ZIMBABWE – Listed diversified group Innscor Africa Limited (Innscor) is challenging the Competition and Tariff Commission (CTC)’s decision to fine it over $2, 5 million for unprocedurally increasing its stake in National Foods (NatFoods).
Addington Chinake, Innscor chairman, said while the matter was still pending conclusion, the group had received legal advice that the penalty is unwarranted.
The renowned commercial lawyer said the group has paid $2,55 million into a trust, as it awaits finalisation of the case.
“The Board has received legal opinion that the penalty being sought is unjustified and inappropriate, and accordingly this amount is currently warehoused on the group’s statement of financial position,” he said in the group’s results for the half year to December 2014.
According to CTC – a statutory body created to investigate, discourage and prevent restrictive practices in industry – Innscor irregularly increased its stake in NatFoods from 36 percent to 49,9 percent.
The group later sold 12 percent to Tiger Brands leaving it with 37,82 percent.
It is CTC’s contention that Innscor advised the regulator of the transactions in 2012, well after its investigations had commenced, and that the group – with stakes in a dozen renowned companies – is crowding many businesses out of the food industry.
The group has in the past few years made several acquisitions under its strategy of backward integration within the fast-moving consumer goods supply chain. The group purchased a 49 percent stake in July 2009 of Irvine’s Zimbabwe, a major producer of chicken and table eggs.
It also shored up its interest in Colcom Holdings Limited, the country’s single largest pork producer and has a controlling interest in biscuit maker Iris and Breathway, commonly known as Zap-snacks.
The conglomerate runs a vibrant retail division which consists of the Spar Corporate Store retail operations and the fast foods operations that include Chicken Inn, Baker’s Inn, Creamy Inn and the local Nando’s franchise.
The Innscor boss also said the group’s financial statements published at the last financial year-end included fair value adjustments arising from the consolidation of NatFoods and Irvine’s Zimbabwe (Private) Limited, which were accounted for as subsidiaries with effect from July 1 2013.
“In the interests of consistency, the Board has restated the interim results at the 31st of December 2013 to comply with the above changes.”
“This restatement has had the effect of increasing basic earnings per share in the comparative prior period from the previously reported 3 cents to 9,94 cents, while headline earnings per share for the same period reduces marginally from the previously reported 2,75 cents to 2,73 cents. All other comparative statements remain unchanged,” he said.
The consolidation of National Foods and Irvine’s has changed the working capital profile of the group.
Meanwhile, in the six months ended December 31, 2014, the group recorded an operating profit of $46 million, a $32 million profit before tax and revenue of $513 million.