Abridged Audited
Financial Results
for the year ended 31 December 2021
Total Transport & Logistics Solutions
Corner Orme and Willow Road, New Adbernnie Harare P.O. Box 772 Harare, Zimbabwe, Tel: +263 8677000777, Website: www.unifreight.co.zw
Chairman's Statement
Overview
The year 2021 was characterised by a rebound in economic activity as a result of the easing of restrictions that had been implemented to combat the Covid 19 pandemic. This was a welcomed development although the operating environment remained challenging. The effect of rising inflation, volatility of exchange rates, and policy inconsistencies has affected business confidence within the economy. We have implemented measures to reduce the impact on the business and we are confident the measures will secure the future of the business.
Financial performance
We are happy to present inflation-adjusted Group Revenue of ZW$3.212Billion which is 32% above prior year and 2% above budget. Despite this healthy growth in Sales, margins have been pressed by the rising in cost. This rise in cost is mainly because of exchange rate volatility and US Dollar inflation experienced during the year. Tonnage was 0.7% above budget and 22% up from the prior year. This increase in tonnage was a result of new business acquisition and
average growth of 50% in volume as existing customers recovered from the impact of Covid 19 restrictions. Inflation-adjusted profit for the year was ZW$581million as compared to a ZW$123 Million Inflation Adjusted loss the prior year. (Historical Profit ZW$ 197 Million)
Outlook
Under the circumstances, the Board is relatively happy with the results produced during the period under review, particularly the acquisition of new revenue-earning equipment, growth in the balance sheet in real terms, and the investment in Zimplow Limited which will result in the Group enjoying benefits from the synergy. The operating environment remains challenging but we are confident that the authorities will implement measures to stabilize the exchange rate and inflation. Meanwhile, as the country gears up for the 2023 elections, the Group will continue to look for opportunities to remain profitable.
Dividend
The board has recommended the declaration of a dividend of 59 cents per share, a separate announcement will be made giving details of payment.
Appreciation
On behalf of the Board, I would like to extend my sincere appreciation to our valued stakeholders. I am grateful to my fellow board members for their strategic insight, management and staff for their continued commitment and dedication.
Peter Annesley
Chairman
28 June 2022
ABRIDGED AUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 Dececember 2021
Audited | Unaudited | |||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||
ZW$ 000 | ZW$ 000 | ZW$ 000 | ZW$ 000 | |||||||||
Inflation Adj | Inflation Adj | Historical | Historical | |||||||||
ASSETS | ||||||||||||
Non current assets | 3,288,820 | 2,477,323 | 1,148,848 | 142,037 | ||||||||
Property, vehicles and | ||||||||||||
equipment | 1,289,563 | 1,413,221 | 168,349 | 84,551 | ||||||||
Investment property | 732,707 | 745,196 | 18,193 | 18,565 | ||||||||
Investment in equity | ||||||||||||
instrument | 810,258 | - | 810,258 | - | ||||||||
Rigt of use of asset | 389,111 | 251,725 | 150,548 | 37,421 | ||||||||
Intangible assets | 67,181 | 67,181 | 1,500 | 1,500 | ||||||||
Current assets | 538,837 | 566,250 | 528,836 | 336,419 | ||||||||
Inventories | 193,670 | 203,211 | 183,669 | 105,875 | ||||||||
Income tax asset | 300 | - | 300 | - | ||||||||
Trade and other receivables | 320,128 | 281,660 | 320,128 | 179,918 | ||||||||
Cash and cash equivalents | 24,739 | 81,379 | 24,739 | 50,626 | ||||||||
Assets held for sale | - | 72,428 | - | 2,046 | ||||||||
TOTAL ASSETS | 3,827,657 | 3,116,001 | 1,677,684 | 480,502 | ||||||||
EQUITY AND LIABILITIES | ||||||||||||
Equity | 3,140,642 | 2,204,455 | 1,206,415 | 258,557 | ||||||||
Share capital | 47,700 | 47,700 | 1,065 | 1,065 | ||||||||
Share premium | 92,265 | 92,265 | 2,060 | 2,060 | ||||||||
Non-distributable reserve | 1,622,559 | 1,622,559 | 46,356 | 46,356 | ||||||||
Fair value reserve for | ||||||||||||
financial assets at FVOCI | 363,985 | - | 476,994 | - | ||||||||
Equity component of | ||||||||||||
shareholders loans | 400,009 | 400,009 | 8,931 | 8,931 | ||||||||
Retained Earnings | 614,124 | 41,922 | 671,009 | 200,145 | ||||||||
Non current liabilities | 395,687 | 612,971 | 179,941 | 39,845 | ||||||||
Lease liability | 154,020 | 59,635 | 154,020 | 37,590 | ||||||||
Deferred tax liabilities | 241,667 | 553,336 | 25,921 | 2,255 | ||||||||
Current liabilities | 291,328 | 283,690 | 291,328 | 181,980 | ||||||||
Trade and other payables | 240,459 | 190,023 | 240,459 | 123,706 | ||||||||
Income tax payable | - | 79,051 | - | 49,161 | ||||||||
Deferred consideration | - | 118 | - | 73 | ||||||||
Lease liability | 7,013 | 2,382 | 7,013 | 1,502 | ||||||||
Loans and borrowings | 43,856 | 12,116 | 43,856 | 7,538 | ||||||||
Liabilities directly associated | ||||||||||||
with the assets held for sale | - | 14,885 | - | 120 | ||||||||
TOTAL EQUITY AND | ||||||||||||
LIABILITIES | 3,827,657 | 3,116,001 | 1,677,684 | 480,502 | ||||||||
ABRIDGED AUDITED CONSOLIDATED STATEMENT | ||||||||||||
OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME | ||||||||||||
for the year ended 31 December 2021 | ||||||||||||
Audited | Unaudited | |||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||
ZW$ 000 | ZW$ 000 | ZW$ 000 | ZW$ 000 | |||||||||
Inflation Adj | Inflation Adj | Historical | Historical | |||||||||
Revenue | 3,211,716 | 2,440,827 | 2,561,597 | 1,038,701 | ||||||||
Operating costs | (3,209,945) | (1,949,981) | (2,392,373) | (821,640) | ||||||||
Movement in expected | ||||||||||||
credit losses | (45,070) | (370) | (45,070) | (9,196) | ||||||||
Dividend Received | 4,102 | - | 3,667 | - | ||||||||
Other operating income | 640,120 | 100,094 | 481,734 | 63,617 | ||||||||
Earnings before interest, | ||||||||||||
tax, depreciation | ||||||||||||
and amortisation (EBITDA) | 600,923 | 590,570 | 609,555 | 271,482 | ||||||||
Finance costs | (44,464) | (11,696) | (38,748) | (12,281) | ||||||||
Depreciation | (227,355) | (333,213) | (30,740) | (13,149) | ||||||||
Monetary (loss)/ gain | (54,314) | (330,246) | - | - | ||||||||
Profit before taxation | 274,790 | (84,585) | 540,067 | 246,052 | ||||||||
Income tax expense | 305,828 | (37,924) | (23,692) | (48,953) | ||||||||
Profit /(Loss) for the year | 580,618 | (122,509) | 516,375 | 197,099 | ||||||||
Other comprehensive income | ||||||||||||
Other comprehensive income | ||||||||||||
not to be reclassified | ||||||||||||
to profit or loss | ||||||||||||
in subsequent periods: | ||||||||||||
Net gain on equity instruments | ||||||||||||
designated at fair value | ||||||||||||
through other | ||||||||||||
income | 363,985 | - | 453,144 | - | ||||||||
Other comprehensive | ||||||||||||
income for the | ||||||||||||
year, net of tax | 363,985 | - | 453,144 | - | ||||||||
Total comprehensive | ||||||||||||
income/ (loss) for the | ||||||||||||
year, net of tax | 944,603 | (122,509) | 969,519 | 197,099 | ||||||||
Earnings per share | ||||||||||||
- Basic earnings for | ||||||||||||
the year attributable to | ||||||||||||
ordinary equity | ||||||||||||
holders of the parent (cents) | 545.31 | (115.06) | 484.98 | 185.11 | ||||||||
- Diluted earnings for the | ||||||||||||
year attributable to | ||||||||||||
ordinary equity holders of | ||||||||||||
the parent (cents) | 545.31 | (115.06) | 484.98 | 185.11 | ||||||||
ABRIDGED AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2021
Attributable to equity shareholders of the parent | |||||||||||||||||||||||||||||||||||||
Share | Share | Non-distributable | Fairvalue reserve | Equity portion of | Retained | Total | |||||||||||||||||||||||||||||||
capital | premium | reserves | of financial | Shareholders loans | Earnings | Equity | |||||||||||||||||||||||||||||||
Inflation Adj | Inflation Adj | Inflation Adj | assets at FVOCI | Inflation Adj | Inflation Adj | Inflation Adj | |||||||||||||||||||||||||||||||
ZW$ 000 | ZW$ 000 | ZW$ 000 | ZW$ 000 | ZW$ 000 | ZW$ 000 | ZW$ 000 | |||||||||||||||||||||||||||||||
Balance as at 1 January 2020 | 47,700 | 92,265 | 1,639,122 | - | 400,009 | 161,396 | 2,340,492 | ||||||||||||||||||||||||||||||
Loss for the year | - | - | - | - | - | (122,509) | (122,509) | ||||||||||||||||||||||||||||||
Dividend | - | - | - | - | - | (13,528) | (13,528) | ||||||||||||||||||||||||||||||
Realised portion of non-distributable reserve | - | - | (16,563) | - | - | 16,563 | - | ||||||||||||||||||||||||||||||
Balance as at 31 December 2020 | 47,700 | 92,265 | 1,622,559 | - | 400,009 | 41,922 | 2,204,455 | ||||||||||||||||||||||||||||||
Balance as at 1 January 2021 | 47,700 | 92,265 | 1,622,559 | - | 400,009 | 41,922 | 2,204,455 | ||||||||||||||||||||||||||||||
Profit for the year | - | - | - | - | - | 580,618 | 580,618 | ||||||||||||||||||||||||||||||
Dividend | - | - | - | - | - | (8,416) | (8,416) | ||||||||||||||||||||||||||||||
Net gain on equity instruments | |||||||||||||||||||||||||||||||||||||
designated at fair value through | |||||||||||||||||||||||||||||||||||||
other comprehensive income | - | - | - | 363,985 | - | - | 363,985 | ||||||||||||||||||||||||||||||
Balance as at 31 December 2021 | 47,700 | 92,265 | 1,622,559 | 363,985 | 400,009 | 614,124 | 3,140,642 | ||||||||||||||||||||||||||||||
Accounting policies | |||||||||||||||||||||||||||||||||||||
ABRIDGED AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS | The consolidated financial statements have been prepared in accordance with International Financial Reporting | ||||||||||||||||||||||||||||||||||||
for the year ended 31 December 2021 | Standards (IFRS) as issued by the International Accounting Standards Board. | ||||||||||||||||||||||||||||||||||||
Audited | The policies applied are consistent with those applied in previous years. | ||||||||||||||||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||||||||||||||||
Inflation Adj | Inflation Adj | Trade and other receivables | Trade and other payables | ||||||||||||||||||||||||||||||||||
ZW$ 000 | ZW$ 000 | Inflation Adj | Inflation Adj | ||||||||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||
Net cash generated from operating activities | 158,324 | 669,056 | Current | ZW$ '000 | ZW$ '000 | Current | ZW$ '000 | ZW$ '000 | |||||||||||||||||||||||||||||
Cash generated from operations | 227,703 | 710,744 | Trade receivables | 250,821 | 248,019 | Trade payables | 138,960 | 90,561 | |||||||||||||||||||||||||||||
Receivables due from | Trade payables due | ||||||||||||||||||||||||||||||||||||
Dividend paid | (8,416) | (13,528) | |||||||||||||||||||||||||||||||||||
related parties | 7,988 | 6,105 | to related parties | 36,752 | 10,027 | ||||||||||||||||||||||||||||||||
Interest paid | (42,355) | (11,695) | Less: provision for impairment | (63,985) | (18,916) | Accrued expenses | 33,212 | 19,650 | |||||||||||||||||||||||||||||
Taxation paid | (18,608) | (16,465) | Trade receivables - net | 194,824 | 235,208 | Social security and other | |||||||||||||||||||||||||||||||
statutory liabilities | 69,785 | ||||||||||||||||||||||||||||||||||||
31,535 | |||||||||||||||||||||||||||||||||||||
Prepayments | 20,822 | 5,441 | 240,459 | 190,023 | |||||||||||||||||||||||||||||||||
Net cash utilised in investing activities | (42,294) | (74,583) | Staff debtors | 187 | 1,042 | ||||||||||||||||||||||||||||||||
Purchase of property, vehicles and equipment to | VAT receivable | 723 | 133 | ||||||||||||||||||||||||||||||||||
Other debtors | 103,572 | 39,836 | |||||||||||||||||||||||||||||||||||
increase operations | (54,469) | (87,560) | |||||||||||||||||||||||||||||||||||
320,128 | 281,660 | ||||||||||||||||||||||||||||||||||||
Dividend Received | 4,102 | - | |||||||||||||||||||||||||||||||||||
Proceeds from sale of property, vehicles and equipment | 8,073 | 12,977 | Borrowings | ||||||||||||||||||||||||||||||||||
Borrowings represent facilities for capital expenditure and working capital. The interest rates is 65%. | |||||||||||||||||||||||||||||||||||||
Net cash generated/(utilised) in financing activities | 6,286 | (54,947) | |||||||||||||||||||||||||||||||||||
Proceeds from borrowings | 75,913 | 16,752 | Dec | Dec | |||||||||||||||||||||||||||||||||
Payment of deferred consideration | (225) | (362) | 2021 | 2020 | |||||||||||||||||||||||||||||||||
Principal payment of lease liabilities | (32,932) | (2,016) | ZW$ '000 | ZW$ '000 | |||||||||||||||||||||||||||||||||
Inflation Adj | Inflation Adj | ||||||||||||||||||||||||||||||||||||
Repayments of borrowings | (36,470) | (69,321) | |||||||||||||||||||||||||||||||||||
Shareholder loans | 400,009 | 400,009 | |||||||||||||||||||||||||||||||||||
Increase in cash and cash equivalents | 122,316 | 539,526 | Equity component of shareholders loans | (400,009) | (400,009) | ||||||||||||||||||||||||||||||||
- | - | ||||||||||||||||||||||||||||||||||||
Cash and cash equivalents at beginning of year | 81,383 | 58,746 | Loans and Borrowings | 43,856 | 12,116 | ||||||||||||||||||||||||||||||||
43,856 | 12,116 | ||||||||||||||||||||||||||||||||||||
Net foreign exchange differences | 6,925 | 11,131 | |||||||||||||||||||||||||||||||||||
Effect of inflation on cash and cash equivalence | (185,885) | (528,020) | Finance cost | ||||||||||||||||||||||||||||||||||
Finance cost comprises the following: | |||||||||||||||||||||||||||||||||||||
Cash and cash equivalents at end of year | 24,739 | 81,383 | |||||||||||||||||||||||||||||||||||
Dec | Dec | ||||||||||||||||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||||||||||||||||
ZW$ '000 | ZW$ '000 | ||||||||||||||||||||||||||||||||||||
Inflation Adj | Inflation Adj | ||||||||||||||||||||||||||||||||||||
NOTES TO THE ABRIDGED AUDITED CONSOLIDATED FINANCIAL STATEMENTS | - Bank borrowings | 17,661 | 5,210 | ||||||||||||||||||||||||||||||||||
for the year ended 31 December 2021 | |||||||||||||||||||||||||||||||||||||
- Consideration liability | 4 | 31 | |||||||||||||||||||||||||||||||||||
General Information | - Leases liabilities | 26,799 | 6,454 | ||||||||||||||||||||||||||||||||||
Unifreight Africa Limited (formerly Pioneer Corporation Africa Limited) was incorporated in Zimbabwe in 1970. | 44,464 | 11,695 | |||||||||||||||||||||||||||||||||||
It is the holding company of a Group of companies primarily involved in the road transport industry whose | Capital expenditure | ||||||||||||||||||||||||||||||||||||
main activities include inter-city freight consolidations, the distribution of general goods, and a courier service. | Acquisition of property, | ||||||||||||||||||||||||||||||||||||
vehicles and equipment | 54,469 | 87,560 | |||||||||||||||||||||||||||||||||||
The Company is incorporated in Zimbabwe. Other entities in the Group are incorporated in | Botswana. The | ||||||||||||||||||||||||||||||||||||
company is listed on the Zimbabwe Stock Exchange | Approved capital commitments | ||||||||||||||||||||||||||||||||||||
at the date of approval | |||||||||||||||||||||||||||||||||||||
These Group consolidated financial statements are presented in Zimbabwean Dollars and were authorised | of financial results | - | - | ||||||||||||||||||||||||||||||||||
for issue by the Board of Directors on 28 June 2022. | Contingent liabilities | ||||||||||||||||||||||||||||||||||||
Basis of preparation | The group is a defendant in various labour disputes with former employees. The cases are at various stages. | ||||||||||||||||||||||||||||||||||||
The consolidated financial statements of the Group have been prepared in accordance with International | The total being claimed in all these cases is ZW$ 895,800. | ||||||||||||||||||||||||||||||||||||
Financial Reporting Standards (IFRS) as issued by the international Accounting Standards Board (IASB). | |||||||||||||||||||||||||||||||||||||
The accounting policies are applied consistently throughout the Group. The consolidated financial statements | Subsequent events | ||||||||||||||||||||||||||||||||||||
are presented in Zimbabwean dollars (ZW$) and all values are rounded to the nearest 1 000 dollars except | There are no adjusting or non-adjusting events after the reporting date which have an effect on the financial | ||||||||||||||||||||||||||||||||||||
where otherwise stated. | position of the group as at the reporting date nor require disclosure in the financial statements. | ||||||||||||||||||||||||||||||||||||
The consolidated financial statements are initially prepared under the historical cost convention as restated | |||||||||||||||||||||||||||||||||||||
for the changes in the general purchasing power of the functional currency for the purposes of fair presentation | INDEPENDENT AUDITOR'S REPORT | ||||||||||||||||||||||||||||||||||||
in accordance with IAS 29 (Financial Reporting in Hyperinflationary Economies). This historical cost information | |||||||||||||||||||||||||||||||||||||
has been restated for changes in the general purchasing power of the Zimbabwe dollar and as a result are | |||||||||||||||||||||||||||||||||||||
stated in terms of the measuring unit current at the end of the reporting period. Accordingly, the inflation | |||||||||||||||||||||||||||||||||||||
adjusted consolidated financial statements represent the primary financial statements of the Group. | This abridged inflation adjusted consolidated financial statements should be read in conjunction with the | ||||||||||||||||||||||||||||||||||||
complete set of inflation adjusted consolidated financial statements for the year ended 31 December 2021 | |||||||||||||||||||||||||||||||||||||
Inflation adjustment | which have been audited by Ernst & Young Chartered Accountants (Zimbabwe). | ||||||||||||||||||||||||||||||||||||
The Public Accountants and Auditors Board (PAAB) in their circular 01/19 communicated that the factors and | |||||||||||||||||||||||||||||||||||||
characteristics to apply IAS 29, Financial Reporting in Hyper-Inflationary Economies had been met in | An adverse opinion has been issued thereon in respect of non-compliance with the requirements of International | ||||||||||||||||||||||||||||||||||||
Zimbabwe. The pronouncement require that entities reporting in Zimbabwe apply the requirements of IAS | |||||||||||||||||||||||||||||||||||||
Accounting Standard 21:"The effects of changes in Foreign Exchange rates", including historical errors not | |||||||||||||||||||||||||||||||||||||
29 with effect from 1 July 2019. | |||||||||||||||||||||||||||||||||||||
adjusted in terms of International Accounting Standard 8:"Accounting Policies, Changes in Accounting Estimates | |||||||||||||||||||||||||||||||||||||
IAS 29 requires that the financial statements prepared in the currency of a hyperinflationary economy be | and Errors", International Financial Reporting Standard (IFRS 13) Fair Value Measurement, IAS 2 inventories | ||||||||||||||||||||||||||||||||||||
stated in terms of the measuring unit current at the balance sheet date and the corresponding figures for the | and consequential impact on the inflation adjusted amounts determined in terms of IAS 29 Financial Reporting | ||||||||||||||||||||||||||||||||||||
previous period be stated in the same terms. The restatement has been calculated by means of conversion | in Hyperinflationary Economies. Additionally, the opinion was also further qualified due to the limitation of scope | ||||||||||||||||||||||||||||||||||||
factors derived from the consumer price index. The Group used the inflation adjustment factors derived from | due to circumstances relating to the nature of our work and non compliance with International Financial | ||||||||||||||||||||||||||||||||||||
the monthly Consumer Price Indices as published by the Reserve Bank of Zimbabwe. The following factors | |||||||||||||||||||||||||||||||||||||
Reporting Standard (IFRS) 11: Joint Arrangements. | |||||||||||||||||||||||||||||||||||||
were applied: | |||||||||||||||||||||||||||||||||||||
The Independent Audit Report on the inflation adjusted consolidated financial statements is available for | |||||||||||||||||||||||||||||||||||||
Period / Month | Factor | Period / Month | FactorJ | ||||||||||||||||||||||||||||||||||
Jan-21 | 1.5246 | Jul-21 | 1.2986 | inspection at the registered office of the company. The engagement partner responsible for this audit is Mr. | |||||||||||||||||||||||||||||||||
Feb-21 | 1.4737 | Aug-21 | 1.2464 | David Gwande. (PAAB Practicing Certificate Number 132) | |||||||||||||||||||||||||||||||||
Mar-21 | 1.4412 | Sept-21 | 1.1901 | ||||||||||||||||||||||||||||||||||
Apr-21 | 1.4187 | Oct-21 | 1.1186 | ||||||||||||||||||||||||||||||||||
May-21 | 1.3835 | Nov-21 | 1.0576 | ||||||||||||||||||||||||||||||||||
Jun-21 | 1.3318 | Dec-21 | 1.0000 | ||||||||||||||||||||||||||||||||||
Directors: P.J. Annesley (Chairman); R.E. Kuipers * (Chief Executive Officer); B.N. Ndebele; H. Crabbe; M. Kalweit *Executive
Ernst & Young | Tel: +263 24 2750905-14 or 2750979-83 |
Chartered Accountants (Zimbabwe) | Fax: +263 24 2750707 or 2773842 |
Registered Public Auditors | Email: admin@zw.ey.com |
Angwa City | www.ey.com |
Cnr Julius Nyerere Way / | |
Kwame Nkrumah Avenue | |
P O Box 62 or 702 | |
Harare | |
Zimbabwe |
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF UNIFREIGHT AFRICA LIMITED
Report on the Audit of the Inflation Adjusted Consolidated Financial Statements
Adverse Opinion
We have audited the inflation adjusted consolidated financial statements of Unifreight Africa Limited and its subsidiaries (the Group), as set out on pages 10 to 52, which comprise the inflation adjusted consolidated statement of financial position as at 31 December 2021, and the inflation adjusted consolidated statement of profit or loss and other comprehensive income, the inflation adjusted consolidated statement of changes in equity and the inflation adjusted consolidated statement of cash flows for the year then ended, and notes to the inflation adjusted consolidated financial statements, including a summary of significant accounting policies and other explanatory notes.
In our opinion, because of the significance of the matters discussed in the Basis for Adverse Opinion section of our report, the accompanying inflation adjusted consolidated financial statements do not present fairly, the financial position of the Group as at 31 December 2021, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) and Companies and Other Business Entities Act (Chapter 24:31).
Basis for Adverse Opinion
Non-compliance with IFRS: Inappropriate application of International Accounting Standard (IAS) 8 - Accounting Policies, Changes in Accounting Estimates and Errors
Historical functional currency matter
As explained in note 2.4a to the inflation adjusted consolidated financial statements, the Group changed its functional currency from the United States Dollars (US$) to Real Time Gross Settlement Dollars (RTGS$), now Zimbabwe Dollars (ZW$), on 23 February 2019 in order to comply with Statutory Instrument 33 of 2019. The inflation adjusted consolidated financial statements is presented in ZW$.
We however believe that the change occurred on 1 October 2018 in terms of International Accounting Standard (IAS 21) - The Effects of Changes in Foreign Exchange Ratesgiven the significant monetary and exchange control policy changes witnessed in Zimbabwe from 2016 through to 2019.
Our audit opinion for the year ended 31 December 2021 was therefore modified as the matter emanating from 2020 had not been corrected.
A member firm of Ernst & Young Global Limited | 3 |
Independent Auditor's Report (Continued)
Unifreight Africa Limited
Basis for Adverse Opinion(continued)
Non-compliance with IFRS: Inappropriate application of International Accounting Standard (IAS) 8 -
Accounting Policies, Changes in Accounting Estimates and Errors (continued)
Management has not made adjustments in current period in terms of IAS 8. The matter therefore continues to impact the following amounts on the inflation adjusted consolidated statement of financial position which still comprise of material amounts from opening balances: vehicles and equipment of ZW$ 1 289 563 000 (31 December 2020: ZW$ 1 413 221 000), investment property of ZW$ 732 707 000
(31 December 2020: ZW$ 745 196 000) and retained earnings ZW$ 614 123 000 (31 December 2020: ZW$ 41 922 000).
As opening balances enter into the determination of cash flows and performance, our audit opinion is modified in respect of the impact of this matter on the depreciation expense of ZW$ 227 355 000 (31 December 2020: ZW$ 333 213 000), operating expenses of ZW$ 3 209 945 000(31 December 2020: ZW$ 1 949 981 000) and income tax credit of ZW$ 305 828 000 (31 December 2020: expense of ZW$ 37 924 000) on the inflation adjusted consolidated statement of profit or loss and other comprehensive income and cashflows from operating activities on the inflation adjusted consolidated statement of cash flows.
Further to the above, corresponding amounts for inventories, non-distributable reserve, and deferred tax
liabilities on the inflation adjusted consolidated statement of financial position remain misstated as they have not been corrected in terms of IAS 8. Therefore, our audit opinion on the current period's inflation
adjusted consolidated financial statements is also modified because of the possible effect of this matter on the comparability of the current period's inflation adjusted consolidated financial statements.
Exchange rates used (Non-compliance with IAS 21)
For the period 1 January 2021 to 31 December 2021, management applied internally derived exchange rates to translate foreign denominated transactions and balances to the functional and reporting currency, the ZW$. We believe that the internally derived exchange rates do not meet the definition of spot rates in terms of IAS 21 and that instead, management should have adopted the spot exchange rates derived from the Foreign Currency Auction system. The following misstatements in the table below arise on the inflation adjusted consolidated statement of financial position balances:
31 December 2021 | 31 December 2020 | ||||||
Disclosed | Misstatement | Disclosed | Misstatement | ||||
amount ZW$ | ZW$ | amount ZW$ | ZW$ | ||||
Inventories | 193 670 000 | Could not be | 203 211 000 | Could not be | |||
determined | determined | ||||||
Trade and other | 320 128 000 | 4 938 415 | 281 660 000 | 6 469 434 | |||
receivables | |||||||
Cash and cash | 24 739 000 | 722 386 | 81 379 000 | 23 603 635 | |||
equivalents | |||||||
Trade and other | 240 450 000 | 1 897 262 | 190 023 000 | 9 372 259 | |||
payables | |||||||
4
Independent Auditor's Report (Continued)
Unifreight Africa Limited
Basis for Adverse Opinion (continued)
Exchange rates used (Non-compliancewith IAS 21)(Continued)
In the inflation adjusted consolidated statement of profit or loss and other comprehensive income, revenues, income taxes and operating expenses are affected. However, the misstatements cannot be quantified owing to the large volume of affected transactions. Consequently, the inflation adjusted consolidated statements of changes in equity and cashflows are also impacted.
Further to the above, corresponding amounts for Vehicles and equipment, equity component of the shareholders' loan and deferred tax liabilities remain misstated as they have not been corrected in terms of IAS 8.
Therefore, our audit opinion on the current period's inflation adjusted consolidated financial statements is also modified because of the possible effect of this matter on the comparability of the current period's
inflation adjusted consolidated financial statements.
Inventory Valuation not in compliance with IFRS requirements of IAS 2 - Inventories
For the period under consideration, the Group revalued their opening spare parts inventory items from their original purchase cost to a fair value determined from the open market US$ values. This revaluation was however not in compliance with IAS 2 which requires that inventories should be measured at the lower of cost, and net realizable value. As a consequence, the current year inventories balances of ZW$193 670 000 could be overstated by ZW$18 999 000, since some of the spare parts inventory items are still available as part of the year end balances.
Further to this, the First-inFirst-out (FIFO) method of valuing inventory has not been applied correctly by Management. Due to challenges in the valuation process during the year, the inventory at year end was valued using the last invoice received. This method assumes that all inventory items were purchased at the same time, contrary to the requirements of the FIFO method. The misstatement could however not be quantified due to the nature of the accounting records.
Consequently, operating expenses on the inflation adjusted consolidated statement of profit or loss and other comprehensive income and working capital movements on the inflation adjusted consolidated statement of cashflows are impacted.
Valuation of Investment Property for Disclosure purposes (Non-compliance with IFRS 13 - Fair Value Measurement and IAS 40 Investment Property
The Group's properties, which are accounted for at cost in terms of the Group's accounting policy, are
subjected to valuation, for disclosure purposes, as per the requirements of IAS 40. The standard requires the fair value details to be disclosed as is described in Notes 7 and 10.1 to the inflation adjusted consolidated financial statements. The relevant fair value principles are set out in IFRS 13- Fair Value Measurement.
Consistent with the prior year, these investment properties were valued as guided by management experts using historical US$ denominated inputs and converted into ZW$ at the applicable closing exchange rates as at 31 December 2021.
5
Independent Auditor's Report (Continued)
Unifreight Africa Limited
Basis for Adverse Opinion(continued)
Valuation of Investment Property for Disclosure purposes (Non-compliance with IFRS 13 - Fair Value
Measurement and IAS 40 Investment Property(continued)
We have concerns over the appropriateness of using a foreign currency for the valuation and then applying a conversion rate to determine the ZW$ values of the investment property and freehold land and buildings. The translation process adopted by management would not meet the fair value measurement principles of the affected items as set out in IFRS 13 due to the following considerations:
- With respect to the implicit investment approach, the US$ estimated rentals may not be an appropriate proxy for the ZW$ amounts in which rentals are settled.
- While historical US$ amounts based on similar transactions have been used as a starting point in determining comparable values on the market comparable approach, it is noted that market participants consider different risk factors in determining an appropriate value in ZW$ terms which are not necessarily limited to the exchange rate.
Scope Limitation on Transactions and balances with a third party
-
Included in the inflation adjusted consolidated financial statements are the results of the contract entered into between the entity and a third party.
In terms of the agreement, the two parties planned to expand and diversify their respective businesses by operating a Joint Venture, whereby SWIFT (a division of the company) would procure, pack and redistribute food packs through its depots with the third party selling the food packs and marketing the service. The above provisions in the contract implied that that the arrangement was to be accounted for as a joint venture under IFRS 11 -JointArrangements wherein the Group would have accounted for the investment in the joint venture as a noncurrent asset and subsequently recorded the profits or losses earned or incurred respectively by the joint venture as other income in inflation adjusted consolidated statement of profit or loss and other comprehensive income. We were however unable to determine whether the IFRS 11 conditions for recognition of an investment in joint venture had indeed been met as the information required to do so was not available.
Instead, the Group accounted for the revenues and cost of sales from the arrangement as part of normal trading with unrelated parties. As the agreement became effective in 2020, the limitation of scope extends to the prior year inflation adjusted consolidated financial statements as well. - We were unable to obtain sufficient and appropriate evidence to support some of the revenue and cost of sales amounts recorded in relation to this arrangement as management were unable to provide the supporting information required to validate the amounts. As a result, we could not determine whether any adjustments might have been necessary in respect of the following accounts:
6
This is an excerpt of the original content. To continue reading it, access the original document here.
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Unifreight Africa Ltd. published this content on 08 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 July 2022 14:43:03 UTC.