AGRO-INDUSTRIAL group Tobacco Sales Limited (TSL)’s plans to make its property company a stand-alone unit are now advanced and only awaiting final regulatory approvals, CEO Washington Matsaira said.The property company has a covered-space of 175 000 square metres and open land space of 120 hectares in Harare, Bulawayo, Mutare, Gweru and Victoria Falls. The value of the portfolio is US$40 million and comprises industrial and residential properties.
In the financial half-year to April, TSL’s turnover was up 9% to US$24,2 million. Excluding associate Hunyani, it was up 19%.
TSL’s earnings before interest, taxation, depreciation and amortisation (EBITDA) rose 28% to US$4,1 million, while the bottom-line was US$2,31 million. Gearing had been kept at 1, a figure Matsaira said he was comfortable with.
Bak Logistics recorded 57% growth in sales on the back of a more active distribution market and growth in storage capacity. Bak Logistics has the widest geographical spread and the largest warehousing space in the country. The unit has opened a warehousing depot in Mutare but it is not yet established at the busiest border post in the country — Beitbridge. Bak is also looking at expanding into the region and pursuing strategic partnerships with international investors.
Tobacco auctioneering division TSF looks to introduce a grower’s scheme through a joint venture, which would target a sizeable hectarage. Funding for the project is currently being raised and partners would match TSL’s contribution dollar for dollar.
Matsaira said the streamlining of group operations into five distinct units; Logistics, Paper and Packaging, Tobacco, Agro Inputs, Properties and Group Services would create greater efficiencies for effective management. Plans to dispose of TS Timber are on track and should be completed in the second half of the year.
Since manufacturing at Agricura had been discontinued in the period, the full impact was expected in the first half of 2013.
In the paper and packaging operations, Hunyani’s sales were lower because of current liquidity challenges, even though the turnover in the period under review was at 49% but contribution to profit 6%.
The TSL group has therefore decided to adopt the IAS 28 (International Accounting Standard) equity method of accounting for the Hunyani operations much earlier in line with new IFR (International Financial Reporting) standards, although this standard comes into effect in January 2013.
IAS 28 applies to all investments in which an investor has significant influence but not control or joint control, except for investments held by a venture capital organisation, mutual fund, unit trust, or similar entity designated under IAS 39 to be at fair value, with fair value, changes recognised in profit or loss. The equity method of accounting is a method by which an equity investment is initially recorded at cost and subsequently adjusted to reflect the investor’s share of the net assets of the associate.
Finance director Peter Mujaya said the method better reflects TSL’s performance. Using the method, turnover in the period would be US$15,2 million; operating profit would be US$2,8 million and net income US$2,3 million. The operating margin would be 18% from the current 13%, while the effective tax rate would be unchanged at 32%.
Matsaira said the group would continue to diversify activity to ensure a revenue flow all year round.
Early this year, TSL adopted a backwards and upwards integration to create a value chain in a bid to reclaim the market share the group’s SBUs (Strategic Business Units) had lost over the years.