7/29/2019 BAT Unaudited results for HY ended 30 Jun 13.pdf

1/1Directors: Kennedy Mandevhani* (Chairman), Lovemore T Manatsa (Managing Director), Peter Doona (Finance Director), Andre Joubert*,Angela Mashanyare*, Hope C Sadza*, Wael Sabra* (Alternate Director), (*Non Executive)

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For h Hf Yr 30 Ju 2013UnaUdited FinanCial ReSUltS

Unaudited Unaudited 30 Jun. 2013 30 Jun. 2012 US$000's US$000'sRevenue 23 137 23 018Cost of sales (7 168) (9 589)Gross prot 15 969 13 429

Selling and marketing costs (2 166) (1 878)Administrative expenses (4 485) (4 946)Share-based payment expense (10 606) -Other income - net 3 694 394Fair value gain (1) 17

Operating prot 2 405 7 016Finance cost (139) (278)Prot before income tax 2 266 6 738

Income tax expense (3 705) (1 678)(Loss) / prot for the period (1 439) 5 060

Other comprehensive income - -Total comprehensive (loss)/income for the period (1 439) 5 060

Attributable to:Owners of the parent (1 439) 5 060Non-controlling interests - -Total comprehensive (loss)/income for the period (1 439) 5 060

Earnings per Share ($) (0.09) 0.29Headline earnings per share ($) (0.09) 0.29

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Unaudited Audited 30 Jun. 2013 31 Dec. 2012 US$000s US$000sASSETS

Non-current assetsProperty, plant and equipment 9 614 9 834Intangible assets 176 222Investment property 222 225Financial assets at fair value through prot or loss 26 27

Total assets 10 038 10 308

Current assetsInventories 7 910 12 466Trade and other receivables 6 693 7 337Cash and cash equivalents 5 123 3 514

19 726 23 317

Total assets 29 764 33 625

EQUITY AND LIABILITIESEquity attributable to the owner of parent Share capital 5 214 5 214Non distributable Reserve 337 337Retained earnings 105 8 411

Total equity 5 656 13 962

Non- current LiabilitiesDeferred tax liablities 2 249 2 033

Current LiabilitiesTrade and other payables 6 343 8 900Provisions for other liabilities and charges 11 185 1 415Current tax liability 1 332 1 465Borrowings 3 000 5 850

21 860 17 630

Total liabilities 24 109 19 663

Total equity and liabilities 29 764 33 625

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IntroductionThe economy has shown signs of stagnation in the first half of 2013. Despite limited growth being achieved in the agricultural andmining sectors, investment in the economy has been constrained by domestic liquidity challenges and restricted availability ofexternal credit lines. It is in this context that British American Tobacco Zimbabwe (Holdings) Limited ("the Company") presents its

unaudited financial results for the six months to 30 June 2013.

Industry cigarette volumes have reduced as a result of the slowdown in GDP gro wth and the ongoing general affordability challengesthat consumers in the country continue to face. Successive increases in excise duty which impacted cigarette retail prices in 2011and 2012 have been compounded by coinage constraints resulting in consumers often paying higher prices than recommended bymanufacturers simply due to the unavailability of coins.

Financial ResultsDomestic cigarette sales volumes declined by a very significant 16% compared to the same period last year for reasons as mentionedpreviously. The decrease in sales volumes was experienced across all our local brands though market leader Madison proved moreresilient. Our Global Drive Brand, Dunhill, grew volume by 44% compared to last year albeit off a small but growing consumer base.

Total revenues were $23.1 million for the first six months of the year, broadly stable when compared with the same period last year,mainly due to manufacturer increases net of excise on key brands in December 2012 which offset on part the impact of lower salesvolumes.

Gross profit increased by $2.5 million to $16.0 million in the period, driven by strong management focus on cost reductions.Cut rag exports to Mozambique were discontinued whilst management focused the business on building distribution of themanufactured cigarette portfolio. Credit is due to the excellent efforts of management to deliver such strong results in the half yearnotwithstanding the volume challenges outlined earlier, and still sustaining the top 2 brands in the country. Independent researchshows BAT market share at over 75%.

On a non-adjusted basis, operating profit r educed to $2.4 million primarily as a result of an IFRS 2 share-based payment expense of$10.6 million. This expense represents the fair value of share awards made to employees by our Employee Share Ownership Trust("ESOT") as part of the Company's compliance with Indigenisation and Economic Empowerment legislation ($10.2 million) plus theassociated payment of dividends to employees participating in the Trust of $0.4 million. The fair value of these awards is assessedwith reference to the market value of BAT Zimbabwe's shares on the Zimbabwe Stock Exchange, which has grown significantly inthe period.

The impact of this expense was partly offset by other income of $3.3 million due to the forgiveness by a related party of payablesfor services which had been accumulated during the country's period of hyperinflation.

After the deduction of finance costs and income tax, there was a net loss for the period of $1.4 million (6 months to June 2012: profitof $5.1 million).

Operating cash flow for the period outperformed reported profit. Cash flows benefited from a reduction in inventories of tobaccoleaf of $4.6 million following the discontinuation of cut rag exports to Mozambique. Cash outflows associated with the EmployeeShare Ownership Trust are weighted towards future years as the awards are cash settled upon employees retiring or leavingemployment with the Company.Corporate GovernanceDuring the period under review, Messrs. Richard Morgan and Jorge Davyt resigned as Finance Director and Non-Executive Director,respectively. The Board is indebted to Messrs. Morgan and Davyt for their contributions during their tenures as directors and wishesthem the best in their future endeavors.

Messrs. Peter Doona and Andre Joubert were appointed as Finance Director and Non-Executive Director respectively in terms ofArticle 88 of the Company's Articles of Association. These appointments will be ratified at the next Annual General Meeting.

DividendDue to the loss for the period, the directors have resolved not to declare an interim dividend.

OutlookTrading conditions are expected to remain challenging in the second half of the year as the country continues to look for economicstability.

We are confident that our strategies remain appropriate, that our brand portfolio is relevant and that the excellent quality ofour people and processes will deliver the sustainable competitive advantage required for future success and to the benefit ofshareholders.

ConclusionThe Company remains committed to overcoming the challenges presented by 2013 towards sustainable growth, supported by agreat team and a winning organization.

Kennedy MandevhaniChairman

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Share capital Non distributable Retained earnings Totalreserves

US$000s US$000s US$000s US$000s

Balance at 1 January 2012 5 214 337 2 928 8 479Net prot attributable to shareholders - - 5 060 5 060Dividends to equity holders - - (2 781) (2 781)Balance at 30 June 2012 5 214 337 5 207 10 758

Balance at 1 January 2013 5 214 337 8 411 13 962Net prot attributable to shareholders - - (1 439) (1 439)

Dividends to equity holders - - (6 867) (6 867)-

Balance at 30 June 2013 5 214 337 105 5 656

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Unaudited Unaudited 6 months 6 months ended ended 30 Jun. 2013 30 Jun. 2012 US$000's US$000'sCash ows from operating activitiesProt before tax 2 266 6 738Net cash before working capital changes 2 951 7 369Changes in working capital 12 415 (1 901)Interes t paid (139) (278)Income tax paid (3 621) (1 161)Net cash generated from operating activities 11 605 4 029

Cash ows from investing activitiesPurchase of property, plant and equipment (288) (267)Proceeds on disposal of property, plant and equipment 9 21

Net cash utilised in investing activities (279) (246)Cashows from nancing activitiesRepayments of borrowings (2 850) -Dividend paid to companys shareholders (6 867) (2 781)

(9 717) (2 781)Net Increase in cash and cash equivalence 1 609 1 002

Cash and cash equivalents at the beginning of the period 3 514 2 243

Cash and cash equivalents as at end of the period 5 123 3 245

Comprising:Cash and bank 5 123 3 245

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1. General informationBritish American Tobacco Zimbabwe (Holdings) Limited ("the Group") manufactures, distributes and sells cigarettes through anetwork of independent retailers and distributors. The Group has a cigarette manufacturing plant in Zimbabwe and sells cigarettesentirely in the Zimbabwe market.

2. Accounting Policies and reporting currencyThere has been no change in the Group's accounting policies since the date of the last audited financial statementsThese financial statements are presented in United States Dollars (US$), being the currency of the primary economic environment inwhich the Group operates.

3. Basis of preparationThe Group's Interim financial statements were prepared in accordance with International FinancialReporting Standards (IFRS) and are based on statutory records that are maintained under the historical cost convention.

Supplementary Information30 Jun. 2013 30 Jun. 2012

US$000's US$000's4. Depreciation charge 535 5015 Capital expenditure 288 2676. Operating prot for the period analysed as:

- adjusted operating profit 9 313 7 016- Indigenous Employee Share Ownership Trust awards (10 173) -- forgiveness of related party payables 3 265 -Operating prot 2 405 7 016

Group Summary (US$000's) June June

2013 2012

Revenue 23 137 23 018

Operating profit 2 405 7 016

Profit before income tax 2 266 6 738

Fc Hghghs

June June

2013 2012

(loss)/profit for the period (1 439) 5 060

Total assets 29 764 31 874

Earnings per share (basic and diluted) (US$) (0.09) 0.29