National Foods Holdings Limited (NTFD.zw) HY2020 Interim Report

We have extracted the Chairman’s Statement from the 2020 interim report of National Foods Holdings Limited (NTFD.zw), listed on the Zimbabwe Stock Exchange:

Directors’ Responsibility
The Holding Company’s Directors are responsible for the preparation and fair presentation of the Group’s consolidated financial statements, of which this press release represents an extract. These Abridged Group interim financial statements are presented in accordance with the disclosure requirements of the Zimbabwe Stock Exchange (ZSE) Listing Requirements for provisional interim financial statements (Preliminary Reports), and in accordance with the measurement and recognition principles of International Financial Reporting Standards (IFRS) and in the manner required by the Companies and Other Business Entities Act (Chapter 24:31). The principal accounting policies applied in the preparation of these interim financial statements are consistent with those applied in the previous annual financial statements. There is no significant impact arising from new and revised IFRS which became effective for reporting periods commencing on or after 1 January 2019.

Cautionary Statement- Reliance on all Financial
Statements prepared in Zimbabwe for 2019/2020 The Directors would like to advise users to exercise caution in their use of these interim financial statements due to the material and pervasive impact of the technicalities brought
about by the change in functional currency in February 2019, its consequent impact on the usefulness of the financial statements for 2019/2020 financial periods and the adoption of International Accounting Standard (IAS) 29 (Financial Reporting in Hyperinflationary Economies), effective 1 July 2019.

Whilst the Directors have exercised reasonable due care, and applied judgements that they felt were appropriate in the preparation and presentation of these interim financial statements, certain distortions may arise due to various specific economic factors that may affect the relevance and reliability of information that is presented in economies that are experiencing hyperinflation, as well as technicalities regarding the change in functional and reporting currency.

The review conclusion on these interim financial statements has been modified by the independent auditors, Ernst & Young Chartered Accountants (Zimbabwe) as indicated in the review conclusion statement below.

Financial Performance
As noted earlier in this report, the Group’s interim financial results have been prepared on an inflation-adjusted basis as required by IAS 29. Historical cost financial statements have not been presented due to the significant distortions arising from the hyperinflationary environment.

Volumes for the period declined by 32% to 211,381 tons compared to the same period last year. There were declines across all categories with the exception of maize meal, largely driven by reduced consumer spending power and the progressive removal of subsidies, notably in the Flour category. Revenue however increased by 30% to ZWL 2.06 billion, reflective of higher selling prices following the reduction in subsidies. Gross margin dollars increased by 65%, driven by various strategic raw material positions the Group took.

Operational expenditure increased by 48% compared to last year. The lag between increases in the Group’s cost base and inflation is progressively becoming shorter, driving the increase in operational cost over last year. Management continues to apply intense focus to managing the Group’s cost base. As a result of the above, profit before tax increased 99% compared to last year.

Under the prevailing inflationary environment, the company was focused on balance sheet protection. In this regard the constrained local currency liquidity prompted several operational changes including the reduction of credit terms and the immediate conversion of available cash to stock. As a result, the Group closed the period with healthy stock pipelines and we believe should be able to trade sustainably in the coming months which are expected to be marked by strong demand in the maize category. In line with this strategy the Group closed the period with prepayments of ZWL 366m, mainly consisting of prepayments for key raw materials.

We continue to work with the authorities in respect of the historical debt owed by the Reserve Bank of Zimbabwe (RBZ) to the Group’s wheat supplier. This debt amounted to USD42.65m at the end of the period under review.

Dividend
In view of the prevailing environment and in particular the liquidity constraints, the Board has adopted a prudent approach in setting the interim dividend. The Board is pleased to declare an interim dividend of 86.47 ZWL cents per share payable in respect of all ordinary shares in the Company. This interim dividend is in respect of the financial year ending 30th June 2020 and will be payable in full to all the shareholders of the Company registered at the close of business on the 3rd of April 2020. The payment of this dividend will take place on or about the 17th of April 2020. The shares of the Company will be traded cum–dividend on the Zimbabwe Stock Exchange up to the market day of the 31st of March 2020 and ex-dividend as from the 1st of April 2020.

Acknowledgement and Appreciation
In spite of the challenging circumstances, the past 6 months has been a period of continued progress for the Group, driven by the dedicated team at National Foods. I would like to extend my gratitude to our employees for their on-going commitment to the company. Lastly, I would also like to record my thanks to my fellow Board members for their wise counsel and stewardship.

Todd Moyo
Chairman