SUSTAINABILITY COMMITMENT REAFFIRMATION
Seed Co is committed to sustainable ethical business practices, the protection of the environment, and economic development while improving the livelihoods of all its stakeholders, including but not limited to employees, farmers, consumers, and communities. To this end, the DNA of our seed-to-feed business is to innovate and make available climate-smarthigh-yielding seed solutions, agronomic support, and training for the efficient utilization of arable land and other farming inputs to sustainably make both small and large-scale farming profitable enterprises that feed both people and livestock with catalytic effects on critical economic value chains.
FOR THE HALF YEAR ENDED 30 SEPTEMBER 2022
INFLATION ADJUSTED | UNAUDITED HISTORICAL COST | |||||||||||
30 SEPTEMBER | 30 SEPTEMBER | 30 SEPTEMBER | 30 SEPTEMBER | |||||||||
2022 (Reviewed) | 2021 (Unaudited) | 2022 | 2021 | |||||||||
ZWL$'000 | ||||||||||||
Revenue | 8,439,095 | 8,062,908 | 5,917,864 | 1,965,283 | ||||||||
Cost of sales | (6,154,058) | (5,901,776) | (2,720,226) | (1,098,710) | ||||||||
Gross profit | 2,285,037 | 2,161,132 | 3,197,638 | 866,573 | ||||||||
Other income | 20,454,863 | 2,084,536 | 16,813,323 | 442,769 | ||||||||
Operating expenses | (4,632,567) | (3,456,445) | (3,742,880) | (853,712) | ||||||||
Sales and marketing costs | (1,031,666) | (489,396) | (535,955) | (132,847) | ||||||||
General and administrative costs | (1,919,467) | (1,935,974) | (1,938,237) | (470,983) | ||||||||
Research costs | (1,308,395) | (1,031,075) | (1,035,186) | (249,882) | ||||||||
Movement in expected credit losses | (373,039) | - | (233,502) | - | ||||||||
Operating profit | 18,107,333 | 789,223 | 16,268,081 | 455,630 | ||||||||
Finance income | 1,816 | 1,106 | 1,291 | 271 | ||||||||
Finance cost | (3,902,880) | (1,212,390) | (3,403,701) | (294,354) | ||||||||
Net monetary gain/(loss) | (8,418,295) | (3,845,820) | - | - | ||||||||
Share of profit from associates | ||||||||||||
and joint venture (JV) | (1,163,968) | (275,929) | (591,109) | 52,686 | ||||||||
Profit/(Loss) before tax | 4,624,006 | (4,543,810) | 12,274,562 | 214,233 | ||||||||
Income tax expense | (2,017,440) | (2,886,709) | (6,246,466) | (137,788) | ||||||||
Profit/(Loss) for the period | 2,606,566 | (7,430,519) | 6,028,096 | 76,445 | ||||||||
Attributable to: | ||||||||||||
Equity holders of the parent | 2,606,566 | (7,430,519) | 6,028,096 | 76,445 | ||||||||
Earnings per share | cents | |||||||||||
Basic earnings per share | 712.98 | (1,126.31) | 2,438.80 | 30.91 | ||||||||
Diluted earnings per share | 697.25 | (1,124.97) | 2,438.80 | 30.91 | ||||||||
Headline earnings per share | 716.02 | (1,124.88) | 2,443.30 | 32.34 | ||||||||
FOR THE HALF YEAR ENDED 30 SEPTEMBER 2022
INFLATION ADJUSTED | UNAUDITED HISTORICAL COST | |||||||||||
30 SEPTEMBER | 30 SEPTEMBER | 30 SEPTEMBER | 30 SEPTEMBER | |||||||||
2022 (Reviewed) | 2021 (Unaudited) | 2022 | 2021 | |||||||||
ZWL$'000 | ||||||||||||
Profit/(loss) for the period | 2,606,566 | (7,430,519) | 6,028,096 | 76,445 | ||||||||
Other comprehensive (loss)/income | ||||||||||||
Share of other comprehensive | ||||||||||||
income/(loss) from associates | (40,655) | 787,400 | (40,654) | 295,193,251 | ||||||||
Total comprehensive | ||||||||||||
income/(loss) for the period, | ||||||||||||
net of tax | 2,565,911 | (6,643,119) | 5,987,442 | 295,269,696 | ||||||||
Attributable to: | ||||||||||||
Equity holders of the parent | 2,565,911 | (6,643,119) | 5,987,442 | 295,269,696 | ||||||||
AS AT 30 SEPTEMBER 2022
INFLATION ADJUSTED | UNAUDITED HISTORICAL COST | ||||||
30 SEPTEMBER | 31 MARCH 2022 | 30 SEPTEMBER | 31 MARCH | ||||
2022 (Reviewed) | (Audited) | 2022 | 2022 | ||||
ZWL$'000 | |||||||
ASSETS | |||||||
PPE | 16,533,886 | 16,863,434 | 6,254,961 | 6,322,021 | |||
Investment in associates and JV | 6,017,675 | 12,075,989 | 3,812,519 | 4,444,283 | |||
Other financial assets | 31,192 | 84,940 | 32,235 | 31,843 | |||
Inventories | 13,242,689 | 8,833,882 | 12,439,548 | 2,431,420 | |||
Trade and other receivables | 26,035,747 | 12,591,626 | 25,480,183 | 4,709,989 | |||
Cash and cash equivalents | 1,118,005 | 691,900 | 1,118,005 | 259,391 | |||
Total assets | 62,979,194 | 51,141,771 | 49,137,451 | 18,198,947 | |||
EQUITY AND LIABILITIES | |||||||
Equity | |||||||
Share capital | 126,700 | 126,700 | 2,472 | 2,472 | |||
Non-distributable reserves | 30,716,510 | 30,757,165 | 7,856,333 | 7,896,988 | |||
Retained earnings | 1,286,782 | 3,534,953 | 10,936,363 | 4,908,268 | |||
Total equity | 32,129,992 | 34,418,818 | 18,795,168 | 12,807,728 | |||
Liabilities | |||||||
Deferred tax liability | 5,008,494 | 6,171,446 | 4,501,575 | 1,435,501 | |||
Bank borrowings | 18,762,294 | 8,238,446 | 18,762,294 | 3,088,560 | |||
Trade and other payables | 7,078,415 | 2,313,061 | 7,078,414 | 867,158 | |||
Total liabilities | 30,849,203 | 16,722,953 | 30,342,283 | 5,391,219 | |||
Total equity and liabilities | 62,979,195 | 51,141,771 | 49,137,451 | 18,198,947 | |||
FOR THE HALF YEAR ENDED 30 SEPTEMBER 2022
INFLATION ADJUSTED | UNAUDITED HISTORICAL COST | |||||
30 SEPTEMBER | 30 SEPTEMBER | 30 SEPTEMBER | 30 SEPTEMBER | |||
2022 (Reviewed) | 2021 (Unaudited) | 2022 | 2021 | |||
ZWL$'000 | ||||||
Operating activities | ||||||
Profit/(Loss) before tax | 4,624,006 | (4,543,810) | 12,274,562 | 214,233 | ||
Non-cash adjustments | 5,526,038 | 14,693,854 | 4,309,995 | 350,263 | ||
Working capital adjustments | (15,695,322) | (8,792,465) | (27,562,530) | (2,989,745) | ||
Tax paid | (610,216) | (2,321,276) | (113,087) | 1,266,992 | ||
Operating cash flows | (6,155,494) | (963,697) | (11,091,060) | (1,158,257) | ||
Investing activities | ||||||
Proceeds from sale of PPE | 7,170 | 19,124 | 3,751 | 6,468 | ||
Purchase of PPE | (274,411) | (349,516) | (238,385) | (201,388) | ||
Loans and receivables net | ||||||
(advances)/receipts | (580) | (84,271) | (391) | (22,785) | ||
Dividends received | - | 632 | ||||
Interest received | 1,816 | 775 | 1,291 | 271 | ||
Investing cash flows | (266,005) | (413,888) | (233,734) | (216,802) | ||
Financing activities | ||||||
Dividend paid | - | - | - | - | ||
Net cash flows from investing activ | 13,255,875 | 6,378,690 | 8,962,352 | 1,272,689 | ||
Interest paid | (3,902,880) | (4,605,528) | (3,403,702) | (294,354) | ||
Financing cash flows | 9,352,995 | 1,773,162 | 5,558,650 | 978,335 | ||
Movement in cash and cash | ||||||
equivalents | 2,931,496 | 395,577 | (5,766,144) | (396,724) | ||
Effects of net monetary | ||||||
movement on cash and cash | ||||||
equivalents | (14,282,797) | 4,344,042 | - | - | ||
Effects of exchange rate on forex | 10,006,345 | 95,637 | 6,711,381 | 34,818 | ||
Cash and cash equivalents at | ||||||
beginning of period | 2,462,961 | (2,372,296) | 172,768 | 534,673 | ||
Cash and cash equivalents at | ||||||
end of period | 1,118,005 | 2,462,960 | 1,118,005 | 172,767 |
FOR THE HALF YEAR ENDED 30 SEPTEMBER 2022
INFLATION ADJUSTED | UNAUDITED HISTORICAL COST | |||||
30 SEPTEMBER | 30 SEPTEMBER | 30 SEPTEMBER | 30 SEPTEMBER | |||
2022 (Reviewed) | 2021 (Unaudited) | 2022 | 2021 | |||
ZWL$'000 | ||||||
Opening shareholders' equity | 29,564,081 | 30,488,306 | 12,807,727 | 6,345,103 | ||
Profit for the period | 2,606,566 | (7,430,519) | 6,028,095 | 76,445 | ||
Other comprehensive (loss)/income | (40,655) | 787,400 | (40,654) | 295,193 | ||
Dividend - cash | - | (6,338) | - | (2,376) | ||
Closing shareholders' equity | 32,129,992 | 23,838,849 | 18,795,168 | 6,714,365 |
-1. Corporate information | Overview |
The first half of the year was an increasingly difficult operating environment in | |
Seed Co Limited is a company which is incorporated and domiciled in | |
Zimbabwe with constant policy interventions. Liquidity crunch, foreign currency | |
Zimbabwe and listed on the Zimbabwe Stock Exchange (ZSE). | shortages and prohibitive borrowing costs were among the major obstacles |
2. Basis of preparation | encountered in the period. During the period under review, the cost of key |
agricultural inputs continued to rise and thereby threaten achievement of food | |
- These abridged financial statements are presented in Zimbabwe Dollars | security. On the global scale, the unending geopolitical dispute in Eastern |
(ZWL$). The basis of preparation of these financial statements is International | Europe has had a massive impact on international supply chains compounding |
Financial Reporting Standards (IFRS) with the exception of IAS 8 and IAS 21 | the challenges of fragile regional economies. |
as documented in the audit report for the year ended 30 September. Inflation | Financial Performance | ||||
adjusted financial statements have been draw up using the conversion factors | Record local winter and barley sales were achieved during the first half i.e., a | ||||
derived from the Consumer Price Index (CPI) prepared by the Zimbabwe | growth of 30% from prior year to 6,320mt. Overall, winter sales were 8% lower | ||||
Central Statistic Office. The conversion factors used to restate the financial | in the absence of repeat export sales. Last year 2,000mt of wheat was | ||||
statements are as follows: | exported to Nigeria. On the other hand, maize seed sales began on a lower | ||||
Index | Conversion | note as farmers did not pre-stock as they did in prior year given the liquidity | |||
Factor | crunch in the economy. | The rollout of Government programmes was also | |||
30 | September 2022 | 12,713.12 | 1.00 | delayed this year. This saw maize sales volumes declining by 45% from same | |
31 | March 2022 | 4,766.10 | 2.67 | prior year period. | |
30 | September 2021 | 3,342.02 | 3.80 | On the export front, the business registered a notable 88% volume growth | |
31 | March 2021 | 2,759.83 | 4.61 | satisfying the shortage in the regional caused by drought in prior year | |
Average for the six (6) months to: | particularly in East Africa. | ||||
30 | September 2022 | 9,468.14 | 1.48 | On the local market, selling prices were regularly adjusted in line with | |
30 | September 2021 | 3,043.50 | 4.19 | inflationary pressures | and exchange rate movements resulting in |
inflation-adjusted turnover being 5% higher than prior year. |
IAS 29 discourages the publication of historical cost financial statements as the inflation adjusted results are the primary records. However, the historical cost results are included as supplementary information to allow for comparability during the transitional phase of applying the Standard and to meet most user requirements.
Gross margins were stable in inflation-adjusted terms owing to inflation tracking price adjustments and the relatively lower carrying value of wheat stock carried over from prior year.
Inflation and exchange rate movements saw overheads increasing significantly compared to prior year.
3. Application of accounting policies
- The principal accounting policies of the Group have been consistently followed in all material respects.
4. CAPEX | INFLATION ADJUSTED | UNAUDITED HISTORICAL COST | ||||
30 SEPT | 30 SEPT | 30 SEPT | 30 SEPT | |||
2022 | 2021 | 2022 | 2021 | |||
(Reviewed) (Unaudited) | ||||||
ZWL$'000 | ||||||
Capital expenditure | 274,411 | 349,516 | 238,385 | 201,388 | ||
5. | Depreciation | 551,901 | 304,855 | 290,580 | 60,454 | |
6. | Contingent liabilities | Nil | Nil | Nil | Nil |
- There were no contigent liabilities in the period under review.
- Approval of financial statements
- These abridged financial statements were approved by the Board on
- December 2022.
8. External auditors' review conclusion
-
The abridged Group results for the half year ended 30 September 2022, should be read in conjunction with the interim condensed consolidated inflation adjusted financial statements for the six months ended 30 September 2022, from which they have been extracted.
The interim condensed consolidated inflation adjusted financial statements for the six months ended 30 September 2022 have been reviewed by KPMG Chartered Accountants (Zimbabwe) and a qualified review conclusion issued thereon.
The auditors' review conclusion is qualified in respect of non-compliance with IFRS 13, Fair Value Measurement, in relation to the valuation of land and buildings, IAS 21, The Effects of Changes in Foreign Exchange Rates, in respect of accounting for blocked funds, IAS 28, Investments in Associates and Joint Ventures, in relation to applying inconsistent accounting policies and non-compliance with IAS 21 and IFRS 13 within the associates and joint ventures, IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors due to these areas of non-compliance remaining uncorrected in the comparative periods and the consequential impact of these items on IAS 29,Financial Reporting in Hyperinflationary Economies.
The independent auditors review conclusion has been made available to management and those charged with governance of Seed Co Limited. The engagement partner responsible for this review is Vinay Ramabhai (PAAB Practising Certificate Number 0569). The auditors' review conclusion is available for inspection at the Company's registered office.
A loss was absorbed from associates mainly contributed by Seed Co International whose first half performance was subdued with notable early sales reduction in Malawi and drop in revenue in Nigeria due to product unavailability and in East Africa due to drought.
Financial Position
The carrying value of property, plant and equipment was relatively stable compared to last year end with no major capital expenditure during the period under review.
The business is still taking deliveries of raw seed and by the end of the first half 15,500mt tonnes of maize seed was in stock across all varieties. The business will have adequate seed available for this summer selling season.
The carrying value of debtors quadrupled from the closing position last year end and this is attributable to winter cereal credit sales as well as the revaluation of grower debts that were advanced denominated in USD. Nearly half of the debtors' book related to grower advances whose balances are being recovered with the delivery of raw seed.
Short-term borrowings increased in line with the borrowing cycle of the business, characterised with the intake of seed from growers as well as processing. The increase is also due to inflation-induced increase in working capital requirements as well as the need to fund delayed settlement of Government related debtors.
Research and Development
Research and Development remains the key pillar of the competitive advantage for the business. Various innovative research projects are underway to produce seed solutions in both existing product portfolio and new crops that are adaptable to the constantly evolving climate and disease regiment. The business has progressed well in crop diversification with remarkable work on rice and potato seeds having been recorded.
Dividend
No interim dividend was declared.
Outlook
Despite the harsh and uncertain operating environment, the Board and management will focus on defending the leading market position and stakeholder value enhancement by harnessing hard currency local sales as well as exploiting regional export opportunities. The business has adequate seed and is prepared for the main summer selling season which is now underway. The regional business is also well prepared for the season on the back of adequate stocks out of Zambia also serving the East African markets, improving economic environment in Zambia, stability in Tanzania and continued business growth in Mozambique. The Group has optimal varietal mix of seed to match the mixed rainfall forecasts with most parts of Southern Africa expecting normal to above normal rains and East Africa anticipating normal to below normal rains.
D. E. B. Long | M. Nzwere | ||||
Chairman | CEO | T. Chatiza | |||
12 December 2022 | 12 December 2022 | Group Secretary | 12 December 2022 | ||
KPMGKPMG
Mutual Gardens 100 The Chase (West)
Emerald Hill, Harare, Zimbabwe
Telephone +263 430 2600
Internet www.kpmg.com/zw
Independent auditor's report on review of interim condensed consolidated inflation adjusted financial statements
To the shareholders of Seed Co Ltd
Introduction
We have reviewed the accompanying interim consolidated inflation adjusted statement of financial position of Seed Co Ltd and its subsidiaries ("the Group") as at 30 September 2022, the consolidated inflation adjusted income statement, consolidated inflation adjusted statement of other comprehensive income, consolidated inflation adjusted statement of changes in equity and consolidated inflation adjusted statement of cash flows for the six month period then ended, and notes to the interim condensed consolidated inflation adjusted financial statements. Management is responsible for the preparation and presentation of these interim condensed consolidated inflation adjusted financial statements in accordance with IAS 34, Interim Financial Reporting. Our responsibility is to express a conclusion on these interim condensed consolidated inflation adjusted financial statements based on our review.
Scope of Review
We conducted our review in accordance with the International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Basis for Qualified Conclusion
Matter 1: Valuation of land and buildings (IFRS 13, Fair Value Measurement ("IFRS 13")) The Group's property, plant and equipment ("PPE") which is carried at ZWL 16 533 886 250, as disclosed in note 7 includes land and buildings, plant and machinery, equipment and motor vehicles. The PPE balances were revalued as at 31 March 2022 and as at 31 March 2021, using inputs which were not in accordance with IFRS 13. The prior year audit opinion for the year ended 31 March 2022, and review conclusion for the six-monthperiod ended 30 September 2021, issued by the predecessor auditor, were also modified due to these matters. Accordingly, these matters impact the comparable periods presented.
KPMG, a Zimbabwean partnership, and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Document classification: KPMG Confidential
Values as at 30 September 2022 were determined by applying the change in CPI from 31 March 2022 to 30 September 2022. As the prior period matters were not addressed, the misstatements continued in the current period, however, could not be quantified, as alternative appropriate inputs were not determined.
Consequently, the following line items are impacted in the current and prior period: Property, plant and equipment, asset revaluation reserve, and deferred tax liability in the consolidated inflation adjusted Statement of Financial Position, and the associated depreciation charges included in cost of sales and operating expenses and deferred tax charges in the interim condensed consolidated inflation adjusted Income Statement.
Matter 2: Equity accounting for joint ventures and associates due to inconsistent accounting policies applied to the Group and underling equity accounted amounts not being correct due to modified audit opinions
The investments in associate and joint venture is disclosed in note 8.2. The share of loss from associates and joint venture is stated as ZWL 789 779 189, and the investment in associates and joint venture balance is stated at ZWL 6 727 712 176. These balances are misstated due to the following matters:
- In respect of the associate company, Quton Seed Company (Private) Limited, property, plant and equipment (PPE) is recorded on the cost model, which is not consistent with the Group's annual revaluation policy. The Group has not made any adjustments at a consolidation level as required by IAS 28, Investments in Associates and Joint Ventures.
- While the Group's share of foreign creditors related to blocked funds in Quton Seed Company (Private) Limited are correctly stated as at 30 September 2022, after conversion at auction rate, the comparative foreign creditor balances and the associated exchange losses were not recorded at an appropriate exchange rate in accordance with IAS 21, The Effects of Changes in Foreign Exchange Rates ("IAS 21"), and have not been corrected in terms of IAS 8, Accounting policies, Changes in accounting Estimates and Errors.
- The ZWL valuation inputs used to revalue the PPE amounts for Prime Seed Co (Private) Limited, an associate company, were not considered to be appropriate in determining fair values in accordance with IFRS 13, Fair Values.
These are prior period errors which have not been corrected in terms of IAS 8 and are continuing in the current interim period.
The impact of these matters is considered to be material, however, cannot be quantified in respect of the share of loss from associates and joint ventures and the investment in associates and joint venture. The prior year audit opinion for the year ended 31 March 2022 and review conclusion for the six-month period ended 30 September 2021, issued by the predecessor auditor, were also modified due to these matters.
Matter 3: Accounting for foreign currency denominated payables related to Blocked Funds Foreign currency denominated payables were incorrectly translated at an exchange rate of ZWL$1: US$1 for the year ended 31 March 2021 and the six- month period ended 30 September 2021, which was not in accordance with IAS 21. As a result, exchange gains and losses (within other income) in the comparative consolidated inflation adjusted Income Statement of ZWL 2 084 535 613 remains materially misstated.
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Seed Co. Ltd. published this content on 13 December 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 December 2022 07:24:04 UTC.