals - - - (20) - (20) - (20)
Depreciation charge
for
the year 43 - 58 112 243 456 - 456
----------- ----------- ----------- ---------- ----------- ---------- ------- --------
Balance at 31 August
2011 160 - 111 204 491 966 614 1,580
----------- ----------- ----------- ---------- ----------- ---------- ------- --------
Carrying amounts
At 31 August 2011 12,939 4,496 741 281 1,140 19,597 2,111 21,708
----------- ----------- ----------- ---------- ----------- ---------- ------- --------
At 31 August 2010 12,425 4,443 433 206 1,041 18,548 3,557 22,105
----------- ----------- ----------- ---------- ----------- ---------- ------- --------
Freehold land and buildings
Freehold land and buildings, relating to Leopard Rock Hotel,
were revalued at 31 August 2011, by C K Holland, an Independent
Valuer, on the basis of market value.
Freehold land and buildings, relating to Medalspot and Paynet
were revalued at 31 August 2011, by T.W.R.E Zimbabwe (Pvt) Ltd, a
firm of Independent Valuers, on the basis of market value.
The valuations conform to International Valuation standards and
were based on recent market transactions of arms length terms for
similar properties.
On 31 August 2011, had freehold land and buildings been carried
at historical cost less accumulated depreciation, their carrying
amount would be approximately GBP9.6 million (2010: GBP9.7
million). The revaluation surplus is disclosed in note 17.
Valuations:
ATdM
Long leasehold land and buildings
The value of long leasehold land and buildings was independently
valued by JHI Real Estate Mo ambique, as at 21 June 2011, on the
basis of market value.
Celsys and Millchem
Revaluation - plant and equipment
The plant and equipment at Celsys Print was independently valued
by Mr. A West in Zimbabwe, as at 30 June 2008. Other assets were
valued by the Directors. Fair value was determined by reference to
market evidence. The Directors consider the fair value at the
reporting date to not be materially different from the carrying
value.
Paynet
Revaluation - property
A professional valuation on freehold land and buildings was made
by T.W.R.E Zimbabwe (Pvt) Limited of US$1,750,000 (GBP1,070,402) at
31 August 2011. Fair value at 31 August 2011 was made by reference
to market evidence. The Directors consider the fair value of other
assets at the reporting date to not be materially different from
the carrying value.
Leopard Rock
Revaluation - land and buildings
A professional valuation on freehold land and buildings was made
by C K Holland of US$18,500,000 (GBP11,315,677) at 31 August 2011.
Fair value at 31 August 2011 was made by reference to market
evidence. The Directors consider the fair value of other assets at
the reporting date to not be materially different from the carrying
value.
Medalspot
Revaluation - property
A professional valuation on freehold land and buildings was made
by T.W.R.E Zimbabwe (Pvt) Limited of US$2,200,000 (GBP1,345,648) at
31 August 2011. Fair value at 31 August 2011 was made by reference
to market evidence. The Directors consider the fair value of other
assets at the reporting date to not be materially different from
the carrying value.
Assets held for sale
At the year end, LonZim held assets to the value of GBP2,111,000
for sale. This is made up of 2 aircraft which are being actively
marketed and the Company would hope to find buyers within the next
year.
2010 Group
Long Furniture
Freehold leasehold fixtures Held
land land Plant Motor and for
and and and vehicles fittings Subtotal sale Total
buildings buildings machinery
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cost or valuation
At 1 September 2009 9,216 4,863 304 320 644 15,347 4,010 19,357
Additions in year 638 - 367 47 653 1,705 - 1,705
Disposals in year - - (36) (46) (6) (88) - (88)
Assets written off - - (142) - - (142) - (142)
Revaluation 2,546 - - - - 2,546 - 2,546
Effect of movements in
foreign exchange 142 (420) (7) (3) (2) (290) 161 (129)
----------- ----------- ----------- ---------- ----------- ---------- ------- -------
Balance at 31 August
2010 12,542 4,443 486 318 1,289 19,078 4,171 23,249
----------- ----------- ----------- ---------- ----------- ---------- ------- -------
Accumulated
depreciation
At 1 September 2009 8 - 24 43 101 176 297 473
Adjustment re disposals - - - (7) - (7) - (7)
Depreciation charge for
the year 109 - 29 76 147 361 317 678
----------- ----------- ----------- ---------- ----------- ---------- ------- -------
Balance at 31 August
2010 117 - 53 112 248 530 614 1,144
----------- ----------- ----------- ---------- ----------- ---------- ------- -------
Carrying amounts
At 31 August 2010 12,425 4,443 433 206 1,041 18,548 3,557 22,105
----------- ----------- ----------- ---------- ----------- ---------- ------- -------
At 31 August 2009 9,208 4,863 280 277 543 15,171 3,713 18,884
----------- ----------- ----------- ---------- ----------- ---------- ------- -------
Valuations:
Long leasehold land and buildings
The value of long leasehold land and buildings is included at
the Directors' valuation at 31 August 2010. The Directors obtained
evidence of observable prices in an active market to determine
their valuation. The Directors consider the fair value at the
reporting date is not materially different from the carrying
value.
Revaluation
The plant and equipment at Celsys Print has been independently
valued by Mr. A West in Zimbabwe, as at 30 June 2008. Other assets
were valued by the directors. Fair value was determined by
reference to market evidence. The historical cost of plant and
machinery which was revalued in the previous period was GBPNil and
the resulting revaluation of GBP232,000 has been taken to
revaluation reserve.
2011 Company
Furniture
Motor fixtures
vehicles and fittings Total
GBP000 GBP000 GBP000
---------- -------------- -------
Cost or valuation
At 1 September 2010 37 5 42
Additions in year 90 8 98
Balance at 31 August 2011 127 13 140
---------- -------------- -------
Accumulated depreciation
At 1 September 2010 15 3 18
Depreciation charge for
the year 36 3 39
---------- -------------- -------
Balance at 31 August 2011 51 6 57
---------- -------------- -------
Carrying amounts
At 31 August 2011 75 8 83
---------- -------------- -------
At 31 August 2010 22 2 24
---------- -------------- -------
2010 Company
Furniture
Motor fixtures
vehicles and fittings Total
GBP000 GBP000 GBP000
---------- -------------- -------
Cost or valuation
At 1 September 2009 37 5 42
Additions in year - - -
Balance at 31 August 2010 37 5 42
---------- -------------- -------
Accumulated depreciation
At 1 September 2009 3 1 4
Depreciation charge for
the year 12 2 14
---------- -------------- -------
Balance at 31 August 2010 15 3 18
---------- -------------- -------
Carrying amounts
At 31 August 2010 22 2 24
---------- -------------- -------
At 31 August 2009 34 4 38
---------- -------------- -------
11. Intangible assets
Group Company
Non
compete Brand Sol Aviation Software Casino
Goodwill agreement name licences licences Total Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cost
At 1 September 2010 4,325 7,290 770 270 774 682 14,111 7,290
Additions - - - - 661 - 661 -
Fair value adjustment - - - (192) - - (192) -
---------- ----------- ------- -------------- ---------- ---------- ------- --------
Balance at 31 August
2011 4,325 7,290 770 78 1,435 682 14,580 7,290
========== =========== ======= ============== ========== ========== ======= ========
Amortisation
At 1 September 2010 - 3,645 97 78 256 176 4,252 3,645
Amortisation for the
year - 1,325 78 - 212 135 1,750 1,325
========== =========== ======= ============== ========== ========== ======= ========
Balance at 31 August
2011 - 4,970 175 78 468 311 6,002 4,970
========== =========== ======= ============== ========== ========== ======= ========
Carrying amounts
At 31 August 2011 4,325 2,320 595 - 967 371 8,578 2,320
========== =========== ======= ============== ========== ========== ======= ========
At 31 August 2010 4,325 3,645 673 192 518 506 9,859 3,645
========== =========== ======= ============== ========== ========== ======= ========
Amortisation
The amortisation charge is recognised in the administration
expenses (note 5) in the income statement. The remaining
amortisation period at 31 August 2011 is 21 months for the
non-compete agreement and 33-91 months for other intangibles.
Goodwill
As at 31 August 2011, the consolidated statement of financial
position included goodwill of GBP4,325k. Goodwill is allocated to
the Group's cash-generating units ("CGUs"), or groups of
cash-generating units, that are expected to benefit from the
synergies of the business combination that gave rise to the
goodwill as follows:
Cash generating unit (CGU) Primary reporting 2011 2010
segment
GBP000 GBP000
Celsys Support services 1,958 1,958
Millchem Support services 1,438 1,438
FMNA Support services 367 367
Paynet Support services 562 562
4,325 4,325
------- -------
Estimates and judgements
The Directors believe that the estimate and judgements used in
preparing these financial statements would not have a material
impact on the carrying values of the intangible assets disclosed
above.
There have been no indications of impairment relating to the
CGUs or groups of CGUs to which goodwill has been allocated and,
accordingly, the disclosures that follow relate to the impairment
test that is required to be conducted on an annual basis:
- The carrying value of goodwill has been assessed with
reference to value in use over 5-10 years reflecting the projected
cash flows of each of the CGUs or group of CGUs based on the most
recent forecast. A forecast period of 5-10 years has been used as
this is reflective of the Board's view of the long term investment
potential in these Zimbabwean subsidiaries. A forecast period of 5
years has been used for ForgetMeNot Africa (BVI) Limited.
- Growth rates for the period not covered by the forecast are
based on a range of growth rates that reflect the products,
industries and countries in which the relevant CGU or group of CGUs
operate. Growth rates have been calculated based on management's
expected forecast volumes and market share increases on
normalisation of the Zimbabwean economy.
- The key assumptions on which the cash flow projections for the
most recent forecast are based relate to discount rates, growth
rates, expected changes in selling prices and direct costs. Key
assumptions also include consideration of the period to
normalisation of the Zimbabwean economy, where the range was
between 1 and 3 years.
- The cash flow projections have been discounted using rates
based on the Group's pre-tax weighted average cost of capital. The
rate used was 12.5%.
- The growth rates applied in the value in use calculations for
goodwill allocated to each of the CGUs or groups of CGUs that is
significant to the total carrying amount of goodwill were in a
range between 0% and 5%.
- Changes in selling price and direct costs are based on past
results and expectations of future changes in the market.
- In respect of the value in use calculations, cash flows have
been considered for both the conservative and the full forecast
potential of future cash-flows with no impact to the valuation of
goodwill.
Impairment loss
The Group tests goodwill annually for impairment, or more
frequently if there are indications that goodwill might be
impaired.
The Directors believe that the value of the Group's investments
are long term and will only be realised on the eventual full
recovery of the Zimbabwean economy. The Directors do not believe
any impairment to goodwill is necessary.
Other intangible assets
The Group tests other intangible assets for impairment if there
are indications that they might be impaired.
The amortisation periods for other intangible assets are:
Non compete agreement 5 [1/2] years
Licences 5-6 years
Brand names 7 years
Non-compete agreement
The agreement covers a period of five and a half years and under
its terms, without the express permission of LonZim Plc, Lonrho Plc
cannot:
- invest in, carry on or be engaged or in any way be interested
in any competing business of LonZim which is carried on in Zimbabwe
or the Beira Corridor;
- provide any of the services provided to any other organization
competing in Zimbabwe or the Beira Corridor;
- induce or assist any other person or company to do any of the
things that Lonrho itself is prohibited from.
The non-compete agreement was originally recognised as an
intangible asset valued at GBP7.3 million being the value of the
shares issued. It was deemed impractical to use any other basis for
the valuation.
LonZim have expressly consented to Lonrho carrying out certain
agricultural activities within Zimbabwe and following the
acquisition of ATdM, the operation of that development in the Beira
Corridor.
12. Investments in subsidiaries and associates
The Company has investments in the following subsidiaries and
associates which principally affected the profits or net assets of
the Group. To avoid a statement of excessive length, details of
investments which are not significant to the Group either in terms
of revenues or assets have been omitted.
Country of Principal Activity Ownership
incorporation interest
LonZim Holdings Limited + Isle of Man Investment company 100%
Commercial and
Celsys Limited Zimbabwe security printing/ATMs 60%
Gardoserve (Pvt) Limited Zimbabwe Chemical products 100%
Peak Mine (Pvt) Limited Zimbabwe Investment company 100%
Rex Mining Holdings Pvt Limited Zimbabwe Investment company 100%
Blueberry International Services British Virgin
Limited Islands Investment company 100%
British Virgin
Blueberry Print (Zambia) Limited Islands Investment company 100%
Wardlaw (1989) Limited United Kingdom Investment company 100%
Morningdale Properties Limited Zimbabwe Investment company 100%
Medalspot (Pvt) Limited Zimbabwe Investment company 100%
Aldeamento Turistico de Macuti
SARL + Mozambique Hotel development 80%
British Virgin Telecommunication
ForgetMeNot Africa (BVI) Limited Islands software company 51%
Paynet Limited Mauritius Payroll bureau 100%
Paynet Zimbabwe (Pvt) Limited Zimbabwe Payroll bureau 100%
Autopay (Pvt) Limited Zimbabwe Payroll bureau 100%
Tradanet (Pvt) Limited Zimbabwe Microfinance company 51%
Le Har (Pvt) Limited Zimbabwe Investment company 100%
British Virgin
LonZim Air (BVI) Limited Islands Aviation company 100%
LonZim Hotels Limited Isle of Man Investment company 100%
Lyons Africa Holdings BV The Netherlands Investment company 100%
Leopard Rock Hotel Company Hotel and Golf
(Pvt) Limited Zimbabwe Resort 100%
+ Held directly by LonZim Plc.
The direct investments in subsidiaries held by the Company are
stated at cost. This is subject to impairment testing.
For a full list of subsidiaries and associates, refer to note
31.
13. Other investments
Group Group
2011 2010
GBP000 GBP000
Balance at 1 September 101 1,269
Acquisitions 37 -
Disposals (71) (1,234)
Unrealised gain - 66
======= ========
At 31 August 67 101
======= ========
14. Inventories
Group Group
2011 2010
GBP000 GBP000
Game stock 50 44
Finished goods 448 295
------- -------
498 339
------- -------
15. Trade and other receivables
Group Company Group Company
2011 2011 2010 2010
GBP000 GBP000 GBP000 GBP000
Amounts owed by Group undertakings - 23,314 - 21,150
Trade receivables 1,629 - 1,106 -
Other receivables 1,078 352 1,654 595
Pre-payments and accrued
income 53 - 162 16
------- -------- ------- --------
2,760 23,666 2,922 21,761
------- -------- ------- --------
The average credit period taken on sales of goods is 84 days. No
interest is charged on receivables.
Included in trade and other receivables is a balance of
GBP611,658 which is not due in less than one year's time. The loan
is repayable in 2 years time and bears interest at 15% per annum.
The loan bears no encumbrances.
The Directors consider the carrying amount of trade and other
receivables approximates their fair value. In determining the
recoverability of the trade receivable, the Group considers any
change in the credit quality of the trade receivable from the date
credit was initially granted up to the reporting date. The
concentration of credit risk is limited due to the customer base
being large and unrelated. Accordingly, the Directors believe that
there is no further credit provision required in excess of the
allowance for doubtful debts.
Credit risk
The Group's credit risk is primarily attributable to its trade
receivables. The amounts presented in the statement of financial
position are net of allowances for doubtful receivables. An
allowance for impairment is made where there is an identified loss
event which, based on previous experience, is evidence of a
reaction in the recoverability of the cashflows.
The Group has no significant concentration of credit risk, with
exposure spread over a large number of counterparties and
customers.
16. Cash and cash equivalents
Group Company Group Company
2011 2011 2010 2010
GBP000 GBP000 GBP000 GBP000
Bank balances 658 365 291 38
Bank overdrafts (29) - - -
------- -------- ------- --------
Cash and cash equivalents 629 365 291 38
------- -------- ------- --------
17. Capital and reserves
Reconciliation of movement in capital and reserves
Group
Share
based Foreign
Share Share Re-valuation payment Retained exchange Non-controlling Total
capital premium reserve reserve earnings reserve Total interests Equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 31
August 2009 3 32,355 734 165 3 (681) 32,579 895 33,474
Share issues 1 1,112 - - - - 1,113 - 1,113
Revaluation - - 2,546 - - - 2,546 - 2,546
Loss for the
year - - - - (4,375) - (4,375) (759) (5,134)
Exchange
difference
on translation
of overseas
operations - - (530) - 76 261 (193) 104 (89)
-------- -------- ------------ -------- --------- ---------- ------- --------------- -------
Balance at 31
August 2010 4 33,467 2,750 165 (4,296) (420) 31,670 240 31,910
-------- -------- ------------ -------- --------- ---------- ------- --------------- -------
Share issues 1 4,843 - - - - 4,844 - 4,844
Revaluation - - 1,298 - - - 1,298 - 1,298
Loss for the year - - - - (5,988) - (5,988) (581) (6,569)
Exchange difference
on translation
of overseas operations - - (130) - - (523) (653) 48 (605)
------- ------ ---- --------- ------ ------- ------ -------
Balance at 31
August 2011 5 38,310 3,918 165 (10,284) (943) 31,171 (293) 30,878
------- ------ ---- --------- ------ ------- ------ -------
Company
Share based
Share Share premium payment Retained
capital reserve earnings
Total
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 31 August
2009 3 32,355 165 (4,154) 28,369
Share issue 1 1,112 - - (1,113)
Loss for the period - - - (3,540) (3,540)
Balance at 31 August
2010 4 33,467 165 (7,694) 25,942
--------- --------------- ------------ ---------- --------
Share issue 1 4,843 - - 4,844
Loss for the period - - - (3,461) (3,461)
Balance at 31 August
2011 5 38,310 165 (11,155) 27,325
------- ---- --------- --------
18. Share capital
Ordinary shares Ordinary shares
2011 2010
No GBP000 No GBP000
Authorised
Ordinary GBP0.0001 shares 54,145,469 5 36,331,525 4
---------- ------ ---------- ------
Issued fully paid
At 1 September 2010 36,331,525 4 32,076,000 3
Issued in period 17,813,944 1 4,255,525 1
At 31 August 2011 54,145,469 5 36,331,525 4
---------- ------ ---------- ------
The Group has also issued share options (see note 19). 500,000
shares are held in reserve to issue in the event that these options
are exercised.
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company. All shares rank equally with
regard to the Company's residual assets.
The Directors are authorised in any period between consecutive
annual general meetings, to allot any number of ordinary shares on
such terms as they shall, in their discretion, determine up to such
maximum number as represents 50 per cent. of the issued share
capital at the beginning of such period. Further ordinary shares
may be allotted on terms determined by the Directors but subject to
the pre-emption rights prescribed by Section 36 of the Isle of Man
Companies Act 2006.
Share Premium
The share premium represents the value of the premium arising on
the share issue in the current year of 17,813,944 ordinary shares
at a price of 0.28p per share net of issue costs of GBP143k and
previous share issue of 36,450,000 ordinary shares at a price of
GBP1.00 per share net of issue costs of GBP2,753k, less the cost of
purchasing and cancelling 4,374,000 shares at 30.5p per share plus
the premium arising on the share issue of 4,255,525 ordinary shares
at a price of 27.5p per share net of issue costs of GBP58k.
Revaluation reserve
The revaluation reserve relates to property, plant and equipment
which has been revalued in the Zimbabwean subsidiaries Celsys,
Paynet, Leopard Rock Hotel, Millchem and Medalspot and leasehold
land in Beira (ATDM).
Share based payment reserve
The share based payment reserve comprises of the charges arising
from the calculation of the share based payment posted to the
income statement in 2008.
19. Share options
The following share options over ordinary shares were granted
under an Unapproved Share Option scheme.
Name Date granted Number of Exercise Period during Market price
share options price which per share
granted exercisable at date of
grant
------------ -------------- --------------- --------- ------------------------ -------------
Paul Heber 11.12.2007 500,000 150p 11.12.2007 - 10.12.2012 100p
------------ -------------- --------------- --------- ------------------------ -------------
In accordance with IFRS 2 'Share-based payments' share options
granted have been measured at fair value and recognised as an
expense in the income statement with a corresponding increase in
equity (other reserves). The fair value of the options granted has
been estimated at the date of grant using the Black-Scholes
option-price in model. The estimated value of the options granted
on 11.12.2007 was GBP165,000.
Options may be exercised in whole or in part until the expiry of
the exercise period. Holders of the options are entitled to receive
notice of certain proposed transactions or events of the Company
which may dilute or otherwise affect their options, and may
exercise or be deemed to have exercised their options prior to the
occurrence thereof. The Company shall keep available sufficient
authorised but unissued share capital to satisfy the exercise of
the options. Ordinary Shares issued pursuant to an exercise of the
options shall rank pari passu in all respects with the Company's
existing Ordinary Shares save as regards any rights attaching by
reference to a record date prior to the receipt by the Company of
the notice of exercise of options. The Company shall apply to admit
to trading on AIM the Ordinary Shares issued pursuant to the
exercise of options.
The following assumptions have been used:
Date of grant Date of grant
30.04.2007 11.12.2007
Share price at vesting date 11 December
2007 32.5p 100p
Exercise price 34.5p 150p
Expected volatility 45.30% 44%
Expected life 2.5years 5 years
Expected dividends 0.00% 0.00
Risk-free interest rate 5.50% 5.00%
Volatility has been calculated by reference to industry indices
at vesting dates.
All share options vested at date of grant and the basis of
settlement is in shares of the company.
The number and weighted average exercise price of share options
are as follows:
2011
Weighted average
exercise price Number of options
Pence No
Exercisable at 1 September 2010 150 500,000
----------------- -------------------
Outstanding at 31 August 2011 150 500,000
Exercisable at 31 August 2011 150 500,000
----------------- -------------------
The options outstanding at the year end have an exercise price
of 150p and a weighted average contractual life of 3 years.
The expected volatility is wholly based on the historic
volatility of similar companies, calculated based on the remaining
life of the share options.
20. Provisions
Group Company Group Company
2011 2011 2010 2010
GBP000 GBP000 GBP000 GBP000
Provisions 628 628 628 628
------- -------- ------- --------
Provisions relate to an 'alienation' agreement with the
Mozambique Government which was assumed as part of the
consideration for the acquisition of Aldeamento Turistico de Macuti
SARL. The provision is for US$1.5m (GBP0.9m). The amount payable by
LonZim Plc is capped at US$1.5m (GBP0.9m) and is expected to be
settled no earlier than 36 months from the reporting date.
The Directors are of the opinion that there is a 70% probability
that this liability will become due and the liability has been
adjusted to reflect this.
Subsequent to the year end, the investment in subsidiary was
sold (see note 32) thus releasing this provision.
21. Deferred tax liability
Recognised deferred liability
The following are the major deferred tax liabilities recognised
by the Group and movements thereon during the current year.
Group 2011 2010
Accelerated Accelerated
tax depreciation Total tax depreciation Total
GBP000 GBP000 GBP000 GBP000
At 1 September 933 933 909 909
Other movements (118) (118) 24 24
At 31 August 815 815 933 933
------------------ ------- ------------------ -------
There have been no deferred assets and liabilities off set in
the current period.
Recognised deferred asset
The following are the major deferred tax assets recognised by
the Group and movements thereon during the current year.
Group 2011 2010
Accelerated Accelerated
tax depreciation Total tax depreciation Total
GBP000 GBP000 GBP000 GBP000
At 1 September 645 645 77 77
Recognised in year in
respect of current trading
losses 150 150 571 571
Recognised directly in
reserves 3 3 (3) (3)
------------------ ------- ------------------ -------
At 31 August 798 798 645 645
------------------ ------- ------------------ -------
22. Interest-bearing borrowings
Group Company Group Company
2011 2011 2010 2010
GBP000 GBP000 GBP000 GBP000
Short term loans 917 917 963 963
917 917 963 963
------- -------- ------- --------
The loan is secured by immovable property held by Medalspot
(Pvt) Limited and Le Har (Pvt) Limited. The loan is repayable on 31
May 2012 and bears interest at a rate of 20% per annum.
23. Trade and other payables
Group Company Group Company
2011 2011 2010 2010
GBP000 GBP000 GBP000 GBP000
Trade payables 751 - 945 -
Non-trade payables and accrued
expenses 890 265 842 636
1,640 265 1,787 636
------- -------- ------- --------
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and on-going costs. The average
credit period taken for trade purposes is 121 days.
The Directors consider that the carrying amount of trade
payables approximates to their fair value.
24. Notes to the statement of cash flows
Group Company
Group 2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000
Loss for the year (6,569) (5,134) (3,461) (3,540)
Amortisation of intangible assets 1,750 1,729 1,325 1,325
Depreciation of property, plant
and equipment 456 678 40 14
Finance income (183) (439) (43) -
Finance costs 147 - - -
Fair value adjustment of property, 1,008 - - -
plant & equipment
Fair value adjustment of intangibles 192 - - -
Loss on sale of property, plant (295) - - -
and equipment
Increase in provisions - - - 140
Provision discount - 143 - -
Gains on investments (16) (361) - -
-------- -------- -------- --------
Operating cash flows before movements
in working capital: (3,510) (3,384) (2,139) (2,061)
Increase in inventories (159) (145) - -
Decrease/(increase) in receivables 162 19 (1,905) (1,423)
(Decrease)/increase in payables (147) (621) (372) 38
-------- -------- -------- --------
Cash used in operations (3,654) (4,131) (4,416) (3,446)
Interest paid (147) (14) - -
Interest received 183 - 43 25
-------- -------- -------- --------
Net cash used in operating activities (3,618) (4,145) (4,373) (3,421)
-------- -------- -------- --------
Cash and cash equivalents (which are presented as a single class
of assets on the face of the statements of financial position)
comprise cash at bank and other short term highly liquid
investments with a maturity of three months or less.
25. Financial instruments
The Group has exposure to the following risks from its use of
financial instruments:
- credit risk
- liquidity risk
- market risk
This note presents information about the Group's exposure to
each of the above risks, the Group's objectives, policies and
processes for measuring and managing risk, and the Group's
management of capital. Further quantitative disclosures are
included throughout these consolidated financial statements. The
Board of Directors has overall responsibility for the establishment
and oversight of the Group's risk management framework.
Credit risk management
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group. The Group has adopted a policy of only dealing with
creditworthy counterparties and obtaining sufficient collateral
where appropriate, as a means of mitigating the risk of financial
loss from defaults. The Group's exposure and the credit ratings of
its counterparties are continuously monitored and the aggregate
value of transactions concluded is spread amongst approved
counterparties.
Trade receivables consist of a large number of customers, spread
across diverse industries and geographical areas. Ongoing credit
evaluation is performed on the financial condition of accounts
receivable and, where appropriate, credit guarantee insurance cover
is purchased. The Group does not have any significant credit risk
exposure to any single counterparty or any group of counterparties
having similar characteristics. The credit risk on liquid funds and
derivative financial instruments is limited because the
counterparties are banks with high credit- ratings assigned by
international credit rating agencies.
The carrying amount of financial assets recorded in the
financial statements, net of any allowances for losses, represents
the Group's maximum exposure to credit risk without taking account
of the value of any collateral obtained. At the reporting date,
there were no significant credit risks.
Exposure to credit risk
The carrying amount of financial assets represents the maximum
credit exposure. Therefore, the maximum exposure to credit risk at
the reporting date was GBP3,336k (2010: GBP3,051k) being the total
of the carrying amount of financial assets, excluding equity
investments as shown in the table below.
2011 2010
GBP000 GBP000
Cash and cash equivalents 629 291
Trade and other receivables 2,707 2,760
------- -------
3,336 3,051
------- -------
The maximum exposure to credit risk for trade and other
receivables at the reporting date by geographic region was:
2011 2010
GBP000 GBP000
East Africa 483 779
Zimbabwe 2,224 1,981
------- -------
2,707 2,760
------- -------
The maximum exposure to credit risk for trade receivables at the
reporting date by type of counterparty was:
2011 2010
GBP000 GBP000
Customers 1,629 1,106
------- -------
The ageing of trade receivables at the reporting date was:
Gross Impairment Gross Impairment
2011 2011 2010 2010
GBP000 GBP000 GBP000 GBP000
Not past due 1,629 - 1,106 -
------- ----------- ------- -----------
Liquidity risk management
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash and another
financial asset.
Ultimate responsibility for liquidity risk management rests with
the Board of Directors, which has built an appropriate liquidity
risk management framework for the management of the Group's short,
medium and long term funding and liquidity management requirements.
The Group manages liquidity risk by maintaining adequate reserves,
banking facilities and reserve borrowing facilities by continuously
monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities.
The following are the contractual maturities of financial
liabilities, including estimated interest payments and excluding
the effect of netting agreements:
2011 2010
Carrying Contractual 1 1 to 2 to< 5years Carrying Contractual 1 year 1 to 2 to 5years+
amount cash year <2years 5years + amount cash flows or <2 <5
flows or less years years
less
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Bank
overdrafts 29 29 29 - - - - - - - - -
Trade
payables 751 751 751 - - - 945 945 945 - - -
Interest
bearing
borrowings 917 917 917 - - - 963 963 963 - - -
========= ============ ======= ======== ======= ======= ========= ============ ======= ======= ======= ========
1,697 1,697 1,697 - - - 1,908 1,908 1,908 - - -
========= ============ ======= ======== ======= ======= ========= ============ ======= ======= ======= ========
In respect of income-earning financial assets and
interest-bearing financial liabilities, the following table
indicates their effective interest rates at the reporting date and
the periods in which they re-price.
2011 2010
Effective Effective 3 months
interest Total 3 months interest Total or
rate or less rate less
% GBP000 GBP000 % GBP000 GBP000
Cash and cash equivalents 0.5 658 658 0.5 291 291
Bank overdrafts 0.5 (29) (29) - - -
Interest bearing
borrowings 20.0 (917) (917) 20.0 (963) (963)
=========== ======= ========== =========== ======= ==========
(288) (288) (672) (672)
=========== ======= ========== =========== ======= ==========
Foreign currency risk management
The Group is exposed to foreign currency risk on sales,
purchases and borrowings that are denominated in a currency other
than pounds sterling. The currencies giving rise to this risk are
primarily the US Dollar and Mozambique Metical. In respect of other
monetary assets and liabilities held in currencies other than
Pounds Sterling, the Group ensures that the net exposure is kept to
an acceptable level, by buying or selling foreign currencies at
spot rates where necessary to address short-term imbalances.
The carrying amount of the Group's foreign currency denominated
monetary assets and monetary liabilities at the reporting date is
as follows:
US Mozambique Total
Dollars Meticals
GBP000 GBP000 GBP000
Cash and cash equivalents 229 37 266
Trade payables (790) - (790)
Other payables (654) - (654)
Trade receivables 1,544 - 1,544
Other receivables 588 - 588
-------- ---------- ------
Net exposure 917 37 954
-------- ---------- ------
The following significant exchange rates applied during the
year:
Reporting Reporting
Average Rate date Average Rate date
2011 mid spot 2010 mid spot
rate rate
2011 2010
Mozambique Meticals 50.742 43.162 47.889 58.323
US Dollars 1.604 1.635 1.566 1.567
Net assets Net assets
2011 2010
GBP000 GBP000
Mozambique Metical 1,157 2,338
US Dollars 8,911 3,630
----------- -----------
10,068 5,968
----------- -----------
The Company does not have any exposure to foreign currencies at
the reporting date (2010: GBPNil).
Sensitivity analysis
In managing interest rate and currency risks the Group aims to
reduce the impact of short-term fluctuations on the Group's
earnings. Over the longer-term, however, permanent changes in
foreign exchange and interest rates would have an impact on
consolidated earnings. A 10% movement in the US Dollar rate would
result in a GBP810k movement in net monetary assets. This risk is
not considered material as, as of 1 September 2011, the Company
changed its reporting currency to the US Dollar.
Mozambique Meticals balance is not trading and therefore a
sensitivity analysis has not been performed.
Interest rate risk management
The Group is not exposed to interest rate risk. Its single loan
of GBP917k is held on a fixed interest rate thus mitigating the
risk.
The Company and the Group's exposures to interest rates on
financial assets and financial liabilities are detailed in the
liquidity risk management section of this note.
The Group's sensitivity to interest rates is low due to cash
balances held.
Capital management
The Board's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the business. The Board of Directors monitors
the return on capital, which the Group defines as net operating
income divided by total shareholders' equity, excluding
non-redeemable preference shares and non-controlling interests. The
Board of Directors also monitors the level of dividends to ordinary
shareholders.
Fair values
The fair values of financial assets and liabilities, together
with the carrying amounts shown in the statement of financial
position are as follows:
Carrying Fair Carrying Fair
amount value amount value
2011 2011 2010 2010
GBP000 GBP000 GBP000 GBP000
Cash and cash equivalents (net
of bank overdraft) 629 629 291 291
Trade receivables 1,629 1,629 1,106 1,106
Trade payables (751) (751) (945) (945)
Interest bearing loans (917) (917) (963) (963)
590 590 (511) (511)
--------- ------- --------- -------
The fair value of assets and liabilities can be classed in three
levels.
Level 1 - Fair values measured using quoted prices (unadjusted)
in active markets for identical assets or liabilities.
Level 2 - Fair values measured using 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 3 - Fair values measured using inputs for the asset or
liability that are not based on observable market data (i.e.
unobservable inputs)
As at 31 August 2011, the Company holds all its financial
instruments at amortised cost and none at fair value. Fair value
hierarchy therefore does not apply.
Estimation of fair values
The following summarises the major methods and assumptions used
in estimating the fair values of financial instruments reflected in
the table.
Cash and cash equivalents (net of bank overdraft)
Fair value approximates its carrying amount largely due to the
short-term maturities of this instrument.
Interest-bearing loans and borrowings
Fair value is calculated based on discounted expected future
principal and interest cash flows.
Trade receivables / payables
For receivables / payables with a remaining life of less than
one year, the notional amount is deemed to reflect the fair
value
26. Operating leases
Leases as lessee
At the reporting date, the Group had outstanding annual
commitments for future minimum lease payments under non-cancellable
operating leases, which fall due as follows:
2011 2010
GBP000 GBP000
Less than one year - 12
- 12
----------------------------- -------
During the year ended 31 August 2011, GBP12k (2010: GBP33k) was
recognised as an expense in the income statement in respect of
operating leases.
Operating lease payments represents rentals payable by the Group
for certain of its properties. Leases are negotiated for an average
term of 3 years and rentals are fixed for an average of 3
years.
Leases as lessor
At the reporting date, the Group had outstanding annual
commitments for future minimum lease receipts under non-cancellable
operating leases, which fall due as follows:
2011 2010
GBP000 GBP000
Less than one year 198 789
Between one and five years 198 789
396 1,578
------- -------
During the year ended 31 August 2011, GBP401k (2010: GBP901k)
was recognised as revenue in the income statement in respect of
operating leases.
Operating lease receivables represent rentals receivable by the
Group for aircraft. Leases are negotiated for an average term of 5
years and rentals are fixed for an average of 5 years.
27. Income statement of LonZim Plc
There is no requirement under the Isle of Man Companies Act 2006
to present a company income statement. The loss for the year to 31
August 2011 was GBP3,461k (2010: GBP3,540k).
28. Capital commitments
The capital commitments at 31 August 2011 totalled GBP133k
relating to various items of plant and machinery at Celsys (2010:
GBP300k relating to refurbishment of Leopard Rock Hotel).
There were no other capital commitments at 31 August 2011.
29. Contingent liabilities
There were no known contingent liabilities at the reporting date
(2010: GBPNil).
30. Related parties
Identity of related parties
The Group has a related party relationship with its subsidiaries
(see note 31), and with its Directors and executive officers and
with Lonrho Plc.
Transactions with subsidiaries
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. All related party transactions are
conducted on terms equivalent to arms length transactions.
Group and Company
Transactions with entities with significant influence over the
entity
As at 11 November 2011 Lonrho Plc held 22.92% of the Company and
exerts a significant influence over the Company. At the date of
listing on AIM the Company issued shares to the value of GBP7.3
million to Lonrho Plc in exchange for Lonrho Plc entering into a
non-compete agreement. The agreement covers a period of five and a
half years and has been recognised as an intangible asset with a
valuation of GBP7.3 million on initial recognition. This intangible
asset is being amortised over the term of the agreement.
During the year the Company was charged US$862k (GBP537k) by
Lonrho Plc as a management charge (2010: US$703k (GBP453k)). Other
recharges amounted to US$183k (GBP114k) (2010: US$91k ($59k)). As
at 31 August 2011, GBP137k (2010: GBP113k) was due from the Company
to Lonrho Plc.
The Group leases two aircraft to 540 (Uganda) Limited, a Lonrho
Plc subsidiary, for US$52k (GBP34k) per month. One of the leases
was cancelled at the end of February 2011. The total lease income
for the year to 31 August 2011 amounted to US$485k (GBP296k). As at
31 August 2011, US$890k (GBP544k) was due from 540 (Uganda) Limited
to the Company.
Fly 540 Aviation, a Lonrho Plc subsidiary, is acting as an agent
in the recovery of the insurance money relating to the Lonzim Air
BVI Limited aircraft written off. As at 31 August 2011, US$100k
(GBP61k) is payable from Lonzim Air to Fly 540 Aviation.
Transactions with key management personnel
Key management personnel are the holding Company Directors and
executive officers.
Paul Heber, a Non-Executive Director, participates in the share
option scheme. Other Directors and key personnel are eligible to
participate in the share option scheme (see note 19).
During the year GBP12k (2010: GBP16k) was charged to the Company
for services performed by DSG Chartered Accountants. Jean Ellis is
a partner in this firm.
The key management personnel compensations are as follows:
Year ended Year ended
31 August 31 August
2011 2010
GBP000 GBP000
Short-term employee benefits 526 550
526 550
----------- -----------
Total remuneration is included in "personnel expenses" (see note
6):
Year ended Year ended
31 August 31 August
2011 2010
GBP000 GBP000
Directors 240 444
Executive officers 286 106
----------- -----------
526 550
----------- -----------
Directors' remuneration
Total Total
2011 2010
GBP000 GBP000
D Lenigas 12 87
G White 12 87
D Armstrong 12 17
E Priestley 12 17
P Turner 98 118
P Heber 44 70
J Ellis 25 24
C Orr-Ewing 25 24
------- -----------
240 444
------- -----------
Other related party transactions
Post year end the Company raised GBP917,341 from an existing
shareholder, via a placing of 3,988,439 shares at a price of 23
pence per share to provide working capital for the Group's existing
businesses and to provide the Company with the ability to continue
implementing its investment strategy. The shareholder is a
substantial shareholder in the Company and therefore its
participation in the placing is considered a related party
transaction.
31. Group entities
Subsidiaries
Country of incorporation Ownership
interest
2011 2010
LonZim Holdings Limited + Isle of Man 100% 100%
Celsys Limited Zimbabwe 60% 60%
Gardoserve (Pvt) Limited Zimbabwe 100% 100%
Peak Mine (Pvt) Limited Zimbabwe 100% 100%
Rex Mining Holdings (Pvt) Limited Zimbabwe 100% 100%
British Virgin
Blueberry International Services Limited Islands 100% 100%
British Virgin
Blueberry Print (Zambia) Limited Islands 100% 100%
Celsys Zambia Limited Zambia 55% 55%
Wardlaw (1989) Limited United Kingdom 100% 100%
Aldeamento Turistico de Macuti SARL + Mozambique 80% 80%
Southern Africa Management Services Mauritius 100% 100%
Morningdale Properties Limited Zimbabwe 100% 100%
Medalspot (Pvt) Limited Zimbabwe 100% 100%
Quickvest525 (Pty) Limited South Africa 100% 100%
Panafmed (Pty) Limited South Africa 51% 100%
British Virgin
ForgetMeNot Africa (BVI) Limited Islands 51% 51%
ForgetMeNot Nigeria Limited Nigeria 100% 100%
Chenyakwaremba Farm (Pvt) Limited Zimbabwe 100% 100%
Paynet Limited Mauritius 100% 100%
Paynet Zimbabwe (Pvt) Limited Zimbabwe 100% 100%
Tradanet (Pvt) Limited Zimbabwe 51% 51%
African Solutions Limited Mauritius 100% 100%
Lanuarna Enterprises (Pvt) Limited Zimbabwe 100% 100%
Para Meter Computers (Pvt) Limited Zimbabwe 100% 100%
Autopay (Pvt) Limited Zimbabwe 100% 100%
Le Har (Pvt) Limited Zimbabwe 100% 100%
Lonrho Properties Zimbabwe Limited Zimbabwe 100% 100%
British Virgin
LonZim Air (BVI) Limited Islands 100% 100%
Sol Aviation (Pvt) Limited Zimbabwe 90% 90%
LonZim Hotels Limited Isle of Man 100% 100%
Lyons Africa Holdings BV The Netherlands 100% 100%
England and
Lyons Africa Holdings Limited Wales 100% 100%
Linus Business Options (Pvt) Limited Zimbabwe 100% 100%
Leopard Rock Hotel Company (Pvt) Limited Zimbabwe 100% 100%
Firstfood Enterprises (Pvt) Limited Zimbabwe 100% 100%
W S Foods (Pty) Limited South Africa 100% 100%
LonZim Properties Limited Isle of Man 100% 100%
British Virgin
LonZim Agribusiness (BVI) Limited Islands 100% 100%
LonZim Enterprises Limited England & Wales 100% 100%
32. Events after the reporting date
On 30 September 2011, LonZim completed a share purchase
agreement to dispose of its 80% holding in ATdM, a company with a
long lease on a prospective coastal development site in Beira,
Mozambique, as part of LonZim's growing focus on the economic
opportunities within Zimbabwe. LonZim disposed of the 80% stake in
ATdM for US$5.1m (GBP3.1m) to Lonrho Hotels (Holdings) Limited, a
100% subsidiary of Lonrho Plc which has a 22.92% interest in
LonZim, the transaction being a related party transaction for
purposes of the AIM Rules, which was deemed fair and reasonable
insofar as shareholders were concerned. Proceeds from the sale are
being received over 60 equal monthly instalments and interest
accrues at 7% on the outstanding balance.
Post year end the Company raised GBP917,341 from an existing
shareholder via a placing of 3,988,439 shares at a price of 23
pence per share to provide working capital for the Group's existing
businesses and to provide the Company with the ability to continue
implementing its investment strategy.
The Directors do not believe there have been any further
material events since the reporting date.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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