Innscor reports impressive financial performance d...

Innscor reports impressive financial performance despite changing currency environment

Audrey Galawu

Innscor Africa Limited recorded revenue of US$804.040 million during the financial year which ended on June 2023, representing a growth of 14.7% over the comparative year.

Innscor attributed revenue performance to have been driven by improved capacity utilisation across the Group’s core manufacturing businesses, and further supported via the introduction of new product categories, category extensions, and route-to-market optimisation strategies undertaken during the financial year under review.

In its financial statement for the period under review, the group reported mild contraction on margin efficiency terms of 3.7% at operating profit before depreciation, amortisation, and fair value adjustments level which according to the group, resulted mainly from reduced gross margin yield where the full increase in the core bills of materials could not be fully recovered in the sales price.

Operating expenditure also saw a significant correction as many cost buckets fully dollarised, which, when combined with international cost-push pressure, resulted in Opex growing 16.8% ahead of the comparative year.

“Currency losses dominated the financial loss line of US$15.404m as the Group faced a diminishing ability to adequately hedge against the rapid local currency devaluation experienced during the latter part of the financial year.

“Depreciation and Amortisation increased by 12% versus the comparative year, driven by the significant investment across the Group in the F2022 to F2023 financial periods.

“Despite the significant increase in local currency lending rates in the first quarter of the financial year under review, the Group managed to contain the annual interest expense to US$13.443 million, representing a 22% reduction on the comparative year.

“Profit Before Tax amounted to US$48.315 million representing a decline against the comparative year," reads the report.

Innscor’s cash generation was outstanding, and was further supported by improved efficiency across the Group’s working capital positions, combining to deliver exceptional operating cash flows of US$112.070 million for the financial year under review, representing a 12% increase over the comparative year.

The group, however bemoaned the substantial changes in the currency environment in Zimbabwe in recent years, including the reintroduction of the ZWL as the country’s functional currency in February 2019 through SI 33 of 2019, followed by the promulgation of SI 185 of 2020, which reintroduced the use of foreign currency for domestic transactions have created have created numerous uncertainties in the treatment of taxes due across the economy.

The group stated that the changes have been compounded by a lack of clear statutory and administrative guidance or practical transitional measures from the tax authorities.

“The wording of existing tax legislation has given rise to varying interpretations of tax law within the country. Over time, it has become apparent that the Group’s interpretation of the law regarding the currency of settlement for taxes, as well as the methodology for tax computation, has differed from that of the authorities, and this has resulted in a number of uncertainties in the Group’s tax position.

“The Group continues to seek adjudication by the courts on these matters.

“The directors have assessed the ability of the Group to continue as a Going Concern and have satisfied themselves that the Group is in a sound financial position and has adequate resources to continue in existence for the foreseeable future.

“Accordingly, they believe that the preparation of these consolidated annual financial statements on a Going Concern basis is appropriate,” the group said.