Masimba Holdings Limited (MSHL.zw) HY2019 Interim Report

We have extracted the Chairman’s Statement from the 2019 half year report for Masimba Holdings Limited (MSHL.zw), listed on the Zimbabwe Stock Exchange:

INTRODUCTION

On behalf of the Board, I am pleased to present to you the interim results for the six months ended 30 June 2019. I wish to bring to the attention of the stakeholders the change in functional and reporting currency from United States Dollars (US$) to Zimbabwe Dollars (ZWL$) as a result of the promulgation of Statutory Instrument 33/2019 on 21 February 2019. Resultantly, opening balances were restated at an exchange rate of ZWL$2,50:US$1 and at the closing period, the rate was at ZWL$6,31. The comparative figures have been stated based on the US$ to ZWL$ exchange rate of 1:1. Consequently, the financial performance for the period under review is not directly comparable to the performance and financial position for the period ended 31 December 2018.

OPERATING ENVIRONMENT

The period under review remained highly volatile for business operations as characterised by significant policy changes in a market faced with foreign currency shortages, tight liquidity and high inflation. Annual inflation reached 175.66% in June 2019 and the Government has discontinued publishing the year on year inflation statistics, a phenomenon that will make measurability of performance very difficult. The Government of Zimbabwe, through Statutory Instrument 142/2019 issued on 24 June 2019, introduced the ZWL$ as the sole legal tender for trading and settlement for domestic transactions.

OPERATIONS

Trading conditions at the beginning of the financial period started slowly and improved in the second quarter. The company recorded a revenue of ZWL$27,784,664 for the six months period ended 30 June 2019. Profit Before Interest, Tax, Depreciation, Amortisation and Fair value adjustments improved to ZWL$7,795,956 mainly driven by procurement, production and plant utilisation efficiencies.

Non-current assets position at 30 June 2019 amounted to ZWL$67,645,098, largely driven by adoption of Statutory Instrument 33/2019 and a Directors’ valuation of property, plant and equipment at end of the financial period, resulting in a foreign currency translation reserve of ZWL$21,268,609, revaluation reserve of ZWL$21,434,771 and fair value gain of ZWL$6,924,000.

Net working capital position improved to ZWL$12,173,775, mainly attributable to growth in business and implementation of effective working capital strategies. The introduction of the inter-bank foreign exchange market has brought about improved foreign currency availability that is competitively priced. In addition, the deterioration of the exchange rate has decelerated post the introduction of the inter-bank foreign exchange market. At the reporting date, the Group had a net foreign asset position of US$665,426.

OCCUPATIONAL HEALTH & SAFETY ASSESSMENT SYSTEMS (OHSAS)

We have maintained our Quality Management System (ISO 9001:2015), Environmental Management System (ISO 14001:2015), Occupational Health & Safety (OHSAS 18001:2007), and are currently working on migrating from OHSAS 18001:2007 to the new ISO 14001:2018. In the period, Lost Time Injury Frequency Rate improved to 1.71 (2018: 3.2).

PROSPECTS

We commend the bold changes implemented by Government in the period under review, in particular the market related pricing of fuel and electricity, introduction of the foreign exchange inter-bank market and the Zimbabwe dollar. While the aforementioned have contributed to an upsurge in inflationary pressures, we hope that the continued efforts by Government to allocate funding to infrastructure and agriculture, in addition to its commitment to the Transitional Stabilisation Program, will spur the economy to positive growth in the medium to long term. Subsequent to the reporting period, the Group has been awarded significant infrastructure projects and this will translate to better resource utilisation efficiencies. The Group has substantial balances in net foreign current assets that are due for settlement by December 2019. Given the weakening ZWL$ exchange rate, this is likely to result in significant foreign exchange gains in the second half of the financial period.

DIVIDEND DECLARATION

In view of the profit for the six months to 30 June 2019 and considering the cashflow position of the business, the Board is proposing an interim cash dividend of ZWL$0.83 cents per share (2018: Nil).

APPRECIATION

On behalf of the Board, I extend my appreciation to our valued customers, suppliers and other key stakeholders for their continued support, as well as to the executives and staff for their valuable contribution towards the attainment of these results in a difficult environment. I also wish to thank my colleagues on the Board for their valuable contribution.

For and on behalf of the Board

G. Sebborn