Zimplow : 2021 FY Results & Audit Report

Abridged Audited Group Results for the Year Ended 31 December 2021

The Directors report the following abridged audited results in respect of the Group and Company's operations for the year ended 31 December 2021.

Chairman's Statement

Dear Stakeholders

Zimplow has continued to transform, making positive steps to build for the future and at the same time delivering pleasing financial performance. The strategic actions taken by the Board and Management have begun to bring the desired results in terms of positioning the Group for growth ensuring Zimplow becomes the largest capital equipment solutions provider within Zimbabwe and beyond our borders. The completion of the acquisition of Scanlink and Trentyre, together with the supporting back-up infrastructure during the year 2021 is yet another significant milestone towards bringing value both to our shareholders and customers.

As a result of the various threats and opportunities currently obtaining in the market, the Board is constantly evaluating options available for the Group to sustainably deliver tailor-made value to both internal and external stakeholders.

Zimplow delivered a strong and encouraging financial performance by growing revenue by 54% for the financial year ended 31 December 2021 in comparison to the prior year performance in inflation adjusted terms. In addition, the operating profit for the year under review grew by 222% in comparison to the prior year performance. This encouraging financial performance was achieved by volumes growth from all the group's business units, with Farmec and Barzem posting record performances.

Trading Environment

The trading environment has continued to pose both opportunities and threats. The year 2021 saw major supply chain distortions to our recently acquired businesses, that is, Trentyre and Scanlink. The supply chain distortions were caused by Covid-19 induced movement restrictions, which in turn affected supply of freight services. In addition, the Group faced challenges in the timely remittance of payments to foreign suppliers. We are however quite pleased with the manner in which the Group responded to the various challenges from the trading environment.

The year commenced on a positive trajectory. However, lower than expected rainfall patterns during the 2021 rainy season adversely affected the agriculture-based value chain. This circumstance was further exacerbated by acute foreign currency challenges, heightened inflation risk, causing exponential increases in operating costs. The above stated challenges resulted in the Group placing considerable focus on balance sheet preservation as well as constant engagement of internal and external stakeholders. Tactically, the Group has continued to prioritise its engagements with suppliers and Original Equipment Manufacturers (OEMs). The Group continues to take positions on strengthening working capital elements in order to drive growth and market positioning.

The Group has made considerable progress in various facets of the business inter alia human capital development, face lifts of branches of Group entities, improvements in general back up infrastructure and factory capacitation. Strategically, the Group is realigning itself, in order to take advantage of the Group synergies and delivery of a wide range of services entrenching the Group's ambition as a one-stop shop for its customers. To sustain this ambition, the Group has restructured its operating model. The new operating structure will give rise to a new operating model focusing on market segments and/or clusters that we operate in namely, the Agriculture, Mining & Infrastructure and Logistics and Automotive clusters.

Operations

The Group has continued to place emphasis on business performance with a particular focus on increasing business volumes, enhancing operating profit, net asset value (NAV) growth in real terms as well as effective cash flow management. In line with the Group's restructuring initiative, the operational performance of the Group shall be reported on a Cluster approach.

Agriculture Cluster

Farmec

Farmec posted an impressive performance growing volumes across all its main product lines. Farmec grew volumes for tractors by 48%, tractor drawn implements by 56%, parts sales by 30% and service hours by 22% in comparison with prior year. This resulted in overall revenue growth of 48% and a growth in the Company's operating profit by 69%, in real terms against prior year performance.

The business unit is steadily growing towards being the leading distributor of agricultural equipment in Zimbabwe. The focus is now on achieving convenience for our customers from an aftersales perspective through a highly engaged back up support team.

Mealie Brand

Mealie Brand recorded a growth in volumes in local implements sales of 10% against prior year performance. There was significant growth in sales of hoes of 138% against prior year, mainly driven by improved capacity at the factory. The lower-than-expected rainfall pattern during the rainy season had an adverse impact on land preparations resulting in a slowdown of demand in local spares by 22% against prior year performance. On the positive, the board is pleased with the growth in export implements and spares volumes of 44% and 75% respectively.

Overall implement sales volumes grew by 21% and spares by 3% against prior year, anchored by export performance in the year under review. Mealie Brand therefore grew its revenue by 34% and operating profit by 21% in real terms against prior year performance.

Operationally, the business unit continues to put effort towards improving factory efficiencies in resource allocation and replacement of key capital equipment. The board remains committed to providing products that meet the evolving needs of its customers through investment towards research and product development. In addition, management have sought to align the distribution network in order to deliver convenience to our customers.

Logistics and Automotive Cluster

Scanlink

The business unit recorded a strong performance despite numerous headwinds attributable to Covid-19 induced supply chain disruptions which negatively impacted the operations of Scanlink. Parts sales grew by 30% driven by strong demand after the realignment of our supply chain model, which made our business extremely competitive and convenient to our customers. Hours also grew by 4% against prior year. As a result of the positive execution of the renewed supply chain model, Scanlink increased its revenues up by 15% and operating profit by 145% in real terms against prior year.

The outlook for the financial year 2022 looks brighter and the business unit is looking to follow through on the considerable backlog in truck and bus orders from the previous year.

Trentyre

The business unit recovered from a challenging first half of 2021 closing the year positively after a staffing and supply chain reorganisation. The volumes of Passenger Car Radial (PCR) tyres grew by 28% against the prior year. This growth in volumes was driven by improved distribution channels and stock availability. Improvements in stock availability also propelled growth in volumes for Truck, Bus and Radial (TBR) tyres by 23% against the prior year. The goodwill and trust in the quality of the Trentyre's Off the Road (OTR) tyres in major mines sustained the performance of the range, as evidenced by a 116% growth against prior year. Resultantly, Trentyre grew its revenue by 15% and operating profit by 193% in real terms compared to prior year, capping what has been the genesis of positive financial performances for Trentyre.

Management continues to place emphasis on the re-organisation of the supply chain and team balance. As a premier supplier of tyre and
tyre management solutions, we have been working hard to provide the quality and standard expected of us by our customers.
Mining and Infrastructure Cluster
CT Bolts
CT Bolts has been making steady progress in asserting its dominance in the fasteners industry. The business unit achieved volumes
growth of 48% against prior year performance. This was driven by the drive towards establishing new market segments such as prepacked
fasteners for the retail market, specialised mining bolts and various other consumables. Management at CT Bolts continues to focus on
business growth and supply chain agility in order to bring convenience and significant value to the Company's customers.
Powermec
2021 was a relatively stable year from a power supply perspective on the main grid, hence the reduced demand for alternative power
products. Generator units sold remained subdued with a 16% drop from the prior year. However, the performance of Powermec's new
Solar product range was encouraging as the business unit achieved a 167% growth against prior year. The strong after sales performance
grew parts sales by 72% and service hours by 22% against prior year, driving both revenue and operating profit up by 30% and 7%
respectively in real terms, compared to prior year performance.
The performance of the solar energy range of products continues to gather momentum and we look forward to a strong performance in
financial year 2022.	0121

Barzem

The drive by the government to support infrastructure development through the Emergency Road Rehabilitation Programme (ERRP) culminated in increased earth moving equipment sales at Barzem. Overall, volumes of earth moving equipment sales grew by 84% against prior year performance. On the other hand, the focus on production by major mining houses who use CAT surface mining and handling equipment resulted in increased fleet maintenance. Consequently, parts sales grew by 75% and hours sold by 65% against prior year performance. Revenue therefore grew by 102% whilst operating profit was 109% ahead of prior year performance.

The challenges in foreign currency remittance experienced in the fourth quarter of 2021 slowed down business volumes. Management therefore adopted balance sheet preservation tactics. In addition, robust engagements with financial institutions have however continued to help in unlocking this foreign currency bottleneck.

Barzem will exit the Caterpillar distributorship on 30 September 2022 given the changes in the strategic direction by both the supplier and Zimplow Group. Whilst this exit is expected to have an impact on the Group's revenue performance initially, we believe that the risk management protocols that have been put in place by the board and management will ensure that the group preserves value and shareholder returns. Given these risk management protocols, the board and management believe the group is in a strong position to deliver its corporate strategy in the Mining & Infrastructure segment.

Dividend Declaration

As a result of the positive performance recorded by the Group, the board declared a final dividend of ZWL 35.40 cents per share for the year ended 31 December 2021. This dividend together with the interim payment brings our total dividend pay-out ratio to 26%. A separate announcement will be made with respect to the dividend payment.

Outlook

The Group continues to strengthen its capability and capacity to respond to changes in the operating environment and undertaking stakeholder management in a holistic and robust manner with respect to suppliers and customers in order to deliver superior value to our Shareholders. Based on the performance as outlined above, the Board is confident that the Group has adequate risk management systems and a viable business strategy to withstand the fluidity and complexities of the country's operating environment.

In addition, the COVID-19 pandemic is still lingering over the operating environment and as such the Group will continue to implement the public health protocols as prescribed by COVID-19 National legislation and the World Health Organisation (WHO).

One of the key strategic matters the Group is currently seized with is the search for a new OEM of earthmoving equipment to replace the Caterpillar brand at the end of the Distributorship Agreement on 30 September 2022. In line with the Group's corporate strategy, the Board will focus on balance sheet preservation and growth of the new product line yet to be introduced, in order to deliver expected shareholder returns.

The Group is confident that the capacity built over the years in terms of goodwill and trust in Zimplow's back up infrastructure, human capital skills and experience in the provision of earth moving equipment, will be vital in resetting the Mining & Infrastructure Cluster to perform in line with the Group's vision.

Acknowledgment

I would like to thank fellow Directors, Management, and Staff for delivering such a pleasing financial performance and set of results despite the complexities obtaining in our current operating environment.

GT Manhambara

Chairman

31 May 2022

Auditor's Statement

These abridged consolidated financial statements have been audited by Ernst & Young Chartered Accountants (Zimbabwe) and a qualified audit opinion was issued thereon due to non-compliance with International Financial Reporting Standards (IFRS): International Accounting Standard (IAS) 21- The Effects of Changes in Foreign Exchange Rates, and IAS 8- Accounting Policies, Changes in Accounting Estimates and Errors.

The auditor's report is available for inspection at the Group's registered office. The engagement partner for the audit is Walter Mupanguri (PAAB Practicing Number 367).

Consolidated Group and Company Statement of Financial Position

as at 31 December 2021

	Group	Company
	Inflation adjusted	Inflation adjusted
	31-Dec-21	31-Dec-20	31-Dec-21	31-Dec-20
	ZWL$	ZWL$	ZWL$	ZWL$
ASSETS
Non-current Assets
Property, plant and equipment	1,830,472,156	1,881,095,605				586,907,368	682,291,850
Intangible assets	3,014,768	3,539,071				3,014,768	3,539,071
Investment property	140,816,504	35,493,985				162,830,000	-
Investment in subsidiaries	-	-				1,492,452,128	463,317,758
Right of use assets	-	-				4,858,891	14,576,673
Long term receivables	205,720,550	79,571,089				178,554,050	46,427,885
Goodwill	800,556,829	37,385,975				-	-
Total non-current assets	2,980,580,807	2,037,085,725				2,428,617,205	1,210,153,237
Current Assets
Inventories	2,409,950,714	1,309,716,834				1,188,349,861	848,438,474
Inter company receivables	-	-				38,233,284	-
Trade and other receivables	748,970,504	314,400,232				131,387,704	102,091,810
Prepayments	493,523,680	538,332,678				327,571,670	512,965,955
Investment in financial assets	79,913	242,613				79,913	242,613
Cash and bank balances	1,420,375,670	249,057,044				309,129,451	126,579,420
Total current assets	5,072,900,481	2,411,749,401				1,994,751,883	1,590,318,272
Total assets	8,053,481,288	4,448,835,126				4,423,369,088	2,800,471,509
EQUITY AND LIABILITIES
Equity
Issued share capital	3,910,992	3,854,272				3,910,992	3,854,272
Share premium	2,197,157,374	797,968,307				2,197,157,374	797,968,307
Revaluation reserve	443,588,479	822,388,197				236,322,309	297,924,396
Capital reserve	(7,860,006)	(7,860,006)				(7,860,006)	(7,860,006)
Change in ownership reserve	(36,549,618)	(36,549,618)				-	-
Accumulated profit	1,278,422,688	1,087,588,869				903,982,542	946,962,768
Attributable to holders of the parent	3,878,669,909	2,667,390,021				3,333,513,211	2,038,849,737
Non-controlling interests	608,641,255	475,872,570				-	-
Total Equity	4,487,311,164	3,143,262,591				3,333,513,211	2,038,849,737
Non-current liabilities
Inter company payables	-	-				-	9,549,684
Deferred tax liabilities	675,785,880	570,912,249				292,765,871	293,204,873
Total non-current liabilities	675,785,880	570,912,249				292,765,871	302,754,557
Current liabilities
Trade and other payables	1,953,850,649	391,191,326				140,800,628	142,931,065
Provisions	21,854,308	25,494,364				9,632,818	8,981,915
Short term borrowings	154,148,168	9,203,994				86,195,930	9,203,994
Customer deposits	472,643,466	132,256,299				337,257,456	116,374,038
Lease liabilities	-	-				1,517,460	5,535,117
Current tax liabilities	287,887,653	176,514,303				221,685,714	175,841,086
Total current liabilities	2,890,384,244	734,660,286				797,090,006	458,867,215
Total equity and liabilities	8,053,481,288	4,448,835,126				4,423,369,088	2,800,471,509

Consolidated Group and Company Statement of Profit or Loss and

Other Comprehensive Income for the year ended 31 December 2021

		Group	Company
		Inflation adjusted	Inflation adjusted
Notes	31-Dec-21	31-Dec-20	31-Dec-21	31-Dec-20
		ZWL$	ZWL$	ZWL$	ZWL$
Sale of goods	6,299,302,427	4,081,188,301			3,294,995,863	2,551,468,781
Rendering of services	310,993,975	169,850,729			158,838,226	107,026,530
Investment property rental income	9,478,168	9,423,672			7,704,349	-
Revenue	6,619,774,570	4,260,462,702			3,461,538,438	2,658,495,311
Cost of sales	(4,162,818,103)	(2,950,348,866)			(2,222,649,017)	(1,698,473,038)
Gross Profit	2,456,956,467	1,310,113,836			1,238,889,421	960,022,273
Other operating income	150,759,429	92,101,232			43,565,579	50,896,431
Selling and distribution expenses	(90,877,335)	(50,726,932)			(62,118,124)	(39,817,765)
Administrative expenses	(1,141,843,672)	(833,449,080)			(630,532,590)	(462,303,447)
Other operating expenses	(419,916,406)	(75,343,898)			(345,119,598)	(68,584,344)
Allowance for expected credit losses	(9,647,694)	(1,074,073)			(7,341,229)	(1,394,831)
Monetary gain/(loss)	25,333,803	75,834,470			25,062,495	(130,031,830)
Operating profit		970,764,592	517,455,555			262,405,954	308,786,487
Finance costs	(11,633,700)	(6,880,230)			(8,690,861)	(12,005,521)
Finance income	1,160,522	208,523			826,973	163,335
Profit before tax		960,291,414	510,783,848			254,542,066	296,944,301
Income tax expense	(525,740,303)	(165,756,800)			(221,716,154)	(212,025,932)
Profit for the year	434,551,111	345,027,048			32,825,912	84,918,369
Other comprehensive income
Other comprehensive income that
may be recycled through profit or loss
Exchange difference on translation of foreign operations	-	(1,219,683)			-	(1,219,683)
Other comprehensive income that will
not be reclassified to profit or loss
Revaluation of Plant, land and buildings net of tax	(413,942,188)	148,388,850			(61,602,088)	78,252,902
Total other comprehensive income
for the year, net of tax	(413,942,188)	147,169,167			(61,602,088)	77,033,219
Total comprehensive income for the year	20,608,923	492,196,215			(28,776,176)	161,951,588
Profit for the year attributed to:
Owners of the parent	266,639,956	283,758,961			32,825,912	84,918,369
Non-controlling interests	167,911,155	61,268,087			-	-
		434,551,111	345,027,048			32,825,912	84,918,369
Total comprehensive profit
for the year attributable to:
Owners of the parent	(112,159,762)	436,919,622			(28,776,176)	161,951,588
Non-controlling interests	132,768,685	55,276,593			-	-
		20,608,923	492,196,215			(28,776,176)	161,951,588
Earnings per share
Basic earnings per share	0.77	1.19			0.10	0.36
Diluted earnings per share	0.77	1.19			0.10	0.36
Headline earnings per share	0.78	1.19			0.11	0.35
Diluted Headline earnings per share	0.78	1.19			0.11	0.35

DIRECTORS: G.T. Manhambara (Chairman), T. Johnson, V. Nyakudya*, L. Kennedy, B.N. Kumalo, K. Patel, G. Pio, M. Davis (*Executive)		1

Abridged Audited Group Results for the Year Ended 31 December 2021

The Directors report the following abridged audited results in respect of the Group and Company's operations for the year ended 31 December 2021.

Consolidated Group and Company Statement of Cash Flows

for the year ended 31 December 2021

	Group				Company
	Inflation adjusted	Inflation adjusted
	31-Dec-21		31-Dec-20	31-Dec-21	31-Dec-20
	ZWL$		ZWL$	ZWL$	ZWL$
Cash flows from operating activities
Operating profit before tax	960,291,414		510,783,848			254,542,066	296,944,301
Adjusted to reconcile profit before tax to net cash flows:
Depreciation of property plant and equipment
and amortisation of intangible assets	120,121,654		29,338,413			102,392,799	31,854,796
Net fair value adjustments	-		(7,769,969)			-	-
Net unrealised foreign exchange differences	(96,500,546)		(19,889,604)			10,693,305	(15,148,296)
Interest received	(1,160,522)		(208,523)			(826,973)	(163,335)
Interest paid	11,633,700		6,880,230			8,690,861	12,005,521
Movement in provisions	(3,640,056)		14,209,501			650,903	(1,626,607)
Loss/ (Profit) on disposal of property, plant & equipment	4,711,504		(428,527)			4,691,089	(428,527)
	995,457,148		532,915,369			380,834,050	323,437,853
Working capital changes
(Increase)/Decrease in Inventories	(1,100,233,880)		(180,516,599)			(339,911,387)	57,680,962
(Increase) in trade and other receivables	(434,570,272)		(149,753,464)			(29,295,894)	(45,370,789)
Decrease/(Increase) in prepayments	44,808,998		(102,485,596)			185,394,285	(190,909,840)
Increase/(Decrease) in customer deposits	340,387,166		(61,595,104)			220,883,418	(6,233,156)
(Decrease) in intergroup balances	-		-			(9,549,684)	(26,239,580)
Increase/(Decrease) in trade and other payables	1,562,659,323		219,425,789			(2,130,437)	130,962,887
	1,408,508,484		257,990,395			406,224,351	243,328,337
Interest received	1,160,522		208,523			826,973	163,335
Interest paid	(11,633,700)		(6,880,230)			(8,690,861)	(12,005,521)
Income tax paid	(214,309,357)		(107,846,308)			(100,161,635)	(53,807,698)
Dividend paid	(75,806,137)		(14,483,695)			(75,806,137)	(14,483,695)
Net cash flow from operating activities	1,107,919,811		128,988,685			222,392,690	163,194,758
Investing activities
Acquisition of subsidiaries-cash acquired	63,645,703
Proceeds from sale of property, plant and equipment	630,122		924,679			630,122	924,679
Purchase of property, plant and equipment	(151,802,126)		(51,447,592)			(80,083,580)	(46,110,384)
Proceeds from sale of financial assets	71,025		-			71,025	-
Purchase of financial assets	-		(42,666)			-	(42,666)
Net cash flows from used in investing activities	(87,455,276)		(50,565,579)			(79,382,433)	(45,228,371)
Financing Activities
Lease liability principal repaid						(2,455,219)	(3,425,890)
Repayments of borrowings	(28,337,682)		(40,397,663)			(34,925,071)	(40,397,663)
Proceeds from borrowings	189,175,389		84,334,821			121,573,171	84,334,821
Net cash flows from financing activities	160,837,707		43,937,158			84,192,881	40,511,268
Net increase in cash and cash Equivalents	1,181,302,242		122,360,264			227,203,138	158,477,655
Effects of exchange rate changes on cash
and cash equivalents	23,402,361		49,326,022			22,003,000	39,030,211
Effects of IAS29	(33,385,977)		(78,898,195)			(66,656,107)	(214,958,972)
Cash and cash equivalents at 1 January	249,057,044		156,268,953			126,579,420	144,030,526
Cash and cash equivalents at 31 December	1,420,375,670		249,057,044			309,129,451	126,579,420
Comprising of:
Cash and cash balances	1,420,375,670		249,057,044			309,129,451	126,579,420

Notes to the financial statements

1. Presentation and statement of compliance

Basis of preparation

The Group's financial results have not been prepared under policies as required by the Companies and Other Business Entities Act (24:31). The financial results have been prepared under the current cost convention in accordance with IAS 29 (Financial Reporting in Hyperinflationary Economies).

The consolidated inflation adjusted financial statements of the Group have not been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and interpretations developed and issued by the International Financial Reporting Interpretations Committee (IFRIC) as a result of non-compliance with IAS 21 (Effects of Changes in Exchange Rates) on accounting for change in functional currency in prior year and IAS 29 (Financial Reporting in Hyperinflationary Economies) and IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors) for non-correction of the prior year non-compliance with IAS 21. This is because it has been impracticable to fully comply with IFRS in the current and prior year due to the need to comply with local legislation, specifically Statutory Instrument 33 of 2019. The Directors are of the view that the requirement to comply with the Statutory Instrument has created inconsistencies with IAS 21 (The Effects of Changes in Foreign Exchange Rates) as well as with the principles embedded in the IFRS Conceptual Framework. This has resulted in the accounting treatment adopted in the prior year and current period financial Statements being different from that which the Directors would have adopted if the Group had been able to fully comply with IFRS. These exceptions have also made full compliance with the Companies and Other Business Entities Act (Chapter 24.31) not possible.

Change in functional currency

In February 2019, the Reserve Bank of Zimbabwe announced a monetary policy statement whose highlights among other issues were:

• Denomination of real time gross settlement (RTGS) balances, bond notes and coins collectively as RTGS dollars. RTGS dollars became part of the multi-currency system.
• Promulgated that RTGS dollars were to be used by all entities (including the Government) and individuals in Zimbabwe for purposes of pricing of goods and services, record debts, accounting and settlement of domestic transactions.
• Establishment of an inter-bank foreign exchange market where the exchange rate would be determined on a willing buyer willing seller basis.

The monetary policy announcement was followed by the publication of Statutory Instrument (S.I.) 33 of 2019 on 22 February 2019. The statutory instrument gave legal effect to the introduction of the RTGS dollar as legal tender and prescribed that for accounting and other purposes, certain assets and liabilities on the effective date would be deemed to be RTGS dollars at a rate of 1:1 to the US dollar and would become opening RTGS dollar values from the effective date. As a result of the currency changes announced by the monetary authorities, the Directors assessed as required by IAS 21 (The Effects of Changes in Foreign Exchange Rates) and consistent with the guidance issued by the Public Accountants and Auditors Board (PAAB) whether use of the United States dollar as the functional and reporting currency remained appropriate. Based on the assessment, the Directors concluded that the Group's transactional and functional currency had changed to the RTGS dollar. The Group adopted the RTGS dollar as the new functional and reporting currency with effect from 22 February 2019 using the interbank midrate of US$1: ZWL$2.5.

Further, on 24 June 2019, Statutory Instrument 142 of 2019 introduced the Zimbabwean Dollar (ZWL$) which was at par with the bond notes and RTGS dollars, that is to say each bond note unit and each RTGS dollar was equivalent to a Zimbabwe Dollar, and each hundredth part of a bond note unit and each hundredth part of a RTGS dollar was equivalent to a Zimbabwean cent. On the 17th of June 2020, an RBZ Exchange Control Directive RV175/2020 was issued on the introduction of a Foreign Exchange Auction System. Foreign exchange auction trading system was operationalised with effect from 23 June 2020, foreign currency trading was conducted through the Foreign Exchange Auction Trading System (Auction) through a bidding system.

On the 24th of July 2020, Statutory Instrument 185 of 2020 the Exchange Control amended the exclusive use of Zimbabwe Dollar for Domestic Transactions by allowing dual pricing and displaying, quoting and offering of prices for domestic goods and services. The SI also permitted any person who provides goods or services in Zimbabwe to display, quote or offer the price for such goods or services in both Zimbabwe dollar and foreign currency at the ruling exchange rate. In this regard, these financial statements are therefore presented in ZWL$ being the currency of the primary economic environment in which the Company operates, and all values are rounded to the nearest ZWL$ except when otherwise indicated.

Application of IAS 29 (Financial Reporting in Hyperinflationary Economies)

In 2019, the high year-on-year inflation amongst other indicators outlined in IAS 29 resulted in a broad market consensus within the accounting and auditing profession that the Zimbabwe economy had met the characteristics of a hyperinflationary economy. The PAAB confirmed this market consensus and issued a pronouncement in October 2019 prescribing application of inflation accounting for reporting periods ended on or after 1 July 2019.

These results have been prepared in accordance with IAS 29 as if the economy had been hyperinflationary from 1 January 2019 being the commencement date of the prior financial year, however given that change in functional currency, 22 February 2019 has been treated as the last revaluation date for non-monetary items. IAS 29 requires that the financial statements prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at the reporting date and that corresponding figures for the previous period also be restated in terms of the same measuring unit.

Consolidated Group Statement of Changes in Equity for the year ended 31 December 2021

						Foreign
					Change in	Currency		Attributable	Non-
	Share	Capital	Share	Revaluation	Ownership	translation	Retained	to Owners	Controlling
Inflation Adjusted	Capital	Reserve	Premium	Reserve	reserve	Reserve	earnings	of the parent	Interest	Total
	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$
Balance on
1 Jan 2020
before
restatement	3,854,272	(7,860,006)	797,968,307	668,007,830	(36,549,618)	1,219,683	967,541,896	2,394,182,364	433,597,675	2,665,550,071
Restatement
impact	-	-	-	-	-	-	(149,228,293)	(149,228,293)	(13,001,675)	-
Restated balance
at 01 Jan 2020	3,854,272	(7,860,006)	797,968,307	668,007,830	(36,549,618)	1,219,683	818,313,603	2,244,954,071	420,596,000	2,665,550,071
Dividend Paid	-	-	-	-	-	-	(14,483,695)	(14,483,695)	-	(14,483,695)
Profit for the year	-	-	-	-	-	-	283,758,961	283,758,961	61,268,087	345,027,048
Other
comprehensive
income/(loss)
net of tax	-	-	-	154,380,367	-	(1,219,683)	-	153,160,684	(5,991,517)	147,169,167		0121
Balance at
31 Dec 2020	3,854,272	(7,860,006)	797,968,307	822,388,197	(36,549,618)	-	1,087,588,869	2,667,390,021	475,872,570	3,143,262,591
Share issue	56,720	-	1,399,189,067	-	-	-	-	1,399,245,787	-	1,399,245,787
Dividend Paid	-	-	-	-	-	-	(75,806,137)	(75,806,137)	-	(75,806,137)
Profit for the year	-	-	-	-	-	-	266,639,956	266,639,956	167,911,155	434,551,111
Other comprehensive
income net of tax	-	-	-	(378,799,718)	-	-	-	(378,799,718)	(35,142,470)	(413,942,188)
Balance at
31 Dec 2021	3,910,992	(7,860,006)	2,197,157,374	443,588,479	(36,549,618)	-	1,278,422,688	3,878,669,909	608,641,255	4,487,311,164

Company Statement of Changes in Equity for the year ended 31 December 2021

					Foreign
					Currency		Attributable
	Share	Capital	Share	Revaluation	translation	Retained	to Owners
	Capital	Reserve	Premium	Reserve	Reserve	earnings	of the parent
Inflation Adjusted	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$
Balance on 1 Jan 2020
before restatement	3,854,272	(7,860,006)	797,968,307	219,671,494	1,219,683	1,012,224,008	2,027,077,758
Restatement impact	-	-	-	-	-	135,695,910	135,695,910
Restated balance
at 01 January 2020	3,854,272	(7,860,006)	797,968,307	219,671,494	1,219,683	876,528,098	1,891,381,848
Dividend Paid	-	-	-	-	-	(14,483,696)	(14,483,696)
Profit for the year	-	-	-	-	-	84,918,366	84,918,366
Other comprehensive
income/ (loss) net of tax	-	-	-	78,252,902	(1,219,683)	-	77,033,219
Balance at 31 Dec 2020	3,854,272	(7,860,006)	797,968,307	297,924,396	-	946,962,768	2,038,849,737
Dividend Paid	-	-	-	-	-	(75,806,137)	(75,806,137)
Share issue	56,720	-	1,399,189,067	-	-		1,399,245,787
Profit for the year	-	-	-	-	-	32,825,912	32,825,912
Other comprehensive
income net of tax	-	-	-	(61,602,087)	-	-	(61,602,087)
Balance at 31 Dec 2021	3,910,992	(7,860,006)	2,197,157,374	236,322,309	-	903,982,542	3,333,513,211

Supplementary Information

		Group	Company
		Inflation Adjusted	Inflation Adjusted
		31-Dec-21	31-Dec-20	31-Dec-21	31-Dec-20
		No. of shares	No. of shares	No. of shares	No. of shares
Shares in issue	344,580,486	238,380,780	344,580,486	238,380,780
For the purpose of basic EPS	344,580,486	238,380,780	344,580,486	238,380,780
For the purpose of diluted EPS	344,580,486	238,380,780	344,580,486	238,380,780
		ZWL$	ZWL$	ZWL$	ZWL$
Headline earnings	270,153,406	283,440,780	36,309,046	84,600,187
Profit for the year	266,639,956	283,758,961	32,825,912	84,918,368
Headline earnings per share	0.78	1.19	0.11	0.35
Basic profit per share	0.77	1.19	0.10	0.36
Diluted profit per share	0.77	1.19	0.10	0.36
Depreciation	120,121,654	29,338,413	102,392,799	31,854,796
Taxation:
Current tax expense	290,439,797	136,272,838	190,249,152	210,793,134
Deferred tax movement	235,300,506	178,403,614	31,467,002	112,457,553

The Company adopted the Zimbabwe consumer price index (CPI) compiled by Zimbabwe National Statistics Agency (ZIMSTAT) as the general price index to restate transactions and balances as appropriate. The indices and conversion factors used to restate these financials are given below:

Dates	Indices	Conversion Factors
31 December 2021	2474.5	1.00
31 December 2020	3977.5	1.61
31 December 2019	551.6	7.21

The procedures applied in the above restatement of transactions and balances are as follows:

Comparative information

Comparative financial information as per IAS 29 was restated using relevant adjusting factor of 4.49 based on the Consumer Price Index (CPI).

Current period information

Monetary assets and liabilities were not restated because they are already stated in terms of the measuring unit current at balance sheet date. Non-monetary assets and liabilities that are not carried at amounts current at statement of financial position and components of shareholders' equity were restated by applying the change in the index from the more recent of the date of the transaction and the date of their most recent revaluation to 31 December 2020.

Items recognised in the income statement have been restated by applying the change in the general price index from the dates when the transactions were initially earned or incurred by applying the monthly index for the year ended 31 December 2020. Depreciation and amortisation amounts are based on the restated amounts. Gains and losses arising from the net monetary position are included in the income statement;

All items in the statement of cash flows are expressed in terms of the general price index at the end of the reporting period.

Hyper Inflation

The historical amounts were restated at the end of the reporting period to reflect the general change in purchasing power of the reporting currency (ZWL$). Professional judgement was used and appropriate adjustments in preparing financial statements according to IAS 29. The indices used were obtained from the Zimbabwe National Statistics Agency for the period.

Statement of compliance

These consolidated financial statements have been prepared with the aim of complying with International Financial Reporting Standards and presented in ZWL$ (Zimbabwe Dollars, rounded to the dollar), which is the Group's functional and presentation currency. While full compliance with IFRS has been possible in the previous periods, compliance has not been achieved from 2019.

1. Leases
   The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
2. Borrowings
   The Group acquired term loan facility of ZWL$189,175,389 secured against buildings valued at ZWL$255,351,000. The average cost of the borrowings was at 40%.

DIRECTORS: G.T. Manhambara (Chairman), T. Johnson, V. Nyakudya*, L. Kennedy, B.N. Kumalo, K. Patel, G. Pio, M. Davis (*Executive)		2

Abridged Audited Group Results for the Year Ended 31 December 2021

The Directors report the following abridged audited results in respect of the Group and Company's operations for the year ended 31 December 2021.

4. Revenue						6
	An analysis of Group revenue and results for the year:
		Group			Company
		Inflation adjusted	Inflation adjusted
		31-Dec-21		31-Dec-20	31-Dec-21	31-Dec-20
		ZWL$		ZWL$	ZWL$	ZWL$
	Sale of goods: Domestic	6,084,386,457		3,918,097,764		3,080,079,893	2,388,378,244
	Sale of goods: Export	214,915,970		163,090,537		214,915,970	163,090,537
	Sale of services: Domestic	310,993,975		169,850,729		158,838,226	107,026,530
	Investment property rental income	9,478,168		9,423,672		7,704,349	-
	Total revenue from contracts with customers	6,619,774,570		4,260,462,702		3,461,538,438	2,658,495,311

• Segment information

		Mining and	Logistics and		Other	Total
Inflation Adjusted	Agriculture Infrastructure	Automative	Property	Segments	Segments	Adjustments	Consolidated
	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$
31 December 2021
Revenue	2,934,643,238	3,021,453,382	668,726,590	9,478,168	7,704,349	6,642,005,727	(22,231,157)	6,619,774,570
Segment
operating profit	592,352,859	482,989,170	94,309,497	(169,497,135)	(66,463,180)	933,691,211	37,073,381	970,764,592
Other items
Finance income	664,286	496,236	-	-	-	1,160,522	-	1,160,522
Finance costs	(6,611,443)	-	(4,501,038)	-	-	(11,112,481)	(521,219)	(11,633,700)
Income taxes	(170,436,597)	(226,233,778)	(56,444,432)	(27,963,395)	(24,381,173)	(505,459,375)	(20,280,928)	(525,740,303)
GROUP PROFIT AFTER TAX	415,969,105	257,251,628	33,364,027	(197,460,530)	(90,844,353)	418,279,877	16,271,234	434,551,111
Segment assets	2,656,226,347	2,772,432,990	1,291,089,814	522,311,000	1,985,497,091	9,227,557,242	(1,174,075,954)	8,053,481,288
Segment liabilities	(960,683,891)	(1,246,786,723)	(845,415,989)	2,561,065	(227,060,985)	(3,277,386,523)	(288,783,601)	(3,566,170,124)
Other segment
information
Depreciation
and amortisation	85,027,049	8,533,842	5,556,859	11,116,108	6,188,609	116,422,467	3,699,187	120,121,654
Additions to
non-current assets	43,161,162	21,276,915	6,287,612	56,161,312	24,915,125	151,802,126	-	151,802,126
Inventory provision	37,459,370	176,483,581	14,458,964	-	-	228,401,915	-	228,401,915
Impairment loss
recognized on receivables	7,341,229	2,306,465	-	-	-	9,647,694	-	9,647,694
			Mining and		Other	Total
Inflation Adjusted		Agriculture Infrastructure	Property	Segments	Segments	Adjustments	Consolidated
		ZWL$	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$	ZWL$
31 December 2020
Revenue		2,230,309,786	2,030,665,575	9,423,672	-	4,270,399,033	(9,936,332)	4,260,462,702
Segment
operating profit		208,991,632	350,725,932	40,932,202	(25,853,361)	574,796,406	(57,340,851)	517,455,555
Other items
Finance income		22,357	47,491	-	(493,838)	(423,989)	632,512	208,523
Finance costs		-	(21,002)	-	-	(21,002)	(6,859,228)	(6,880,230)
Income taxes		(279,421,610)	(200,488,038)	19,183,420	(17,779)	(460,744,007)	294,987,207	(165,756,800)
GROUP PROFIT AFTER TAX		(70,407,621)	150,264,383	60,115,622	(26,364,977)	113,607,407	231,419,640	345,027,048
Segment assets		2,182,293,241	1,648,783,392	683,599,322	750,175,681	5,264,851,636	(816,016,509)	4,448,835,126
Segment liabilities		(649,865,013)	(543,498,488)	2,785,210	(111,167,433)	(1,301,745,723)	(3,826,813)	(1,305,572,536)	7
Other segment
information
Depreciation		17,481,157	(1,271,880)	10,568,005	2,561,130	29,338,413	-	29,338,413
Additions to non-current assets	21,581,485	18,139,283	-	11,726,824	51,447,592	-	51,447,592
Impairment loss
recognized on receivables		37,170,801	1,482,013	-	-	38,652,814	-	38,652,814

Reassessment of Deferred tax accounting under IAS29

The Group reassessed and corrected its treatment of deferred tax relating to prepayment, inventory and customer deposit balances under IAS12, "Income Tax", in the context of IAS29," Financial Reporting in Hyper-Inflationary Economies". Under IAS12 the historical carrying amounts of these balances is equal to the tax base resulting in nil deferred tax recognition. However, after restating the numbers according to IAS29 a temporary difference arises between the hyper-inflated balances and the respective tax bases, giving rise to deferred tax

The corrected approach will also be used in subsequent periods.
	Before		After
	restatement		restatement
	Inflation	Restatement	Inflation
	adjusted	Impact	adjusted
GROUP
Statement of Profit or Loss -
Year ended 31 December
Profit before tax	510,783,848	-	510,783,848
Income tax expense	(140,058,149)	(25,698,651)	(165,756,800)
Profit for the year	735,680,659	(25,698,651)	709,982,008
Statement of Financial Position
as at 31 December
Accumulated profit	1,241,021,520	(153,432,651)	1,087,588,869
Attributable to holders of the parent	1,241,021,520	(153,432,651)	1,087,588,869
Non-controlling interests	510,368,552	(34,495,982)	475,872,570
Non-current liabilities
Deferred tax liabilities	382,983,616	187,928,633	570,912,249
Total non-current liabilities	382,983,616	187,928,633	570,912,249
COMPANY
Statement of Profit or Loss -
Year ended 31 December
Profit before tax	296,944,301	-	296,944,301
Income tax expense	(230,192,948)	18,167,016	(212,025,932)
Profit for the year	66,751,353	18,167,016	84,918,369
Statement of Financial Position
as at 31 December
Accumulated profit	1,064,490,112	(117,527,344)	946,962,768
Attributable to holders of the parent	1,064,490,112	(117,527,344)	946,962,768
Non-current liabilities			-
Deferred tax liabilities	175,677,529	117,527,344	293,204,873
Total non-current liabilities	175,677,529	117,527,344	293,204,873

Events after the reporting period

On 30 March 2022, Barloworld Equipment UK the distributors of the Caterpillar (CAT) franchise globally issued a notice to Barzem Enterprises (Private) Limited, (51% owned by Zimplow), local distributor of the Caterpillar brand, to terminate the distribution agreement entered into between Barloworld itself and Barzem Enterprises. The notice received dictates that the distribution agreement will terminate on 30 September 2022 in terms of the Distributors Agreement. Engagements are currently underway with suppliers including BWE UK for the continuation of distribution of earth moving and related equipment with brands currently operating in Zimbabwe, in the similar industry.

0121

E Q U I P M E N T • P A R T S • S E R V I C E

DIRECTORS: G.T. Manhambara (Chairman), T. Johnson, V. Nyakudya*, L. Kennedy, B.N. Kumalo, K. Patel, G. Pio, M. Davis (*Executive)		3

Ernst & Young	Tel: [phone] or 2750979-83
Chartered Accountants (Zimbabwe)	Fax: [phone] or 2773842
Registered Public Auditors	Email: [e-mail]
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 Shareholders of Zimplow Holdings Limited

Report on the Audit of the Inflation adjusted Consolidated and Separate Financial Statements

Qualified Opinion

We have audited the inflation adjusted consolidated and separate financial statements of Zimplow Holdings Limited and its subsidiaries (the Group) and company set out on pages 38 to 91, which comprise the inflation adjusted consolidated and separate Statements of Financial position as at 31 December 2021, and the inflation adjusted consolidated and separate Statements of Profit or Loss and other Comprehensive income, the inflation adjusted consolidated and separate Statements of Changes in Equity and the inflation adjusted consolidated and separate Statements of Cash flows for the year then ended, and notes to the inflation adjusted consolidated and separate financial statements, including a summary of significant accounting policies.

In our opinion, except for the effects of the matters described in the Basis for Qualified Opinion section, the accompanying financial statements present fairly, in all material respects the inflation adjusted consolidated and separate financial position of the group and company as at 31 December 2021, and their inflation adjusted consolidated and separate financial performance and inflation adjusted consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies and Other Business Entities Act (Chapter 24:31).

Basis for Qualified Opinion

Non-compliance with International Financial Reporting Standards (IAS) 21- The Effects of Changes in Foreign Exchange Rates and IAS 8 - Accounting Polices, Changes in Accounting Estimates and Errors

Impact of prior year modification on current period

Date of Change of Functional Currency

Historical date of change in functional currency

As explained in note 2.1 to the consolidated and separate inflation adjusted financial statements, the Group and Company changed their functional and reporting currency from United States Dollar (US$) to Zimbabwe Dollars (ZWL) on 22 February 2019 in compliance with Statutory Instrument 33 of 2019.

We however believe that the change occurred on 1 October 2018 in terms of IAS21 given the significant monetary and exchange control policy changes witnessed in Zimbabwe from 2016 through to 2019. Our prior year audit report for the year ended 31 December 2020 was modified due to impact of this matter on Property Plant and Equipment on the consolidated and separate inflation adjusted Statement of Financial Position which still comprised of material amounts from opening balances, as well as movements on the consolidated and separate inflation adjusted statements of profit or loss, cashflows and changes in equity.

A member firm of Ernst & Young Global Limited

32

Independent Auditor's Report (Continued)

Zimplow Holdings Limited

This matter has not been corrected through a restatement in terms of IAS 8 - Accounting Polices, Changes in Accounting Estimates and Errors. Our opinion on the current period's consolidated

inflation adjusted financial statements is therefore modified because of the possible effect of this matter on the comparability of the current period's figures and the corresponding figures.

Exchange rates used in prior year

Further contributing to the adverse opinion was the use of inappropriate exchange rates which did not meet IAS 21 requirements for a spot rate for the period 22 February 2019 to 22 June 2020. The interbank exchange rate was used to translate foreign denominated transactions and balances to ZWL functional currency; however, the rate was not available for immediate delivery therefore not a spot rate in terms of IFRS. The misstatements could however not be quantified as an appropriate exchange rate had not been identified.

Management has not made retrospective adjustments in terms of IAS 8 to correct this matter. The matter continues to impact the following amounts on the consolidated and separate inflation adjusted statement of financial position which still comprise material amounts from opening balances: Retained Earnings stated at Group ZWL1 278 422 688 (2020: ZWL1 087 588 869) Company ZWL903 982 542 (2020: ZWL946 962 768), Non-Controlling Interest Group ZWL608 641 255 (2020: ZWL475 872 570)

As opening balances enter into the determination of financial performance, our audit report is modified in respect of the impact of these matters on Cost of Sales stated at Group ZWL4 162 818 103 (2020: ZWL2 950 348 866) Company ZWL2 222 649 017 (2020: ZWL1 698 473 038) and Tax Expense stated at Group ZWL525 740 303 (2020: ZWL165 756 800) Company ZWL221 716 154 (2020: 212 025 932) in the consolidated and separate inflation adjusted Statement of Profit or Loss. Consequently, the consolidated and separate inflation adjusted Statement of Changes in equity and consolidated and separate inflation adjusted Statement of Cashflows may also require amendments.

Further, corresponding numbers relating to Revaluation Reserve on the consolidated inflation adjusted statement of Profit or Loss remains misstated. Corresponding numbers relating to Inventories, Prepayments, Property, Plant and Equipment and Deferred Tax Liability on the

consolidated and company inflation adjusted Statement of Financial Position remain misstated. Our opinion on the current period's consolidated and separate inflation adjusted financial statements is

therefore also modified because of the possible effects of the above matter on the comparability of the specified current period's figures and the corresponding figures.

Valuation of Property and Manufacturing Plant and Equipment (Group and Company) (Non- compliance with IFRS 13 - Fair Value Measurement and IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors)

The Group's Investment Properties and Freehold Land and Buildings are carried at Group ZWL140 816 504 (2020: ZWL35 493 985) Company ZWL162 830 000 and Group ZWL 1 830 472

156 (2020: ZWL 1 881 095 605) Company ZWL586 907 368 (2020: ZWL682 291 850) respectively as at 31 December 2021 as described in Note 10. The implicit investment method was applied for Industrial and commercial properties and key inputs into the calculations include rentals per square metre and capitalisation rates. Residential properties and vacant stands were valued in terms of the market comparable approach. In both cases, the valuation was performed based on USD denominated inputs and converted to ZWL as the presentation currency using a rental yield as determined by management as described on Note 13.

We have concerns over the appropriateness of using a foreign currency for the valuation inputs and then applying a conversion rate to a US$ valuation to calculate ZWL Property and Manufacturing Plant and Equipment values as in our opinion this may not be an accurate reflection of the current dynamics where there is a disparity between exchange rates.

33