ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013 Consolidated Statement of Comprehensive Income 2013 2012 US$ US$ Revenue 42 878 242 42 508 441 Cost of sales (32 382 546 ) (30 133 932) Gross prot 10 495 696 12 374 509 Other opertating income 383 133 253 761 Selling and distribution expenses (2 061 492) (1 711 288) Adminstrative expenses (8 692 950) (6 592 576) Prot from operating activities 124 387 4 324 406 Finance income 19 619 3 285 Finance costs (3 222 759) (3 117 802) Net nance costs (3 203 140) (3 114 517) (Loss)/prot from operations before income tax expense (3 078 753 ) 1 209 889 Income tax credit/(expense) 516 173 (149 974) (Loss)/prot for the year (2 562 580) 1 059 915 Other comprehensive income, net of income tax - - Total comprehensive (loss)/income for the period (2 562 580 ) 1 059 915 Number of shares in issue (000s) 493 040 493 040 Basic and diluted earnings per share (cents) (0.50) 0.21 Consolidated Statement of Changes in Equity Share Share Revaluation Non Retained capital premi um reserve distributabl e earnings Total US$ US$ US$ US$ US$ US$ Balance at 1 January 2012 4 930 403 181 908 7 639 504 7 655 239 8 068 431 28 475 485 Total comprehensive income for the year - - - - 1 059 915 1 059 915 Balance at 31 December 2012 4 903 403 181 908 7 639 504 7 655 239 9 128 346 29 535 400 Total comprehensive loss for the year - - - - (2 562 580) (2 562 580) Balance at 31 December 2013 4 930 403 181 908 7 639 504 7 655 239 6 565 766 26 972 820 Chairman’s Statement I am pleased to present Turnall Holdings Limited’s nancial results for the year ended 31 December 2013. Operating environment The results were achieved in an operating environment characterised by uncertainty and subdued economic growth. The manufacturing sector was adversely affected by working capital constraints which had a negative impact on capacity utilisation. Businesses continued to face high interest rates, acute liquidity challenges, power outages, lack of medium to long term funding, as well as deation. The absence of signicant foreign direct investment in the economy impacted negatively on companies. For Turnall Holdings, demand for building products remained lower than expected due to low disposable incomes in target market segments, as unemployment levels continued to increase. This was worsened by a drought season which saw consumers shifting their priorities from construction. As has been the case over the past few years, projects l ined up for both sewer and water reticulation did not materialise as a result of funding limitations, despite the company having received inquiries and orders. Exports into South Africa were affected by price volatility due to the free fall of the rand thus limiting export volumes during the year. The company continued to import chrysotile bre from Brazil and Russia in the year under review. The continued importation of key raw materials put pressure on both production costs and operating cash ows, resulting in margin decline. The company is following, with keen interest, developments around efforts by Government to resuscitate AA Mines. Financial performance Owing to a number of domestic and external factors, 2013 was a very challenging year for operators in the manufacturing industry. The Group’s’ results were therefore signicantly below par. Revenue of US$42.9 million was 1% above the previous year’s level for the same period at US$42.5 million. The Group is of the view that the adverse liquidi ty situation in the economy will persist in the short to medium term, thereby posing challenges in the collection of trade receivables. As a result, the company has found it prudent to signicantly increase the allowance for credit losses. To that end, an impairment provision of US$3.3 million (2012:US$ 0.027 million) has been recognised in the nancial statements. Gross prot margin was 24% compared with 29% in 2012, with an operating prot margin of 0.29% compared to 10% for the same period l ast year. A negative net prot margin of 7% was attained against a positive 2.85% for the previous year. Operating prot was US$0.124 million compared to US$4.32 million for the same period in 2012. Net nance charges were US$3.2 million compared to US$3.1 million for the previous year. Sustainabili ty reporting Turnall is implementing an integrated approach in managing sustainability impacts and opportunities based on the Global Reporting Initiatives (GRI)’s Sustainability Reporting Framework that the company adopted in 201 1 as best practice. This model, which we will report on and publish annually, aims to engage with our key stakeholders and other standard setters. It progressively improves the quality of non-nancial reporting while reecting Turnall’s true performance and We will be publishing our second sustainability report using and meeting the requirements of the Global Reporting Initiative (GRI) Sustainability Reporting Framework (G3.1: Level C) as an integrated report with our annual nancial performance report for 2013. Outlook Liquidity constraints are expected to persist in the medium to long term. We believe that our future depends on our ability to harness all our skills, capabilities and experience in order to successfully navigate the current harsh economic climate. In the outlook, working capital and cash ow management will play a key role in improving the Group’s operations. The additional line that was added to the business at the end of 2013, concrete tiles, has helped improve cash receipts as this is premised on a cash trading model. The bre cement business which has traditionally traded on credit terms has also, since the beginning of the year 2014, been modelled around a similar cash trading model. The Group remains solid and is well positioned to take advantage of opportunities in the medium to long term. Despite the prevailing conditions in the economy, the Group sees opportunities in the infrastructure upgrade in water and sanitation together with housing construction. Exports which grew from US$1 million to US$1.7 million continue to offer the greatest opportunity for growth despite the weakening of the South African Rand. The Group has a rm order book as well as inquiries from the export market. Appreciation I would like to express my appreciation to all our customers, suppliers and stakeholders for the support and cooperation rendered. I would also like to record my appreciation to management and all staff at Turnall, for their diligence and contributions. I also want to take this opportunity to express my gratitude and appreciation to my colleagues on the Board, for the support and cooperation during the period under review. We have indeed carried on as a team. Finally, the Group and I would like to express its gratitude to the late Robert Dube who passed on in January 2014. We will certainly miss his invaluable contribution to the business. Herbert Nkala Chairman 20 March 2014 Dividend At a meeting held on 14 March 2014, the Board of Directors resolved not to declare a nal dividend for the year to 31 December 2013 in view of the Group’s lower than expected performance. By Order of the Board Elizabeth Mamukwa Company secretary 20 March 2014 Auditor’s Statement Consolidated Statement of Financial Position 2013 2012 US$ US$ ASSETS Non-current assets Property, plant and equipment 32 884 465 31 685 103 Investment property 301 621 291 325 Trade and other receivables 1 175 191 - Total non-current assets 34 361 277 31 976 428 Current assets Inventories 18 005 899 18 757 112 Short term investments 24 027 19 958 Trade and other receivables 16 349 038 16 233 953 Cash and cash equivalents 242 384 993 390 Total current assets 34 621 348 36 004 413 Total assets 68 982 625 67 980 841 EQUITY AND LIABILITIES Capital and reserves Share capital 4 930 403 4 930 403 Share premium 181 908 181 908 Non-distributable reserve 7 655 239 7 655 239 Revaluation reserve 7 639 504 7 639 504 Retained earnings 6 565 766 9 128 346 Total equity 26 972 820 29 535 400 Non-current liabilities Deferred taxation 6 086 836 6 604 514 Current liabilities Loans and borrowings 9 542 352 10 779 318 Trade and other payables 24 433 711 19 078 437 Taxation 1 488 266 1 488 266 Bank overdraft 458 640 494 906 Total current liabilities 35 922 969 31 840 927 Total liabilities 42 009 805 38 445 441 Total equity and liabilities 68 982 625 67 980 841 Notes to the nancial statements Statement of compliance The underlying nancial statements to these results have been prepared in accordance with International Financial Reporting Standards and in the manner required by the Companies Act (Chapter 24:03) and the Zimbabwe Stock Exchange Listing Requirements. Accounting policies and reporting currency There have been no changes in the Group’s accounting policies since the date of the last audited nancial statements. The underlying nancial statements to these results are presented in United States dollars, which is the functional currency of the Group. 2013 2012 US$ US$ Capital expenditure Purchase of property, plant and equipment 3 816 914 2 604 160 Additions to property, plant and equipment include US$2,8million (2012:US$1,5million) for the concrete tile machine which was commissioned in September 2013. Commitments for capital expen diture Authorised by directors and not contracted for 1 150 000 1 500 000 Trade and other payables Trade payables 9 799 934 8 363 783 Amounts owing to group companies 3 094 695 2 353 449 Value added tax 4 579 149 4 174 433 Other payables 6 959 933 4 186 772 24 433 711 19 078 437 Trade and other receivables Non-current trade and other receivables relates to the amount that the business is expecting to receive after 12 months from the reporting date. Events after the reporting period Subsequent to the reporting period date, t here were no material adjusting or non-adjusting events. Consolidated Statement of Cash Flows 2013 2012 US$ US$ CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/prot for the year (2 562 580 ) 1 059 915 Adjustments for: Depreciation of property, plant and equipment 2 591 151 2 422 240 Depreciation of investment property 6 413 6 225 Net nance costs 3 203 140 3 114 517 Unrealised exchange losses (141 976 ) (126 110 ) (Prot)/loss on disposal of property, plant and equipment (3 283 ) 6 438 Net change in other investments (4 069 ) (373 ) Interest payable (617 264 ) (288 822 ) Income tax (credit)/expense (516 173 ) 149 974 Operating cash ows before reinvestment in working capital 1 955 359 6 344 004 Decrease/(increase) in inventories 751 213 (3 944 751) Increase in trade and other receivables (1 290 276 ) (16 530) Increase in provisions, trade and other payables 5 355 274 6 344 320 6 771 570 8 727 043 Withholding tax paid (1 505 ) (137 ) Income tax paid - (638 551) Realised exchange losses (148 995 ) (2 956) Interest paid (2 314 527 ) (2 699 914) (2 465 027 ) (3 341 558) Net cash ows from operating activities 4 306 543 5 385 485 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment: - to increase operating capacity (3 086 541 ) (1 542 721 ) - to maintain current capacity (730 373 ) (1 061 439 ) (3 816 914 ) (2 604 160 )