We are pleased to present the Annual Report of Axia Corporation Limited, a company listed on the Zimbabwe Stock Exchange (ZSE) for the three months ended 30 June 2016. This report is targeted at a broad range of our stakeholders with the aim of presenting a balanced review of material issues and performance from our operations. The report also outlines the Group’s goal and ambition, in the years to come, to move towards sustainable business practices, accountability, transparency and international best practices as laid out in the Global Reporting Initiatives (GRI) Sustainability Reporting Guidelines (G4). This annual report is structured to reflect our initial steps towards aligning with sustainability reporting guidelines. Our financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and audited by Ernst & Young Chartered Accountants (Zimbabwe) in accordance with International Standards on Auditing (ISA). An independent auditors’ report on the financial statements is contained on Page 24.
AXIA Annual Report 2016
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The operating environment presented a mix of challenges and opportunities for the specialty retail and distribution businesses. Government initiatives and efforts to stabilize exchange rates in the last quarter of the financial year provided a supportive platform for volume growth. However, persistent foreign currency shortages and competition from informal markets required adaptive strategies to sustain growth and profitability. The ongoing shift towards a more informal economy has impacted demand for some of our FMCG products in the modern trade, as certain segments of the market are able to access those products in the informal market at lower prices regardless of quality. Nonetheless, the Group has been proactively addressing this challenge and is making significant strides in reclaiming market share.
The Group had a steady increase in the use of foreign currency across its businesses and reassessed its functional currency in accordance with the requirements of IAS 21. The Group concluded that based on the primary operating environment and the Group’s own operating activities, there had been a change in its functional currency from Zimbabwean Dollar (“ZWL”) to United States Dollars (“USD”) with effect from the beginning of the current financial year. IAS 21 directs that entities operating in hyperinflationary economies should translate their last reported inflation-adjusted financial statements using the closing rate of exchange at the reporting date in order to derive and present comparative financial statements under a newly assessed functional currency.
The Group adopted the Zimbabwe Consumer Price Index (CPI) as the general price index to restate transactions and balances as appropriate. Non-monetary assets and liabilities carried at historic cost have been restated to reflect the change in the general price index. Monetary assets and liabilities and non-monetary assets and liabilities carried at revalued amounts have not been restated as they are presented at the measuring unit current at the end of the reporting period. Items recognized in the statement of profit, or loss have been restated by applying the change in the general price index from the dates when the transactions were initially earned or incurred. A net monetary adjustment was recognized in the statement of profit or loss. All items in the statement of cash flows are expressed in terms of the general price index at the end of the reporting period. Comparative amounts in the Group financial results have been adjusted to reflect the change in the general price index. Financial statements prepared under the historical cost convention have also been presented as supplementary information. The auditor has not expressed an opinion on these historical results.
