GB : HY22 Results & Audit Review

ABRIDGED REVIEWED FINANCIAL RESULTS

FOR THE HALF YEAR ENDED 30 JUNE 2022

CHAIRMAN'S STATEMENT

FOR THE HALF YEAR ENDED 30 JUNE 2022

INTRODUCTION

I hereby present to you the half year reviewed interim results for the six months period ended 30 June 2022. Commentary is on inflation adjusted figures.

Following the significant strides by government to contain the COVID 19 pandemic, the Russian Ukraine conflict presented a new crisis in the global economy. The unprecedented protraction of the conflict unleashed new challenges which among others included constrained logistical flow of traffic, grain shortages and resource protectionist policies resulting in global price increases. Consequently, these price increases introduced imported USD inflation to vulnerable economies in the sub region which included Zimbabwe whose economy was already blighted with soaring exchange and inflation rates.

To counter the effect of these headwinds, a raft of policies were implemented to tame both the runaway exchange and inflation rates. It is expected that in the long run these interventions will have a stabilising effect on the exchange and inflation rates obtaining in the economy. However, business suffered immediate shocks in reduced working capital, debtor default and increased import costs. Notwithstanding the above, the company pursued its strategy of continuously delivering a commensurate value proposition to its customers through a product offering that competes with world players.

GROUP PERFORMANCE

Despite the liquidity constraints in the economy, total volumes increased by 21% to 500 metric tonnes when compared with same period prior year's 412 metric tonnes buoyed by a 42 % volume increase at Cernol Chemicals Division. Cernol Chemicals shored up the volumes as the economy opened up post COVID 19 restrictive measures and benefited from its consolidation

in the niche markets. General Beltings volumes decline was attributable to shortages of raw materials even though the order book was firm.

Total turnover at ZWL 669 million increased by 12% when compared with the same period prior year's turnover of ZWL 597 million. Turnover growth was a result of volume growth at Cernol Chemicals. General Beltings consolidated its market positioning in the traditional markets as customers substituted imports with locally produced products.

Total gross profit at ZWL 278 million increased by 5% when compared with same period prior year's ZWL 265 million due to improved throughput and cost containment measures. However due to the USD imported inflation in the rapidly dollarized environment, operating costs at ZWL260 milliom increased by 58 % when compared with the prior year period's ZWL164 million. As a result, an operating profit of ZWL 24 million was recorded against ZWL 104 million of the prior year's same period.

OUTLOOK

The Government of Zimbabwe is predicting the economy to grow by 4.6 % in 2022 due to increased hospitality activity improved, agricultural output and viable mineral prices. It is anticipated that the monetary policy initiatives will stabilise the economic environment in the long run and stimulate a positive growth trajectory. Indications are that the cessation of the Russia -Ukraine conflict is still far and logistical supply chains will be congested as the year closes.

The Company is poised to meet the increased demand in the fourth quarter driven by an improved order book as local firms continue to appreciate the Company's commensurate value

proposition. In addition, activity in the tourism industry is expected to improve given the positive sentiment around containment of potential pandemics like COVID-19 and Monkeypox.

DIVIDEND

At their meeting on 22 September 2022, the Board considered the need for additional working capital to fund a firming order book and the need to adequately stock raw materials. To that end the Board resolved not to pay an interim dividend for the period under review.

APPRECIATION

The above adversities notwithstanding, the company operated as a going concern and recorded an operating profit for the six months. I thank all the employees, management and other stakeholders whose support remains invaluable to the company. To my fellow Directors, I thank you for the counsel and support you have accorded the company. I look forward to the same as the company enters into the final quarter of the year.

1. Nhemachena Chairman
   30 September 2022

INDEPENDENT EXTERNAL AUDITOR'S STATEMENT

These abridged interim financial results for the six months ended 30 June 2022 have been reviewed by Messrs Grant Thornton Chartered Accountants (Zimbabwe) and a modified review conclusion issued thereon. This review conclusion is adverse with respect to non-compliance with International Accounting Standard (IAS 21), The Effects of Changes in Foreign Exchange Rates, International Accounting Standard (IAS 29) - Financial Reporting in Hyperinflationary Economies.

The review conclusion has been made available to management and those charged with the governance of the company. The Independent Review Report on the abridged interim financial results is available for inspection at the company's registered office.

The engagement partner responsible for this review is Trevor Mungwazi

PAAB number 0622

Abridged Statement of Profit and Loss and Other Comprehensive income for the six months ended 30 June 2022

						Inflation adjusted				Historical cost
					REVIEWED					REVIWED	REVIEWED			REVIEWED
				30 JUNE 2022	30 JUNE 2021	30 JUNE 2022	30 JUNE 2021
			NOTES			ZWL					ZWL			ZWL			ZWL
			13
REVENUE			669 002 064		596 795 366	433 734 699			190 573 545
Cost of sales				(390 998 287)		(331 333 899)	(234 279 388)			(106 746 242)
Gross profit				278 003 777		265 461 467	199 455 311			83 827 303
Other income				5 691 750		2 730 854	5 236 733			747 689
Operating expenses				(259 777 392)		(163 925 942)	(196 183 949)			(53 211 283)
Profit from operations				23 918 135		104 266 379	8 508 095			31 363 709
Finance charges				(15 454 833)		-	(8 812 662)			-
Profit/(loss) before exchange gains		8 463 302		104 266 379	(304 567)			31 363 709
Monetary loss				(41 070 491)		(50 857 006)	-			-
(Loss)/profit before tax				(32 607 189)		53 409 373	(304 567)			31 363 709
Income tax expense			14	(11 593 250)		(18 218 967)	(6 673 548)			(7 544 333)
(Loss)/profit for the period				(44 200 439)		35 190 406	(6 978 115)			23 819 376
Other comprehensive income				-		-	-			-
Total comprehensive (loss)/income
for the period				(44 200 439)		35 190 406	(6 978 115)			23 819 376
Number of shares in issue				536 588 624		536 588 624	536 588 624			536 588 624
Basic profit/ (loss) per share (cents)		(0.082)		0.70	(0.013)			0.04
Diluted profit/ (loss) per share (cents)		(0.081)		0.06	(0.013)			0.04
Headline profit/ (loss) per share (cents)		(0.081)		0.06	(0.013)			0.04
Abridged Statement of Financial Position
as at 30 June 2022
						Inflation adjusted				Historical cost
						Reviewed					Audited		Reviewed	Audited
					30 June 2022					31 Dec 2021	30 June 2022	31 Dec 2021
			Notes			ZWL					ZWL			ZWL	ZWL
ASSETS
Non-current assets
Property, plant and equipment			6		929 983 838				931 546 851	17 602 323			18 525 195
Current assets
Inventories			7		92 640 139				160 394 551	86 168 457			71 002 378
Trade and other receivables			8		155 307 263				313 630 996	155 307 263			143 262 834
Cash and cash equivalents			9		34 353 170				41 827 674	34 353 170			19 106 374
					282 300 572				515 853 221	275 828 890			233 371 586
Total assets					1 212 284 410				1 447 400 072	293 431 213			251 896 781
EQUITY AND LIABILITIES
Capital and reserves
Share capital					62 739 659				62 739 659	536 588			536 588
Share options reserve					2 244 928				2 244 928	19 200			19 200
Retained earnings					688 157 324				732 357 763	41 141 613			48 119 728
					753 141 911				797 342 350	41 697 401			48 675 516
Non-current liabilities
Deferred tax					205 352 235				205 263 928	1 858 738			1 770 431
Deferred revenue			10		3 944 366				3 843 228	29 176			29 965
					209 296 601				209 107 156	1 887 914			1 800 396
Current liabilities
Borrowings			11		25 000 000				100 188 525	25 000 000			45 764 903
Trade and other payables			12		196 672 569				293 501 398	196 672 569			134 067 878
Corporate tax payable					28 173 329				47 260 643	28 173 329			21 588 088
					249 845 898				440 950 566	249 845 898			201 420 869
Total liabilities					459 142 499				650 057 722	251 733 812			203 221 265
Total equity and liabilities					1 212 284 410				1 447 400 072	293 431 213			251 896 781
Abridged Statement of Changes in Equity
for the six months ended 30 June 2022
					Inflation adjusted
												Foreign
						Share					currency
						options					translation			Retained
	Share capital			reserve					reserve			earnings	Total
			ZWL			ZWL					ZWL			ZWL	ZWL
Balance at 1 January 2021		62 739 659		2 244 928				(11 270 323)	791 089 266			844 803 530
Total comprehensive loss for the year	-	-		-	(25 740 927)			(25 740 927)
Realisation of foreign currency translation reserve	-		11 270 323	(11 270 323)			-
Dividend paid			-	-		-	(21 720 253)			(21 720 253)
Balance at 31 December 2021		62 739 659		2 244 928				-	732 357 763			797 342 350
Total comprehensive loss for the period	-	-		-	(44 200 439)			(44 200 439)

							Foreign
					Share	currency
					options	translation	Retained
	Share capital	reserve	reserve	earnings	Total
			ZWL	ZWL	ZWL	ZWL	ZWL
Balance at 30 June 2021		62 739 659		2 244 928		-		688 157 324			753 141 911
Historical cost
Balance at 1 January 2021			536 588		19 200		(712 820)		38 229 313			38 072 281
Total comprehensive
income for the period			-		-		-		18 243 554			18 243 554
Realisation of foreign currency
translation reserve			-		-		712 820		( 712 820)			-
Dividend paid			-		-		-		(7 640 319)			(7 640 319)
Balance at 31 December 2021			536 588		19 200		-		48 119 728			48 675 516
Total comprehensive loss for the period	-		-		-		(6 978 115)			(6 978 115)
Balance at 30 June 2022			536 588		19 200		-		41 141 613			41 697 401

Abridged Consolidated Statement of Cash Flows for the six months ended 30 June 2022

			Inflation adjusted			Historical cost
			Reveiwed	Reviewed	Reviewed	Reviewed
		30 June 2022	30 June 2021	30 June 2022	30 June 2021
			ZWL	ZWL		ZWL	ZWL
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss)/profit before tax	(32 607 189)		53 409 373	(304 567)	31 363 709
Adjusted for:
Depreciation of property, plant
and equipment	2 691 783		16 054 503	1 540 732	194 628
Interest expense	15 454 833		-	8 812 662	-
Deferred revenue	101 138		-	789	-
Monetary loss	41 070 491		50 857 006	-	-
Operating inflows before working
capital changes	26 711056		120 320 882	10 049 616	31 558 337
Changes in working capital
Decrease/(increase) in inventories	67 754 412		(29 088 771)	(15 166 079)	(19 413 374)
Decrease/(increase) in trade and
other receivables	158 323 733		140 323 971	(12 044 429)	31 114 908
(Decrease)/increase in trade and
other payables	(96 828 829)		(148 775 306)	62 604 692	(33 120 846)
Net cash generated from operating activities		155 960 372		82 780 776	45 443 800	10 139 025
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment	(1 128 770)		(16 918 330)	(617 860)	(5 550 854)
Net cash utilised in investing activities	(1 128 770)		(16 918 330)	(617 860)	(5 550 854)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid	(15 454 833)		-	(8 812 662)	-
Loans paid	(75 188 525)		(467 142)	(20 764 903)	(1 989)
Dividend	-		(22 276 312)	-	(7 640 319)
Net cash utilised in financing activities	(90 643 358)		(22 743 454)	(29 577 565)	(7 642 308)
NET INCREASE/(DECREASE) IN
CASH AND CASH EQUIVALENTS	64 188 244		43 118 992	15 248 375	(3 054 137)

Notes to the abridged reviewed Financial Statements for the six months ended 30 June 2022

• Nature of operations
  The main business of the company, which is incorporated in Zimbabwe (Registration Number 510/68), is that of producing rubber and chemical products.

• General information, basis of preparation and statement of compliance with IFRS
  The abridged interim financial statements are for the six months ended 30 June 2022 and are presented in Zimbabwe dollars (ZWL), which is the functional currency of the Company and all values are rounded to the nearest dollar. They are based on historical cost approach and restated to take account of inflation in accordance with International Accounting Standard 29 (Financial Reporting in Hyperinflationary Economies) - IAS 29. Accordingly the inflation adjusted abridged interim financial statements represent the principal abridged financial statements of the Company.
  The Company used the price indices provided by the Zimbabwe Statistical Office as reported on the Reserve Bank of Zimbabwe website. Below are the indices and adjustment factors up to 30 June 2022:

Index		Conversion	factor
CPI as at 30	June 2022	8,707.40	1.00
CPI as at 31	December 2021	3,977.50	2.19
CPI as at 30	June 2021	2,986.40	2.92

The abridged inflation adjusted interim financial results are prepared in accordance with International Accounting Standard 34 "Reviewed Financial Reporting" as well as the requirements of the Securities and Exchange (Zimbabwe Stock Exchange) (ZSE) Listing Rules and in the manner required by the Companies and Other Business Entities Act (Chapter 24:31). They do not include all of the information required in annual financial statements in accordance with International Financial Reporting Standards (IFRSs) and should be read in conjunction with the Company's annual financial results for the year ended 31 December 2021.

• New standards adopted at 1 January 2022
  There are no accounting pronouncements which have become effective from 1 January 2022 that have a significant impact on the Company's abridged interim financial statements.

• Significant accounting policies
  The abridged reviewed Financial Statements have been prepared in accordance with the accounting policies adopted in the Company's most recent annual financial statements for the year ended 31 December 2021.

• Estimates and judgements
  When preparing the abridged interim financial statements, management undertakes a number of judgements, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results.
  The judgements, estimates and assumptions applied in the abridged interim financial statements, including the key sources of estimation uncertainty, were the same as those applied in the Company's last annual financial statements for the year ended 31 December 2021. The only exceptions are the estimate of income tax liabilities which is determined in the abridged reviewed financial statements using the estimated average annual effective income tax rate

	applied to the pre-tax income of the interim period.
6	Property, plant and equipment
				Inflation Adjusted					Historical Cost
				ZWL	ZWL		ZWL	ZWL
	Opening carrying amount	931 546 851		931 131 586			18 525 195		7 137 622
	Additions to property and equipment	1 128 770		26 461 953			617 860		13 739 405
	Depreciation charge		(2 691 783)		(26 046 670)			(1 540 732)		(2 351 832)
	Closing carrying amount		929 983 838		931 546 851			17 602 323		18 525 195
7	Inventories
	Raw materials	40 950 221		51 554 022			38 081 035		22 535 433
	Finished goods	40 768 542		49 996 615			37 920 141		21 854 655
	Consumables	4 300 136		13 572 035			4 017 894		5 932 645
	Work in progress	6 621 240		45 271 879			6 149 387		20 679 645
			92 640 139		160 394 551			86 168 457		71 002 378
8	Trade and other receivables
	Trade receivables	154 385 672		294 089 240			154 385 672		134 336 397
	Less: Allowance for credit losses		(1 000 194)		(1 550 958)			(1 000 194)		(708 459)
	Trade receivables-net	153 385 478		292 538 282			153 385 478		133 627 938
	Other receivables	1 921 785		21 092 714			1 921 785		9 634 896
	Financial assets other than cash and
	cash equivalents classified a
	loans and receivables	155 307 263		313 630 996			155 307 263		143 262 834

• Cash and cash equivalents
  For the purposes of statement of cash flows, cash and cash equivalents consist of:

Bank and cash balances	33 253 972		41 827 674		33 253 972		19 106 374
Cash on hand	1 099 198		-		1 099 198		-
		34 353 170		41 827 674		34 353 170		19 106 374
10 Deferred revenue
Balance as at 1 January	4 045 504		4 045 504		29 965		31 542
Plant and machinery income realised
through profit and loss	(101 138)		(202 276)		(789)		(1 577)
Balance as at 31 December		3 944 366		3 843 228		29 176		29 965

Deferred revenue relates to equipment that was given to the entity as part of a loyalty programme by one of its suppliers, Nuvo Rubber Compounders. Other componets of equity is credited to profit or loss on a straight line basis over the expected life of the equipment of 20 years.

11 Borrowings
FBC Bank	25 000 000		98 518 354		25 000 000		45 001 989
Central African Building Society (CABS)		-		1 670 171		-		762 914
		25 000 000		100 188 525		25 000 000		45 764 903

The FBC short term loan facility accrues interest at 47.5% per annum and is repayable by the 30th of November 2022. The loans are secured by land and buildings with a carrying amount of ZWL 2 146 177.

12	Trade and other payables
	Trade payables	33 167 852		104 543 781		33 167 852		47 754 331
	Other payables	163 504 717		188 957 617		163 504 717		86 313 547
	Total trade and other payables		196 672 569		293 501 398		196 672 569		134 067 878
13	Revenue
	Disaggregation of Revenue
	Sale of chemicals	265 021 950		206 517 673		173 869 959		65 946 901
	Sale of rubber products	403 980 114		390 277 693		259 864 740		124 626 644
			669 002 064		596 795 366		433 734 699		190 573 545

The company has disaggregated revenue into two categories in the above table which is intended to enable users to understand the relationship with revenue segment information.

14 Income tax expense
Current tax	11 504 943		22 387 394		6 585 241		7 678 418
Deferred tax	88 307		(4 168 427)		88 307		(134 085)
		11 593 250		18 218 967		6 673 548		7 544 333

DIRECTORS: Mr. G. Nhemhachena (Board Chairman);Dr. I. Murefu; Mrs. P. Nyazenga; Mr. T. Mabeza; Mr. T. Muganyi; Mr. C. Dzumbunu; Mr. W. Tsuroh (Managing Director); Mr P. Munyanyi