ZECO Holdings Limited’s independent auditors have issued an adverse conclusion on the company’s half-year financials as the currency conundrum continues to trouble local firms.
Rising inflation and currency volatility have stood out as some of the key issues arising from the reporting period, with several companies announcing they were coming up with strategies to ensure their balance sheets remain strong. Some companies have in the past been fined or suspended from the Zimbabwe Stock Exchange (ZSE) for failing to comply with listing requirements such as timely publication of financials.
According to the group’s results for the six months ending 30 June, Zeco recorded revenues of ZW$23 million (inflation-adjusted ZW$46m) for the six months ended 30 June 2022 compared to ZW$29 million (inflation-adjusted ZW$56m) for the corresponding period last year.
During the period, the group incurred a loss of ZW$4 million (inflation-adjusted ZW$3.6m). Total assets as at 30 June 2022 amounted to ZW$1.7 billion (inflation-adjusted ZW$1.9bn).
MGI Chartered Accounts however raised the red flag, saying the exchange rates used in preparing the financial statements did not meet International Accounting Standards (IAS).
“The group and company did not comply with IAS 21 in the prior financial period, as it elected to comply with Statutory Instrument 33 of 2019 (“SI 33/19”),” MGI said in note accompanying the financials.
“Had the assessment required by IAS 21 occurred in the correct period from 1 October, 2018, the adjustments that were recognised in the comparative 2019 period would have been materially different. Therefore, the departure from the requirements of IAS 21 were considered to be pervasive in the prior period. The financial effects on the inflation-adjusted consolidated financial statements of this departure were not determined. Furthermore, our conclusion on the current period’s financial results is modified because of the possible effects of the matter on the comparability of the current period’s financial results with that of the prior year.
“Due to the significance of the matters described in the Basis for Adverse Conclusion paragraphs, we conclude that the accompanying interim financial information of the Group does not present fairly, in all material respects, the consolidated interim inflation-adjusted financial position of the group as at 30 June 2022, and of its consolidated interim inflation-adjusted financial performance and cashflows for the six-month period then ended in accordance with International Accounting Standards on Interim Financial Reporting (IAS 34) and the requirements of the Companies and Other Business Entities Act (24:31).”
International Accounting Standard 21 gives guidance relating to the effects of changes in foreign exchange rates in volatile markets.
Last month, Zeco Holdings shareholders gave a nod to the company’s plan to transform the manufacturing entity into a real estate firm following years of waning fortunes.
The perennially under-performing ZSE-listed manufacturing concern recently held a virtual extraordinary general meeting to ratify a change in its business model after disposing of rolling stock for US$4.5 million as the moribund state of the country’s rail infrastructure threatens the company’s viability.