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2017 ANNUAL REPORT BLANTYRE HOTELS PLC BLANTYRE HOTELS PLC Annual Report 2017 2
FIVE YEAR PERFORMANCE HIGHLIGHTS
2013 2014 2015 2016 2017 Gross Revenue (MK’ Million) 1 574 2 163 2 705 3 524 4 118 Profit Before Tax (MK’ Million) 154 231 254 576 743 Earnings per Share (Tambala) 84 124 141 321 392 Gross Dividend Paid (MK’ Million) 32 78 106 129 129 Gross Dividend per Share (Tambala) 25 60 82 100 100 Total Assets (MK’ Million) 3 044 5 629 5 671 7 255 7 669 Net Assets (MK’ Million) 1 760 3 547 3 700 4 765 5 147 Share Price (Tambala) 800 800 960 1290 2500 Net Asset Value per Share (Tambala) 1363 2745 2864 3688 3984 Price to Book Value (times) 0,59 0,29 0,34 0,35 0,63 Price Earnings Ratio (times) 9,52 6,45 6,81 4,02 6,38 Market Capitalisation (MK’ Million) 1 034 1 034 1 240 1 667 3 230
GROSS REVENUE PROFIT BEFORE TAX
4,500 900 4,000 800 3,500 700 3,000 600 2,500 500 2,000 400
MK’ Million 1,500 MK’ Million 300 1,000 200 500 100 - - 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 1,574 2,163 2,705 3,524 4,118 154 231 254 576 743 Annual Report 2017 BLANTYRE HOTELS PLC 3
TOTAL ASSETS NET ASSETS
9,000 6,000 8,000 5,000 7,000 6,000 4,000 5,000 3,000 4,000 MK’ Million 3,000 MK’ Million 2,000 2,000 1,000 1,000 - - 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 3,044 5,629 5,671 7,255 7,669 1,760 3,547 3,700 4,765 5,147
DIVIDEND PER SHARE EARNINGS PER SHARE
140 450.00 120 400.00 350.00 100 300.00 80 250.00 60 200.00 Tambala Tambala 150.00 40 100.00 20 50.00 0 0.00 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 25 60 82 100 100 84 124 141 321 392
SHARE PRICE MARKET CAPITALISATION
3,000 3,500
2,500 3,000 2,500 2,000 2,000 1,500 1,500 Tambala
1,000 MK’ Million 1,000 500 500 - - 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 800 800 960 1290 2500 1,034 1,034 1,240 1,667 3,230 BLANTYRE HOTELS PLC Annual Report 2017 4
Mr. Vizenge M. Kumwenda Mr. Tom Daniel Mr. Elias Azele Malion CHAIRMAN DIRECTOR DIRECTOR
FCCA, ACII, CA(M), M.Sc (Fin), B.Com, FCA (India), CA (M) B.Acc, MBA, FCCA, CA(M) B.Com (Acc), Dip. Bus.
Mr Kumwenda is a Group Managing Mr. Daniel was a Group Finance Mr. Malion is a chartered accountant Director for NICO Holdings Plc, Director at NICO Holdings Plc (CA) with extensive experience a parent company of subsidiaries for many years and his experience in financial management and specialising in Life and General spans insurance, retirement accounting. He is a Fellow of the Insurance, Pension Administration, funds management, accounting, Association of Chartered Certified Banking and Asset Management. investments management, corporate Accountants (FCCA) and holds a He holds a Diploma in Business advisory (mergers, acquisitions, Bachelor of Accountancy degree Studies, a Bachelor of Commerce etc.), project management and (with Distinction) and a Master Accountancy degree from the business start-ups. Apart from of Business Administration from University of Malawi and a Master Blantyre Hotels Plc, Tom has also the University of Malawi. He is
PROFILES OF DIRECTORS PROFILES of Science (Finance) degree from served on, and actively participated a member of the Institute of the University of Strathclyde, on various committees of several Chartered Accountants in Malawi Scotland. He is a Fellow of the boards including the boards of NBS (and is currently the Head of Association of Chartered Certified Bank Plc, NICO Holdings Plc, NICO Finance and Administration of Accountants (FCCA) and Associate Insurance Zambia Limited, NIKO Press Trust, Malawi’s foremost local of the Chartered Insurance Institute Insurance Tanzania Limited, NIKO charitable institution. In a career (UK). He has worked with NICO Insurance Uganda Limited, Chichiri spanning more than 17 years, he Holdings Limited for twenty-one Shopping Centre, Chibuku Products has also worked for Malawi Posts years. He rose ‘through the ranks’ Limited and Malawi Stock Exchange. Corporation and Deloitte and and was appointed Deputy Managing Touche. Presently he also serves as a Director from January 2012, the Tom currently serves on many other non-executive director on the board position which he held until end of boards namely Mwaiwathu Private of Mwaiwathu Private Hospital 2015 when he became Managing Hospital Limited, Alliance Capital Limited. Director from January 2016. He sits Limited, Broll Malawi, Transunion, on several Boards. He brings to the Axis Pensions, and Omega Security Board a breadth of experience and Solutions. expertise in finance and insurance. Annual Report 2017 BLANTYRE HOTELS PLC 5
Ms. Rosemary Mkandawire Mr. Macarthur Mtila DIRECTOR DIRECTOR
FCCA, Degree in Sciences and English, FCCA Advanced Strategic Leadership
Ms. Mkandawire is a qualified Chartered Accountant Mr. Mtila has concurrently been General and also holds a general degree in Sciences and Manager and Chief Finance Officer of Access English (Malawi) and Advanced Strategic Leadership Communications Limited, a telecommunications (UCT Graduate School of Business). She was the business from August 2011 to December 2017. first woman to become a fully qualified professional Prior to that, he was an independent management accountant in Malawi and the first woman Managing consultant in the areas of document management, Director in the Toyota Group when she took up the digital archiving and printer control systems. He position at Toyota Malawi from 2005 to 2014. She was also the proprietor of KAB Limited, a plastics went on to become the non-executive Chairperson conversion business. of Toyota Malawi for two years up to 2015. She is the current co-owner of Nthumbo Agro-Dealer He has considerable experience in financial and Limited. She has also worked as Finance Director general management and control of substantial for Toyota Malawi and Lonhro Motors Group Malawian commercial and industrial enterprises between 1997 and 2005. at a senior level for over 35 years. From 2000 to 2005, he was Chief Executive Officer of various Rosemary has achieved major successes including subsidiaries of ADMARC. Between 1994 and 2000 involvement in the setting up of Malawi’s he was Head of Human Resources and Financial Privatization Commission, appointments as one Controller of NSCM, the Malawi subsidiary of of the founding Trustees of the Malawi Blood Cargill Inc. He also worked for ten years as Transfusion Trust, to assist as a Commissioner in Finance Manager of Malawi Hotels (now Sunbird setting up a Secretariat for the Competition and Tourism Plc). Previous to that, for ten years, he was Fair Trading Commission and as an active council in general and financial management of Blantyre member of ICAM (formerly SOCAM). For 20 Printing & Publishing group (now Times Group). years she has served on Boards including those of In his personal capacity, he has been a member of NBS Bank Plc, Malawi Revenue Authority, National several parastatal and commercial boards, including Bank of Malawi Plc, NICO Life Insurance Company those of the Malawi Development Corporation, Limited, Standard Bank Plc and Malawi Blood Blantyre Water Board, MPICO Plc and Optichem. Transfusion Trust. She currently serves on the He has served on the board of Blantyre Hotels Plc Board of Reserve Bank of Malawi and also chairs its from 2002. Appointments and Remuneration Committee. BLANTYRE HOTELS PLC Annual Report 2017 6 Annual Report 2017 BLANTYRE HOTELS PLC 7
CHAIRMAN’S STATEMENT
It is my pleasure to report on our company’s performance in respect of the financial year ended 30 September 2017 and on the company’s prospects.
Overview of Results The opening of other hotels in The performance for the year ended Blantyre will continue to have an A final dividend of MK19.4 million, 30 September 2017 was satisfactory. adverse impact on the Hotel’s representing 15 tambala per share, performance in the coming year. was proposed by your directors on The operating results for the year The company will continue with its 1 February 2018, subject to approval improved when compared with efforts in quality service delivery at the forthcoming Annual General previous year. The hotel revenue and continuous improvements in Meeting grew by 17% in 2017 mainly due the food and beverages products. to the increased occupancy and Protea Ryalls by Marriot remains On approval of this final dividend, improved average room rates. the preferred choice in Blantyre for the total dividend for the year will Direct expenses increased by 17%, most of our clientele. be 115 tambala per share compared mainly from back-up power and to 100 tambala in the previous year. maintenance costs. Despite the The company intends to construct This represents a 15% increase over challenging economic and operating a 180 room four star hotel in the previous year’s dividend. environment, the hotel profit after Lilongwe. I am glad to report that tax increased by 22% to MK507 negotiations with the landowners Concluding Remarks million, from MK414 million in the are at an advanced stage and the previous year. clearances and approvals from On your behalf, I thank my fellow relevant authorities are in progress. directors for their hard work and The migration to Marriot We plan to raise the capital for assistance during the year. Central Reservations channels the company through a rights also contributed to the positive issue devoted to the funding of the I also thank our Managers, Messrs performance of the company. project. Protea Hotels Group and Marriott International, and the entire staff Prospects Dividend of Blantyre Hotels Plc for their continued efforts and hard work As mentioned at the last Annual A first interim dividend of MK64.6 which is very much appreciated, General Meeting in 2017, since the million, representing 50 tambala per especially by our Guests. year end, the hotel has refurbished share, was paid on 5 July 2017 and a the 21 Grill using internally second interim dividend of MK64.6 generated funds. This is expected million, representing 50 tambala per to improve the performance of the share, was paid on 29 December food and beverage department in 2017. Vizenge Kumwenda terms of patronage and profitability. CHAIRMAN
BLANTYRE HOTELS PLC Annual Report 2017 8
RYALLS LILONGWE to become a reality
Blantyre Hotels Plc is very proud decades, in the city’s office blocks, of its successful ownership of shopping malls and, latterly, in Ryalls Blantyre for close to a cooperation with Government century, its hard-won status over even in road construction. Hotel the past 20 years as the most developments in Lilongwe have prestigious business-favoured hotel also grown apace to match this in Malawi and its very professional physical development but Blantyre management on our behalf by Hotels Plc has affirmed a more Protea Marriott. specific opportunity there. Such a development echoes and reflects As a direct result, Blantyre Hotels BH success with accommodation Plc now aims to construct a major and dining at Ryalls Blantyre and will hotel in Lilongwe. complement its well-proven appeal to loyal market sectors in Blantyre The company is at an advanced stage identified by our researchers. of negotiations with the landowners for the proposed 180 room 4 star Blantyre Hotels Plc already holds hotel to be built in Lilongwe. Design unique knowledge and successful concept required for the preliminary experience in the local hospitality clearances and approvals from the industry. The prime objective with relevant authorities are in progress. Ryalls Lilongwe is to build on that It is anticipated the company will valuable experience in Blantyre, raise fresh equity through a rights to incorporate that into the new issue towards funding the project hotel and provide equally appealing cost. When details are finalised, upmarket accommodation in specific announcements will be Lilongwe for our existing patrons. made.
Prior to that Blantyre Hotels had identified a need in the market to develop a second hotel offering in Lilongwe, Malawi. The striking urban growth of Lilongwe had already been catalysed very considerably by existing shareholder investment, especially over the past three Annual Report 2017 BLANTYRE HOTELS PLC 9
The physical development of Lilongwe in the past ten years has been startling.
Retail markets have sprung up in the form of shopping centres and impressively diverse shopping malls with banking services quick to serve customer needs followed by office development. International interest has been quick to follow and with new routes and improved connections and frequencies introduced by the revitalisation of our national airline, hotels designed specifically to cater to the international business community also began to enhance the capital’s skyline. To the extent the city is now popular for regional and international conferences using purpose-built facilities such as the Bingu International Conference Centre pictured here below. BLANTYRE HOTELS PLC Annual Report 2017 10 Annual Report 2017 BLANTYRE HOTELS PLC 11
General Manager’s Report
I am extremely proud to manage a hotel that prides itself in being of the highest quality and standard. This is achieved by a strong belief in our staff and our guests.
Introduction There is a view that a hotel consists both locally and internationally only of a building and the staff. has been a challenge in the I am extremely proud to manage However no matter how impressive past; however now with two a hotel that prides itself in the physical product is, it is the staff international and local flights daily being of the highest quality and which make its appeal memorable this has vastly improved business standard. This is achieved by a and being fully aware of this is a key for Blantyre over all sectors, strong belief in our staff and our foundation to our success. The belief especially in hospitality. Blantyre guests. Some of the key areas is verified and reinforced by our is an extremely competitive that drive this statement have guest feedback survey from which it environment for hotels, so delivery always been: teamwork, integrity, is clear that we adhere to the best of the highest standards, offering training, consistency, high quality possible policy. a quality product together with of service standards, promoting consistency and service are vital from within and finally moulding Overview elements distinguishing us from our future hoteliers. We focus on The hotel is located in Blantyre local competition. offering an invariably unique which is the commercial hub product with diverse features of Malawi and we have a rich which sets us apart from the other and lengthy heritage as a city hospitality organisations in the centre hotel which dates back to Mr. Mischa Lehner country. 1921. Accessibility to Blantyre GENERAL MANAGER
21 GRILL
A soft refurbishment of our famous 21 Grill on Hannover restaurant was completed in September 2017 using internally generated funds. This is expected to improve the overall ambience and further enhance the environment there by further improving the patronage and profitability of the food and beverage department. While keeping in context the location and history of 21 Grill on Hannover, it was key that this would be influential in designing the restaurant, as it played such a big part in the makeup of the Hotel. It was therefore important to integrate this historical influence through the decorative elements, while still updating the restaurant and incorporating new life. BLANTYRE HOTELS PLC Annual Report 2017 12 EXECUTIVE MANAGEMENT PROFILES
Mr. Mischa Lehner GENERAL MANAGER B.Sc. Hotel, Restaurant & Tourism Mgt. (USA), Dip. Hosp. Mgt. (Switzerland) Mischa Lehner, graduated in 2003 with a Bachelor of Science Degree in Hotel, Restaurant, and Tourism Management from the University of South Carolina, USA and a Hotel and Motel Association (AM&MA) and Swiss Hotel Manager Diplomas in Hospitality and Tourism Management from Hotel Institute Montreux, Switzerland in 1998.
He has been involved in the hospitality industry for some 20 years. He has worked in three continents in numerous countries all in the hospitality industry from large hotel chains such as Marriott, Starwood & Wyndham in the USA to popular ski resorts and well known hotels in Switzerland and Austria to island resorts in the Bahamas and finally to Africa in Nigeria, South Africa and currently Malawi. He has worked in almost every department within the Hotel Industry from entry level to managerial level. He has also been involved in numerous tourism sub- sectors as well as the more general travel industry. Annual Report 2017 BLANTYRE HOTELS PLC 13
Mrs. Chikondi Msosa FInance Manager FCCA, CA(M), MBA Chikondi is a qualified and seasoned accountant with 19 years of experience, 15 years of which have been with an audit firm, having worked with Graham Carr, certified public accountants firm and a member of Nexia International. Prior to joining Blantyre Hotels Plc, she worked as a Finance Manager for Entyre Limited, a trading and manufacturing company.
She holds a Master of Business Administration Degree from the Eastern and Southern Africa Management Institute (ESAMI), a fellow of the Association of Chartered Certified Accountants (FCCA) and a Certified Public Accountant (CPA) with the Institute of Chartered Accountants of Malawi (CA(M)). BLANTYRE HOTELS PLC Annual Report 2017 14
EXECUTIVE MANAGEMENT PROFILES (CONTINUED) Mr. Valentine Bandawe Human Resources Manager B.A. (Pub. Admin), Dip. Fin. Mgt Valentine Bandawe is Human Resource Manager and is a holder of Bachelor of Arts in Public Administration from the University of Malawi. He also holds Diploma in Financial Management awarded by ACCA.
Valentine joined Blantyre Hotels Plc in February 2015. At an HR Conference for the Middle East and Africa region for Marriott International held in Dubai, Valentine was recognised with an award as Human Resource Manager of the Year (2017) within the Protea Group.
Prior to joining Blantyre Hotels Plc, he worked as a Human Resource and Administration Manager for the Malawi Blood Transfusion Service for four years. He has also worked with Concern Worldwide Malawi, Auction Holdings Limited and Malawi Savings Bank Limited at senior management levels. Annual Report 2017 BLANTYRE HOTELS PLC 15
Mr. Ronuel Malikita OPERATIONS Manager
Ronuel Malikita, is a seasoned hotelier and marketer in the local hospitality industry. He has a certificate in Hotel and Hospitality Management from Cornell University (New York, USA). Ronuel has attended various international courses including Strategic Management at the Texas Southern University in Houston, Texas and studied Marketing at the University of Cape Town, South Africa. Other courses have included Strategic Planning for Globe Competitiveness also at Texas Southern University and courses in Globe IT issues, integration, transparency, security and intelligency.
He worked as a General Manager for Ku Chawe Inn, Lilongwe Hotel and Mount Soche Hotel, all for Sunbird Tourism Plc as well as General Manager for Ryalls Hotel when Blantyre Hotels Plc had two hotels, Ryalls Hotel and Shire Highlands Hotel.
Apart from working under the Protea/Marriott Group as a hotel manager, he has also worked under different hotel and catering management companies, under Tourism International Development Corporation (TIDC), Malawi Development Corporation (MDC) and the prestigious Paris-based Le Meridien International Hotel Group.. Ronuel has also worked as National Sales and Marketing Manager for Blantyre Hotels Plc. He has been with Blantyre Hotels since 2000. BLANTYRE HOTELS PLC Annual Report 2017 16
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Sub headers Annual Report 2017 BLANTYRE HOTELS PLC 17 BLANTYRE HOTELS PLC Annual Report 2017 18
Corporate Governance Statement
The Board
The company has a Board of Directors comprising • Oversees the company’s relationship with its five non-executive directors. There are no executive external auditor and reviews and monitors the directors. external auditor’s independence and objectivity and the effectiveness of the audit process; The company is committed to good corporate • Makes recommendations to the Board, for it to put governance practices as enshrined in the Code of to shareholders for their approval in general meeting, Best Practice for Corporate Governance in Malawi in relation to the appointment and remuneration of (The Malawi Code II). external auditors.
The Board meets at least four times a year. Adequate b) Remuneration and Appointments and efficient communication and monitoring systems are Committee in place to ensure that the directors receive all relevant This Committee reviews on a regular basis the information to guide them in making necessary strategic composition, size and balance of the full Board to ensure decisions, and providing effective leadership, control that the Board is not lacking in skills or experience and and strategic direction over the company’s operations, adequately represents the interests of the shareholders and in ensuring that the company fully complies with as a whole. Furthermore, the Committee deliberates relevant legal, ethical and regulatory requirements. Ad hoc on the appropriate level of remuneration of directors meetings are held as and when necessary for the Board to be recommended for approval by the shareholders to execute any urgent and critical business that may need in general meeting. This Committee also makes to be transacted by the Board over and above businesses recommendations to the Board on the appointment and already carried out during the regular meetings. contractual terms of appointment of key Management positions in the Company and facilitates liaison and To ensure thorough and effective direction of the communication between the Managers of the Company Company by the Board, the Company has the following and the Board by recommending and ensuring adoption standing Board Committees: of such relevant policies for the smooth-running of the Company. Board Committees Company Secretary a) Finance and Audit Committee The Finance and Audit Committee is responsible for the The Company Secretarial function ensures that the following: Board has timely access to relevant information and reports necessary for the Board to effectively make • Monitors the integrity of the financial statements of decisions and direct the Company’s affairs. The Board the company and any formal announcements relating also has access to such advice and guidance as may be to the company’s financial performance, including required from the Company Secretary’s Office. reviewing significant financial reporting judgments contained in them; Ethical Standards • Reviews the company’s internal financial controls to ensure the operation of adequate systems and The Board is fully committed to ensuring the company’s control processes to safeguard the company’s assets; affairs are conducted with integrity and that the highest • Reviews the company’s policies and procedures to ethical standards are maintained. ensure they adequately address compliance and regulatory issues; 19
Audited Financial Statements
BLANTYRE HOTELS PLC For the year ended 30 September 2017 BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 20 For the year ended 30 September 2017
DIRECTORS’ REPORT
The Directors have pleasure in presenting their report and annual financial statements of Blantyre Hotels Plc for the year ended 30 September 2017.
INCORPORATION AND REGISTERED OFFICE Blantyre Hotels Plc is a company incorporated in Malawi under the Companies Act of Malawi and is domiciled in Malawi.
The registered office of the company is situated at:
Ryalls Hotel P O Box 21 2 Hannover Avenue, Blantyre, Malawi.
NATURE OF BUSINESS Blantyre Hotels Plc operates in the hospitality industry in Malawi with one hotel, Protea Hotel Ryalls, based in Blantyre.
FINANCIAL PERFORMANCE The results and state of affairs of the company are set out in the accompanying statements of financial position, profit or loss and other comprehensive income, changes in equity, and cash flows and notes to the financial statements.
PROFIT The net profit attributed to owners of the company for the year of MK507 million (2016 as restated: MK414 million) has been added to retained earnings.
DIVIDENDS An interim dividend of MK64.6 million representing 50 tambala per share was paid on 5 July 2017 and a second interim dividend of MK64.6 million representing 50 tambala per share was paid on 29 December 2017
The Directors will propose at the forthcoming Annual General Meeting of members, to be held in February 2018, to pay a final dividend of MK19.4 million representing 15 tambala per share, bringing the total dividend to MK148.6 million representing 115 tambala per share (2016: 100 tambala per share).
BOARD OF DIRECTORS AND SECRETARY The following served as Directors and Secretary of the Company during the year:
Mr. V.M. Kumwenda Chairman and Non-executive Director (from 9 March 2017 to date) Mr. F.L. Mlusu Chairman and Non-executive Director (up to 9 March 2017) Mr. P.T. Daniel Independent and Non-executive Director (throughout the year) Mr. M.S. Mtila Independent and Non-Executive Director (throughout the year) Ms. R. Mkandawire Independent and Non-Executive Director (throughout the year) Mr. E. Malion Non-executive Director (throughout the year) NICO Asset Managers Limited Company Secretary (throughout the year) BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 21 For the year ended 30 September 2017
BOARD MEETINGS The Board meets quarterly. Ad-hoc meetings are held when necessary. The directors are provided with comprehensive board documentation at least seven days prior to each of the scheduled meetings. During the year there were six board meetings and the attendance was as follows:
Member Meetings Attended Mr. Vizenge Kumwenda (Chairman) – (From 9 March 2017 to date) 3 Mr. Felix Mlusu (Chairman) – (Up to March 2017) 3 Mr. Thomas Daniel 6 Mr. Elias Malion 6 Mr. Macarthur Mtila 5 Ms. Rosemary Mkandawire 6
During the year there were four Finance and Audit Committee meetings and the attendance was as follows:
Member Meetings Attended Mr. Thomas Daniel (Chairman) 4 Mr. Elias Malion 4 Mr. Macarthur Mtila 4
During the year there were eight Remuneration and Appointments Committee meetings and the attendance was as follows:
Member Meetings Attended Ms Rosemary Mkandawire (Chairperson) 8 Mr. Patrick Mhango 8 Mr. Macarthur Mtila (from 16 May 17) 2 Mrs. Emily Makuta (from 19 May 17) - Mr. Osman Karim (up to 19 May 17) 4
SHAREHOLDING STRUCTURE The authorised share capital of the company is MK35 million divided into 140 million ordinary shares of 25 tambala each. The shareholders and their respective holdings in the company are as follows: 2017 2016 NICO Life Insurance Company Limited 34.3% 34.3% Africap LLC 32.2% 32.2% Press Trust 26.3% 26.3% The Public 7.2% 7.2% 100.0% 100.0% The company is listed on the Malawi Stock Exchange and the share price at the year-end was MK25.00 (2016: MK12.90) per share.
DIRECTORS INTEREST The following directors held shares in the Company as at 30 September 2017: Mr. P.T. Daniel 5,263 (2016: 5,263) ordinary shares.
CHAIRMAN DIRECTOR 1 February 2018 BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 22 For the year ended 30 September 2017
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are responsible for the preparation and fair presentation of the financial statements of Blantyre Hotels Plc, comprising the statement of financial position as at 30 September 2017, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act, 2013 of Malawi. In addition, the directors are responsible for preparing the directors’ report.
The Companies Act also requires the directors to ensure that the company keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and ensure the financial statements comply with the Companies Act, 2013 of Malawi.
In preparing the financial statements, the directors accept responsibility for the following:- • Maintenance of proper accounting records; • Selection of suitable accounting policies and applying them consistently; • Making judgements and estimates that are reasonable and prudent; • Compliance with applicable accounting standards, when preparing financial statements, subject to any material departures being disclosed and explained in the financial statements; and • Preparation of financial statements on a going concern basis unless it is inappropriate to presume the company will continue in business.
The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error and for maintaining adequate accounting records and an effective system of risk management.
The directors have made an assessment of the ability of the company to continue as a going concern and have no reason to believe that the business will not be a going concern in the year ahead.
The auditor is responsible for reporting on whether the financial statements give a true and fair view in accordance with International Financial Reporting Standards and in the manner required by the Companies Act, 2013 of Malawi.
Approval of the financial statements The financial statements of Blantyre Hotels Plc, as identified in the first paragraph, were approved by the Board of Directors on 1 February 2018 and signed on its behalf by:
AUTHORISED DIRECTOR AUTHORISED DIRECTOR BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 23 For the year ended 30 September 2017
INDEPENDENT AUDITOR’S REPORT
KPMG Telephone: (265) 01 820 744 / 01 820 391 Chartered Accountants and Business Advisors Telefax: (265) 01 820 575 MASM House, Lower Sclater Road E-mail: [email protected] P.O. Box 508 Website: www.kpmg.com/mw Blantyre, Malawi
TO THE SHAREHOLDERS OF BLANTYRE HOTELS Plc
Opinion We have audited the financial statements of Blantyre Hotels Plc (“the Company”), set out on pages 28 to 61 which comprise the statement of financial position as at 30 September 2017, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and the notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the financial statements give a true and fair view of the financial position of Blantyre Hotels Plc as at 30 September 2017, and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and in the manner required by the Companies Act, 2013 of Malawi.
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the International Ethics Standard Board for Accountants’ Code for Ethics for Professional Accountants (IESBA Code) and we have fulfilled our ethical responsibilities in accordance with the requirements of the IESBA code. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Resident Partners: L.M. Gama, H.B. Nyirenda, B.J. Mwenelupembe, G. Tembo KPMG Malawi, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 24 For the year ended 30 September 2017
INDEPENDENT AUDITOR’S REPORT (continued) Key audit matter How our audit addressed the key audit matter Impairment of trade receivables
See notes 3.12, 3.13, 4.1.2, 5.1 and 11 to the financial statements
The entity provides services to a wide range of Our audit procedures included for both specific customers, including tourists, corporate entities, and collective impairment: government institutions and local individuals on a Assessing whether the disclosure related to impairment credit basis. The impact of the market and economic of trade receivables are in accordance with IAS 39 conditions in Malawi, including high interest rates and the Financial Instruments: Recognition and Measurements. depreciation of the local currency against all the major The following procedures were performed in our testing currencies impact the ability of customers to repay the of the specific impairment: Company. Assessing the recoverability of trade receivables Impairment of trade receivables is determined by the by: Company at a specific allowance level and at a collective • selecting a sample of balances due from customers at level. The estimate of impairment of trade receivables for year end and comparing management’s estimation of both specific and collective, involved the use of significant recoverability of amounts outstanding to the history judgements. of repayments from these customers, and • inspecting payments from these customers received Specific impairment is determined by the company when subsequent to year end. there is objective evidence that the asset is impaired. − Testing a sample of receivables which had not been The company estimates the amount to be impaired identified by management as potentially impaired and by considering the significant difficulties of the debtor, formed our own judgement on whether management’s probability that the debtor will enter bankruptcy or judgement was appropriate, based on our knowledge financial re-organisation, and default or delinquency in of the client, our experience of the industry in which payments (more than 120 days overdue). it operates, and using external evidence in respect of the relevant counterparties. Collective impairment is determined by the company by calculating three percent of the debtors’ book to We challenged management’s judgment applied calculate the amount of impairment which is determined to the impairment of trade receivables by: by the Company’s Management company, Protea • Evaluating the accuracy of the age buckets in the Hospitality (Proprietary) Limited (trading as Luxury trade receivables age analysis report and challenged Hotels International South Africa (Pty) Limited. management where the ageing was accurate as the ageing of the trade receivables has a significant Due to the subjective nature of the estimation and influence on the determination of impairment judgment with regard to the impairment of specific estimate by management. allowance and the work effort by the audit team on the • Comparing the debtor’s age analysis report for impairment testing, the impairment of trade receivables the current year against prior year to determine was considered a key audit matter. whether the current year’s debtor’s book is improving or deteriorating as this would be significant in determining the adequacy of the impairment amount.
We performed the following procedures to test the collective impairment: − Testing the reasonableness of the three percent used to determine collective impairment and determined BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 25 For the year ended 30 September 2017
Key audit matter Valuation of property How our audit addressed the key audit matter
See Notes 3.1, 4.1.1 and 7 to the financial statements whether the percentage used was appropriate based on our understanding of the client and our experience of the industry in which it operates. − Recalculating the accuracy of collective impairment and challenged management where the collective impairment was not determined accurately.
The Company operates from Protea Ryalls hotel situated Our audit procedures included: in Blantyre, Malawi. The property is the most significant − Testing the fair value of the properties at year end by revenue generating asset of the Company. considering whether the assumptions and judgements used by the independent valuer during 2016 i.e. location This property is measured at the revalued amount and of the hotel, easy accessibility of the hotel, condition the revaluation is carried out with sufficient regularity of the hotel, number of rooms at the hotel, lending to ensure that its carrying amount does not materially rates, inflation rates, power and water supply are still differ from its fair value. During the 2016 financial year appropriate and consistent with market conditions and an external independent valuer was utilized to provide the economic environment prevailing during the year. specialist advice on valuing the assets at 31 December 2016. An open market valuation technique was used by • Understanding management’s assumptions applied in the external independent valuer which was based on determining whether the fair values of the property at year the income approach methodology, which is complex, end have not significantly changed from the prior year. subjective and requires estimates regarding anticipated revenue, operating expenses and occupancy rates. • Assessing the appropriateness of management’s assumptions based on our understanding and knowledge In the current year, management is of the opinion that of the property market and the economic environment the carrying value at year end is not significantly different within which the Company operates. from the valuation performed at 31 December 2016, based on the volatility of property values in the country • Comparing a sample of market data such as inflation and inflation levels. used by management in making their assumptions to independently verifiable data. Due to the significant risk associated with the property from an audit perspective and the judgement applied by • Assessing the Company’s disclosures in respect of the management and external valuer, the valuation of the valuation of property to the relevant financial reporting property was considered a key audit matter. framework.
Other information The directors are responsible for the other information. The other information comprises the Directors’ report and Statement of director’s responsibilities, which we obtained prior to the date of this auditor’s report, and the Annual Report, which we expect to be made available to us after that date. The other information does not include the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditors’ report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 26 For the year ended 30 September 2017
INDEPENDENT AUDITOR’S REPORT (continued)
Responsibilities of directors for the financial statements The directors are responsible for the preparation of the financial statements that give a true and fair view in accordance with International Financial Reporting Standards and in the manner required by the Companies Act, 2013 of Malawi, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 27 For the year ended 30 September 2017
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
KPMG
Gordon Tembo Chartered Accountants (Malawi) Partner Blantyre, Malawi
16 February 2018 BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 28 As at 30 September 2017
STATEMENT OF FINANCIAL POSITION
30 September 30 September 30 September 2017 2016 2015 Note MK’000 MK’000 MK’000 Restated* Restated* ASSETS Non-current assets Property and equipment 7 6,391,873 6,229,126 5,060,303 Intangible assets 8 8,121 2,476 1,189 Investment 9 2,284 2,284 2,284 Total non-current assets 6,402,278 6,233,886 5,063,776
Current assets Inventories 10 412,062 371,937 331,924 Trade and other receivables 11 360,813 345,781 224,774 Cash and cash equivalents 12 493,354 303,382 50,219 Total current assets 1,266,229 1,021,100 606,917
Total assets 7,668,507 7,254,986 5,670,693
EQUITY AND LIABILITIES Equity Share capital 13 32,298 32,298 32,298 Share premium 14 264,626 264,626 264,626 Revaluation reserve 15 3,518,171 3,518,987 2,761,582 Retained earnings 1,331,906 948,684 641,235 Total equity 5,147,001 4,764,595 3,699,741
Liabilities Non-current liabilities Loans and borrowings 16 - 73,583 178,833 Obligations under finance leases - - 4,061 Deferred tax liabilities 17 1,571,541 1,594,912 1,274,580 Total non-current liabilities 1,571,541 1,668,495 1,457,474
Current liabilities Trade and other payables 18 683,468 662,372 382,320 Loans and borrowings 16 82,354 105,250 105,250 Current income tax liabilities 19 184,143 54,274 19,356 Obligations under finance leases - - 6,552 Total current liabilities 949,965 821,896 513,478
Total liabilities 2,521,506 2,490,391 1,970,952
Total equity and liabilities 7,668,507 7,254,986 5,670,693
* See note 30 on prior period error for more detail.
The financial statements were approved for issue by the Board of Directors on 1 February 2018 and were signed on its behalf by:
CHAIRMAN DIRECTOR BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 29 For the year ended 30 September 2017
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Note 2017 2016 MK’000 MK’000 Restated*
Revenue 21 4,118,092 3,523,721 Cost of sales 22 (1,716,253) (1,460,299)
Gross profit 2,401,839 2,063,422 Other income 15,225 36,701 Selling and administrative expenses 23 (1,651,305) (1,424,418)
Profit from operating activities 765,759 675,705 Finance income 24 22,152 4,487 Finance costs 24 (45,111) (104,016)
Net finance cost 24 (22,959) (99,529) Profit before income tax 742,800 576,176 Taxation 19 (236,262) (162,102)
Profit for the year 506,538 414,074
Other comprehensive income Items that will not be reclassified to profit or loss Revaluation of land and buildings - 1,112,921 Deferred tax on revalued property 5,060 (339,720)
Total other comprehensive income 5,060 773,201
Total comprehensive income for the year 511,598 1,187,275
Earnings per share (tambala) Basic and diluted earnings per share 25 392 321
* See note 30 on prior period error for more details. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 30 For the year ended 30 September 2017
STATEMENT OF CHANGES IN EQUITY
Share Share Revaluation Retained Total capital premium reserve earnings equity MK’000 MK’000 MK’000 MK’000 MK’000
2017 Balance as at 1 October 2016 32,298 264,626 3,518,987 948,684 4,764,595
Total comprehensive income for the year Profit for the year - - - 506,538 506,538
Other comprehensive income for the year Deferred tax on revalued property - - 5,060 - 5,060
Total other comprehensive income - - 5,060 - 5,060
Total comprehensive income for the year - - 5,060 506,538 511,598
Transfers within reserves Excess depreciation on revalued assets - - (5,876) 5,876 -
Total transfers within reserves - - (5,876) 5,876 -
Transactions with owners of the company Dividends paid - - - (129,192) (129,192) Balance as at 30 September 2017 32,298 264,626 3,518,171 1,331,906 5,147,001 BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 31 For the year ended 30 September 2017
STATEMENT OF CHANGES IN EQUITY (continued)
Share Share Revaluation Retained Total capital premium reserve earnings equity MK’000 MK’000 MK’000 MK’000 MK’000
2016 Balance as at 1 October 2015 (as previously reported) 32,298 264,626 2,714,680 670,799 3,682,403
Adjustment - - 46,902 (29,564) 17,338
Restated balance as at 1 October 2015* 32,298 264,626 2,761,582 641,235 3,699,741
Total comprehensive income for the year Profit for the year as restated - - - 414,074 414,074
Other comprehensive income for the year Surplus on revaluation of land and buildings - - 1,112,921 - 1,112,921 Deferred tax on revaluation - - (339,720) - (339,720)
Total other comprehensive income - - 773,201 - 773,201
Total comprehensive income for the year - - 773,201 414,074 1,187,275
Transfers within reserves Excess depreciation on revalued assets - - (22,567) 22,567 - Deferred tax on excess depreciation - - 6,771 - 6,771
Total transfers within reserves - - (15,796) 22,567 6,771
Transactions with owners of the company Dividends paid - - - (129,192) (129,192)
Balance as at 30 September 2016 32,298 264,626 3,518,987 948,684 4,764,595
* See note 30 on prior period error for more details. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 32 For the year ended 30 September 2017
STATEMENT OF CASH FLOWS
Note 2017 2016 MK’000 MK’000 Restated* Cash flows from operating activities Profit for the year 506,538 414,074 Adjust for non-cash items Depreciation expense 7 154,335 122,735 Amortisation charge 8 2,538 1,299 Finance income 24 (22,152) (4,487) Finance costs 24 35,816 84,887 Unrealised foreign exchange losses 24 9,295 19,129 Profit on disposal of plant and equipment (6,552) (13,188) Tax expense 19 236,262 162,102 916,080 786,551 Movement in working capital Increase in inventory (40,125) (40,013) Increase in trade and other receivables (13,332) (121,007) (Decrease)/increase in trade and other payables 10,101 260,923
Cash generated from operations 872,724 886,454 Interest paid (33,731) (84,887) Taxation paid 19 (124,704) (139,802)
Net cash generated by operating activities 714,289 661,765
Cash flows from investing activities Purchase of property and equipment 7 (322,041) (183,564) Acquisition of intangibles 8 (8,183) (2,586) Proceeds from the sale of equipment 7,262 18,116 Finance income 24 22,152 4,487 Net cash used in investing activities (300,810) (163,547)
Cash flows from financing activities Dividends paid to owners of the company (127,028) (129,192) Repayment of finance lease liabilities - (10,613) Repayment of loans 16 (96,479) (105,250)
Net cash used in financing activities (223,507) (245,055)
Net increase in cash and cash equivalents 189,972 253,163 Cash and cash equivalents at the beginning of the year 303,382 50,219 Cash and cash equivalents at the end of the year 12 493,354 303,382
* See note 30 on prior period error for more details. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 33 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS 1. Reporting entity
Blantyre Hotels Plc is a company domiciled in Malawi and incorporated under the Companies Act, 2013 of Malawi. The main business of the company is the provision of accommodation, conferencing and catering services. The registered address of the company is Ryalls Hotel, 2 Hannover Avenue, P.O. Box 21, Blantyre, Malawi.
2. Basis of preparation
a) Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs), the interpretations issued by the International Accounting Standards Board (IASB) and provisions of the Companies Act, 2013 of Malawi.
b) Basis of preparation The financial statements have been prepared on the historical cost basis except for certain properties that are measured at revalued amounts. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
c) Functional and presentation currency These financial statements are presented in Malawi Kwacha, which is the company’s functional currency. All financial information has been presented in Malawi Kwacha and has been rounded to the nearest thousands, except where otherwise indicated.
d) Going concern basis of accounting The financial statements have been prepared on a going concern basis, which assumes that the company will be able to meet the mandatory repayment terms of the banking facilities as disclosed in note 16.
e) Use of judgements and estimates The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. Critical accounting judgements and key sources of estimation are detailed in note 4.
f) Comparatives Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 34 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS (continued) 2. Basis of preparation (continued)
g) Adoption of new and revised International Financial Reporting Standards Standards and Interpretations affecting amounts reported and/or disclosed in the financial statements In the current year, the company has adopted those new and revised Standards and Interpretations issued by the International Accounting Standards Board and the International Financial Reporting Interpretations Committee of the International Accounting Standards Board that are relevant to its operations and are effective for annual reporting periods beginning on 1 October 2016.
The adoption of these new and revised Standards and Interpretations did not have a significant impact on the financial statements of the entity.
Standards and Interpretations in issue, not yet effective A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2016, and have not been applied in preparing these financial statements. Those which may be relevant to the Company are set out below. The Company does not plan to adopt these standards early. These will be adopted in the period that they become mandatory unless otherwise indicated:
Effective for the financial year commencing on or after 1 January 2016 • IAS 16 and 38 (Amendments) Clarification of Acceptable Methods of Depreciation and Amortisation The amendments to IAS 16 Property, Plant and Equipment explicitly state that revenue-based methods of depreciation cannot be used for property, plant and equipment. The amendments to IAS 38 Intangible Assets introduce a rebuttable presumption that the use of revenue-based amortisation methods for intangible assets is inappropriate. The presumption can be overcome only when revenue and the consumption of the economic benefits of the intangible asset are ‘highly correlated’, or when the intangible asset is expressed as a measure of revenue. The Company uses the straight-line method for depreciation. The amendments apply prospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted. This amendment will not have a significant impact on the Company’s financial statements
Effective for the financial year commencing on or after 1 January 2018 • IFRS 15 Revenue from Contracts with Customers This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from \Customers and SIC-31 Revenue – Barter of Transactions Involving Advertising Services. The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised. This new standard will most likely have a significant impact on the Company, which will include a possible change in the timing of when revenue is recognised and the amount of revenue recognised. The Company will assess the impact of the standard before the effective date.
• IFRS 9 Financial Instruments On 24 July 2014 the IASB issued the final IFRS 9 Financial Instruments Standard, which replaces earlier versions of IFRS 9 and completes the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement. This standard will have a significant impact on the Company, which will include changes in the measurement bases of the Company’s financial assets to amortised cost, fair value through other comprehensive income or fair value BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 35 For the year ended 30 September 2017
through profit or loss. Even though these measurement categories are similar to IAS 39, the criteria for classification into these categories are significantly different. In addition, the IFRS 9 impairment model has been changed from an “incurred loss” model from IAS 39 to an “expected credit loss” model, which is expected to increase the provision for bad debts recognised in the Company.
The standard is effective for annual periods beginning on or after 1 January 2018 with retrospective application, early adoption is permitted.
All standards and interpretations will be adopted at their effective date (except for those Standards and Interpretations that are not applicable to the entity).
• IFRS 16 Leases IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer (‘lessee’) and the supplier (‘lessor’). IFRS 16 replaces the previous leases Standard, IAS 17 Leases, and related Interpretations. IFRS 16 includes a single model for lessees which will result in almost all leases being included in the Statement of Financial Position. No significant changes have been included for lessors. IFRS 16 also includes extensive new disclosure requirements for both lessees and lessors.
The company is assessing the potential impact of IFRS 16 on the financial statements.
3. Significant accounting policies
3.1 Property and equipment
Recognition and measurement All items of property and equipment are initially recognised at cost. Land and buildings are subsequently measured at revalued amounts being the fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amounts do not differ materially from that would be determined using fair values at the end of each reporting period. All other property, plant and equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.
Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.
An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss on disposal of an item of property and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.
Revaluation Any revaluation increase arising on the revaluation of such property is recognised in other comprehensive income and credited to a non-distributable revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such property is charged to profit or loss to the extent that it accedes the balance, if any, held in the revaluations reserve relating to a previous revaluation of that asset. Depreciation on revalued property is charged to profit or loss. On the realisation of revalued property, either through sale or use, the attributable revaluation surplus in the revaluation reserve is transferred directly to retained earnings. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 36 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS (continued) 3. Significant accounting policies (continued) 3.1 Property and equipment (continued)
Subsequent costs Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the company. Ongoing repairs, and maintenance are expensed as incurred.
Depreciation Items of property and equipment are depreciated from the date they are available for use or, in respect of self- constructed assets i.e. buildings, from the date that the asset is completed and ready for use.
Depreciation is calculated to write off the cost of items of property and equipment less their estimated residual values, using the straight-line basis over their estimated useful lives. Depreciation is generally recognised in profit or loss.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the company will obtain ownership by the end of the lease term. Freehold land and properties under construction are not depreciated.
The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:-
Freehold buildings 50 years Motor vehicles 4 years Furniture and equipment 3-12 years
Freehold land is not depreciated.
Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period, with the effect of any change in estimate being accounted for on a prospective basis.
3.2 Intangible assets Software acquired by the company is measured at cost less accumulated amortisation and accumulated impairment losses.
Subsequent expenditure on software is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of the software from the date it is available for use. The estimated useful life of software is three years for the current and comparative periods. Amortisation method, useful lives and residual values are reviewed at the end of each reporting period, with the effect of any change in estimate being accounted for on a prospective basis.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.
BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 37 For the year ended 30 September 2017
3.3 Leased assets Leases in terms of which the company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
3.4 Inventories Inventories consist of items for sale such as foodstuffs, consumables and operating equipment such as crockery and linen. These are measured at the lower of cost and net realisable value, with cost determined on a first-in, first-out basis and is consistent with the prior year. The cost of inventories includes the purchase price plus the costs incurred in bringing each product to its present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expenses.
3.5 Provisions Provisions are recognised when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that the company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
3.6 Income tax Income tax expense comprises current and deferred income tax. Current income tax and deferred income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit nor loss.
The measurement of deferred tax reflects the tax consequences that would follow the manner in which the company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 38 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS (continued) 3. Significant accounting policies (continued) 3.6 Income tax (continued)
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to set-off current tax liabilities and assets, and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at the end of each reporting period, and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
3.7 Foreign currency translations Transactions in currencies other than the entity’s functional currency (foreign currencies) are translated at the rates of exchange prevailing on the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are re-translated to the functional currency at the rates prevailing at that date.
Foreign currency gains or losses arising on the settlement of monetary items, and on the translation of monetary items, are included in the profit or loss. When a gain or loss on a non-monetary item is recognised in other comprehensive income, any exchange component of that gain or loss is recognised in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognised in profit or loss in the period in which they arise.
3.8 Employee benefits
Defined contribution plans Pensions are administered through a defined contribution pension scheme. A defined contribution plan is a post- employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to the scheme are included in profit or loss as an expense as they fall due.
Short-term benefits Short-term employee benefits obligations such as bonuses are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for the service. Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
3.9 Revenue Revenue comprises rent of rooms, catering services, conferencing and related services.
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and sales related taxes. Sales of goods or services are recognised when goods are delivered or services are rendered. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 39 For the year ended 30 September 2017
3.10 Finance income and expenses The company’s finance income and finance costs include:- • interest income; • interest expense; • the foreign currency gain or loss on financial assets and financial liabilities.
Interest income and expense is recognised using the effective interest method.
3.11 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the profit or loss in the period in which they are incurred.
3.12 Financial instruments Financial assets and financial liabilities are recognised in the statement of financial position when the company becomes a party to the contractual provisions of the instrument.
The company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the company is recognised as a separate asset or liability.
Non-derivative financial instruments Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs, except as described below. Subsequent to initial recognition, non-derivative financial instruments are measured as described below.
A financial instrument is recognised if and when the Company becomes a party to the contractual provisions of the instrument. Regular purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Company commits itself to purchase or sell the asset. Financial assets are derecognised if the Company’s contractual rights to the cash flows from the financial assets expire or if the Company transfers the right to receive the contractual cash flows on the financial asset in a transaction in which substantially all risks and rewards of ownership of the asset are transferred. Any interest in such derecognised financial assets that is created or retained by the Company is recognised as a separate asset or liability.
Financial liabilities are derecognised if the Company’s obligations specified in the contract expire or are discharged or cancelled.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 40 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS (continued) 3. Significant accounting policies (continued) 3.12 Financial instruments (continued)
Financial assets Trade and other receivables Trade and other receivables are measured on initial recognition at fair value plus directly attributable transaction costs. Trade and other receivables are subsequently measured at amortised cost using the effective interest method, less any impairment losses.
Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Cash and cash equivalents are measured at fair value plus any directly attributable transaction costs on initial recognition and subsequently measured at amortised cost, which approximates fair value.
Financial liabilities Loans and borrowings Interest-bearing bank loans and overdrafts are initially measured at fair value less any directly attributable transaction costs, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the effective interest method.
Trade and other payables Trade and other payables are initially measured at fair value less any directly attributable transaction costs. Subsequent measurement is at amortised cost using the effective interest method.
3.13 Impairment
Financial assets Non-derivative financial assets A financial asset not classified as at fair value through profit or loss is assessed at the end of each reporting period to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flow of that asset that can be estimated reliably.
Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the company on terms that the company would not consider otherwise indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security.
Financial assets measure at amortised cost An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.
Significant financial assets are tested for impairment on individual basis. The remaining financial assets are assessed collectively in groups that share similar risk characteristics.
All impairment losses are recognised in profit or loss. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 41 For the year ended 30 September 2017
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost the reversal is recognised in profit or loss.
Non-financial assets The carrying amounts of the company’s non-financial assets, other than inventories and deferred tax assets, are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Impairment losses recognised in respect of a cash generating unit are allocated to reduce the carrying value of assets in the unit on a pro rata basis.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. An impairment loss is reversed only to the extent that the asset’s net of depreciation or amortisation, if no impairment loss had been recognised.
3.14 Earnings per share The calculation of basic earnings per share is based on the profit or loss for the year and the weighted average number of shares in issue throughout the year. Where new equity shares have been issued by way of capitalisation or subdivision, the profit is apportioned over the shares in issue after the capitalisation or subdivision and the corresponding figures for all earlier periods are adjusted accordingly. Diluted earnings per share is determined by adjusting the profit and loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. There were no transactions which diluted earnings per share.
3.15 Dividends per share The calculation of dividend per share is based on the dividends payable to shareholders (inclusive of the related withholding tax) during the year divided by the number of ordinary shares in the register of shareholders at the date of payment.
4. Critical accounting judgements and key sources of estimation uncertainty
4.1 Critical judgements in applying the company’s significant accounting policies
4.1.1 Valuation of properties The company carries out revaluation of its land and buildings with sufficient regularity to ensure that its carrying amount does not materially differ from its fair value. Land and buildings were last revalued on 30 September 2016 by Don R Whayo B.Sc., Dip (Urban Man), BA MRICS, MSIM Chartered Valuation Surveyor of Knight Frank Limited. Refer to note 7. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 42 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS (continued)
4. Critical accounting judgements and key sources of estimation uncertainty (continued) 4.1 Critical judgements in applying the company’s significant accounting policies (continued)
4.1.2 Impairment of trade and other receivables The carrying amounts of trade and other receivables are presented net of specific and collective allowances for impairment losses. Impairment of trade receivables is determined by the Company at two levels: specific allowance for impairment level and at collective level. Specific impairment is determined by the company when there is objective evidence that the asset is impaired. The company estimates the amount to be impaired by considering the significant difficulties of the debtor, probability that the debtor will enter bankruptcy or financial re-organisation, and default or delinquency in payments (more than 120 days overdue). These are considered, by the company, as indicators that individual debtors are impaired.
Once these indicators are identified, the company uses judgement to determine the recoverable amount by estimating the amount of loss through the review of historical trend of the individual debtors’ payments and determining a percentage of the amount to be impaired. Collective impairment is determined by the company by calculating three percent of the debtors book to calculate the amount of impairment which is determined by the Company’s Management Company Protea Hospitality (Proprietary) Limited (trading as Luxury Hotels International, South Africa (Pty) Limited). Refer to note 5.1
The company believes that the unimpaired amounts that are past due by more than 30 days are still collectible in full, based on historical payment behaviours.
4.2 Key sources of estimation uncertainty Information about assumptions and estimation uncertainties are included in the following notes:
4.2.1 Note 23 - short term employee benefits which are staff bonuses are based on the existing staff bonus policy payable after approval by the Board of directors. The amount is estimated based on draft performance results, and is confirmed only after approval by the board;
Note 11- impairment test; key assumptions underlying recoverable amounts, including the recoverability of receivables;
Note 7 - The residual value and useful life of assets are reviewed at each reporting date and, if expectations differ from previous estimates, the change(s) are accounted for as a change in an accounting estimate, useful lives and residual values are determined based on historical data on usage of the assets.. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 43 For the year ended 30 September 2017
5. Financial risk management
5.1 Categories of financial instruments Other Loans and financial Carrying Receivables liabilities amount Fair value Note MK’000 MK’000 MK’000 MK’000 At 30 September 2017 Financial assets Investment 9 2,284 - 2,284 11,174 Trade and other receivables 11 333,830 - 333,830 333,830 Cash and cash equivalents 12 493,354 - 493,354 493,354 Total financial assets 829,468 - 829,468 838,358
Financial liabilities Loans and borrowings 16 - 82,354 82,354 82,354 Trade and other payables 18 - 636,525 636,525 636,525
Total financial liabilities - 718,879 718,879 718,879
At 30 September 2016 Financial assets Investment 9 2,284 - 2,284 11,097 Trade and other receivables-Restated* 11 325,251 - 325,251 325,251 Cash and cash equivalents 12 303,382 - 303,382 303,382
Total financial assets 630,917 - 630,917 639,730
Financial liabilities Loans and borrowings 16 - 105,250 105,250 105,250 Trade and other payables 18 - 607,531 607,531 607,531
Total financial liabilities - 712,781 712,781 712,781
5.2 Fair value measurements This note provides information about how the company determines fair values of various financial assets and financial liabilities.
5.2.1 Valuation techniques and assumptions applied for the purposes of measuring fair value • The fair values of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices (includes listed redeemable notes, bills of exchange, debentures and perpetual notes).
• The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments.
* See note 30 on prior period error for more details. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 44 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS (continued) 5. Financial risk management (continued) 5.2 Fair value measurements (Continued)
5.2.2 Fair value of financial assets and financial liabilities that are not measured at fair value (but fair value disclosures are required).
With the exception of the investment in Unparalleled Journeys (note 9 and 5.1), the directors consider that the carrying amounts of financial assets and financial liabilities recognised in the financial statements approximate their fair value.
5.2.3 Fair value of the company’s financial assets and financial liabilities that are measured at fair value on a recurring basis
The company did not have any financial assets and financial liabilities that are measured at fair value at the end of the reporting period.
5.3 Overview of the company’s financial risk management framework The company has exposure to the following risks from its use of financial instruments: • credit risk; • liquidity risk; and • market risk.
This note presents information about the company’s exposure to each of the above risks, the company’s objectives, policies and processes for measuring and managing risk. Further quantitative disclosures are included throughout these financial statements.
Risk management framework The Board of Directors has overall responsibility for the establishment and oversight of the company’s risk management framework. The Board is responsible for developing and monitoring the company’s risk management policies.
The company’s risk management policies are established to identify and analyse the risks faced by the company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the company’s activities. The company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Audit Committee of the Board oversees how management monitors compliance with risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risk faced by the company. The audit committee is assisted in its oversight role by an outsourced internal audit function. The outsourced internal audit function undertakes regular and ad hoc reviews of risk management controls and procedures, the result of which are reported to the audit committee.
5.4 Credit Risk Credit risk is the risk of the financial loss of the company if the customer or counterparty to the financial instrument fails to meet its contractual obligations and arises principally from the company’s receivables. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 45 For the year ended 30 September 2017
Exposure to credit risk The carrying amount of the financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the end of the reporting period was as follows: Note 2017 2016 MK’000 MK’000 Restated *
Trade receivables 11 295,315 299,429 Other receivables (excluding prepayments) 11 38,515 25 822 Cash and cash equivalents 12 493,354 303 382 Total 827,184 628,633
The Board established a credit policy under which each new customer is analysed individually for credit worthiness before the company’s standard payment terms and conditions are offered. The company’s reviews include bank references and other trade references. Customers that fail to meet the company’s benchmark creditworthiness may transact with the company on a prepayment basis.
Cash deposits are held with Standard Bank Plc, National Bank of Malawi Plc, CDH Investment Bank Limited and NBS Bank Plc. These banks are highly-reputable banks in Malawi and are all licensed by the Reserve Bank of Malawi.
The company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The component of this allowance are specific loss component that relates to individually significant exposures and collective loss component established for the company’s assets in respect of the losses that have been incurred but not yet identified. The collective loss allowance is determined based on the historic data of payment statistics for similar financial assets.
Credit quality of financial assets Trade and other receivables comprise mainly of balances due from corporate entities, travel agents and tour operators. Rigorous assessment of the credit worthiness of these corporate entities, travel agents and tour operators is undertaken before credit is granted. The company does not hold any collateral over these balances.
The maximum exposure to credit risk for trade receivables at the end of the reporting period by geographic region was as follows: Note 2017 2016 K’000 K’000 Restated *
Based in Malawi 11 295,315 295,998 Other countries 11 - 3,431 295,315 299,429
The maximum exposure to credit risk for trade receivables at the end of the reporting period by type of counterparty was as follows:
Corporate customers 11 295,315 295,998 Tour operators and travel agents 11 - 3,431 295,315 299,429 * See note 30 on prior period error for more details. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 46 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS (continued) 5. Financial risk management (continued) 5.4 Credit Risk (Continued)
Impairment losses The aging of trade and other receivables at the end of the reporting period was as follows:
Note 2017 2016 MK’000 MK’000 Restated *
Not past due 11 185,858 288,272 Past due but not impaired 11 121,087 16,926 Impairment 11 (11,630) (5,569) Total 295,315 299,629
Net Note 2017 2016 K’000 K’000 The movement in the allowance for impairment in respect of trade and other receivable during the year was as follows:
Impairment at beginning of the year 11 5,569 1,243 Impairment reversed 11 (5,569) (1,243) Impairment recognised 11 11,630 5,569 Balance as at end of the year 11,630 5,569
In determining the recoverability of a trade receivables, the company considers any change in the current quality of the trade receivable from the date credit was initially granted up to the end of the reporting period.
The company believes that the unimpaired amounts that are past due more than 30 days are still collectible based on the historic payment behaviour and extensive analysis of the customer credit risk.
Cash and cash equivalents The company held cash and cash equivalents of MK493 million (2016: MK303 million) as at 30 September 2017 of which MK322 million (2016: MK89 million) are in foreign denominated accounts.
5.5 Liquidity risk
* See note 30 on prior period error for more details. Liquidity risk is the risk that the company will encounter difficulty in meeting the obligation associated with the financial liabilities that are settled by delivering cash or another financial asset. The company’s approach to managing liquidity is to ensure as far as possible that it will always have sufficient liquidity to meet its liabilities when they fall due, under both normal and stressed conditions without incurring unacceptable losses or risking damage to the company’s reputation. The sufficient liquidity is achieved through management’s monitoring of cash flow requirements and optimising its cash return on investments. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 47 For the year ended 30 September 2017
The following are the contractual maturities of the financial liabilities, including estimated interest payments.
Carrying contractual Less than After amount cash flows 1 year 1 year Note MK’000 MK’000 MK’000 MK’000 As at 30 September 2017 Loans and borrowings 16 82,354 82,354 82,354 - Trade payables and other payables 18 636,525 636,525 636,525 - 718,879 718,879 718,879 - As at 30 September 2016 Loans and borrowings 16 178,833 178,833 105,250 73,583 Trade payables and other payables 18 607,531 607,531 607,531 - 786,364 786,364 712,781 73,583
5.6 Market risk The market risk is the risk that changes in market prices such as foreign exchange and interest rates will affect the company’s income or the values of its financial instruments. The objective of the market risk management is to manage and control market risk exposure within acceptable parameters, while optimizing the return.
5.6.1 Currency risk The company is exposed to currency risk on sales and purchases that are denominated in currency other than the functional currency of the company, which is Malawi Kwacha. The currencies in which these transactions are primarily denominated are United States Dollar and the South African Rand.
All purchases in foreign currency are economically hedged by Foreign Currency Denominated Accounts (FCDA’s) in the same currencies. Any purchase in USD is paid for using funds in USD account and the same applies to South African Rand. The company generates foreign currency through its normal operations but opts to set aside foreign currency funds in FCDA accounts to cover its foreign currency denominated liabilities.
No other hedge is actively taken out for this risk. However, exchange rate exposures are managed mainly using accelerated payments. Accelerated payments of foreign currency payable minimises exposure to foreign currency risk by reducing the amounts due in foreign currency.
The Company’s foreign exchange exposures at the reporting date were as follows: Impact Exchange on profit Rate and equity Assets Liabilities Net movement (net of tax) USD 319,937 - 319,937 10% 22,396 ZAR 2,134 - 2,134 10% 149 GBP 143 - 143 10% 10 EUR 146 - 146 10% 10 322,360 - 322,360 22,565
As at 30 September 2017, if the Malawi Kwacha had weakened/strengthened by 10% against the US dollar with all other variables held constant, post-tax profit for the year and equity would have been K22.6 million (2016: K5.4 million) higher/ lower, mainly as a result of foreign exchange gains/losses on translation of foreign currency-denominated financial instruments. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 48 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS (continued) 5. Financial risk management (continued) 5.6 Market risk (continued)
5.6.2 Interest rate risk The company adopts a policy of ensuring that some borrowings are at fixed rates and others are at variable rates depending on the currency of the borrowings, terms and conditions.
At the reporting date the interest rate profile of the company’s interest-bearing financial instruments was:
Variable rate instruments Carrying amounts Note 2017 2016 K’000 K’000
Loans and borrowings 16 82,354 178,833 82,354 178,833
The loan, which was obtained from CDH Investment Bank Limited, bears interest at National Bank of Malawi’s base lending rate minus 5% per annum (2016: National Bank of Malawi’s base lending rate minus 5% per annum).
Cash flow sensitivity analysis for variable rate instruments An increase of 5% in interest rates at the reporting date would have increased interest being charged to the profit or loss by MK8 million (2016: MK62 million). This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
Fixed rate instrument Note 2017 2016 MK’000 MK’000
Cash and cash equivalents 12 97,893 83,945
Cash and cash equivalents earn interest at a rate of 0.3% - 30% (2016: 0.3% - 30.0%).
Fair value sensitivity analysis for fixed rate instruments The company does not account for any fixed rate financial instrument at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.
6. Capital management
The Company’s objectives when managing capital are to safeguard the company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the company monitors capital on the basis of the movements in the gearing ratio. This ratio is calculated as total borrowings divided by total capital. Total capital is calculated as equity’ as shown in the statement of financial position plus net debt. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 49 For the year ended 30 September 2017
2017 2016 Note MK’000 MK’000
Total borrowings 16 82,354 178,333 Less: cash and cash equivalents 12 (493,354) (303,382)
Net debt - - Total equity 5,365,900 4,892,931
Gearing ratio 1.5% 3.6%
The company is not subject to any externally imposed capital requirements and does not have a target gearing ratio.
7. Property and equipment See accounting policy in Note 3.1
Freehold Motor Furniture Capital land Buildings vehicles equipment WIP Total MK’000 MK’000 MK’000 MK’000 MK’000 MK’000 Cost/valuation At 1 October 2015 501,600 4,098,320 96,813 810,906 12,872 5,520,511 Additions during the year - 49 29,623 153,892 - 183,564 Transfers between categories - - - 8,623 (8,623) - Surplus on revaluation 163,400 872,631 - - - 1,036,031 Disposals during the year - - (7,725) (6,313) - (14,038) At 30 September 2016 665,000 4,971,000 118,711 967,108 4,249 6,726,068
At 1 October 2016 665,000 4,971,000 118,711 967,108 4,249 6,726,068 Additions during the year - - 5,265 139,903 176,873 322,041 Reclassification - - - - (4,249) (4 249) Disposals during the year - - (4,483) (25,494) - (29,977) At 30 September 2017 665,000 4,971,000 119,493 1,081,517 176,873 7,013,883
Accumulated depreciation At 1 October 2015 - 43,393 41,599 375,216 - 460,208 Depreciation charge for the year - 33,497 15,729 73,509 - 122,735 Released on revaluation of assets - (76,890) - - - (76,890) Eliminated on disposals - - (3,091) (6,020) - (9,111)
At 30 September 2016 - - 54 237 442,705 - 496,942
At 1 October 2016 - - 54,237 442,705 - 496,942 Depreciation charge for the year - 38,793 18,993 96,549 - 154,335 Eliminated on disposals - - (4,423) (24,844) - (29,267) At 30 September 2017 - 38,793 68,807 514,410 - 622,010
Carrying amounts At 30 September 2017 665,000 4,932,207 50,686 567,107 176,873 6,391,873
At 30 September 2016 665,000 4,971,000 64,474 524,403 4,249 6,229,126 BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 50 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS (continued) 7. Property and equipment (continued)
The registers of land and buildings are available for inspection at the company’s registered office.
The company’s land and buildings at Ryalls Hotel in Blantyre are charged as collateral security for MK430 million in favour of CDH Investment Bank Limited for borrowing facilities detailed in note 16.
The Ryalls Hotel land and buildings property were independently valued at the price at which on orderly transactions to sell the asset would take place between market participants at the measurement date under current market conditions by Don R Whayo B.Sc., Dip (Urban Man) B.A. MRICS, MSIM Chartered Valuation Surveyor of Knight Frank Limited as of 30 September 2016 on behalf of the Board. The Board is of the opinion that the carrying value is not significantly different from fair value as of 30 September 2017.
The valuation technique used in measuring the fair values of property and equipment, as well as the significant unobservable inputs used are presented below:
Valuation technique The valuation expert adopted an open market value basis using the income approach methodology.
Market value The market value basis of valuation is interpreted as the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.
Significant unobservable inputs In valuation of properties in the hospitality industry, use of trading revenue or estimated or reasonably anticipated revenue from the business and operating expenses is made to formulate an opinion on market value.
Inter-relationship between key unobservable inputs and fair value measurement The improvement in the occupancy rate is reflected in the revenues which in turn has translated into a growth rate in value.
Management is of the opinion that the carrying value is not significantly different from fair value as at 30 September 2017 because of the following considerations;
Last year of revaluation The property was last revalued as at 30 September 2016. In between the last revaluation and the current reporting period there hasn’t been any indication in country property values which would have led management to believe that the property values have significantly changed.
Volatility of property values Historically the property market in Malawi is not prone to volatile price movements. As such, management does not expect that after 12 months there would be some significant changes in property values.
Inflation levels The Malawi economy in the last 12 months has not been a hyperinflationary environment. The inflation levels are actually going down. This gives management the expectation that property values may not have increased substantially in the last 12 months making the current property values a fair representation of carrying values. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 51 For the year ended 30 September 2017
Management is therefore of the view that the carrying amounts represent fair values of the property.
The carrying amount of both land and buildings, without revaluation, as at 30 September 2017 was MK688 million (2016: MK639 million). 2017 2016 MK’000 MK’000 8. Intangible assets See accounting policy in Note 3.2
Software Cost Balance at beginning of year 19,879 17,293 Additions during the year 8,183 2,586 At end of year 28,062 19,879
Amortisation Balance at beginning of year 17,403 16,104 Amortisation charge for the year 2,538 1,299 At end of year 19,941 17,403
Carrying amount At end of year 8,121 2,476
The amortisation charge has been included under selling and administration expenses in profit or loss.
9. Investment
Investment in shares 2,284 2,284
The company has a 10% shareholding in Unparalleled Journeys, which is a company that was registered in New Zealand and is involved in the travel business. The investment is measured at cost and has been reclassified from trade and other receivables. The fair value of the investment as at the reporting date is MK11 million (2016: MK11 million).
10. Inventories See accounting policy in Note 3.4
Food stuff and beverage 116,882 74,825 Consumables 168,681 113,338 Operating stock 126,499 183,774 412,062 371,937 Consumables mainly consist of spares and operating stock includes linen and crockery. There were no inventories that were written down to net realisable value. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 52 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS (continued)
2017 2016 MK’000 MK’000
11. Trade and other receivables See accounting policy in Notes 3.12 and 3.13 Restated *
Trade receivables 306,945 304,998 Less: impairment (11,630) (5,569) 295,315 299,429 Sundry receivables 34,052 22,913 Staff advances 4,463 2,909 Prepayments 26,983 20,530 360,813 345,781
As at 30 September 2016, the trade and other receivables balance included the balance for investment in Unparalleled Journeys which has been reclassified to investment (note 9).
* See note 30 on prior period error for more details.
Impairment was broken down as follows:- Specific impairment 4,939 5,569 Collective impairment 6,691 - 11,630 5,569
12. Cash and cash equivalents See accounting policy in Note 3.12
Foreign currency accounts 322,360 89,062 Current account balances 73,101 130,375 Fixed deposits 97,893 83,945 Cash and cash equivalents as presented in the statement of cash flows 493,354 303,382
Cash and cash equivalents earn interest at a rate of 0.3% - 30% (2016: 0.3% - 30.0%) The fixed deposits all mature within 90 days’ time.
13. Share capital
Authorised 140 000 000 (2016: 140 000 000) ordinary shares at 25 tambala each 35,000 35,000
Issued and fully paid 129 192 416 (2016: 129 192 416) ordinary shares 32,298 32,298
14. Share premium
At the beginning and end of the year 264,626 264,626 BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 53 For the year ended 30 September 2017
2017 2016 MK’000 MK’000
15. Revaluation reserve Restated * At the beginning of the year (restated) 3,518,987 2,761,582 Revaluation surplus - 1,112,921 Excess depreciation on revaluation gain (5,876) (22,567) Deferred tax 5,060 (339,720) Deferred tax on excess depreciation - 6,771 3,518,171 3,518,987
16. Loans and borrowings See accounting policy in Note 3.12
Amounts due within one year 82 354 105,250 Amounts due after one year - 73,583 Total loans payable to third parties 82 354 178,833
The movement on loans payable to third parties is analysed as below: At the beginning of the year 178,833 284,083 Loan repaid during the year (96,479) (105,250) At the end of the year 82,354 178,833
The loan, which was obtained from CDH Investment Bank Limited, bears interest at National Bank of Malawi’s base lending rate minus 5% per annum and is repayable over 43 months from June 2014 and is secured by a charge of MK430 million over the hotel building situated on Plot Title No. Blantyre West 132, whose carrying value as at 30 September 2017 was MK5.6 billion (2016: MK5.6 billion).
The market value of the loan is estimated at MK86.7 million (2016: MK178.8 million) calculated as the present value of cash outflows discounted at market related interest rate. The fair value is classified as level 3 fair value based on the inputs used in the measurement.
* See note 30 on prior period error for more details.
17. Deferred tax liabilities See accounting policy in Note 3.6
Assets Liabilities Net 2017 2016 2017 2016 2017 2016 MK’000 MK’000 MK’000 MK’000 MK’000 MK’000
Property and equipment - - 1,595,579 1,473,420 1,595,579 1,601,756 Other temporary differences (24,038) (6,844) - - (24,038) (6,844) Total (24,038) (6,844) 1,595,579 1,473,420 1,571,541 1,594,912 BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 54 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS (continued) 17. Deferred tax liabilities (continued) See accounting policy in Note 3.6
Deferred tax liabilities movement can be analysed as follows:- Recognised Balance at Recognised in other Balance at beginning of in profit or comprehensive end of the the year loss income/equity year MK’000 MK’000 MK’000 MK’000 Description restated 2017 Property and equipment 1,601,756 (1,117) (5,060) 1,595,579 Other temporary differences (6,844) (17,194) - (24,038) 1,594,912 (18,311) (5,060) 1,571,541 2016 Property and equipment 1,282,116 (13,310) 332,950 1,601,756 Other temporary differences (7,536) 692 - (6,844) 1,274,580 (12,618) 332,590 1,594,912
18. Trade and other payables See accounting policy in Note 3.12 2017 2016 MK’000 MK’000
Trade payables 245,061 162,606 Accruals 74,913 52,194 Audit fees 18,085 7,361 Defined contribution pension accrual * 9,360 7,775 Gym advance payments 368 371 Management fees payable 116,340 96,758 Incentive fee payable 20,820 71,824 Staff bonus 27,780 36,449 Advance deposits 117,617 160,731 Tourism levy - 7,445 Unclaimed dividends 6,181 4,017 Other taxes due 13,023 14,208 VAT payable 33,920 40,633 683,468 662,372
The directors consider that the carrying amounts of trade payables and accruals approximate to their fair value. These amounts do not attract any interest.
*Pensions are administered through a defined contribution pension scheme Obligations for contributions to the scheme are included in profit or loss as an expense as they fall due. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 55 For the year ended 30 September 2017
19. Income tax See accounting policy in Note 3.6 2017 2016 MK’000 MK’000 Restated* Current income tax liabilities Balance at the beginning of the year 54,274 19,356 Charge for the year 254,573 174,720 Paid during the year (124,704) (139,802)
Balance at the end of the year 184,143 54,274
Income tax expense Income tax payable at 30% (2016: 30%) 254,573 174,720 Deferred tax movement (net) (note 17) (18,311) (12,618)
Total income tax expense 236,262 162,102
Reconciliation of the effective tax rate Profit before tax 742,800 576,176
Income tax at standard rate 30% 30% 222,840 30% 172 853 Permanent differences 2% 13,422 (2%) (10,751) Effective tax 32% 236,262 28% 162,102
* See note 30 on prior period error for more details.
20. Related party transactions See accounting policy in Note 3.12
The company’s major shareholders are NICO Life Insurance Company Limited, Africap LLC and Press Trust. Services are supplied in the ordinary course of business by the company to shareholders and by shareholders to the company at arm’s length.
Management Company The company has a management agreement with Protea Hospitality (Proprietary) Limited (trading as Luxury Hotels International South Africa (Pty) Limited under which the latter provides managerial, marketing and technical services to Blantyre Hotels Plc.
Compensation to key management personnel In addition to key management personnel’s salaries the company also provides non-cash benefits to a post-employment defined contribution plan for key management personnel’s benefits. In accordance with the plan, employees contribute 8.63% of the basic pay while the company contributes 15.62% of the basic pay to cover pension and group life cover. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 56 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS (continued) 20. Related party transactions (continued) See accounting policy in Note 3.12
The following related party transactions took place during the year:
Value of Value of Type of transactions Balance at transactions Balance at Related party Relationship transaction from/(to) year end from/(to) year end 2017 2017 2016 2016
Nico Asset Managers Common Transfer and company (11,573) - (23,474) - Limited shareholder secretarial fees
Luxury Hotels Management - Management fees (123,785) (58,170) (106,984) (96,758) International South company - Marketing fees (123,785) (58,170) (106,984) - Africa (Pty) Limited - Incentive fees (11,403) (20,820) (71,824) (71,824)
NICO Life Insurance Shareholder - Pension and Life (74,782 (9,360) (88,266) (7,775) Company Limited cover - Accommodation 15,617 3,773 2,977 -
NICO Holdings Plc Parent of Accommodation 23,779 4,903 32,201 8,646 shareholder
Press Trust Shareholder Accommodation 7,436 1,290 - -
NICO General Common - Insurance (39,057) - (27,907) 324 Insurance Company shareholder - Accommodation 5,059 423 3,870 - Limited
Procurement Subsidiary of Guest supplies (183,921) - (15,971) - International Limited Management Co.
Broll Malawi Entity in - Accommodation 362 - 1,016 - which a - Asset valuation - - (2,505) - Director has shareholding
NOTE: The amounts in brackets indicate that the goods/services were acquired by Blantyre Hotels Plc from related parties whilst the others indicate services provided to the related parties at arm’s length.
The balances are interest free and are payable in the normal course of business.
Nico Asset Managers Common shareholder Secretarial services Nico Asset Managers Common shareholder Accommodation Procurement International Limited Subsidiary of management company Guest supplies BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 57 For the year ended 30 September 2017
2017 2016 MK’000 MK’000
Compensation to Key Management Personnel comprised the following:
Short-term employee benefits Salaries and bonuses 125,335 125,240
Directors’ remuneration Directors’ fees 7,074 5,750
Post-employment benefits Pension Contributions 81,618 88,265
21. Revenue See accounting policy in Note 3.9 Restated*
Accommodation 2,439,939 2,038,364 Food and beverage 1,619,397 1,386,899 Other revenues 58,756 98,458
Total revenue 4,118,092 3,523,721
22. Cost of sales
Salaries and wages 692,297 546,460 Guest entertainment and supplies 159,722 127,225 Room cleaning and maintenance 111,825 90,243 Food and beverage costs 52,409 696,371
Total cost of sales 1,716,253 1,460,299
* See note 30 on prior period error for more details. BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 58 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS (continued)
2017 2016 MK’000 MK’000
23. Selling and administration expenses
Auditor’s expenses - Current year fees 18,085 15,400 - other audit expenses 324 1,623 Bad debt actual 2,676 - Bad debt provision 6,061 2,752 Bank charges 9,101 8,520 Board expenses 14,964 7,313 Commission on credit cards 47,562 33,406 Company secretarial and transfer fees 16,307 13,086 Computer expenses 17,175 12,002 Depreciation 156,873 124,034 Directors fees 7,074 5,750 Donations and subscriptions 8,002 4,336 Fees to management company (Note 23.1) 258,973 285,792 Fringe benefit tax 15,899 22,187 Internal audit expense 6,144 - Insurance 32,463 23,474 Legal and professional fees 12,396 9,965 Levies, licenses and permits 2,783 4,009 Malawi Stock Exchange listing fees 8,595 4,173 Marketing expenses 61,748 89,301 Motor vehicle expenses 19,231 19,337 Other staff costs 158,787 126,204 Postage 1,415 1,957 Power and lighting 172,555 148,434 Printing and stationery 16,780 11,765 Promotion 15,843 29,24 Rates and taxes 23,602 11,806 Repair and maintenance 193,659 103,832 Salaries and wages 220,729 202,353 Security costs 48,999 39,21 Sundry expenses 34,473 18,163 Telephone 19,952 36,433 Travel 22,075 8,553 1,651,305 1,424,418 23.1 Fees payable to Management Company Management fees 123,785 106,984 Marketing fees 123,785 106,984 Incentive fees 11,403 71,824 258,973 285,792
Management, marketing and incentive fees are payable to Luxury Hotels International South Africa (Pty) Limited (Note 20). BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 59 For the year ended 30 September 2017
2017 2016 MK’000 MK’000
24. Finance income/(costs) See accounting policy in Note 3.10
Interest income – on bank balances 22,152 4,487
Interest expense Interest on loans (35,816) (84,887) Exchange losses (9,295) (19,129) (45,111) (104,016) Net finance cost (22,959) (99,529)
25. Earnings per share See accounting policy in Note 3.14
The calculation of basic and diluted earnings per share is based on profit attributable to shareholders ofMK507 million (2016 restated: MK414 million) and the weighted average number of ordinary shares during the year of 129,192,416 (2016: 129,192,416) as below:- Restated*
Profit for the year (MK’000) 506,538 414,074
Weighted average number of shares (‘000) 129,192 129,192
Basic earnings per share (tambala) 392 321
26. Dividends See accounting policy in Note 3.15
2017 Interim dividend of MK0.50 per share declared and paid in the year 2017 64,596 38,757 2017 Second interim dividend of MK0.50 per share declared and paid in the year 2017 64,596 25,839 2016 Interim dividend of MK0.50 per share declared and paid in the year 2016 - 64,596
Total dividend declared during the year 129,192 129,192
27. Capital commitments and contingent liabilities
The Board approved capital commitments relating to refurbishment and equipment costs amounting to MK322 million at the end of the year (2016: MK110million). These costs are to be funded wholly by funds generated internally.
There were no known material contingent liabilities as at 30 September 2017 (2016: Nil). BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 60 For the year ended 30 September 2017
NOTES TO THE FINANCIAL STATEMENTS (continued) 28. Reportable segments
Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on the types of services provided. The directors of the company have chosen to organise the company around differences in services provided. No operating segments have been aggregated in arriving at the reportable segments of the company. Specifically, the company’s reportable segments under IFRS 8 are Accommodation and Food and Beverage.
Accommodation Food and beverage 2017 2016 2017 2016 MK’000 MK’000 MK’000 MK’000
Revenue 2,439,939 2,038,364 1,619,397 1,424,474
Segment profit 1,996,003 1,675,415 415,336 496,133
Revenue reported above represents revenue generated from external customers.
The segments do not have separately reportable assets and liabilities.
* See note 30 on prior period error for more details.
29. Exchange rates and inflation
The average of the year-end buying and selling rates of the foreign currencies most affecting the performance of the company are stated below, together with the increase in the National Consumer Price Index, which represents an official measure of inflation. 2017 2016
Kwacha/Rand 54.60 53.97 Kwacha/US Dollar 725.65 720.73
Inflation rate (%) 8.4% 21.2%
As at the approval of these financial statements, the exchange rates had moved as follows:
Kwacha/Rand 61.00 Kwacha/US Dollar 734.00
Inflation rate (%) 7.10% BLANTYRE HOTELS PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 61 For the year ended 30 September 2017
30. Prior period error
Accounting for Prokard Discount In the prior years (starting from the financial year 2014/2015), reported revenue and trade receivables included the discount offered to customers under the Prokard customer loyalty programme. This is contrary to the requirements of IAS 18, Revenue, which guides that revenue should be measured net of such discounts.
Determination of deferred tax liabilities The tax base of land that was used to determine deferred tax in the prior years, was not being adjusted by the Consumer Price Indices to reflect the adjusted basis that would be allowed for tax purposes in accordance with the Taxation Act. Consequently, the reported deferred tax liability was overstated.
Impact of restatement of comparatives
As reported in 2015 Adjustment Restated MK’000 MK’000 MK’000 Statement of financial position
Trade and other receivables 267,008 (42,234) 224,774 Current income tax liabilities 32,026 (12,670) 19,356 Deferred tax liabilities 1,321,482 (46,902) 1,274,580 Equity 3,682,403 17,338 3,699,741
As reported in 2016 Adjustment Restated MK’000 MK’000 MK’000
Trade and other receivables 425,590 (79,809) 345,781 Current income tax liabilities 78,217 (23,943) 54,274 Deferred tax liabilities 1,652,267 (57,355) 1,594,912 Equity 4,763,106 1,489 4,764,595
As reported in 2016 Adjustment Restated MK’000 MK’000 MK’000 Statement of profit or loss and other comprehensive income
Revenue 3,561,296 (37,575) 3,523,721 Current income tax charge 173,375 (11,273) 162,102 Deferred tax on revaluation 350,173 (10,453) 339,720 Profit for the year 440,376 (26,302) 414,074
The financial statements have been restated in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and related disclosures made in accordance with IAS 1 Presentation of Financial Statements.
31. Events after reporting period
Subsequent to the reporting date, no events have occurred necessitating adjustments to or disclosures in the financial statements. BLANTYREBLANTYRE HOTELS HOTELS PLC PLC Financial Statements Financial Statements BLANTYRE HOTELS PLC 62
Key Shareholder Statistics As at 30 September 2017
Shareholding By Country
Country Total Shares Total Shares % Total Holders Holders % AUSTRALIA 37 653 0,03 2 0,80 MALAWI 86 727 663 67,13 202 80,48 MAURITIUS 100 0,00 1 0,40 NETHERLANDS 1 320 0,00 1 0,40 SOUTH AFRICA 411 312 0,32 16 6,37 SWAZILAND 25 850 0,02 2 0,80 UNITED KINGDOM 191 854 0,15 10 3,98 UNITED STATES OF AMERICA 41 536 543 32,15 1 0,40 ZIMBABWE 260 121 0,20 16 6,37 TOTALS 129 192 416 100% 251 100%
Shareholding By Industry
Industry Total Shares Total Shares % Total Holders Holders % BANKS/NOMINEES 11 300 0,01 2 0,79 FOREIGN COMPANY 41 712 796 32,29 7 2,76 FOREIGN INDIVIDUAL 751 957 0,58 42 16,54 INSURANCE / ASSURANCE 100 000 0,08 1 0,39 LOCAL COMPANY 83 173 756 64,38 24 9,45 LOCAL INDIVIDUAL 3 122 859 2,42 171 68,50 PENSION/PROVIDENT 293 748 0,23 3 1,18 RESIDENT IND 26 000 0,02 1 0,39 TOTALS 129 192 416 100% 251 100%
Shareholding Distribution
MSE Code Distribution Range Shares Total Shares % Holders Holders % BHL 1 - 5000 188 920 0,15 88 35,06 BHL 5001 - 25000 1 301 338 1,01 101 40,24 BHL 25001 - 50000 865 494 0,67 26 10,36 BHL 50001 - 100000 1 113 890 0,86 15 5,98 BHL 100001 - 200000 1 296 952 1,00 9 3,59 BHL 200001 - 500000 2 334 329 1,81 7 2,79 BHL 500001 - 1000000 730 000 0,57 1 0,40 BHL 1000001 - 999999999 121 361 493 93,94 4 1,59 TOTALS 129 192 416 100% 251 100%